Document:

Exhibit 10.11

 

NETSTREIT CORP.
 2019 OMNIBUS INCENTIVE COMPENSATION PLAN

 

RESTRICTED STOCK UNIT AGREEMENT

 

THIS RESTRICTED STOCK UNIT AGREEMENT (this “Agreement”) is made effective as of [        ], 20[  ] (the “Grant Date”) by and between NetSTREIT Corp., a Maryland corporation (the “Company”), and [           ] (the “Participant”), pursuant to the NetSTREIT Corp. 2019 Omnibus Incentive Compensation Plan, as in effect and as amended from time to time (the “Plan”). Capitalized terms that are not defined herein shall have the meanings given to such terms in the Plan.

 

WHEREAS, the Company has adopted the Plan in order to grant Awards from time to time to certain key Employees (including prospective Employees), Directors and Consultants of the Company and its Subsidiaries or Affiliates; and

 

WHEREAS, the Participant is an Eligible Recipient as contemplated by the Plan, and the Administrator has determined that it is in the interest of the Company to grant this Award to the Participant.

 

NOW, THEREFORE, in consideration of the premises and subject to the terms and conditions set forth herein and in the Plan, the parties hereto agree as follows:

 

1.             Grant and Vesting of Restricted Stock Units.

 

(a)           Shares Subject to Award. As of the Grant Date, the Participant will be credited with [     ] Restricted Stock Units. Each Restricted Stock Unit is a notional amount that represents the right to receive one Share, subject to the terms and conditions of the Plan and this Agreement, if and when the Restricted Stock Unit vests.

 

(b)           Vesting. The Restricted Stock Units shall vest in substantially equal annual installments on each of the first five (5) anniversaries of the Grant Date, subject to the Participant’s continuous service with the Company or a Subsidiary or Affiliate thereof, as applicable, whether as an Employee, Director, or Consultant (“Service”), from the Grant Date through each such anniversary of the Grant Date. Notwithstanding the foregoing, all or a portion of the Restricted Stock Units may also vest under the circumstances described in Section 3(c).

 

2.             Rights as a Stockholder.

 

(a)           Unless and until a Restricted Stock Unit has vested and the Share underlying it has been distributed to the Participant, the Participant will not be entitled to vote in respect of that Restricted Stock Unit or that Share.

 

(b)           If the Company declares a cash dividend on its Shares, then, on the payment date of the dividend, the Participant will be credited with dividend equivalents equal to the amount of cash dividend per Share multiplied by the number of Restricted Stock Units credited to the Participant through the record date. The dollar amount credited to the Participant under the preceding sentence will be credited to an account (“Account”) established for the Participant for

 

1

 

bookkeeping purposes only on the books of the Company. The balance in the Account will be subject to the same terms regarding vesting and forfeiture as the Participant’s Restricted Stock Units awarded under this Agreement, and will be paid in cash in a single sum at the time that the Shares associated with the Participant’s Restricted Stock Units are delivered (or forfeited at the time that the Participant’s Restricted Stock Units are forfeited).

 

3.             Termination of Service.

 

(a)           Any Termination. Except as otherwise set forth in Section 3(c), in the event that the Participant’s Service terminates for any reason, any portion of the Restricted Stock Units that is not then vested shall terminate and be cancelled immediately upon such termination of Service.

 

(b)           Termination for Cause. In the event that the Participant’s Service terminates for Cause, the entire Award of Restricted Stock Units, whether or not then vested, shall terminate and be cancelled immediately upon such termination of Service.

 

(c)           Termination without Cause; Termination for Good Reason. In the event that the Company terminates the Participant’s Service without Cause or, if applicable, the Participant terminates Services without Good Reason, the Restricted Stock Units shall immediately vest in full.

 

4.             Timing and Form of Payment.

 

Once a Restricted Stock Unit vests, the Participant will be entitled to receive a Share in its place. Delivery of the Share will be made as soon as administratively feasible following the vesting of the associated Restricted Stock Unit. Shares will be credited to an account established for the benefit of the Participant with the Company’s administrative agent. The Participant will have full legal and beneficial ownership of the Shares at that time.

 

5.             Tax Withholding.

 

The Company or any Affiliate thereof shall have the power to withhold, or require the Participant to remit to the Company or such Affiliate thereof, cash or Shares that are distributable to the Participant with respect to the Restricted Stock Units in an amount sufficient to satisfy the federal, state, and local withholding tax requirements, both domestic and foreign, relating to such transaction, and the Company or such Affiliate thereof may defer payment of cash or issuance of Shares until such requirements are satisfied; provided, however, that such amount may not exceed the maximum statutory withholding rate. The Participant shall be entitled to satisfy the amount of any such required tax withholding by having the Company withhold from the Shares otherwise distributable to the Participant upon vesting of the Restrictive Stock Units a number of Shares having a Fair Market Value equal to the amount of such required tax withholdings.

 

6.             Unauthorized Disclosure; Non-Competition; Non-Solicitation; Interference with Business Relationships; Proprietary Rights.

 

(a)           Unauthorized Disclosure. The Participant agrees and understands that in the course of the Participant’s Service, the Participant has been and will be exposed to and has and will receive information relating to the confidential affairs of the Company, its Subsidiaries and Affiliates

 

2

 

(collectively, the “Group”), including, without limitation, technical information, intellectual property, business and marketing plans, strategies, customer information, software, other information concerning the products, promotions, development, financing, expansion plans, business policies and practices of the Group and other forms of information considered by the Group to be confidential or in the nature of trade secrets (including, without limitation, ideas, research and development, know-how, formulas, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information and business and marketing plans and proposals) (collectively, the “Confidential Information”). Confidential Information shall not include information that is generally known to the public or within the relevant trade or industry other than due to the Participant’s violation of this Section 6(a) or disclosure by a third party who is known by the Participant to owe the Company an obligation of confidentiality with respect to such information.  The Participant agrees that at all times during the Participant’s employment with the Company and thereafter, the Participant shall not disclose such Confidential Information, either directly or indirectly, to any individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof without the prior written consent of the Company and shall not use or attempt to use any such information in any manner other than in connection with the Participant’s Service, unless required by law to disclose such information, in which case the Participant shall provide the Company with written notice of such requirement as far in advance of such anticipated disclosure as possible. This confidentiality covenant has no temporal, geographical or territorial restriction. Upon termination of the Participant’s Service, the Participant shall promptly supply to the Company all property, computers, tablets, keys, notes, memoranda, writings, lists, files, reports, customer lists, correspondence, tapes, disks, cards (including credit cards), surveys, maps, logs, machines, technical data and any other tangible product or document which has been produced by, received by or otherwise submitted to the Participant during or prior to the Participant’s Service, and any copies thereof in the Participant’s (or reasonably capable of being reduced to his or her) possession; provided that nothing in this Agreement shall prevent the Participant from retaining and utilizing: (i) documents relating to the Participant’s personal benefits, entitlements and obligations; (ii) documents relating to the Participant’s personal tax obligations; (iii) the Participant’s desk calendar, rolodex, and the like; and (iv) such other records and documents as may reasonably be approved by the Company. Notwithstanding the foregoing or anything to the contrary in this Agreement or any other agreement between the Participant and any member of the Group, the Participant shall be entitled to provide, without breaching this Agreement or any such other agreement and without prior notice to the Company, information to governmental or administrative authorities regarding possible violations of law or otherwise testify or participate in any investigation or proceeding by any governmental or administrative authorities, and for purpose of clarity, the Participant is not prohibited from providing information voluntarily to the Securities and Exchange Commission pursuant to Section 21F of the Exchange Act.

 

(b)           Non-Competition. By and in consideration of the Company’s entering into this Agreement, and in further consideration of the Participant’s exposure to the Confidential Information of the Group, the Participant agrees that the Participant shall not, during the period of the Participant’s Service and for [twelve (12)] [twenty-four (24)] months following the termination thereof, regardless of the reason for such termination and regardless of whether the Participant is then entitled to receive any severance benefits (the “Restriction Period”), directly or indirectly, own, manage, operate, join, control, be employed by, or participate in the ownership, management, operation or control of, or be connected in any manner with, including, without limitation, holding

 

3

 

any position as a stockholder, director, officer, consultant, independent contractor, employee, partner, or investor in, any Restricted Enterprise (as defined below); provided, that in no event shall ownership of one percent (1%) or less of the outstanding securities of the limited partnership interest in any private equity fund, hedge fund or venture capital fund or any class of any issuer whose securities are registered under the Exchange Act, standing alone, be prohibited by this Section 6(b), so long as the Participant does not have, or exercise, any rights to manage or operate the business of such fund or issuer other than rights as a limited partner or stockholder thereof.  For purposes of this Section 6(b), “Restricted Enterprise” shall mean any enterprise (including, but not limited to, any enterprise related to the business of acquiring, developing, investing, structuring or managing retail net lease real estate properties and any other lines of business any member of the Group is participating in, or has taken substantive steps towards participating in, as of the date hereof) that is competitive with the business conducted by the Company and its direct or indirect subsidiaries, partnerships and joint ventures during the Participant’s Service, within the United States and anywhere outside the United States where the Company and its direct or indirect subsidiaries, partnerships and joint ventures operated during the Participant’s Service.

 

(c)           Non-Solicitation. During the Restriction Period, the Participant shall not:

 

(i)            directly or indirectly contact, induce or solicit (or assist any Person to contact, induce or solicit) for employment any person who is, or within twelve (12) months prior to the date of such solicitation was, an employee of any member of the Group; or

 

(ii)           induce or attempt to induce any customer, supplier, or licensee of the Group to cease doing business with the Group or in any way interfere with the relationship between the Group, on the one hand, and any such customer, supplier, or licensee, on the one hand.

 

(d)           Interference with Business Relationships. During the Restriction Period (other than in connection with carrying out the Participant’s responsibilities for the Group), the Participant shall not directly or indirectly induce or solicit (or assist any Person to induce or solicit) any customer or client of any member of the Group to terminate its relationship or otherwise cease doing business in whole or in part with any member of the Group, or directly or indirectly interfere with (or assist any Person to interfere with) any material relationship between any member of the Group and any of their customers, clients, suppliers, joint venture partners or licensors so as to cause harm to any member of the Group.

 

(e)           Extension of Restriction Period. The Restriction Period shall be tolled with respect to Sections 6(b), 6(c), and 6(d) for any period during which the Participant is in breach of any such section.

 

(f)            Proprietary Rights. The Participant shall disclose promptly to the Company any and all inventions, discoveries, and improvements (whether or not patentable or registrable under copyright or similar statutes), and all patentable or copyrightable works, initiated, conceived, discovered, reduced to practice, or made by the Participant, either alone or in conjunction with others, during the Participant’s Service and related to the business or activities of the Group (the “Developments”).  Except to the extent any rights in any Developments constitute a work made for hire under the U.S. Copyright Act, 17 U.S.C. § 101 et seq. that are owned ab initio by a member

 

4

 

of the Group, the Participant assigns and agrees to assign all of the Participant’s right, title and interest in all Developments (including all intellectual property rights therein) to the Company or its nominee without further compensation, including all rights or benefits therefor, including without limitation the right to sue and recover for past and future infringement. The Participant acknowledges that any rights in any Developments constituting a work made for hire under the U.S. Copyright Act, 17 U.S.C § 101 et seq. are owned upon creation by the Company as the Participant’s employer.  Whenever requested to do so by the Company, the Participant shall execute any and all applications, assignments or other instruments which the Company shall deem necessary to apply for and obtain trademarks, patents or copyrights of the United States or any foreign country or otherwise protect the interests of the Group.  These obligations shall continue beyond the end of the Participant’s employment with the Company with respect to inventions, discoveries, improvements or copyrightable works initiated, conceived or made by the Participant while employed by the Company, and shall be binding upon the Participant’s employers, assigns, executors, administrators and other legal representatives.  In connection with the Participant’s execution of this Agreement, the Participant has informed the Company in writing of any interest in any inventions or intellectual property rights that the Participant holds as of the date hereof.  If the Company is unable for any reason, after reasonable effort, to obtain the Participant’s signature on any document needed in connection with the actions described in this Section 6(f), the Participant hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as the Participant’s agent and attorney in fact to act for and on the Participant’s behalf to execute, verify and file any such documents and to do all other lawfully permitted acts to further the purposes of this Section 6(f) with the same legal force and effect as if executed by the Participant.

 

(g)           Other Covenants. For the avoidance of doubt, the restrictive covenants set forth in this Section 6 are in addition to, and not in lieu of, any restrictive covenants to which the Participant may otherwise be subject, whether under the terms of his or her employment or services agreement or otherwise.

 

(h)           Severability. The covenants contained in this Section 6 shall be construed as a series of separate covenants, one for each county, city, state or any similar subdivision in any geographic area. Except for geographic coverage, each such separate covenant shall be deemed identical in terms to the covenant contained in the preceding sections. If, in any judicial proceeding, a court refuses to enforce any of such separate covenants (or any part thereof), then such unenforceable covenant (or such part) shall be eliminated from this Agreement to the extent necessary to permit the remaining separate covenants (or portions thereof) to be enforced. In the event that the provisions of this Section 6 are deemed to exceed the time, geographic or scope limitations permitted by applicable law, then such provisions shall be reformed to the maximum time, geographic or scope limitations, as the case may be, permitted by applicable law.

 

(i)            Remedies.

 

(i)            The Participant agrees that any breach of the terms of this Section 6 would result in irreparable injury and damage to the Group for which the Company would have no adequate remedy at law; the Participant therefore also agrees that in the event of said breach or any threat of breach, the Company shall be entitled to obtain from any court of competent jurisdiction an immediate injunction and restraining order to prevent such

 

5

 

breach and/or threatened breach and/or continued breach by the Participant and/or any and all Persons acting for and/or with the Participant, without having to prove damages, in addition to any other remedies to which the Company may be entitled at law or in equity, including, without limitation, the remedy set forth in Section 6(i)(ii) hereof.  The terms of this Section 6(i) shall not prevent the Company from pursuing any other available remedies for any breach or threatened breach hereof, including, without limitation, the recovery of damages from the Participant. The Participant and the Company further agree that the provisions of the covenants contained in this Section 6 are reasonable and necessary to protect the businesses of the Group because of the Participant’s access to Confidential Information and the Participant’s material participation in the operation of such businesses.

 

(ii)           In addition, and not in limitation of the foregoing, in the event of the Participant’s breach of any of the restrictive covenants set forth in this Section 6, (A) the Restricted Stock Units (whether vested or unvested) shall immediately be forfeited, (B) the Company shall be entitled to recover any Shares acquired upon the vesting of the Restricted Stock Units, and (C) if the Participant has previously sold any of the Shares derived from the Restricted Stock Units, the Company shall also have the right to recover from the Participant the economic value thereof.

 

7.             Nontransferability of Restricted Stock Units.

 

The Restricted Stock Units granted hereunder may not be sold, transferred, pledged, assigned, encumbered or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution or, on such terms and conditions as the Administrator shall establish, to a permitted transferee.

 

8.             Beneficiary Designation.

 

The Participant may from time to time name any beneficiary or beneficiaries (who may be named contingently or successively) by whom any right under the Plan and this Agreement is to be exercised in case of his or her death. Each designation will revoke all prior designations by the Participant, shall be in a form reasonably prescribed by the Administrator, and will be effective only when filed by the Participant in writing with the Administrator during his or her lifetime.

 

9.             Requirements of Law.

 

The issuance of Shares following vesting of the Restricted Stock Units shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.  No Shares shall be issued upon vesting of any portion of the Restricted Stock Units granted hereunder, if such issuance would result in a violation of applicable law, including the U.S. federal securities laws and any applicable state or foreign securities laws.

 

10.          No Guarantee of Continued Service.

 

Nothing in the Plan or in this Agreement shall interfere with or limit in any way the right of the Company or an Affiliate thereof to terminate the Participant’s Service at any time or confer upon the Participant any right to continued Service.

 

6

 

11.          No Rights as a Stockholder.

 

Except as provided in Section 2 above or as otherwise required by law, the Participant shall not have any rights as a stockholder with respect to any Shares covered by the Restricted Stock Units granted hereunder prior to the date on which he or she is recorded as the holder of those Shares on the records of the Company.

 

12.          Interpretation; Construction.

 

Any determination or interpretation by the Administrator under or pursuant to this Agreement shall be final and conclusive on all persons affected hereby. Except as otherwise expressly provided in the Plan, in the event of a conflict between any term of this Agreement and the terms of the Plan, the terms of the Plan shall control.

 

13.          Amendments.

 

The Administrator may, in its sole discretion, at any time and from time to time, alter or amend this Agreement and the terms and conditions of the unvested portion of the Restricted Stock Units (but not any portion of the Restricted Stock Units that has previously vested) in whole or in part, including without limitation, amending the criteria for vesting set forth in Section 1 hereof and substituting alternative vesting criteria; provided that such alteration, amendment, suspension or termination shall not adversely alter or impair the rights of the Participant under the Restricted Stock Units without the Participant’s consent. The Company shall give written notice to the Participant of any such alteration or amendment of this Agreement as promptly as practicable after the adoption thereof.  This Agreement may also be amended by a writing signed by both the Company and the Participant.

 

14.          Miscellaneous.

 

(a)           Notices. All notices, requests, demands, letters, waivers and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if delivered personally, mailed, certified or registered mail with postage prepaid, sent by next-day or overnight mail or delivery, or sent by fax, as follows:

 

(i)                                     If to the Company:

 

NetSTREIT Corp.

5910 N. Central Expressway

Suite 1600

Dallas, TX 75206

Phone: 972-200-7100

 

(ii)                                  If to the Participant, to the Participant’s last known home address,

 

or to such other person or address as any party shall specify by notice in writing to the Company.  All such notices, requests, demands, letters, waivers and other communications shall be deemed to have been received (w) if by personal delivery on the day after such delivery, (x) if by certified or registered mail, on the fifth business day after the mailing thereof, (y) if by next-day or overnight

 

7

 

mail or delivery, on the day delivered, or (z) if by fax, on the day delivered, provided that such delivery is confirmed.

 

(b)           Binding Effect; Benefits. This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and assigns.  Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.

 

(c)           No Guarantee of Future Awards. This Agreement does not guarantee the Participant the right to or expectation of future Awards under the Plan or any future plan adopted by the Company.

 

(d)           No Impact on Other Benefits. The value of the Restricted Stock Units is not part of the Participant’s normal or expected compensation for purposes of calculating any severance, retirement, welfare, insurance or similar employee benefit.

 

(e)           Waiver. Either party hereto may by written notice to the other (i) extend the time for the performance of any of the obligations or other actions of the other under this Agreement, (ii) waive compliance with any of the conditions or covenants of the other contained in this Agreement and (iii) waive or modify performance of any of the obligations of the other under this Agreement.  Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of either party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants or agreements contained herein.  The waiver by either party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by either party to exercise any right or privilege hereunder shall be deemed a waiver of such party’s rights or privileges hereunder or shall be deemed a waiver of such party’s rights to exercise the same at any subsequent time or times hereunder.

 

(f)            Entire Agreement; Plan Controls. This Agreement, together with the Plan, constitutes the entire obligation of the parties with respect to the subject matter of this Agreement and supersedes any prior written or oral expressions of intent or understanding with respect to such subject matter. In the event that the terms of this Agreement conflict with the terms of the Plan, the Plan shall control.

 

(g)           Code Section 409A Compliance. The Restricted Stock Units are intended to be exempt from or comply with the requirements of Code Section 409A and this Agreement shall be interpreted accordingly. Notwithstanding any provision of this Agreement, to the extent that the Administrator determines that any portion of the Restricted Stock Units granted under this Agreement is subject to Code Section 409A and fails to comply with the requirements of Code Section 409A, notwithstanding anything to the contrary contained in the Plan or in this Agreement, the Administrator reserves the right to amend, restructure, terminate or replace such portion of the Restricted Stock Units in order to cause such portion of the Restricted Stock Units to either not be subject to Code Section 409A or to comply with the applicable provisions of such section.

 

8

 

(h)           Applicable Law. This Agreement shall be governed by and construed in accordance with the law of the State of Delaware, regardless of the law that might be applied under principles of conflict of laws.

 

(i)            Section and Other Headings. The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

 

(j)            Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument.

 

(k)           Erroneously Awarded Compensation. Notwithstanding any provision in the Plan or in this Agreement to the contrary, this Award shall be subject to any compensation recovery and/or recoupment policy that may be adopted and amended from time to time by the Company to comply with applicable law, including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or to comport with good corporate governance practices.

 

[Signature Page Follows]

 

9

 

IN WITNESS WHEREOF, the Company and the Participant have duly executed this Agreement as of the date first above written.

 

	
 
    	
NETSTREIT   CORP.
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
PARTICIPANT
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Name:   [          ]
    

 

[Signature Page to RSU Agreement]Exhibit 10.12

 

TAX PROTECTION AGREEMENT

 

This TAX PROTECTION AGREEMENT (this “Agreement”) is entered into as of December 23, 2019, by and among NetSTREIT Corp., a Maryland corporation (the “REIT”), NetSTREIT, L.P., a Delaware limited partnership (the “Operating Partnership”), Hillview Way, LLC, an Ohio limited liability company (“Hillview”) and Mayfield Road Group, LLC, an Ohio limited liability company (“Mayfield”).

 

RECITALS

 

WHEREAS, the REIT will elect to qualify a real estate investment trust, within the meaning of Section 856 of the Code, commencing with its taxable year ending December 31, 2019;

 

WHEREAS, pursuant to that certain Contribution Contract (the “Contribution Contract”), by Amelia 7776 LLC, an Ohio limited liability company, Clanton 4893 LLC, an Ohio limited liability company, Franklin 6415 LLC, an Ohio limited liability company, Hanover 6798 LLC, an Ohio limited liability company, Hurricane 7124 LLC, an Ohio limited liability company, Vaughn 7063 LLC, an Ohio limited liability company, Warrior 4943 LLC, an Ohio limited liability company, Waterford 8038, LLC, an Ohio limited liability company, and Woodstock 2470 LLC, an Ohio limited liability company (each, a “Co-Contributor”), and EverSTAR Income & Value Fund V, LP (f/k/a Capview Income & Value Fund IV, LP), a Delaware limited partnership (“EverSTAR”), each Co-Contributor contributed a tract of real property to EverSTAR (the “Contributed Properties”);

 

WHEREAS, pursuant to that certain Agreement of Merger dated May 25, 2017, each Co-Contributor was merged into Mayfield, such that Mayfield is the successor in interest to all of the Co- Contributors;

 

WHEREAS, in connection with the subsequent contribution of that certain property located at 112 E. 12300 South, Draper, Utah by Hillview (the “Hillview Property”) to Capview Income and Value Fund IV, and pursuant to that certain Addendum to Contribution Option Contract dated as of May 2, 2018, by and between Hillview and Capview Income and Value Fund IV, Hillview was granted the benefit of the same tax indemnity provisions as granted to each Co-Contributor pursuant to Section 16 of the Contribution Contract;

 

WHEREAS, EverSTAR granted each Co-Contributor the benefit of certain tax indemnity provisions pursuant to Section 16 of the Contribution Contract;

 

WHEREAS, pursuant to that certain Merger Agreement, dated as of December 19, 2019 (the “Merger Agreement”), EverSTAR will merge into the Operating Partnership and the Operating Partnership will acquire the Contributed Properties;

 

WHEREAS, it is intended for federal income tax purposes that the transactions contemplated by the Merger Agreement will be treated as tax-deferred contributions of the Contributed Properties and the Hillview Property to the Operating Partnership for OP Units under Section 721 of the Code;

 

WHEREAS, as a condition to engaging in the transactions contemplated by the Merger Agreement, and as an inducement to do so, the parties hereto are entering into this Agreement.

 

THEREFORE, in consideration of the promises and mutual agreements contained herein and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

 

ARTICLE I

 

DEFINED TERMS

 

For purposes of this Agreement, the following terms shall have the meanings ascribed to them.

 

Section 1.1            “Agreement” has the meaning set forth in the preamble.

 

Section 1.2            “Closing Date” has the meaning assigned to it in the Contribution Contract.

 

Section 1.3            “Code” means the Internal Revenue Code of 1986, as amended.

 

Section 1.4            “Contributed Property” has the meaning set forth in the recitals.

 

Section 1.5            “Gain Limitation Property” means (i) each Contributed Property; (ii) any other property or asset hereafter acquired by the Operating Partnership or any direct or indirect interest owned by the Operating Partnership in any entity that owns an interest in a Gain Limitation Property, if the disposition of that property or asset would result in the recognition of Protected Gain by a Protected Partner; and (iii) any other property that the Operating Partnership directly or indirectly receives that is in whole or in part a “substituted basis property” as defined in Section 7701(a)(42) of the Code with respect to a Gain Limitation Property.

 

Section 1.6            “Indirect Owner” means any person owning an equity interest in a Protected Partner, and in the case of any Indirect Owner that itself is an entity that is classified as a partnership, disregarded entity, or subchapter S corporation for federal income tax purposes, any person owning an equity interest in such entity.

 

Section 1.7            “Minimum Liability Amount” means, as to each Protected Partner, the amount of indebtedness of the Operating Partnership that needs to be allocated to such Protected Partner pursuant to Section 752 of the Code so that such Protected Partner will not recognize any Protected Gain,  The initial Minimum Liability Amount for the Protected Partner as of the date of this Agreement is set forth on Schedule II hereto and represents the Protected Partner’s so called “negative tax capital account” as of the Closing Date.  It is understood that the Minimum Liability Amount set forth on Schedule II is believed by the Protected Partner to be the requisite amount, but until tax returns are completed for the Protected Partner, such amount is not final, and after the Closing Date, until seven (7) years following the Closing Date, the Protected Partner may provide to the Operating Partnership the correct Minimum Liability Amount reflecting any such final determination of the negative tax capital account as the Closing Date, and ten (10) days after receipt thereof by the Operating Partnership, Schedule II shall be deemed amended to reflect such other amount.  The Protected Partner shall certify to the Operating Partnership that the determination and calculation of the Minimum Liability Amount as presented to the Operating Partnership is true and correct.

 

Section 1.8            “OP Agreement” means the Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated as of December 23, 2019.

 

Section 1.9            “OP Units” means units of Class A partnership interest in the Operating Partnership, as described in the OP Agreement.

 

Section 1.10          “Operating Partnership” has the meaning set forth in the preamble.

 

2

 

Section 1.11          “Person” means an individual or a corporation, partnership, trust, unincorporated organization, association, limited liability company or other entity.

 

Section 1.12          “Property” means the property identified on Exhibit A hereto and each property and/or interest acquired in exchange for the Property.

 

Section 1.13          “Protected Gain” shall mean the income or gain that would be allocable to and recognized by a Protected Partner or Indirect Owner under Section 704(c) of the Code in the event of the sale of a Gain Limitation Property or any interests in Gain Limitation Property in a fully taxable transaction. The amount of Protected Gain with respect to the Contributor shall be determined as if the Operating Partnership sold each Gain Limitation Property in a fully taxable transaction on the Closing Date for consideration equal to the Section 704(c) Value of such Gain Limitation Property on the Closing Date. The initial Protected Gain for the Protected Partner as of the date of this Agreement is set forth on Schedule III hereto and represents the Protected Partner’s estimated Protected Gain.  It is  understood that the initial Protected Gain set forth on Schedule III is believed by the Protected Partner to be the requisite amount, but until tax returns are completed for the Protected Partner, such amount is not final, and after the date hereof, until seven (7) years following the Closing Date, the Protected Partner may provide to the Operating Partnership the correct Protected Gain reflecting any such final determination, and ten (10) days after receipt thereof by the Operating Partnership, Schedule III shall be deemed amended to reflect such other amount The Protected Partner shall certify to the Operating Partnership that the determination and calculation of the Protected Gain as presented to the Operating Partnership is true and correct.

 

Section 1.14          “Protected Partner” and “Protected Partners” means each of the Persons identified on Schedule I attached hereto and any Persons who (i) acquire OP Units from a Protected Partner in a transaction in which gain or loss is not recognized in whole or in part and in which such transferee’s adjusted basis for federal income tax purposes is determined in whole or in part by reference to the adjusted basis of the Protected Partner in such OP Units, (ii) has notified the Operating Partnership of its status as a Protected Partner and (iii) provides all documentation reasonably requested by the Operating Partnership to verify such status, but excludes any person that ceases to be a Protected Partner to this Agreement.

 

Section 1.15          “REIT” has the meaning set forth in the preamble.

 

Section 1.16          “Section 704(c) Value” means the fair market value of any Gain Limitation Property as of the Closing Date, as determined pursuant to Section 704(c) of the Code and the Treasury Regulations thereunder, and as set forth next to each Gain Limitation Property on Schedule IV hereto.  The Operating Partnership shall initially carry each Gain Limitation Property on its books at a value equal to the Section 704(c) Value as set forth in the preceding sentence.

 

Section 1.17          “Tax Protection Period” has the meaning set forth in Section 2.1(a).

 

Section 1.18          “Treasury Regulations” means the income tax regulations under the Code, whether such regulations are in proposed, temporary or final form, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

 

ARTICLE II

 

TAX MATTERS

 

Section 2.1            Restrictions on Disposition of Gain Limitation Properties. The Operating Partnership agrees for the benefit of each Protected Partner, for the term beginning as of the date hereof and

 

3

 

ending on the earlier of the sale or transfer of all or substantially all of the assets of the Operating Partnership or the liquidation of the Operating Partnership in which the Protected Partners receive solely cash  or marketable securities, without restriction, for their respective interests in the Operating Partnership (the “Tax Protection Period”), not to directly or indirectly sell, exchange, transfer, or otherwise dispose of a Gain Limitation Property or any interest therein, without  regard to whether such disposition is voluntary or involuntary, in a transaction that causes the Protected Partners to recognize any Protected Gain.  Without limiting the foregoing, the term “sale, exchange, transfer or disposition” by the Operating Partnership shall be deemed to include, and the prohibition shall extend to:

 

(a)           any direct or indirect disposition by the Operating Partnership of any Gain Limitation Property (or any direct or indirect interest therein) that is subject to Section 704(c)(l)(B) of the Code and the Treasury Regulations thereunder; and

 

(b)           any distribution by the Operating Partnership to a Protected Partner that is subject to Section 737 of the Code and the Treasury Regulations thereunder.

 

Notwithstanding the foregoing, this Section 2.1 shall not apply to a merger or consolidation of the Operating Partnership pursuant to which (1) the Protected Partner is offered as consideration for the Protected Partner’s OP Units either (A) cash or property treated as cash pursuant to Section 731 of the Code (“Cash Consideration”) or (B) partnership interests that are substantially equivalent (including value and profit and loss sharing) to the OP Units disposed of, and the receipt of such partnership interests would not result in the recognition of gain for federal, state, or local income tax purposes by the Protected Partner (“Operating Partnership Interest Consideration”); (2) the Protected Partner has the right to elect to receive solely Operating Partnership Interest Consideration in exchange for his OP Units and the continuing partnership has agreed in writing to assume the obligations of the Operating Partnership under this Agreement; (3) no Protected Gain is recognized by the Operating Partnership as a result of any partner of the Operating Partnership other than the Protected Partner receiving Cash Consideration; and (4) the Protected Partner elects or is deemed to elect to receive Cash Consideration.  Furthermore, notwithstanding the restriction set forth in this Section 2.1, the Operating Partnership may dispose of any Gain Limitation Property (or any interest therein) if such disposition qualifies as a “like-kind exchange” under Section 1031 of the Code, or an involuntary conversion under Section 1033 of the Code, or other transaction (including, but not limited to, a contribution of property to any entity that qualifies for the non-recognition of gain under Section 721 or Section 351 of the Code, or a merger or consolidation of the Partnership with or into another entity that qualifies for taxation as a “partnership” for federal income tax purposes) that, as to each of the foregoing, does not result in the recognition of any taxable income or gain to any Protected Partner with respect to any of the OP Units; provided, however, that in the case of a “like-kind exchange” under Section 1031 of the Code, if such exchange is with a “related party” within the meaning of Section 1031(f)(3) of the Code, any direct or indirect disposition by such related party of the Gain Limitation Property or any other transaction prior to the expiration of the two (2) year period following such exchange that would cause Section 1031(f)(1) of the Code to apply with respect to such Gain Limitation Property (including by reason of the application of Section 1031(f)(4) of the Code) shall be considered a violation of this Section 2.1 by the Partnership.

 

Section 2.2            Section 704(c) Method. The Operating Partnership shall report allocations of income, gain, loss and deduction (as computed for tax purposes) with respect to the Properties so as to take account of the Section 704(c) built­ in gain of such properties under Code Section 704(c) or the principles set forth in Treasury Regulations section 1.704-3(a), as the case may be, using the traditional method (as specifically provided in Treasury Regulations section 1.704-3(b)).

 

4

 

Section 2.3            Maintenance of Indebtedness. With respect to each Protected Partner, the Operating Partnership agrees to maintain, or cause to be maintained, from  time  to time, sufficient indebtedness pursuant to the  requirements  set forth  below in this Section 2.3 such that, pursuant to Treasury Regulation Section 1.752-3 and pursuant to Treasury Regulation Section 1.752-2, the Protected Partner is allocated as its share of the indebtedness of the Operating Partnership, an amount at least equal to the Minimum Liability Amount; provided, however, that this Section 2.3 shall not apply if and to the extent that Treasury Regulations Section 1.752-2 and/or Section 1.752-3 is revised or amended in such a manner to cause indebtedness of the Operating Partnership that was allocated as a share of indebtedness to the Protected Partner immediately prior to such revision or amendment to no longer be allocated to such Protected Partner as a result of such  revision  or amendment.

 

Section 2.4            Tax Loan. In the event that the Operating Partnership breaches its obligations set forth in this Article II with respect to a Protected Partner, as its sole remedy the Protected Partner shall have the right to receive an interest-free loan from the Operating Partnership, and the Operating Partnership shall make an interest-free loan to such Protected Partner, in an amount equal to the aggregate federal, state, and local tax on income or Medicare taxes  (including Section 1411 of the Code) incurred by the Protected  Partner or an Indirect Owner with respect to the amount of the Protected Gain recognized with respect to the Gain Limitation Property that is allocable to (or borne by) such Protected Partner or Indirect Owner as a result of the Operating Partnership’s breach of the obligations set forth in this Article II (the “Tax Loan”).  For purposes of computing the amount of federal, state, and local income taxes incurred by a Protected Partner (or Indirect Owner), (i) any deduction for state and local income taxes payable as a result thereof actually allowed in computing federal income taxes shall be taken into account (taking into account any limitation on full deductibility due to adjusted gross income levels), and (ii) a Protected Partner’s (or  Indirect  Owner’s)  tax liability shall be computed using the highest federal, state and local marginal income tax rates (including any Medicare taxes under Section 1411 of the Code) that would be applicable to such Protected Partner’s (or Indirect Owner’s) taxable income (taking into account the character and type of such income or gain) for the year with respect to which the taxes must be paid, without regard to any deductions (other than state and local income taxes), losses or credits that may be available to such Protected Partner (or Indirect Owner) that would reduce or offset its actual taxable income or actual tax liability if such deductions, losses or credits could be utilized by the Protected Partner (or Indirect Owner) to offset other income, gain  or taxes of the Protected Partner (or Indirect Owner), either in the current year, in earlier years, or in later years. The Tax Loan shall mature and be due and payable in full, and the Protected Partner shall repay the Tax Loan upon the termination of the Tax Protection Period and the Operating Partnership shall have the right to offset any and all distributions otherwise payable on or after the date the Tax Protection Period ends to the Protected Partner against and apply such distributions otherwise payable to the Protected Partner toward the payment of the Tax Loan.

 

ARTICLE III

 

GENERAL PROVISIONS

 

Section 3.1            Changes in Law; Voluntary Redemptions.  Notwithstanding any provision of this Agreement to the contrary, the Operating Partnership shall not be required to make any payment to a Protected Partner pursuant to this Agreement if such obligation arises solely as a result of a change in any provision of the Code, the Treasury Regulations or any other applicable tax law or any administrative or judicial interpretation thereof.

 

Section 3.2            Cooperation.  The Operating Partnership and the Partners’ Representative agree to furnish or cause to be furnished to the other, upon request, as promptly as practicable, such information and assistance as is reasonably necessary to effectuate the provisions of this Agreement.  In the event any change in any applicable provision of the Code, the Treasury Regulations or any other applicable tax law or any

 

5

 

administrative or judicial interpretation thereof would result in the recognition of taxable income or gain by any Protected Partner, the parties shall reasonably cooperate to minimize or avoid any resulting tax on such Protected Partner.  Prior to any anticipated change (or as soon as reasonably possible following any unanticipated change) in any applicable provision of the Code, the Treasury Regulations or any other applicable tax or any administrative or judicial interpretation thereof, or the consummation of any spin-off transaction, reorganization transaction or other transaction that would affect the Operating Partnership and the Protected Partners, the parties shall cooperate in good faith to amend this Agreement as may be necessary or appropriate to preserve the intent and effect of this Agreement.

 

Section 3.3            Notices.  All notices, demands, declarations, consents, directions, approvals, instructions, requests and other communications required or permitted by the terms of this Agreement shall be given in the same manner as in the OP Agreement.

 

Section 3.4            Titles and Captions.  All Article or Section titles or captions in this Agreement are for convenience only.  They shall not be deemed part of this Agreement and in no way define, limit, extend or describe the scope or intent of any provisions hereof.  Except as specifically provided otherwise, references to “Articles” and “Sections” are to Articles and Sections of this Agreement.

 

Section 3.5            Pronouns and Plurals.  Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.

 

Section 3.6            Further Action.  The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement.

 

Section 3.7            Blinding Effect.  This Agreement shall be binding upon and inure to the benefit of the Operating Partnership and REIT and their respective successors and permitted assigns, and the Protected Partners.

 

Section 3.8            Creditors.  Other than as expressly set forth herein, none of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Operating Partnership.

 

Section 3.9            Waiver.  No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach or any covenant, duty, agreement or condition.

 

Section 3.10          Counterparts.  This Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all of the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart.  Each party shall be become bound by this Agreement immediately upon affixing its signature hereto.

 

Section 3.11          Applicable Law.  This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law.

 

Section 3.12          Invalidity of Provisions.  If any provisions of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality or enforceability of other remaining provisions contained herein shall not be affected thereby.

 

6

 

Section 3.13          Entire Agreement; Coordination with OP Agreement.  This Agreement contains the entire understanding and agreement among the Partners with respect to the subject matter hereof.  The parties hereto agree that, to the extent of any conflict between the provisions of the OP Agreement and the provisions of this Agreement with respect to the rights, obligations or remedies of any such party under this Agreement, the provisions of this Agreement shall control.

 

Section 3.14          No Rights as Stockholders.  Nothing contained in this Agreement shall be construed as conferring upon the holders of the OP Units any rights whatsoever as stockholders of the REIT, including, without limitation, any right to receive dividends or other distributions made to stockholders of REIT or to vote or to consent or to receive notice as stockholders in respect of any meeting of stockholders for the election of directors of REIT or any other matter.

 

[Remainder of Page Left Blank Intentionally]

 

7

 

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

 

	
 
    	
REIT:
    
	
 
    	
 
    
	
 
    	
NetSTREIT   Corp.,
    
	
 
    	
a Maryland   corporation
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Mark Manheimer
    
	
 
    	
Name: Mark   Manheimer
    
	
 
    	
Title:   President, Chief Executive Officer, Secretary and Treasurer
    
	
 
    	
 
    
	
 
    	
OPERATING   PARTNERSHIP:
    
	
 
    	
 
    
	
 
    	
NetSTREIT   OP, L.P.,
    
	
 
    	
A Delaware   limited partnership
    
	
 
    	
 
    
	
 
    	
By:
    	
NetSTREIT   GP, LLC, its General Partner
    
	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Mark Manheimer
    
	
 
    	
 
    	
Name: Mark   Manheimer
    
	
 
    	
 
    	
Title:   President, Secretary and Treasurer
    

 

Signature to Tax Protection Agreement

 

 

	
 
    	
PROTECTED   PARTNERS:
    
	
 
    	
 
    
	
 
    	
HILLVIEW   WAY, LLC,
    
	
 
    	
an Ohio   limited liability company
    
	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Carol   Zaremba
    
	
 
    	
 
    	
Name: Carol   Zaremba
    
	
 
    	
 
    	
Title:   Manager
    
	
 
    	
 
    
	
 
    	
MAYFIELD   ROAD GROUP, LLC,
    
	
 
    	
an Ohio   limited liability company
    
	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Richard   S. Rivitz
    
	
 
    	
 
    	
Name:   Richard S. Rivitz
    
	
 
    	
 
    	
Title:   President
    

 

Signature to Tax Protection Agreement

 

 

SCHEDULE I

 

PROTECTED PARTNERS

 

Hillview Way, LLC

 

Mayfield Road Group, LLC, as successor in interest to:

 

Amelia 7776 LLC

 

Clanton 4893 LLC

 

Franklin 6415 LLC

 

Hanover 6798 LLC

 

Hurricane 7124 LLC

 

Vaughn 7063 LLC

 

Warrior 4943 LLC

 

Waterford 8038, LLC

 

Woodstock 2470 LLC

 

Schedule I-1

 

SCHEDULE II

 

MINIMUM LIABILITY AMOUNT

 

	
Property
    	
 
    	
Minimum Liability Amount
    	
 
    
	
52 West Main   Street
    	
 
    	
$
    	
(1,401,104
    	
)
    
	
1105 7th Street   North
    	
 
    	
$
    	
(1,254,179
    	
)
    
	
1154 Liberty Pike
    	
 
    	
$
    	
(2,262,140
    	
)
    
	
110 E. Lagrange   Road
    	
 
    	
$
    	
(1,104,726
    	
)
    
	
3901 Teays   Valley Road
    	
 
    	
$
    	
(1,109,309
    	
)
    
	
55 Ray   Thorington Road
    	
 
    	
$
    	
(1,875,945
    	
)
    
	
434 US Highway   31
    	
 
    	
$
    	
(1,216,398
    	
)
    
	
7960 Cooley Lake   Road
    	
 
    	
$
    	
(3,184,100
    	
)
    
	
3785 Sixes Road
    	
 
    	
$
    	
(1,493,307
    	
)
    
	
112 E. 12300   South
    	
 
    	
$
    	
0
    	
 
    

 

Schedule II-1

 

SCHEDULE III

 

PROTECTED GAIN

 

	
Property
    	
 
    	
Protected Gain
    	
 
    
	
52 West Main   Street
    	
 
    	
$
    	
1,995,356
    	
 
    
	
1105 7th Street   North
    	
 
    	
$
    	
1,788,435
    	
 
    
	
1154 Liberty   Pike
    	
 
    	
$
    	
3,234,957
    	
 
    
	
110 E. Lagrange   Road
    	
 
    	
$
    	
1,562,144
    	
 
    
	
3901 Teays   Valley Road
    	
 
    	
$
    	
1,559,652
    	
 
    
	
55 Ray   Thorington Road
    	
 
    	
$
    	
2,720,737
    	
 
    
	
434 US Highway   31
    	
 
    	
$
    	
1,737,333
    	
 
    
	
7960 Cooley Lake   Road
    	
 
    	
$
    	
4,674,014
    	
 
    
	
3785 Sixes Road
    	
 
    	
$
    	
2,140,745
    	
 
    
	
112 E. 12300   South
    	
 
    	
$
    	
243,899
    	
 
    

 

Schedule III-1

 

SCHEDULE IV

 

SECTION 704(C) VALUE

 

	
Property
    	
 
    	
Section 704(c) Value
    	
 
    
	
52 West Main   Street
    	
 
    	
$
    	
2,272,072
    	
 
    
	
1105 7th Street   North
    	
 
    	
$
    	
2,036,081
    	
 
    
	
1154 Liberty   Pike
    	
 
    	
$
    	
3,678,477
    	
 
    
	
110 E. Lagrange   Road
    	
 
    	
$
    	
1,779,236
    	
 
    
	
3901 Teays   Valley Road
    	
 
    	
$
    	
1,776,921
    	
 
    
	
55 Ray   Thorington Road
    	
 
    	
$
    	
3,095,325
    	
 
    
	
434 US Highway   31
    	
 
    	
$
    	
1,977,246
    	
 
    
	
7960 Cooley Lake   Road
    	
 
    	
$
    	
5,319,156
    	
 
    
	
3785 Sixes Road
    	
 
    	
$
    	
2,436,442
    	
 
    
	
112 E. 12300   South
    	
 
    	
$
    	
1,354,599
    	
 
    

 

Schedule IV-1

 

EXHIBIT A

 

PROPERTY

 

Property

 

52 West Main Street

 

1105 7th Street North

 

1154 Liberty Pike

 

110 E. Lagrange Road

 

3901 Teays Valley Road

 

55 Ray Thorington Road

 

434 US Highway 31

 

7960 Cooley Lake Road

 

3785 Sixes Road

 

112 E. 12300 South

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00312-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00312-of-00352.parquet"}]]