Document:

Exhibit 10.3

 

BUSINESS
MANAGEMENT AGREEMENT

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

(f)      provide internal audit services as hereinafter
provided;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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approved by the Independent Trustees under Section 2,
11 or 12 hereof or this Section 7 shall be
promptly reported to the Company for consideration by the Independent Trustees.

 

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

 

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

 

10.           Compensation.

 

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

 

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

 

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

 

(c)     For purposes of this Agreement:  (i) “Annual Average Invested Capital”
of the Company shall mean the average of the aggregate historical cost of the
consolidated assets of the Company and its subsidiaries invested, directly or
indirectly, in equity interests in or loans secured by real estate and personal
property owned in connection with such real estate (including acquisition
related costs and costs which may be allocated to intangibles or are
unallocated), all before reserves for depreciation, amortization, impairment
charges or bad debts or other similar noncash reserves, computed by taking the
average of such values at the end of month during such period; provided,
however, “Annual Average Invested Capital of the Transferred Assets”
shall mean the average of the aggregate historical cost thereof on the books of
HRPT Properties Trust immediately prior to the acquisition of such property by
the Company (including acquisition related costs and costs which may be
allocated to intangibles or are unallocated), all before reserves for
depreciation, amortization, impairment charges or bad debts or other similar
noncash reserves, computed by taking the average of such values at the end of
month during such period, and all subsequent adjustments shall be based on such
historical cost; and (ii) “FFO The Share” for any fiscal year shall
mean (x) the Company’s consolidated net income, computed in accordance
with generally accepted accounting principles in the United States, before gain
or loss on sale of properties and extraordinary items, depreciation,
amortization, impairment charges and other non-cash items, including the
Company’s pro rata share of the funds from operations (determined in accordance
with this clause) for such fiscal year of (A) any unconsolidated
subsidiary and (B) any entity for which the Company accounts by the equity
method of accounting, divided by (y) the weighted average number of Common
Shares outstanding on a fully diluted basis during such fiscal year; and (iii) “Transferred
Assets” shall mean the consolidated assets of the Company and its
subsidiaries invested, directly or indirectly, in equity interests in or loans
secured by real estate and personal property owned in connection with such real
estate previously or hereafter acquired by the Company or its subsidiaries from
HRPT Properties Trust or its subsidiaries (including acquisition related costs
and costs which may be allocated to intangibles or are unallocated and including
assets contributed by HRPT Properties Trust or its subsidiaries to the Company
or its subsidiaries or purchased by the Company or its subsidiaries from HRPT
Properties Trust or its subsidiaries); it being understood that amounts
invested in or with respect to any such Transferred Assets by the Company or
its subsidiaries following the acquisition of such assets by the Company or its
subsidiaries from HRPT Properties Trust or its subsidiaries shall be included
as part of the Transferred Assets to the extent such amounts otherwise satisfy
the standards included in the definition of Transferred Assets.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(d)     miscellaneous administrative expenses incurred in
supervising, monitoring and inspecting real property and other investments of
the Company or relating to performance by the Manager of its obligations
hereunder.

 

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

 

(a)     the cost of borrowed money;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

If the annual Fees
owed upon termination as shown in such Certificate exceed the Fees paid by the
Company upon termination, the Company shall include its check for such deficit
and deliver the same to the Manager with such Certificate.

 

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

 

13

 

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

 

If the annual Fees
owed upon termination as shown in such Certificate are less than the Fees paid
by the Company upon termination, the Manager shall remit to the Company its
check in an amount equal to such difference.

 

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

 

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

 

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

 

If to the Company:

 

Government Properties
Income Trust

400 Centre Street

Newton, Massachusetts 02158

Attention:  President 

Facsimile No.:  (617) 219-1441

 

14

 

If to the Manager:

 

Reit Management &
Research LLC

400 Centre Street

Newton, Massachusetts 02158

Attention:  President 

Facsimile No.:  (617) 928-1305

 

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

 

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

 

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

 

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

 

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

 

27.           Arbitration.

 

(a)     Any disputes, claims or controversies among the
parties hereto arising out of or relating to this Agreement or the provision of
the services by the Manager pursuant to this Agreement, including any claims or
disputes, whether in contract, tort, equity or otherwise and whether relating
to the meaning, interpretation, effect, validity, performance or enforcement of
this Agreement (all of which are referred to as “Disputes”) or relating
in any way to such a Dispute or Disputes, shall on the demand of any party to
such Dispute be resolved through binding and final arbitration in accordance
with the Commercial Arbitration Rules (the “Rules”) of the American
Arbitration Association (“AAA”) then in effect, except as modified herein.  For the avoidance of doubt, a Dispute shall
include a Dispute made derivatively on behalf of one party against another
party.

 

15

 

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

 

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

 

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

 

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

 

(f)      Each party shall bear its own costs and expenses
(including attorneys’ fees) in the arbitration, and the arbitrators shall not
render an award that would include shifting of any such costs or expenses
(including attorneys’ fees).

 

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

 

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

 

16

 

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

 

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

 

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

 

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

 

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

 

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

 

17

 

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

 

 

	
   

  	
  GOVERNMENT
  PROPERTIES INCOME TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
    Name: David Blackman

  
	
   

  	
   

  	
    Title: Treasurer and Chief Financial
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  REIT MANAGEMENT & RESEARCH LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
    Name:

  
	
   

  	
   

  	
    Title:

  

 

 

[Signature Page to
Business Management Agreement]

 

18Exhibit 10.4

 

PROPERTY MANAGEMENT AGREEMENT

 

THIS
PROPERTY MANAGEMENT AGREEMENT (this “Agreement”) is made and entered into as of
[     ·     ] [·], 2009, by and among Reit Management &
Research LLC, a Delaware limited liability company (“Managing
Agent”), and Government Properties Income Trust, a Maryland real
estate investment trust (the “Company”), on behalf of itself and those
of its subsidiaries as may from time to time own properties subject to this
Agreement (each, an “Owner” and, “collectively,
“Owners”).

 

W I T N E S S E T H :

 

WHEREAS, Owners are
the owners of various properties that are currently majority leased to
government tenants and may, in the future, acquire additional properties which,
unless otherwise expressly agreed, shall automatically become subject to this
Agreement without amendment hereof, unless otherwise agreed by the Company and
Managing Agent (collectively, the “Managed Premises”);

 

WHEREAS, Managing Agent is a company that provides property
management and administrative services;

 

WHEREAS, Owners wishes to engage Managing Agent to provide
certain property management and administrative services as hereinafter
provided;

 

NOW,
THEREFORE, in consideration of the premises and the
agreements herein contained, Owners and Managing Agent hereby agree as follows:

 

1.             Engagement.  Subject to the terms and conditions
hereinafter set forth, Owners hereby engage Managing Agent to provide the
property management and administrative services with respect to the Managed
Premises contemplated by this Agreement. 
Managing Agent hereby accepts such engagement as managing agent and
agrees to devote such time, attention and effort as may be appropriate to
operate and manage the Managed Premises in a diligent, orderly and efficient
manner.  Managing Agent may, with Owners’
consent, subcontract out some or all of its obligations hereunder to third
party managers.

 

Notwithstanding anything to the contrary set forth in this Agreement,
the services to be provided by Managing Agent hereunder shall exclude all services
(including, without limitation, 

 

 

any garage management or cafeteria management
services) whose performance by a manager to any Owner could give rise to an
Owner’s receipt of “impermissible tenant service income” as defined in §856(d)(7) of
the Internal Revenue Code of 1986 (as amended or superseded hereafter) or could
in any other way jeopardize an Owner’s federal or state tax qualification as a
real estate investment trust.  Managing
Agent shall not perform any such service and if, in the event Managing Agent
shall inadvertently perform any such service, no compensation therefor shall be
paid or payable hereunder.

 

2.             General Parameters.  Any or all services may be performed or goods
purchased by Managing Agent under arrangements jointly with or for other
properties owned or managed by Managing Agent and the costs shall be reasonably
and fairly apportioned.  Managing Agent
may employ personnel who are assigned to work exclusively at the Managed
Premises or partly at the Managed Premises and other buildings owned and/or
managed by Managing Agent.  Wages,
benefits and other related costs of centralized accounting personnel and
employees employed by Managing Agent and assigned to work exclusively or partly
at the Managed Premises shall be reasonably and fairly apportioned and
reimbursed, pro rata, by Owners in addition to the Fee and Construction
Supervision Fee (each as defined in Section 6).

 

3.             Duties.  Without limitation, Managing Agent agrees to
perform the following specific duties:

 

(a)     To administer the day to day operations of the Managed
Premises.  To seek tenants for the
Managed Premises in accordance with the rental schedule established by the
applicable Owner and to negotiate leases including renewals thereof and to
lease in the applicable Owner’s name space on a lease form approved by such
Owner, only to tenants, at rentals, and for periods of occupancy all as are
approved in each case by the applicable Owner. 
To employ appropriate means in order that the availability of rental
space is made known to potential tenants; provided, however, that
such means shall not include the employment of brokers unless otherwise agreed
by the applicable Owner.  The legal
expenses of negotiating such leases and leasing such space shall be approved
and paid by the applicable Owner.

 

(b)     To administer day to day relations with tenants; to collect
all rents and other income from the Managed Premises and to give receipts
therefor, both on behalf of Owners, and deposit such funds in such banks and
such accounts as are named, from time to time, by Owners, in agency accounts
for and under the name of Owners. Managing Agent shall be empowered to sign
disbursement checks on these accounts.

 

(c)     To monitor the Managed Premises as would be done by a prudent
owner, including by making contracts for and supervising any repairs and/or
alterations to the Managed Premises, including tenant improvements and
decoration of rental space, as may be approved by the applicable Owner.

 

2

 

(d)     For Owners’ account and at its expense, to hire, supervise
and discharge employees or third party contractors, hired with Owners’ consent,
as required to maintain in good order and repair the Managed Premises and their
operating systems.

 

(e)     To obtain, at Owners’ expense, appropriate insurance for the
Managed Premises protecting Owners and Managing Agent while acting on behalf of
Owners against all normally insurable risks relating to the Managed Premises
and complying with the requirements of Owners’ mortgagee, if any, and, upon
approval thereof, to cause the same to be provided and maintained by all
tenants with respect to the Managed Premises to the extent required by the
terms of such tenants’ leases.

 

(f)      To promptly notify the applicable Owner and its insurance
carriers, as required by the applicable policies, of any casualty or injury to
person or property at the Managed Premises, and complete customary reports in
connection therewith.

 

(g)     To procure seasonably all supplies and other materials
necessary for the proper operation of the Managed Premises, at Owners’ expense.

 

(h)     To pay promptly from rental receipts, other income derived
from the Managed Premises, or other monies made available by Owners for such
purpose, all costs incurred in the operation of the Managed Premises which are
expenses of Owners hereunder, including wages or other payments for services
rendered, invoices for supplies or other items furnished in relation to the
Managed Premises, and pay over forthwith the balance of such rental receipts,
income and monies to Owners or as Owners shall from time to time direct.  (In the event that the sum of the expenses to
operate and the compensation due Managing Agent exceed gross receipts in any
month and no excess funds from prior months are available for payment of such
excess, Owners shall pay promptly the amount of the deficiency thereof to
Managing Agent upon receipt of statements therefor.)

 

(i)      To advise Owners promptly of any material developments in the
operation of the Managed Premises that might affect the profitable operation of
the Managed Premises.

 

(j)      To establish, in Owners’ name and with Owners’ approval,
reasonable rules and regulations for tenants of the Managed Premises.

 

(k)     At the direction of the applicable Owner and with counsel
selected by such Owner, to institute or defend, as the case may be, any and all
legal actions or proceedings (in the name of such Owner if necessary) relating
to operation of the Managed Premises.

 

3

 

(l)      To maintain the books and records of Owners reflecting the
management and operation of the Managed Premises, making available for
reasonable inspection and examination by Owners or its representatives, all
books, records and other financial data relating to the Managed Premises.

 

(m)    To prepare and deliver seasonably to tenants of the Managed
Premises such statements of expenses or other information as shall be required
on the landlord’s part to be delivered to such tenants for computation of rent,
additional rent, or any other reason.

 

(n)     To aid, assist and cooperate with Owners in matters relating
to taxes and assessments and insurance loss adjustments, notify the Owners of
any tax increase or special assessments relating to the Managed Premises and,
with Owners’ approval, to enter into contracts for tax abatements services.

 

(o)     To provide such emergency services as may be required for the
efficient management and operation of the Managed Premises on a 24-hour basis.

 

(p)     To enter into contracts for utilities (including, without
limitation, water, fuel, electricity, heating, air conditioning, lighting and
telephone) and for building services (including, without limitation, cleaning
of windows, common areas and tenant space, ash, rubbish and garbage hauling,
snow plowing, landscaping, carpet cleaning and vermin extermination), and for
other services as are appropriate to first class office space or such other
types of properties as may be included in the Managed Premises.

 

(q)     To seek the lowest competitive price commensurate with
desired quality for all items purchased or services contracted by it under this
Agreement.

 

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

 

(s)     To take such action with respect to the Managed Premises,
generally consistent with the provisions of this Agreement, as would be done by
a prudent owner.

 

(t)      To, from time to time, or at any time requested by the Board
of Trustees of the Company (the “Trustees”), make reports of its performance
of the foregoing services to the Company.

 

4.             Authority.  Owners give to Managing Agent the authority
and powers to perform the foregoing duties on behalf of Owners, subject,
however, to Owners’ approval as specified. Owners further authorize Managing
Agent to incur such reasonable expenses, specifically 

 

4

 

contemplated in Section 2,
on behalf of Owners as are necessary in the performance of those duties.

 

5.             Special Authority of Managing
Agent.  In addition
to, and not in limitation of, the duties and authority of Managing Agent
contained herein, Managing Agent shall perform the following duties, but only
with Owners’ prior approval in each case:

 

(a)     Terminate tenancies and sign and serve in the name of Owners
such notices therefor as may be required for the proper management of the
Managed Premises.

 

(b)     With counsel selected by Owners, and at Owners’ expense,
institute and prosecute actions to evict tenants and recover possession of
rental space, and recover rents and other sums due; and when expedient, settle,
compromise and release such actions or suits or reinstate such tenancies.

 

6.             Compensation.

 

(a)     In consideration of the services to be rendered by Managing
Agent hereunder, Owners agree to pay and Managing Agent agrees to accept as its
sole compensation (i) a management fee (the “Fee”)
equal to three percent (3%) of the gross collected rents actually received by
Owners from the Managed Premises, such gross rents to include all fixed rents,
percentage rents, additional rents, operating expense and tax escalations, and
any other charges paid to Owners in connection with occupancy of the Managed
Premises, but excluding any amounts collected from tenants to reimburse Owners
for the cost of capital improvements or for expenses incurred in curing any
tenant default or in enforcing any remedy against any tenant; and (ii) a
construction supervision fee (the “Construction
Supervision Fee”) in connection with all interior and exterior
construction renovation or repair activities at the Managed Premises,
including, without limitation, all tenant and capital improvements in, on or
about the Managed Premises, undertaken during the term of this Agreement, other
than ordinary maintenance and repair performed by maintenance staff, equal to
five percent (5%) of the cost of such construction which shall include the
costs of all related professional services and the cost of general conditions.

 

(b)     The Fee shall be due and payable monthly, in arrears based on
a reasonable annual estimate or budget with an annual reconciliation within
thirty (30) days after the end of each calendar year.  The Construction Supervision Fee shall be due
and payable periodically, as agreed by Managing Agent and Owners, based on
actual costs incurred to date.

 

5

 

(c)     Notwithstanding anything herein to the contrary, Owners shall
reimburse Managing Agent for reasonable travel expenses incurred when traveling
to and from the Managed Premises while performing its duties in accordance with
this Agreement; provided, however, that reasonable travel
expenses shall not include expenses incurred for travel to and from the Managed
Premises by personnel assigned to work exclusively at the Managed Premises.

 

(d)     Managing Agent shall also receive the amount of any lump sum
reimbursables paid by tenants of the Managed Premises to the extent amounts
paid exceed costs incurred by Owners for work performed with respect thereto.

 

(e)     Except as set forth in Section 2 of this
Agreement, Managing Agent shall be entitled to no other additional compensation
or reimbursement, whether in the form of commission, bonus or the like for its
services under this Agreement.  Except as
otherwise specifically provided herein with respect to payment by Owners of
legal fees, accounting fees, salaries, wages, fees and charges of parties hired
by Managing Agent on behalf of Owners to perform operating and maintenance
functions in the Managed Premises, and the like, if Managing Agent hires third
parties to perform services required to be performed hereunder by Managing
Agent without additional charge to Owners, Managing Agent shall (except to the
extent the same are reasonably attributable to an emergency at the Managed
Premises) be responsible for the charges of such third parties.  Managing Agent shall not, however, hire any
third party without Owners’ prior written consent.

 

7.             Contracts. Managing
Agent shall not, without the prior consent of Owners, enter into any contracts
on behalf of Owners which extend beyond the then current term of this
Agreement.

 

8.             Term of Agreement.  This Agreement shall continue in force and
effect until December 31, 2010, and is renewable annually thereafter by
the Company, on behalf of itself and the Owners, upon such terms and conditions
as may be approved by a majority of the Independent Trustees as defined in the
Company’s Bylaws, as amended as of the date hereof  (the “Independent Trustees”) serving
on the Compensation Committee of the Trustees.

 

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

 

6

 

For
purposes of this Agreement, a “Change of Control” shall mean (a) the
acquisition by any person or entity, or two or more persons or entities acting
in concert, of beneficial ownership (such term, for purposes of this Section 8,
having the meaning provided such term in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) of 9.8% or more, or rights, options or
warrants to acquire 9.8% or more, or any combination thereof, of the Company’s
outstanding common shares of beneficial interest or other voting interests of
the Company, including voting proxies for such shares, or the power to direct
the management and policies of the Company, directly or indirectly (excluding,
with respect to the Company, Managing Agent and its affiliates), (b) the
merger or consolidation of the Company with or into any other entity (other
than the merger or consolidation of any entity into the Company that does not
result in a Change in Control of the Company under clauses (a), (c), or (d) of
this definition), (c) any one or more sales or conveyances to any person or
entity of all or any material portion of the assets (including capital stock or
other equity interests) or business of the Company and its subsidiaries taken
as a whole or (d) the cessation, for any reason, of the individuals who at
the beginning of any 36 consecutive month period constituted the Trustees
(together with any new trustees whose election by the Trustees or whose
nomination for election by the shareholders of the Company was approved by a
vote of a majority of the trustees then still in office who were either
trustees at the beginning of any such period or whose election or nomination
for election was previously so approved) to constitute a majority of the
Trustees then in office.

 

Section 9 hereof shall
govern the rights, liabilities and obligations of the parties upon termination
of this Agreement; and, except as provided in Section 9, such
termination shall be without further liability of either party to the other,
other than for breach or violation of this Agreement prior to termination..

 

9.             Termination or Expiration.  Upon termination or expiration of this
Agreement with respect to any of the Managed Premises for any reason
whatsoever, Managing Agent shall as soon as practicable turn over to Owners all
books, papers, funds, records, keys and other items relating to the management
and operation of such Managed Premises, including, without limitation, all
leases in the possession of Managing Agent and shall render to Owners a final
accounting with respect thereto through the date of termination.  Owners shall be obligated to pay all
compensation for services rendered by Managing Agent hereunder prior and up to
the effective time of such termination, including, without limitation, any Fees
and Construction Supervision Fees, and shall pay and reimburse to Managing
Agent all expenses and costs incurred by Managing Agent prior and up to the
effective time of such termination which are otherwise payable or reimbursable
to Managing Agent pursuant to the terms of this Agreement.  The amount of such fees paid as compensation
pursuant to the foregoing sentence shall be subject to adjustment in accordance
with the annual reconciliation contemplated by Section 6(b) and
consistent with past practices in performing such reconciliation.

 

10.           Fidelity Bond.  Owners, at Owners’ expense, may require that
employees of Managing Agent who handle or are responsible for Owners’ money to
be bonded by a fidelity bond in an amount sufficient in Owners’ determination
to cover any loss which may occur in the 

 

7

 

management and operation of
the Managed Premises or that Managing Agent obtain a fiduciary policy of
insurance.

 

11.           Limit on Responsibility;
Indemnification and Insurance.

 

(a)     Managing Agent assumes no responsibility other than to render
the services described herein in good faith and shall not be responsible for
any action of the Trustees in following or declining to follow any advice or
recommendation of Managing Agent.

 

(b)     Owners agree to defend, indemnify and hold harmless Managing
Agent from and against all costs, claims, expenses and liabilities (including
reasonable attorneys’ fees) arising out of Managing Agent’s performance of its
duties in accordance with this Agreement including, without limitation, injury
or damage to persons or property occurring in, on or about the Managed Premises
and violations or alleged violations of any law, ordinance, regulation or order
of any governmental authority regarding the Managed Premises except any injury,
damage or violation resulting from Managing Agent’s default hereunder, or from
Managing Agent’s willful bad faith or gross negligence in the performance of
its duties hereunder.  Without limiting
the foregoing, the Owners shall promptly advance expenses incurred by the
indemnitees referred to in this section for matters referred to in this
section, upon request for such advancement.

 

(c)     Owners agree that required insurance shall include, at Owners’
expense, public liability and workmen’s compensation insurance as required by
law and as mutually agreed by Owners and Managing Agent.

 

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

 

If
to the Company or the Owners:

 

Government
Properties Income Trust

400 Centre Street

Newton, Massachusetts 02158

Attention:  President 

Facsimile No.:  (617) 219-1441

 

8

 

If
to Managing Agent:

 

Reit
Management & Research LLC

400 Centre Street

Newton, Massachusetts 02158

Attention:  President 

Facsimile No.:  (617) 928-1305

 

13.           Limitation of Liability.

 

(a)     Neither Owners nor Managing Agent shall be personally liable
hereunder, all such liability being limited in the case of Owners to the
interest of Owners in the Managed Premises and in the case of Managing Agent,
to its interest hereunder.

 

(b)     The Declarations of Trust establishing some Owners, a copy of
each, together with all amendments thereto (the “Declarations”),
is duly filed with the Department of Assessments and Taxation of the State of
Maryland, provides that the names of such Owners refers to the trustees under
such Declarations collectively as trustees, but not individually or
personally.  No trustee, officer,
shareholder, employee or agent of such Owners shall be held to any personal
liability, jointly or severally, for any obligation of, or claim against, such
Owners.  All persons or entities dealing
with such Owners, in any way, shall look only to the respective assets of such
Owners for the payment of any sum or the performance of any obligation of such
Owners.

 

(c)     It is the intention of the parties hereto that each Owner be
liable hereunder only with respect to the Managed Premises owned by such Owner
and that each Owner be solely responsible for liabilities incurred with respect
only to its properties and receive all income therefrom.

 

14.           Other Activities of Manager.  Nothing herein shall prevent Managing Agent
from engaging in other activities or businesses or from acting as Managing
Agent to any other person or entity (including other real estate investment
trusts) even though such person or entity has businesses similar to those of
the Company or the Owners.  The Company
and the Owners acknowledge that Managing Agent manages and provides property
management services to real estate investment trusts and other persons or entities
(including, as of the date of this Agreement, HRPT Properties Trust,
Hospitality Properties Trust, Senior Housing Properties Trust, Five Star
Quality Care, Inc. and TravelCenters of America LLC) and, except as
otherwise expressly agreed in writing, waives any conflict arising therefrom.  In addition, nothing herein shall prevent any
shareholder or affiliate of Managing Agent from engaging in any other business
or from rendering services of any kind to any other person or entity (including
competitive business activities).  The
Company and the Owners acknowledge and agree that Managing Agent has certain
interests that may be divergent from those of the Company and the Owners.  The parties agree that these relationships
and interests shall not affect the party’s rights and 

 

9

 

obligations under this
Agreement; provided, however, the Company and the Owners further
acknowledge and agree that whenever any conflicts of interest arise resulting
from the relationships and interests described or referred to in this section
or any such relationship or interest as may arise or be present in the future
by and between the Company or the Owners and Managing Agent or their respective
affiliates or any entity with whom Managing Agent has a relationship or
contract, Managing Agent will act on its own behalf and/or on behalf of any
such entity and not on the Company’s or the Owners’ behalf, and the Company and
the Owners shall make their own decisions and require and obtain the advice and
assistance of independent third parties at their own cost, as they may deem
necessary.

 

15.           Modification of Agreement.  This Agreement may not be modified, altered
or amended in manner except by an amendment in writing, duly executed by the
parties hereto.

 

16.           Independent Contractor.  This Agreement is not one of general agency
by Managing Agent for Owners, but one with Managing Agent engaged as an
independent contractor.  Nothing in this
Agreement is intended to create a joint venture, partnership, tenancy-in-common
or other similar relationship between Owners and Managing Agent for any
purposes whatsoever, and, without limiting the generality of the foregoing,
neither the terms of this Agreement nor the fact that Owners and Managing Agent
have joint interests in any one or more investments, ownership or other
interests in any one or more entities or may have common officers or employees
or a tenancy relationship shall be construed so as to make them such partners
or joint venturers or impose any liability as such on either of them.

 

17.           Governing Law.  This Agreement shall be governed by and in
accordance with the laws of The Commonwealth of Massachusetts.

 

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

 

10

 

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

 

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

 

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

 

22.           Survival.  The provisions of Sections 8 (limited
to the last paragraph of such Section), 9, 11, 12, 13, 14 (limited to the
obligations of the Company and the Owners to keep information provided to the
Company by Managing Agent confidential as provided in such section), 17, 20,
22, 23 and 24 of this Agreement shall survive the termination hereof.

 

23.           Arbitration.

 

(a)     Any disputes, claims or controversies among the parties
hereto arising out of or relating to this Agreement or the provision of the
services by Managing Agent pursuant to this Agreement, including any claims or
disputes, whether in contract, tort, equity or otherwise and whether relating
to the meaning, interpretation, effect, validity, performance or enforcement of
this Agreement (all of which are referred to as “Disputes”) or relating
in any way to such a Dispute or Disputes, shall on the demand of any party to
such Dispute be resolved through binding and final arbitration in accordance
with the Commercial Arbitration Rules (the “Rules”) of the American
Arbitration Association (“AAA”) then in effect, except as modified herein.  For avoidance of doubt, a Dispute shall
include a Dispute made derivatively on behalf of one party against another party.

 

(b)     There shall be three arbitrators.  Each party (with, for purposes of this Section 23,
any and all Owners involved in the Dispute treated as one party) shall select
one arbitrator within 15 days after receipt by respondent of a copy of the
demand for arbitration.  The two
party-nominated arbitrators shall jointly nominate the third and presiding
arbitrator within 15 days of the nomination of the second arbitrator.  If any arbitrator has not been nominated
within the time limit specified herein, then the AAA shall provide a list of
proposed arbitrators in accordance with the Rules and the arbitrator shall
be appointed by the AAA in accordance with a listing, striking and ranking
procedure, with each party having a limited number of strikes, excluding
strikes for cause.    For the avoidance
of doubt, the arbitrators appointed by the parties to such Dispute may be
affiliates or interested persons of such parties but the third arbitrator
elected by the party arbitrators or by the AAA shall be unaffiliated with
either party.

 

11

 

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

 

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

 

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

 

(f)      Each party shall bear its own costs and expenses (including
attorneys’ fees) in the arbitration, and the arbitrators shall not render an
award that would include shifting of any such costs or expenses (including
attorneys’ fees).

 

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

 

(h)     Any monetary award shall be made and payable in U.S. dollars
free of any tax, deduction or offset. 
The party against which the Award assesses a monetary obligation shall
pay that obligation on or before the 30th day following the date of the Award
or such other date as the Award may provide.

 

24.           Consent to Jurisdiction and Forum.  This Section 24 is subject to, and shall
not in any way limit the application of, Section 23; in case of any
conflict between this Section 24 and Section 23, Section 23
shall govern.  The exclusive jurisdiction
and venue in any action brought by any party hereto pursuant to this Agreement
shall lie in any federal or state court located in Boston, Massachusetts.  By execution and delivery of this Agreement,
each party hereto irrevocably submits to the jurisdiction of such courts for
itself and in respect of its property with respect to such action. The parties
irrevocably agree that venue would be proper in such court, and hereby waive
any objection that such court is an improper or inconvenient forum for the
resolution of such action.  The parties
further agree and consent to the service of any 

 

12

 

process required by any such
court by delivery of a copy thereof in accordance with Section 12 and that
any such delivery shall constitute valid and lawful service of process against
it, without necessity for service by any other means provided by statute or rule of
court.

 

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

 

[Signature Page To
Follow]

 

13

 

IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as a sealed instrument as of the date above first
written.

 

 

	
   

  	
  MANAGING AGENT:

  
	
   

  	
   

  
	
   

  	
  REIT MANAGEMENT &
  RESEARCH LLC

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  OWNERS:

  
	
   

  	
   

  	
   

  
	
   

  	
  GOVERNMENT PROPERTIES INCOME
  TRUST, on its own behalf and on behalf of its subsidiaries

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: David M. Blackman

  
	
   

  	
   

  	
  Title: Treasurer and Chief
  Financial Officer

  

 

 

[Signature Page to Property Management Agreement]

 

14

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