Document:

Exhibit 10.16

Execution Version

 

CONSULTING AGREEMENT

 

Consulting Agreement (the “Agreement”), dated as of March 10, 2017, by and between JBG SMITH Properties, a Maryland real estate investment trust (together with its affiliates, the “Company”), with its principal offices in Chevy Chase, Maryland and Mitchell Schear (“Consultant”).

 

Recitals

 

The Company and Consultant desire to set forth the terms upon which Consultant will enter into an engagement with the Company to provide consulting services;

 

Vornado Realty Trust, a Maryland real estate investment trust and Vornado Realty L.P., a Delaware limited partnership (the “Vornado Parties”), and JBG Properties Inc., a Maryland corporation and JBG/Operating Partners, L.P., a Delaware limited partnership, together with certain JBG entities (the “JBG Parties”), and the Company, entered into that certain Master Transaction Agreement dated October 31, 2016 (the “Transaction Agreement”), pursuant to which the Vornado Parties and the JBG Parties will effectuate a series of transactions resulting in the acquisition, transfer and contribution of assets and interests to JBG SMITH Properties and JBG SMITH Properties LP, a Delaware limited partnership; and

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth below, the parties hereby agree as follows:

 

Agreement

 

1.             Engagement of Consultant.  The Company hereby agrees to engage Consultant, and Consultant hereby accepts such engagement, on the terms and conditions hereinafter set forth.  Consultant’s engagement hereunder will be as an independent contractor, rather than as an employee of the Company.

 

2.             Term.  The term of this Agreement and Consultant’s engagement by the Company hereunder will commence on the Closing Date (as defined in the Transaction Agreement) (the “Effective Date”) and will continue until December 31, 2017 (the “Initial Period”).  The term will renew for a single period from January 1, 2018 through the 24-month anniversary of the Effective Date (the “Renewal Period”) upon agreement by each party in writing of renewal at least 60 days prior to the end of the Initial Period (the Initial Period and the Renewal Period, if applicable, the “Term”).  This Agreement and the Term may be terminated earlier by either party as set forth in Section 5.  The effectiveness of this Agreement is contingent on the occurrence of the Closing (as defined in the Transaction Agreement).  If the Transaction Agreement terminates in accordance with its terms or the Closing does not occur for any reason, this Agreement will be void ab initio.

 

3.             Scope of Services.  Consultant will serve as a consultant and adviser to the Company, and hold himself out as available to provide services on an as-needed basis, with regard to matters of the Company that Consultant was involved with prior to the date hereof and certain other matters as may be identified by the Company’s Board of Directors (the “Board”) or the Company’s Chief Executive Officer, in each case as requested by the Company.  Consultant will report directly to the Company’s Chief Executive Officer.  Consultant will devote such time that is reasonably necessary for Consultant to perform

 

 

services for the Company, perform such services in a professional manner commensurate with the favorable reputation of the Company and not engage in any activities that will conflict with the best interests of the Company.  Upon the Company’s request, Consultant will provide the Company with a reasonable accounting of the amount of time Consultant has devoted to providing services under this Agreement.  It is the Company’s and Consultant’s current anticipation that the level of services will not exceed 20% of the average level of services performed by Consultant during Consultant’s last three years of employment with Vornado Realty Trust.  During Consultant’s active provision of regular consulting services to the Company under this Agreement during the Term, without regard to whether the Company continues to pay Consultant under Section 7(b) hereof (the “Active Consulting Period”), the Company shall provide Consultant with administrative support via his current assistant (or if such assistant’s employment terminates for any reason, a replacement acceptable to him) in order to enable him to perform his services hereunder.  After conclusion of the Active Consulting Period, Consultant agrees to remain available to consult with the Company on an as-needed basis for the remainder of the Term.

 

4.             Consulting Fees and Expenses.  During the Term, the Company will pay Consultant fees at the rate $166,667 per month (“Consulting Fees”).  The Consulting Fees will be paid in cash in installments in accordance with the Company’s customary payroll practices.  The Company will promptly reimburse Consultant for all reasonable business expenses upon the presentation of reasonably itemized statements of such expenses in accordance with the Company’s policies and procedures now in force or as such policies and procedures may be modified with respect to all senior executive officers of the Company (such expenses, “Business Expenses”), and will continue to provide Consultant with an additional cash payment of $2,750 per month for the period during which Consulting Fees are paid.

 

5.             Termination of the Agreement.  This Agreement and the Term may be terminated by either party for any reason on 60 days’ notice, and will automatically terminate upon Consultant’s death; provided that the Company may terminate this Agreement, the Term and Consultant’s engagement hereunder for Cause without advance notice.  For purposes of this Agreement, the Company will have “Cause” to terminate this Agreement and the Term upon Consultant’s:

 

(i)  conviction of, or plea of guilty or nolo contendere to, a felony;

 

(ii) willful and continued failure to use reasonable best efforts to substantially perform his duties hereunder (other than such failure resulting from Consultant’s incapacity due to physical or mental illness) that Consultant fails to remedy within 30 days after written notice is delivered by the Company to Consultant that specifically identifies in reasonable detail the manner in which the Company believes Consultant has not used reasonable efforts to perform in all material respects his duties hereunder; or

 

(iii) willful misconduct (including, but not limited to, a willful breach of the provisions of Section 10) that is materially economically injurious to the Company.

 

For purposes of this Section 5, no act, or failure to act, by Consultant will be considered “willful” unless committed in bad faith and without a reasonable belief that the act or omission was in the best interests of the Company.

 

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6.             Notice and Date of Termination.  Any termination of this Agreement and the Term will be communicated by written Notice of Termination to the other party hereto in accordance with Section 13.  For purposes of this Agreement, a “Notice of Termination” means a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Agreement under the provision so indicated).  “Date of Termination” means (i) the date the Agreement is terminated due to the Consultant’s death or (ii) if the Agreement is terminated for any other reason, the date set forth in the applicable Notice of Termination.

 

7.             Compensation upon Termination of Agreement.  This Section provides the payments and benefits to be paid or provided to Consultant as a result of termination of this Agreement and the Term. Except as provided in this Section 7, Consultant shall not be entitled to anything further from the Company as a result of the termination of this Agreement and the Term, regardless of the reason for such termination.

 

(a)           Termination of Agreement for Any Reason.  Following the termination of this Agreement and the Term, regardless of the reason for such termination and including, without limitation, a termination of this Agreement and the Term by the Company for Cause or upon expiration of the Term, the Company will pay Consultant (or his estate in the event of his death) as soon as practicable following the termination of the Agreement (A) any Consulting Fees for the period Consultant provided services under the Agreement that were earned but remain unpaid and (B) reimburse Consultant as soon as practicable following the Date of Termination for any amounts due to Consultant for Business Expenses (unless such termination occurred as a result of misappropriation of funds).

 

(b)           Company’s Termination of the Agreement without Cause or Upon a Nonrenewal, or Consultant’s Termination of the Agreement for Any Reason (including as a result of Death or Disability).  If this Agreement and the Term is terminated following notice to Consultant of the Company’s intention to not renew the Term of this Agreement, pursuant to Section 2 or by the Company without Cause, or the Consultant terminates the Agreement for (x) any reason after December 31, 2017, provided that the Active Consulting Period continues through that date or (y) as a result of Consultant’s death or Disability (as defined below), Consultant will be entitled to receive, in addition to any payments under Section 7(a), continued payment of the Consulting Fees through the 24-month anniversary of the Effective Date, paid in approximately equal monthly installments commencing on the 60th day after the Date of Termination (with a catch-up payment made on the 60th day for amounts otherwise payable during such first 60-day period).  As a condition to the continuation of Consulting Fee payments pursuant to this paragraph, Consultant must execute a separation and general release agreement in the form attached hereto as Exhibit B (the “Release”), which must become effective within 55 days following the Date of Termination; provided, however, that if Consultant’s Date of Termination occurs on or after November 1 of a given calendar year, any such payments (subject to Section 10 hereof) shall commence to be paid in January of the immediately following calendar year.  “Disability” means that, as a result of Consultant’s incapacity due to physical or mental illness, Consultant has been been substantially unable to perform his duties hereunder for a continuous period of 180 days.

 

(c)           Company’s Termination of the Agreement for Cause.  In the event this Agreement is terminated by the Company for Cause, Consultant will be entitled only to the payments described under Section 7(a).

 

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8.             Independent Contractor.  As an independent contractor of the Company, Consultant will not be entitled to any benefits available to employees of the Company.  The Company will report payments to Consultant on an IRS Form 1099, and Consultant acknowledges that Consultant will be solely responsible for any federal, state or local income or self-employment taxes arising with respect to any fees hereunder and that Consultant has no state law workers’ compensation rights with respect to services under this Agreement.  As an independent contractor, Consultant will not, directly or indirectly, act as an agent, servant or employee of the Company and will not have any authority to legally bind the Company or hold himself out as having such authority.  Consultant agrees to observe all policies and rules established by the Company for its independent contractors from time to time.

 

9.             409A and Termination.  Notwithstanding the foregoing, solely to the extent  necessary to comply with the restriction in Section 409A(a)(2)(B) of the Internal Revenue Code of 1986, as amended (the “Code”) concerning payments to “specified employees” (as defined in Section 409A of the Code and applicable regulations thereunder, “Section 409A”) any payment on account of Consultant’s separation from service that would otherwise be due hereunder within six months after such separation shall nonetheless be delayed until the first business day of the seventh month following Consultant’s Date of Termination and the first such payment shall include the cumulative amount of any payments that would have been paid prior to such date if not for such restriction, together with interest on such cumulative amount during the period of such restriction at a rate, per annum, equal to the applicable federal short-term rate (compounded monthly) in effect under Section 1274(d) of the Code on the Date of Termination. Notwithstanding anything contained herein to the contrary, Consultant shall not be considered to have terminated services with the Company for purposes of Section 7 hereof unless he would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A.

 

10.          Confidential Information, Ownership of Documents; Non-Competition; Non-Solicitation.

 

(a)           Confidential Information. During the Term and thereafter, Consultant shall hold in a fiduciary capacity for the benefit of the Company all trade secrets and confidential information, knowledge or data relating to the Company and its businesses and investments, which shall have been obtained by Consultant during Consultant’s engagement with the Company and which is not generally available public or industry knowledge (other than by acts by Consultant in violation of this Agreement). Except as may be required or appropriate in connection with his carrying out his duties under this Agreement, Consultant shall not, without the prior written consent of the Company or as may otherwise be required by law or any legal process, any statutory obligation or order of any court or statutory tribunal of competent jurisdiction, or as requested by a governmental or administrative agency, or as is necessary in connection with any adversarial proceeding against the Company (in which case Consultant shall use his reasonable best efforts in cooperating with the Company (at the Company’s expense) in obtaining a protective order against disclosure by a court of competent jurisdiction), communicate or divulge any such trade secrets, information, knowledge or data to anyone other than the Company and those designated by the Company or on behalf of the Company in the furtherance of its business or to perform duties hereunder.  For the avoidance of doubt, nothing in this Agreement is intended to impair Consultant’s rights to make disclosures under any applicable Federal whistleblower or trade secret law.

 

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(b)           Removal of Documents; Rights to Products. Consultant may not remove any records, files, drawings, documents, models, equipment, and the like relating to the Company’s business from the Company’s premises without its written consent, unless such removal is in the furtherance of the Company’s business or is in connection with Consultant carrying out his duties under this Agreement and, if so removed, such items will be returned to the Company promptly after termination of this Agreement and the Term, or otherwise promptly after removal if such removal occurs following termination of this Agreement and the Term.  Consultant shall and hereby does assign to the Company all rights to trade secrets and other products relating to the Company’s business developed by him alone or in conjunction with others at any time while rendering services to or on behalf of the Company.  In the event of any conflict between the provisions of this paragraph and of any applicable employee or independent contractor manual or similar policy of the Company, the provisions of this paragraph will govern.

 

(c)           Protection of Business.  Consultant acknowledges (i) that the Company has devoted extensive time, effort and resources in maintaining a stable workforce and that, solely as a result of his employment with Vornado Realty Trust and his future provision of services to the Company as provided herein, Consultant has had and will continue to have direct contact and dealings with employees of and other services providers to the Company, and (ii) that in such roles the Consultant has received and is expected to receive confidential information of the Company, including Company trade secrets, and therefore, Consultant acknowledges and agrees that the following restrictions are both reasonable and commensurate with and in light of the foregoing:  during the Restricted Period (as defined herein below), Consultant will not (x) engage in any Competing Business (as defined below) or pursue or attempt to develop or to direct to any other entity any project known to Consultant and which the Company is or was pursuing, developing or attempting to develop during the Term (a “Project”), or interfere or otherwise compete (other than in connection with performing services for the Company or its affiliates with regard to other properties managed by the Company or its affiliates with the consent of the Chairman of the Board) with any active lease negotiations of the Company which Consultant is or was actively involved in conducting or strategizing on behalf of the Company or its affiliates] and (y) Consultant will not solicit any officer, employee (other than secretarial staff) or exclusive or primary consultant of the Company to leave the employ of the Company.  “Competing Business” means any business that is engaged in the Washington, D.C. metropolitan area, directly or indirectly, in the financing, acquisition, operation, management, leasing or disposition of any commercial office real estate property or any improvements thereof on behalf of any public or non-public company, other than activities set forth in Exhibit A hereto.  “Restricted Period” means (a) the period during and through the first anniversary of the Effective Date, with respect to any Competing Business that directly competes with the Company, including Boston Properties, First Potomac Realty Trust and Brandywine Realty Trust, (b) four (4) months after the Effective Date, with respect to any other Competing Business that is approved by the Chairman of the Board of the Company in his or her sole discretion upon request from the Consultant, and (c) with respect to clause (y) above, the first anniversary of the Effective Date.  For the avoidance of doubt, Consultant’s interest in, and continuing services on behalf of, the Waterfront Station project at any time shall not be deemed a conflict of interests by Consultant under Section 3 (or otherwise) or a violation of this Section 10(c).

 

(d)           Injunctive Relief.  In addition to any other remedy available to the Company under applicable law, in the event of a breach or threatened breach of this Section 10, Consultant agrees that the Company shall be entitled to seek injunctive relief in a court of

 

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appropriate jurisdiction to remedy any such breach or threatened breach, Consultant acknowledging that damages would be inadequate and insufficient.

 

(e)           Continuing Operation.  Except as specifically provided in this Section 10, the termination of this Agreement, the Term and Consultant’s engagement hereunder shall have no effect on the continuing operation of this Section 10.  For the avoidance of doubt, following a nonrenewal of the Agreement by the Company, Consultant shall continue to be subject to those provisions that survive the termination of this Agreement and the Term, including without limitation, those provided in Section 10.

 

11.          Indemnification.

 

(a)           The Company agrees that if Consultant is made a party to or threatened to be made a party to or is requested to be made a witness in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that Consultant is or was a consultant to, or trustee, director or officer of, the Company or is or was serving at the request of the Company or any subsidiary or either thereof as a consultant to, or trustee, director, officer, member, employee or agent of, another corporation or a partnership, joint venture, trust or other enterprise, including, without limitation, service with respect to employee benefit plans, whether or not the basis of such Proceeding is alleged action in an official capacity as a consultant, trustee, director, officer, member, employee or agent while serving as a consultant, trustee, director, officer, member, employee or agent, Consultant shall be indemnified and held harmless by the Company to the fullest extent authorized by applicable law (including the advancement of applicable, reasonable legal fees and expenses), as the same exists or may hereafter be amended, against all liabilities, costs, fees  and other  expenses  incurred or suffered by Consultant in connection therewith, and such indemnification shall continue as to Consultant even if Consultant has ceased to be an officer, director, trustee or agent, or is no longer  rendering consulting services to or on behalf of  the Company and shall inure to the benefit of his heirs, executors and administrators.

 

12.          Successors; Binding Agreement.

 

(a)           Company’s Successors. No rights or obligations of the Company under this Agreement may be assigned or transferred except that the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.

 

(b)           Consultant’s Successors. No rights or obligations of Consultant under this Agreement may be assigned or transferred by Consultant other than his rights to payments or benefits hereunder, which may be transferred only by will or the laws of descent and distribution. If Consultant should die following his Date of Termination while any amounts would still be payable to him hereunder if he had continued to live, all such amounts unless otherwise provided herein shall be paid in accordance with the terms of this Agreement to such person or persons so appointed in writing by Consultant, or otherwise to his legal representatives or estate.

 

13.          Notice. For the purposes of this Agreement, notices, demands and all other communications provided for in this Agreement shall be in writing and shall be deemed to

 

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have been duly given when delivered either personally or by United States certified or registered mail, return receipt requested, postage prepaid, addressed as follows:

 

If to Consultant:

 

Address on file with the Company

 

With a copy to:

 

Katzke & Morgenbesser LLP

1345 Avenue of the Americas

New York, NY 10105

Attention: Henry I. Morgenbesser, Esq.

 

If to the Company:

 

JBG SMITH Properties

4445 Willard Avenue, Suite 400

Chevy Chase, Maryland 20815
 Attention:  General Counsel

 

14.          Resolution of Differences Over Breaches of Agreement. The parties shall use good faith efforts to resolve any controversy or claim arising out of, or relating to this Agreement or the breach thereof, first in accordance with the Company’s internal review procedures, except that this requirement shall not apply to any claim or dispute under or relating to Section 10 of this Agreement. If despite their good faith efforts, the parties are unable to resolve such controversy or claim through the Company’s internal review procedures, then such controversy or claim shall be resolved by arbitration in Maryland, in accordance with the rules then applicable of the American Arbitration Association (provided that the Company shall pay the filing fee and all hearing fees, arbitrator expenses and compensation fees, and administrative and other fees associated with any such arbitration), and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.  If any contest or dispute shall arise between the Company and Consultant regarding any provision of this Agreement, the Company shall reimburse Consultant for all legal fees and expenses reasonably incurred by Consultant in connection with such contest or dispute, but only if Consultant is successful in respect of substantially all of Consultant’s claims brought and pursued in connection with such contest or dispute.

 

15.          Miscellaneous.

 

(a)           Amendments. No provisions of this Agreement may be amended, modified, or waived unless such amendment or modification is agreed to in writing signed by Consultant and by a duly authorized officer of the Company, and such waiver is set forth in writing and signed by the party to be charged. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

 

(b)           Full Settlement. The Company’s obligations to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder will not (absent fraud or willful misconduct or a termination for Cause) be affected by any set-offs, counterclaims, recoupment, defense, or other claim, right or action that the Company may

 

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have against Consultant or others.  After termination of the Term, in no event will Consultant be obligated to seek employment or take any other action by way of mitigation of the amounts payable to Consultant under any of the provisions of this Agreement and such amounts will not be reduced whether or not Consultant obtains other employment.

 

(c)           Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Maryland without regard to its conflicts of law principles.

 

16.          Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, term sheets, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto in respect of such subject matter. Any other prior agreement of the parties hereto in respect of the subject matter contained herein is hereby terminated and cancelled, other than any equity agreements or any compensatory plan or program in which Consultant is a participant on the Effective Date.

 

17.          409A Compliance.

 

(a)           This Agreement is intended to comply with the requirements of Section 409A. To the extent that any provision in this Agreement is ambiguous as to its compliance with Section 409A or to the extent any provision in this Agreement must be modified to comply with Section 409A (including, without limitation, Treasury Regulation 1.409A-3(c)), such provision shall be read, or shall be modified (with the mutual consent of the parties, which consent shall not be unreasonably withheld), as the case may be, in such a manner so that all payments due under this Agreement shall comply with Section 409A. For purposes of Section 409A, each payment made under this Agreement shall be treated as a separate payment. In no event may Consultant, directly or indirectly, designate the calendar year of payment.

 

(b)           All reimbursements provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during Consultant’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement is not subject to liquidation or exchange for another benefit.

 

(c)           Consultant further acknowledges that any tax liability incurred by Consultant under Section 409A of the Code is solely the responsibility of Consultant.

 

18.          Representations. Consultant represents and warrants to the Company that he is under no contractual or other binding legal restriction which would prohibit his from entering into and performing under this Agreement or that would limit the performance his duties under this Agreement.

 

19.          Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. This Agreement shall become binding when one

 

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or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. Photographic, faxed or PDF copies of such signed counterparts may be used in lieu of the originals for any purpose.

 

[signature page follows]

 

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

 

	
COMPANY:
    	
CONSULTANT:
    
	
 
    	
 
    
	
JBG SMITH Properties, a Maryland
    	
 
    
	
real   estate investment trust
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/   Joseph Macnow
    	
 
    	
/s/   Mitchell Schear
    
	
 
    	
Name:   Joseph Macnow
    	
 
    	
Mitchell   Schear
    
	
 
    	
Title:   Executive Vice President
    	
 
    

 

 

EXHIBIT A

 

“Excluded  Activities” means the following:

 

1. The right to engage, in the Washington, D.C. metropolitan area (the “Non-Compete Area”), in any way, directly or indirectly, in the financing, acquisition, operation, development, leasing or disposition of any primarily (determined on a relative square foot basis) commercial real estate property or any improvements thereof (“Ownership Prohibited Activities”) on behalf of any private company (a “Prohibited Company”) where the projects of the Prohibited Company directly related to Ownership Prohibited Activities in the Non-Compete Area involve ownership and control of operating properties of less than 3,500,000 rentable square feet (not including any square footage with respect to properties listed in Item 6 below).

 

2. The right to engage, in the Non-Compete area, in any way, directly or indirectly, in the management and leasing of any primarily (determined on a relative square foot basis) commercial office real estate property or any improvements thereof (“Management Prohibited Activities”) on behalf of any Prohibited Company where the projects of the Prohibited Company directly related to Management Prohibited Activities in the Non-Compete Area involve management of operating properties of less than 6,000,000 rentable square feet (not including any square footage with respect to properties listed in Item 6 below).

 

3. The right to engage in Ownership Prohibited Activities and Management Prohibited Activities through a company started by Executive following the termination of the Employment Period.

 

4. The right to engage in lease brokerage (representing only tenants (excluding any Tenant), sales brokerage or mortgage brokerage activities.

 

5. The acquisition, ownership, development, management, leasing or disposition of any property by any entity in which Executive owns or acquires an equity interest as a minority passive investor (including, without limitation, as a limited partner or a non-operating member of a limited liability company) having no managerial or similar role with respect to such property.

 

6. Oversight of specified investments, passive investments and investments not being transferred 100% to the Company pursuant to the transactions authorized by the Contribution Agreement, including the following:

 

a. Waterfront

b. Central Place

c. 2099 Pennsylvania Avenue N.W.

 

7. Acting as consultant to governmental entities of the District of Columbia in connection with real estate developments.Exhibit 10.18

 

FORM OF JBG SMITH PROPERTIES

2017 OMNIBUS SHARE PLAN
 FORMATION UNIT AGREEMENT

 

FORMATION UNIT AGREEMENT (the “Agreement” or “Formation Unit Agreement”) made as of the Grant Date set forth on Schedule A hereto between JBG SMITH Properties, a Maryland real estate investment trust (the “Company”), its subsidiary JBG SMITH Properties LP, a Delaware limited partnership (the “Partnership”), and the employee of the Company or one of its affiliates listed on Schedule A (the “Employee”).

 

RECITALS

 

A.                                    In accordance with the JBG SMITH Properties 2017 Omnibus Share Plan, as it may be amended from time to time (the “Plan”), the Company desires, in connection with the employment of the Employee and the transactions contemplated by that certain Master Transaction Agreement (the “Transaction Agreement”) dated as of October 31, 2016 between Vornado Realty Trust, a Maryland real estate investment trust and Vornado Realty L.P., a Delaware limited partnership, and JBG Properties Inc., a Maryland corporation and JBG/Operating Partners, L.P., a Delaware limited partnership, together with certain affiliated entities, and the Company and the Partnership, to provide the Employee with an opportunity to acquire Formation Units (as defined in the agreement of limited partnership of the Partnership, as amended (the “Partnership Agreement”)) having the rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption and conversion set forth herein, in the Plan and in the Partnership Agreement, and thereby provide additional incentive for the Employee to promote the progress and success of the business of the Company, the Partnership and its subsidiaries.

 

B.                                    Schedule A hereto sets forth certain significant details of the Formation Unit grant herein and is incorporated herein by reference. Capitalized terms used herein and not otherwise defined have the meanings provided in the Partnership Agreement and on Schedule A.

 

NOW, THEREFORE, the Company, the Partnership and the Employee hereby agree as follows:

 

AGREEMENT

 

1.                                            Grant of Formation Units. On the terms and conditions set forth below, as well as the terms and conditions of the Plan, the Company hereby grants to the Employee such number of Formation Units set forth on Schedule A (the “Formation Units”).  Once vested in accordance with Section 3, each Formation Unit is intended to provide the Employee with the opportunity to share in the appreciation of the value of a Share in excess of the Formation Unit Participation Threshold set forth on Schedule A based on the Formation Unit Conversion Factor and other terms set forth in the Partnership Agreement. The Formation Units will accumulate and/or participate in regular cash distributions made for Common Partnership Units as set forth in the Partnership Agreement, in accordance with the Formation Unit Fraction set forth on Schedule A.

 

2.                                            Conversion and Term. Subject to earlier forfeiture, termination, acceleration or cancellation of the Formation Units as provided in the Partnership

 

 

Agreement, Plan or this Agreement, until the Expiration Date (or such later time as set forth in the Employee’s employment agreement), vested Formation Units shall be convertible at the Employee’s election into a number of LTIP Units, which in turn are convertible into Common Partnership Units and common Shares (“Common Shares”) as provided in the Partnership Agreement.  For purposes of this Agreement, “Expiration Date” means the earlier of (a) 60 days after the date of the Employee’s termination of employment by the Company without Cause, resignation for Good Reason, Retirement, Disability or death, (b) the date of employment termination for any reason other than as set forth in clause (a), and (c) the tenth (10th) anniversary of the Grant Date.  Unless otherwise provided in an agreement between the Company and the Employee, upon the Expiration Date any Formation Units which have not been converted into LTIP Units shall terminate, be cancelled for no consideration and be without further force or effect.

 

3.                                            Vesting Period. The vesting period of the Formation Units (the “Vesting Period”) begins on the Grant Date and continues until such Vesting Dates as set forth on Schedule A. On the first Vesting Date following the date of this Agreement and each Vesting Date thereafter, the number of Formation Units equal to the applicable Vesting Amount specified on Schedule A shall become vested, subject to earlier forfeiture as provided in this Agreement. To the extent that Schedule A provides for amounts or schedules of vesting that conflict with the provisions of this paragraph, the provisions of Schedule A will govern. Except as permitted under Section 13, the Formation Units for which the applicable Vesting Period has not expired may not be sold, assigned, transferred, pledged or otherwise disposed of or encumbered (whether voluntary or involuntary or by judgment, levy, attachment, garnishment or other legal or equitable proceeding).

 

The Employee shall have the right to vote the Formation Units if and when voting is allowed under the Partnership Agreement, regardless of whether the applicable Vesting Period has expired.

 

4.                                            Forfeiture of Formation Units. Except as otherwise provided in any employment agreement between the Employee and the Company, upon the Employee’s Retirement, Disability or death, or if the employment of the Employee by the Company or its affiliate is terminated either by the Company or its affiliate (or a successor thereof) without Cause or by the Employee for Good Reason, all outstanding unvested Formation Units shall vest, become convertible and non-forfeitable. If the employment of the Employee by the Company or its affiliate terminates for any reason other than as described in the preceding sentence, any outstanding unvested Formation Units as of the date of such termination shall be forfeited and returned to the Company for delivery to the Partnership and cancellation.

 

5.                                            Definitions.

 

For purposes of this Formation Unit Agreement, the following terms will have the meaning given to them by any employment agreement between the Employee and the Company, and if there is no such agreement, the meanings below:

 

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

 

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the Employee has not used reasonable efforts to perform in all material respects his duties hereunder, or (c) willful misconduct that is materially economically injurious to the Company.  For purposes of this paragraph, no act, or failure to act, by the Employee will be considered “willful” unless committed in bad faith and without a reasonable belief that the act or omission was in the best interests of the Company.

 

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

 

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

 

“Retirement” means termination of the Employee’s employment with the Company and its affiliates after attainment of age 65.

 

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

 

7.                                      Tax Withholding. The Company or its applicable affiliate has the right, to the extent applicable, to withhold from cash compensation payable to the Employee all applicable income and employment taxes due and owing at the time the applicable portion of the Formation Units becomes includible in the Employee’s income (the “Withholding Amount”), and/or to delay delivery of Formation Units until appropriate arrangements have been made for payment of such withholding. In the alternative, the Company has the right to retain and cancel, or sell or otherwise dispose of, such number of Formation Units as have a market value (determined as of the date the applicable

 

3

 

Formation Units vest) approximately equal to the Withholding Amount, with any excess proceeds being paid to Employee.

 

8.                                      Certain Adjustments. The Formation Units shall be subject to adjustment as provided in the Partnership Agreement, and except as otherwise provided therein, if (i) the Company shall at any time be involved in a merger, consolidation, dissolution, liquidation, reorganization, exchange of shares, sale of all or substantially all of the assets or stock of the Company, spin-off of a Subsidiary, business unit or other transaction similar thereto, (ii) any stock dividend, stock split, reverse stock split, stock combination, reclassification, recapitalization, significant repurchases of stock, or other similar change in the capital structure of the Company, or any extraordinary dividend or other distribution to holders of Common Shares or Common Partnership Units other than regular dividends shall occur, or (iii) any other event shall occur that in each case in the good faith judgment of the Compensation Committee of the Board (the “Committee”) necessitates action by way of appropriate equitable adjustment in the terms of this Formation Unit Agreement, the Plan or the Formation Units, then the Committee shall take such action as it deems necessary to maintain the Employee’s rights hereunder so that they are substantially proportionate to the rights existing under this Agreement and the terms of the Formation Units prior to such event, including, without limitation: (A) adjustments in the Formation Units; and (B) substitution of other awards under the Plan or otherwise. In the event of any change in the outstanding Common Shares (or corresponding change in the Conversion Factor applicable to Common Partnership Units of the Partnership) by reason of any share dividend or split, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other corporate change, or any distribution to common shareholders of the Company other than regular dividends, any LTIP Units, Common Partnership Units, shares or other securities received by the Employee with respect to the applicable Formation Units for which the Vesting Period shall not have expired will be subject to the same restrictions as the Formation Units with respect to an equivalent number of shares or securities and shall be deposited with the Company.

 

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

 

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

 

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

 

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

 

4

 

13.                               Transfer; Redemption. None of the Formation Units shall be sold, assigned, transferred, pledged or otherwise disposed of or encumbered (whether voluntarily or involuntarily or by judgment, levy, attachment, garnishment or other legal or equitable proceeding) (each such action, a “Transfer”), or redeemed in accordance with the Partnership Agreement (a) prior to vesting and (b) unless such Transfer is in compliance with all applicable securities laws (including, without limitation, the Securities Act), and such Transfer is in accordance with the applicable terms and conditions of the Partnership Agreement. Any attempted Transfer of Formation Units not in accordance with the terms and conditions of this Section 13 shall be null and void, and the Partnership shall not reflect on its records any change in record ownership of any Formation Units as a result of any such Transfer, and shall otherwise refuse to recognize any such Transfer.

 

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

 

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

 

16.                               Counterparts. This Formation Unit Agreement may be executed in multiple counterparts with the same effect as if each of the signing parties had signed the same document. All counterparts shall be construed together and constitute the same instrument.

 

17.                               Miscellaneous. This Formation Unit Agreement may not be amended except in writing signed by the Company and the Employee. Notwithstanding the foregoing, this Formation Unit Agreement may be amended in writing signed only by the Company to: (a) correct any errors or ambiguities in this Formation Unit Agreement; and/or (b) to make such changes that do not materially adversely affect the Employee’s rights hereunder. This grant shall in no way affect the Employee’s participation or benefits under any other plan or benefit program maintained or provided by the Company. In the event of a conflict between this Formation Unit Agreement and the Plan or the Partnership Agreement, the Plan or the Partnership Agreement, respectively, shall govern; provided, that the Plan may not be amended in a manner that materially adversely affects the Employee’s rights hereunder without the Employee’s consent.

 

18.                               Conflict With Employment Agreement. If (and only if) the Employee and the Company or its affiliates have entered into an employment agreement, in the event of any conflict between any of the provisions of this Agreement and any such employment agreement, the provisions of such employment agreement will govern. As further provided in Section 9, nothing herein shall imply that any employment agreement exists between the Employee and the Company or its affiliates.

 

19.                               Status as a Partner. As of the Grant Date, the Employee shall be admitted as a partner of the Partnership with beneficial ownership of the number of Formation Units issued to the Employee as of such date pursuant to this Formation Unit

 

5

 

Agreement by: (A) signing and delivering to the Partnership a copy of this Agreement; and (B) signing, as a Limited Partner, and delivering to the Partnership a counterpart signature page to the Partnership Agreement (attached hereto as Exhibit A).

 

20.                               Status of Formation Units under the Plan. The Formation Units are both issued as equity securities of the Partnership and granted as awards under the Plan. The Company will have the right at its option, as set forth in the Partnership Agreement, to issue Common Shares in exchange for Partnership Units into which Formation Units may have been converted pursuant to the Partnership Agreement, subject to certain limitations set forth in the Partnership Agreement, and such Common Shares, if issued, will be issued under the Plan. The Employee must be eligible to receive the Formation Units in compliance with applicable federal and state securities laws and to that effect is required to complete, execute and deliver certain covenants, representations and warranties (attached as Exhibit B). The Employee acknowledges that the Employee will have no right to approve or disapprove such determination by the Company.

 

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

 

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

 

23.                               Acknowledgement.  The Employee hereby acknowledges and agrees that this Formation Unit Agreement and the Formation Units issued hereunder shall constitute satisfaction in full of all obligations of the Company and the Partnership, if any, to grant to the Employee Formation Units pursuant to the terms of any written employment agreement or letter or other written offer or description of employment with the Company and/or the Partnership executed prior to or coincident with the date hereof.

 

[signature page follows]

 

6

 

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

 

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

 

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

 

7

 

EXHIBIT A

 

FORM OF LIMITED PARTNER SIGNATURE PAGE

 

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

 

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

 

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

 

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

 

Exhibit A-1

 

4.                                      The Limited Partner hereby confirms that, notwithstanding any provisions of the Partnership Agreement to the contrary, the Formation Units shall not be redeemable by the Limited Partner pursuant to Section 8.6 of the Partnership Agreement.

 

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

 

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

 

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

 

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

 

Exhibit A-2

 

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

 

 

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

 

Exhibit A-3

 

EXHIBIT B

 

EMPLOYEE’S COVENANTS, REPRESENTATIONS AND WARRANTIES

 

The Employee hereby represents, warrants and covenants as follows:

 

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

 

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

 

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

 

(iii)                               The Partnership Agreement; and

 

(iv)                              The Plan.

 

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

 

(b)                                 The Employee hereby represents and warrants that:

 

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

 

(ii)                                  The Employee understands that (A) the Employee is responsible for consulting his own tax advisors with respect to the application of the U.S. federal income tax laws, and the tax laws of any state, local or other taxing jurisdiction to which the Employee is or by reason of the award of Formation Units may become subject, to his particular situation; (B) the Employee has not received or relied upon business or tax advice from the Company, the Partnership or any of their respective employees, agents, consultants or advisors, in their capacity as

 

Exhibit B-1

 

such; (C) the Employee provides services to the Partnership on a regular basis and in such capacity has access to such information, and has such experience of and involvement in the business and operations of the Partnership, as the Employee believes to be necessary and appropriate to make an informed decision to accept this award of Formation Units; and (D) an investment in the Partnership and/or the Company involves substantial risks. The Employee has been given the opportunity to make a thorough investigation of matters relevant to the Formation Units and has been furnished with, and has reviewed and understands, materials relating to the Partnership and the Company and their respective activities (including, but not limited to, the Background Documents). The Employee has been afforded the opportunity to obtain any additional information (including any exhibits to the Background Documents) deemed necessary by the Employee to verify the accuracy of information conveyed to the Employee. The Employee confirms that all documents, records, and books pertaining to his receipt of Formation Units which were requested by the Employee have been made available or delivered to the Employee. The Employee has had an opportunity to ask questions of and receive answers from the Partnership and the Company, or from a person or persons acting on their behalf, concerning the terms and conditions of the Formation Units. The Employee has relied upon, and is making its decision solely upon, the Background Documents and other written information provided to the Employee by the Partnership or the Company.

 

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

 

(iv)                              The Employee acknowledges that (A) neither the Formation Units to be issued, nor the Common Units issuable upon conversion of the Formation Units, have been registered under the Securities Act or state securities laws by reason of a specific exemption or exemptions from registration under the Securities Act and applicable state securities laws and, if such Formation Units or Common Units are represented by certificates, such certificates will bear a legend to such effect, (B) the reliance by the Partnership and the Company on such exemptions is predicated in part on the accuracy and completeness of the representations and warranties of the Employee contained herein, (C) such Formation Units or Common Units, therefore, cannot be resold unless registered under the Securities Act and applicable state securities laws, or unless an exemption from registration is available, (D) there is no public market for such Formation Units and Common Units and (E) neither the Partnership nor the Company has any obligation or intention to register such Formation Units or the Common Units issuable upon conversion of the Formation Units under the Securities Act or any state securities laws or to take any action that would make available any exemption from the registration requirements of such laws, except that, upon the redemption of the Common Units for REIT Shares, the Company

 

Exhibit B-2

 

may issue such REIT Shares under the Plan and pursuant to a Registration Statement on Form S-8 under the Securities Act, to the extent that (I) the Employee is eligible to receive such REIT Shares under the Plan at the time of such issuance, (II) the Company has filed a Form S-8 Registration Statement with the Securities and Exchange Commission registering the issuance of such REIT Shares and (III) such Form S-8 is effective at the time of the issuance of such REIT Shares. The Employee hereby acknowledges that because of the restrictions on transfer or assignment of such Formation Units acquired hereby and the Common Units issuable upon conversion of the Formation Units which are set forth in the Partnership Agreement or this Agreement, the Employee may have to bear the economic risk of his ownership of the Formation Units acquired hereby and the Common Units issuable upon conversion of the Formation Units for an indefinite period of time.

 

(v)                                 The Employee has determined that the Formation Units are a suitable investment for the Employee.

 

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

 

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

 

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

 

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

 

Exhibit B-3

 

EXHIBIT C

 

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

 

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

 

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

 

Name: (the “Taxpayer”)

 

Address:

 

Social Security No./Taxpayer Identification No.:

 

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

 

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

 

3.                                      The date on which the Formation Units were transferred is             , 20 . The taxable year to which this election relates is calendar year 20  .

 

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

 

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

 

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

 

5.                                      The fair market value at time of transfer (determined without regard to any restrictions other than a nonlapse restriction as defined in Treasury Regulations Section 1.83-3(h)) of the Formation Units with respect to which this election is being made was $0 per Formation Unit.

 

6.                                      The amount paid by the Taxpayer for the Formation Units was $0 per Formation Unit.

 

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

 

	
Dated:
    	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Name:
    

 

Exhibit C-1

 

SCHEDULE TO EXHIBIT C

 

Vesting Provisions of Formation Units

 

The Formation Units are subject to time-based vesting with 25% vesting on each of         , 20  , and          , 20  , and 50% vesting on         , 20  , provided that the Taxpayer remains an employee of JBG SMITH Properties or its affiliates through such dates, subject to acceleration in the event of certain extraordinary transactions or termination of the Taxpayer’s service relationship with JBG SMITH Properties (or its affiliate) under specified circumstances. Unvested Formation Units are subject to forfeiture in the event of failure to vest based on the passage of time and continued employment.

 

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

 

Exhibit C-2

 

SCHEDULE A TO FORMATION UNIT AGREEMENT

 

(Terms being defined are in quotation marks.)

 

	
Date of Formation Unit   Agreement:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Name of Employee:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Number of Formation Units Subject to Grant:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
“Grant Date”:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
“Formation Unit Participation Threshold”:
    	
 
    	
$[  ] [insert the average of   the high and low prices of Company stock on the first trading day after the Effective   Time]
    
	
 
    	
 
    	
 
    
	
“Formation Unit Fraction”:
    	
 
    	
10%
    
	
 
    	
 
    	
 
    
	
“Vesting Amount(s)”:

With respect to 25% of the Formation Units ([add number])
    	
 
    	
“Vesting Period”/“Vesting Date(s)”:

1. From the Grant Date through [insert 3rd anniversary of the Grant Date] (the first Vesting Date)
    
	
 
    	
 
    	
 
    
	
With respect to 25% of the Formation Units ([add number])
    	
 
    	
2. From the day after the first Vesting Date through   [insert 4th anniversary   of the Grant Date] (the second   Vesting Date)
    
	
 
    	
 
    	
 
    
	
With respect to 50% of the Formation Units ([add number])
    	
 
    	
3. From the day after the second Vesting Date   through [insert 5th anniversary   of the Grant Date] (the final   Vesting Date)
    

 

A-1

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