EXHIBIT 2.1

 

MASTER TRANSACTION AGREEMENT

 

by and among

 

VORNADO REALTY TRUST,

 

VORNADO REALTY L.P.,

 

JBG PROPERTIES INC.,

 

JBG/OPERATING PARTNERS, L.P.,

 

THE JBG PARTIES SET FORTH ON SCHEDULE A,

 

VORNADO DC SPINCO

 

and

 

VORNADO DC SPINCO OP LP

 

dated as of

 

October 31, 2016

 

 

TABLE OF CONTENTS

 

		Page
ARTICLE I CONTRIBUTIONS, DISTRIBUTIONS AND MERGERS		3
Section 1.1.	Pre-Combination Transactions	3
Section 1.2.	Combination Transactions	3
Section 1.3.	Post-Closing Structuring	5
Section 1.4.	Consideration for JBG Contributions	5
Section 1.5.	Asset Values of the Included Assets	6
Section 1.6.	Kickout of Included Interests; Designation of Additional Vornado Excluded Properties	10
Section 1.7.	Determination and Election of Consideration to the JBG Parties; Requirements of Equity Consideration	11
Section 1.8.	Distributions of Consideration to the Equityholders of the JBG Parties	13
Section 1.9.	JBG Representative	13
Section 1.10.	Withholding	15
ARTICLE II CLOSING		15
Section 2.1.	Closing	15
Section 2.2.	Deliveries by the Vornado Parties at the Closing	16
Section 2.3.	Deliveries by the JBG Parties at the Closing	18
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE VORNADO PARTIES		19
Section 3.1.	Organization and Qualification; Subsidiaries	19
Section 3.2.	Organizational Documents	21
Section 3.3.	Capital Structure	21
Section 3.4.	Authority	23
Section 3.5.	No Conflict; Required Filings and Consents	24
Section 3.6.	Financial Statements	25
Section 3.7.	No Undisclosed Liabilities	27
Section 3.8.	Absence of Certain Changes or Events	27
Section 3.9.	Litigation	27
Section 3.10.	Taxes	28
Section 3.11.	Material Contracts	30
Section 3.12.	Environmental Matters	33
Section 3.13.	Compliance with Laws; Permits	34

 

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Section 3.14.	Intellectual Property	35
Section 3.15.	Properties	35
Section 3.16.	Intentionally Omitted	38
Section 3.17.	Personal Property	38
Section 3.18.	Approval Required	39
Section 3.19.	Insurance	39
Section 3.21.	Information in SEC Filings	39
Section 3.22.	Bankruptcy	40
Section 3.23.	Employee Benefit Plans	40
Section 3.24.	Brokers; Expenses	41
Section 3.25.	Labor and Other Employment Matters	42
Section 3.26.	OFAC	42
Section 3.27.	Patriot Act	43
Section 3.28.	Anti-Corruption	43
Section 3.29.	Capital Commitments for Vornado Included Investments	43
Section 3.30.	No Other Representations or Warranties	44
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE JBG PARTIES		44
Section 4.1.	Organization	44
Section 4.2.	Authorization; Validity of Agreement	46
Section 4.3.	No Conflict; Consents	46
Section 4.4.	Capital Structure; Subsidiaries	47
Section 4.5.	Securities Laws Matters	49
Section 4.6.	Financial Statements	52
Section 4.7.	No Undisclosed Liabilities	53
Section 4.8.	Absence of Certain Changes or Events	53
Section 4.9.	JBG Included Properties	53
Section 4.10.	JBG Development Properties	57
Section 4.11.	Personal Property	58
Section 4.12.	Litigation	58
Section 4.13.	Taxes	58
Section 4.14.	Compliance with Laws; Permits	61
Section 4.15.	Funds	62
Section 4.16.	Material Contracts	62
Section 4.17.	Environmental Matters	66
Section 4.18.	Bankruptcy	66
Section 4.19.	Employee Benefit Plans	67
Section 4.20.	Labor and Other Employment Matters	68

 

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Section 4.21.	Intellectual Property	69
Section 4.22.	OFAC	70
Section 4.23.	Patriot Act	70
Section 4.24.	Anti-Corruption	70
Section 4.25.	Insurance	70
Section 4.26.	Information in the SEC Filings	71
Section 4.27.	Brokers; Expenses	71
Section 4.28.	Capital Commitments	71
Section 4.29.	Non-Controlled Subsidiaries	71
Section 4.30.	JBG Fund Credit Amounts	71
Section 4.31.	No Other Representations or Warranties	71
ARTICLE V PRE-CLOSING COVENANTS		72
Section 5.1.	Access; Notice of Certain Events	72
Section 5.2.	Consents and Approvals	73
Section 5.3.	Publicity	80
Section 5.4.	Conduct of Business by the Vornado Parties	81
Section 5.5.	Conduct of Business by the JBG Parties	86
Section 5.6.	Compliance with Securities Regulations	91
Section 5.7.	Credit Facility	91
Section 5.8.	Certain Pre-Closing Actions	92
Section 5.9.	Rule 3-14/Regulation S-X Cooperation	93
Section 5.10.	Exclusivity	94
Section 5.11.	NYSE Listing	94
Section 5.12.	Equity Incentive Plan	94
Section 5.13.	Newco Board of Trustees and Officers	95
Section 5.14.	Newco Declaration and Bylaws	96
Section 5.15.	Intentionally Omitted	96
Section 5.16.	Newco Officer’s Certificate	96
Section 5.17.	Vornado Officer’s Certificates	96
Section 5.18.	JBG Officer’s Certificates	96
Section 5.19.	Form 10 Filing	97
Section 5.20.	Confidentiality	97
ARTICLE VI ADDITIONAL AGREEMENTS		98
Section 6.1.	ROFRs and Tenant Estoppels under Ground Leases and Joint Venture Agreements	98
Section 6.2.	Casualty and Condemnation	100
Section 6.3.	Tax Matters	100

 

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Section 6.4.	Employee Matters	102
Section 6.5.	Management of Vornado Excluded Assets	103
Section 6.6.	Transition Services; Separation and Distribution Agreement; Cleaning Services Agreements	103
Section 6.7.	Further Assurances	104
Section 6.8.	Other Post-Closing Matters	104
ARTICLE VII CONDITIONS TO CONSUMMATION OF THE TRANSACTIONS		104
Section 7.1.	Conditions to Each Party’s Obligations to Consummate the Transactions at the Closing	104
Section 7.2.	Conditions to Obligations of the Vornado Parties	105
Section 7.3.	Conditions to Obligations of the JBG Parties	108
Section 7.4.	Frustration of Closing Conditions	110
ARTICLE VIII TERMINATION		111
Section 8.1.	Termination	111
Section 8.2.	Effect of Termination	112
ARTICLE IX	MISCELLANEOUS	112
Section 9.1.	Amendment	112
Section 9.2.	Waiver	112
Section 9.3.	Non-Survival	113
Section 9.4.	Expenses	113
Section 9.5.	Notices	113
Section 9.6.	Certain Definitions	115
Section 9.7.	Terms Defined Elsewhere	131
Section 9.8.	Interpretation	135
Section 9.9.	Counterparts	136
Section 9.10.	Entire Agreement; Third-Party Beneficiaries	136
Section 9.11.	Severability	136
Section 9.12.	Governing Law; Jurisdiction	136
Section 9.13.	Waiver of Jury Trial	137
Section 9.14.	Assignment	137
Section 9.15.	Enforcement; Remedies	137
Section 9.16.	No Recourse	138
Section 9.17.	Joint and Several	138

 

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Schedules and Exhibits
Schedule A		JBG Properties Affiliates
Schedule B		Asset Values
Schedule C		Terms of Cleaning Services Agreements
Schedule D		Example of Share Number Calculation
Exhibit A-1		Vornado Included Properties
Exhibit A-2		Vornado Included Entities
Exhibit A-3		Vornado Included Investments
Exhibit B-1		JBG Included Properties
Exhibit B-2		JBG Included Entities
Exhibit B-3		JBG Managing Member Entities
Exhibit C-1		Form of JBG LLC Merger Agreement
Exhibit C-2		Form of JBG Fund Contribution Agreement
Exhibit C-3		Form of JBG Partnership Merger Agreement
Exhibit C-4		Form of JBG Properties Contribution Agreement
Exhibit C-5		Form of JBG Managing Member Contribution Agreement
Exhibit D		Form of Separation and Distribution Agreement
Exhibit E		Form of Registration Rights Agreements
Exhibit F		Form of Partnership Agreement Amendment and Restatement
Exhibit G		Form of Employee Matters Agreement
Exhibit H		Form of Tax Matters Agreement
Exhibit I		Form of GP Subcontract
Exhibit J		Form of FIRPTA Certificate
Exhibit K		Form of Equity Incentive Plan
Exhibit L		Form of Declaration of Trust Amendment and Restatement
Exhibit M		Form of Bylaws Amendment and Restatement
Exhibit N		Form of Ground Lease Estoppel

 

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MASTER TRANSACTION AGREEMENT

 

This MASTER TRANSACTION AGREEMENT (hereinafter referred to as this “ Agreement ”), dated as of October 31, 2016, is made by and among Vornado Realty Trust, a Maryland real estate investment trust (“ Vornado ”), Vornado Realty L.P., a Delaware limited partnership (“ Vornado OP ”, and together with Vornado, the “ Vornado Parties ”), JBG Properties Inc., a Maryland corporation (“ JBG Properties ”), JBG/Operating Partners, L.P., a Delaware limited partnership (“ JBG Operating Partners ” and together with JBG Properties, the “ JBG Management Entities ”) and the JBG Properties affiliates listed on Schedule A (the “ JBG Funds ” and together with the JBG Management Entities, the “ JBG Parties ”), Vornado DC Spinco, a Maryland real estate investment trust (“ Newco ”) and Vornado DC Spinco OP LP, a Delaware limited partnership (“ Newco OP ”, and together with the Vornado Parties, the JBG Parties and Newco, collectively, the “ Parties ”). All capitalized terms used in this Agreement shall have the meaning ascribed to such terms in Section 9.6 (Certain Definitions) or as otherwise defined elsewhere in this Agreement unless the context clearly provides otherwise.

 

RECITALS

 

WHEREAS, certain subsidiaries of the Vornado Parties are engaged in real estate investment, development, leasing and property management in the Washington D.C. metropolitan area;

 

WHEREAS, the JBG Parties and their affiliate entities are engaged in real estate investment, development, leasing and property management predominantly in the Washington D.C. metropolitan area;

 

WHEREAS, the Vornado Parties own direct or indirect interests in the real properties set forth on Exhibit A-1 hereto (all such real property interests, together with all buildings, structures and other improvements and fixtures located on or under such real property and all easements, rights and other appurtenances benefitting such real property, collectively, the “ Vornado Included Properties ”) through their ownership of the Equity Interests of the entities set forth on Exhibit A-2 hereto (the “ Vornado Included Entities ”) (collectively, the “ Vornado Included Interests ”);

 

WHEREAS, the Vornado Included Entities own direct or indirect interests in the real properties listed on Section A of the Vornado Disclosure Letter (collectively, the “ Vornado Excluded Properties ”), which Vornado Excluded Properties will not be acquired by Newco or Newco OP (together with all other assets and properties of the Vornado Parties that constitute Vornado Assets as defined in the Separation and Distribution Agreement, the “ Vornado Excluded Assets ”);

 

WHEREAS, certain Vornado Included Entities own direct or indirect debt or equity investments in the entities listed on Exhibit A-3 hereto (collectively, the “ Vornado Included Investments ”);

 

 

WHEREAS, the JBG Funds own direct or indirect interests in the real properties and hold real property purchase options and interests set forth on Exhibit B-1 hereto (all such real property interests and purchase options, together with all buildings, structures and other improvements and fixtures located on or under such real property and all easements, rights and other appurtenances benefitting such real property, collectively, the “ JBG Included Properties ”) through their ownership of the Equity Interests of the entities (the “ JBG Included Entities ”) set forth on Exhibit B-2 hereto (collectively, the “ JBG Included Interests ”);

 

WHEREAS, the entities listed on Exhibit B-3 hereto (the “ JBG Managing Member Entities ”) act as the managing member in respect of certain JBG Included Entities;

 

WHEREAS, the JBG Funds own direct or indirect interests in the real properties listed on Section A of the JBG Disclosure Letter hereto (collectively, the “ JBG Excluded Properties ”), which JBG Excluded Properties will not be acquired by Newco or Newco OP (together with all other assets and properties of the JBG Funds other than the JBG Included Assets, the “ JBG Excluded Assets ”);

 

WHEREAS, prior to the Closing, each JBG Fund will engage in a restructuring through a series of steps pursuant to which, among other things, the JBG Included Assets of each JBG Fund will be transferred to a newly formed entity (each such newly formed entity, a “ Transferred LLC ”) to be owned directly or indirectly by the members or partners of such JBG Fund, as applicable;

 

WHEREAS, pursuant to the terms and subject to the conditions of this Agreement, the Parties desire to effectuate a series of transactions, including the Pre-Combination Transactions (as defined below), the Combination Transactions (as defined below) and the Restructuring Transactions (as defined below) (together, the “ Transactions ”);

 

WHEREAS, as consideration for the contributions of the JBG Included Assets, by way of contribution, merger or otherwise, of the Transferred LLCs by way of contribution, merger or otherwise, and of the merger of JBG Operating Partners described below, (a) Newco shall, or shall cause Newco OP to, deliver to the applicable JBG Parties or JBG Designees the Cash Consideration, (b) Newco shall issue to the applicable JBG Parties or JBG Designees the Issued Newco Shares and/or shall contribute certain of the Issued Newco Shares to Newco OP in exchange for an equal number of OP Units, and in turn Newco OP shall deliver such Issued Newco Shares to the applicable JBG Parties or JBG Designees, and (c) Newco OP shall issue to the JBG Parties the Issued OP Units (the transactions contemplated under the preceding clauses (b) and (c) being referred to herein as the “ Equity Issuance ”);

 

WHEREAS, the board of trustees of Vornado (the “ Vornado Board ”) has duly and validly authorized the execution and delivery of this Agreement and the Transactions to be effected by Vornado, Vornado OP and the Vornado Subsidiaries;

 

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WHEREAS, Vornado in its capacity as the sole general partner of Vornado OP, on behalf of Vornado OP, has approved this Agreement and the Transactions to be effected by Vornado OP and its Subsidiaries;

 

WHEREAS, each of the JBG Parties has received any requisite approval pursuant to its Governing Documents of the Restructuring Transactions, this Agreement, the contribution of the JBG Included Assets and the other Transactions;

 

WHEREAS, as an inducement to and condition of the Vornado Parties entering into this Agreement, each of the employees listed in Section B of the JBG Disclosure Letter have concurrently entered into employment agreements with Newco, which shall become effective contingent upon and as of the Closing (the “ Employment Agreements ”); and

 

WHEREAS, the Vornado Parties and the JBG Parties desire to make certain representations, warranties, covenants and agreements in connection with the Transactions and also prescribe various conditions to the Transactions as set forth herein.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this Agreement and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties agree as follows:

 

AGREEMENT

 

ARTICLE I

 

CONTRIBUTIONS, DISTRIBUTIONS AND MERGERS

 

Section 1.1. Pre-Combination Transactions . Subject to Section 5.8 , and pursuant to the terms and subject to the conditions herein, and in reliance upon the representations, warranties and agreements herein, the steps set forth on Section 1.1 of the Vornado Disclosure Letter constitute the “ Pre-Combination Transactions ”.

 

Section 1.2. Combination Transactions . Subject to Section 5.8 , immediately following the occurrence of the Pre-Combination Transactions, and pursuant to the terms and subject to the conditions herein, and in reliance upon the representations, warranties and agreements herein, the following “ Combination Transactions ” shall occur:

 

(a)  Fund VI Contribution . Immediately prior to or at the Closing, but following the occurrence of the Pre-Combination Transactions, JBG Investment Fund VI, L.L.C. (“ Fund VI ”) will consummate a series of transactions, pursuant to which the Transferred LLC of Fund VI (which will own all right, title and interest in and to the JBG Included Interests with respect to the JBG Included Properties listed under “Fund VI” on Section 1.2 of the JBG Disclosure Letter and all JBG Included Assets related thereto and no other assets or properties) will merge (pursuant to a merger agreement substantially in the form attached hereto as Exhibit C-1 (such form, with all blanks completed and other applicable revisions made in a manner consistent with this Agreement being hereinafter referred to as the “ JBG LLC Merger

 

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Agreement ”)) with a wholly-owned subsidiary (directly and indirectly) of Newco OP, with the Transferred LLC of Fund VI surviving in such merger and Newco OP owning all of the interests in the Transferred LLC of Fund VI (directly and indirectly).

 

(b)  Fund VII Contribution . Immediately prior to or at the Closing, but following the occurrence of the Pre-Combination Transactions, JBG Investment Fund VII, L.L.C. (“ Fund VII ”) will consummate a series of transactions, pursuant to which the Transferred LLC of Fund VII (which will own all right, title and interest in and to the JBG Included Interests with respect to the JBG Included Properties listed under “Fund VII” on Section 1.2 of the JBG Disclosure Letter and all JBG Included Assets related thereto and no other assets or properties) will merge (pursuant to a JBG LLC Merger Agreement with all blanks completed and other applicable revisions made in a manner consistent with this Agreement) with a wholly-owned subsidiary (directly and indirectly) of Newco OP, with the Transferred LLC of Fund VII surviving in such merger and Newco OP owning all of the interests in the Transferred LLC of Fund VII (directly and indirectly).

 

(c)  Fund VIII Contribution . Immediately prior to or at the Closing, but following the occurrence of the Pre-Combination Transactions, JBG Investment Fund VIII, L.L.C. (“ Fund VIII ”) will consummate a series of transactions, pursuant to which all of the Equity Interests in the Transferred LLC of Fund VIII (which will own 100% of the outstanding common Equity Interests in JBG/Fund VIII Trust (“ Fund VIII REIT ”) and which together with Fund VIII REIT will collectively own all right, title and interest in and to the JBG Included Interests with respect to the JBG Included Properties listed under “Fund VIII” on Section 1.2 of the JBG Disclosure Letter and all JBG Included Assets related thereto and no other assets or properties) will be contributed to Newco OP pursuant to a contribution agreement substantially in the form attached hereto as Exhibit C-2 (such form, with all blanks completed and other applicable revisions made in a manner consistent with this Agreement being hereinafter referred to as the “ JBG Fund Contribution Agreement ”).

 

(d)  Fund IX Contribution . Immediately prior to or at the Closing, but following the occurrence of the Pre-Combination Transactions, JBG Investment Fund IX, L.L.C. (“ Fund IX ”) will consummate a series of transactions, pursuant to which the Transferred LLC of Fund IX (which will own all right, title and interest in and to the JBG Included Interests with respect to the JBG Included Properties listed under “Fund IX” on Section 1.2 of the JBG Disclosure Letter and all JBG Included Assets related thereto and no other assets or properties) will merge (pursuant to a JBG LLC Merger Agreement with all blanks completed and other applicable revisions made in a manner consistent with this Agreement) with a wholly-owned subsidiary (directly and indirectly) of Newco OP, with the Transferred LLC of Fund IX surviving in such merger and Newco OP owning all of the interests in the Transferred LLC of Fund IX (directly and indirectly).

 

(e)  UDM Contribution . Immediately prior to or at the Closing, but following the occurrence of the Pre-Combination Transactions, JBG/Urban Direct Member, L.L.C. (“ UDM ”) will consummate a series of transactions, pursuant to which all of the Equity Interests in the Transferred LLC of UDM (which will own all right, title and interest in and to the JBG

 

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Included Interests listed under “UDM” on Section 1.2 of the JBG Disclosure Letter and all JBG Included Assets related thereto and no other assets or properties) will be contributed to Newco OP pursuant to a JBG Fund Contribution Agreement with all blanks completed and other applicable revisions made in a manner consistent with this Agreement.

 

(f)  Management Company Transactions . Immediately prior to or at the Closing, but following the occurrence of the Pre-Combination Transactions:

 

(i) JBG Operating Partners will merge with and into a wholly owned limited liability company Subsidiary of Newco OP, with the partners of JBG Operating Partners receiving OP Units as set forth in a merger agreement substantially in the form attached hereto as Exhibit C-3 (such form with all blanks completed in a manner consistent with this Agreement being hereinafter referred to as the “ JBG Partnership Merger Agreement ” and together with the JBG LLC Merger Agreement, the “ JBG Merger Agreements ”);

 

(ii) JBG Properties will transfer all of its assets to Newco OP in exchange for OP Units as set forth in a contribution agreement substantially in the form attached hereto as Exhibit C-4 (such form with all blanks completed in a manner consistent with this Agreement being hereinafter referred to as the “ JBG Properties Contribution Agreement ”); and

 

(iii) The JBG Management Entities shall cause each JBG Managing Member Entity to transfer and contribute any managing member interest it has in any JBG Included Entity as set forth on Section 1.2 of the JBG Disclosure Letter (collectively, the “ Managing Member Interests ”) other than any Excluded Managing Member Interest, to a newly formed wholly owned Subsidiary of Newco OP pursuant to a contribution agreement substantially in the form attached hereto as Exhibit C-5 (such form, with all blanks completed and other applicable revisions made in a manner consistent with this Agreement being hereinafter referred to as the “ JBG Managing Member Contribution Agreement ” and together with the JBG Fund Contribution Agreements and the JBG Properties Contribution Agreement, the “ JBG Contribution Agreements ”).

 

Section 1.3. Post-Closing Structuring . Immediately following the Closing, Newco shall cause the actions set forth on Section 1.3 of the JBG Disclosure Letter that are contemplated to be taken after Closing (the “ Post-Closing Transactions ”) to be implemented as set forth therein. The Parties will reasonably agree to modify the Post-Closing Transactions as requested by either Party so long as such modifications do not adversely affect the non- requesting Party in any material respect.

 

Section 1.4. Consideration for JBG Contributions . In consideration of the JBG Parties’ contribution of the JBG Included Assets pursuant to the transactions described in Section 1.2 , the JBG Parties and their JBG Designees will receive from Newco and Newco OP, collectively, a number of Issued Newco Shares and/or Issued OP Units (collectively, the “ Equity

 

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Consideration ”) equal to the Share Number. The composition of the Equity Consideration will be determined in accordance with Section 1.7 (it being understood that certain JBG Parties or JBG Designees may be required to accept Cash Consideration in lieu of Equity Consideration as provided by Section 1.7 ).

 

Section 1.5. Asset Values of the Included Assets .

 

(a) As of the applicable Valuation Date, the equity value of each Included Property, each Vornado Included Investment, and of the Vornado management business and of the JBG management business (each such value, the “ Asset Value ”) is set forth on Schedule B .

 

(b)  Adjustments to Valuations .

 

(i) The Asset Value of each Included Property shall be increased, without duplication, by amounts actually paid prior to the Revaluation Time in connection with such Included Property by the Vornado Parties or their Subsidiaries or the JBG Parties or their Subsidiaries, as applicable, for (A) tenant improvement costs, tenant improvement allowances, landlord work, base building work required in connection with a lease, leasing commissions, buyout costs (net of any subleasing or other similar revenues) with respect to a tenant’s former premises and other leasing costs (collectively, “ Leasing Costs ”) actually paid before the Revaluation Time (or, as provided by Section 1.5(d) , after the Revaluation Time and before the Closing Date) pursuant to any Vornado Lease or JBG Lease (including any amendments, extensions, expansions or renewals of a Vornado Lease or JBG Lease) first signed after the applicable Valuation Date, provided , that with respect to the Included Properties identified on Section 1.5(b)(i)(A)  of the JBG Disclosure Letter or on Section 1.5(b)(i)(A)  of the Vornado Disclosure Letter (collectively, the “ Under Construction and Predevelopment Properties ”), the adjustment described in this clause (A) shall also apply with respect to Leasing Costs actually paid after the Valuation Date with respect to Vornado Leases and JBG Leases (including any amendments, extensions, expansions or renewals of a Vornado Lease or JBG Lease) in existence as of the applicable Valuation Date, (B) costs of capital expenditures to an Included Property paid after the applicable Valuation Date and before the Revaluation Time (or, as provided by Section 1.5(d) , after the Revaluation Time and before the Closing Date), (C) amortization, repayment, prepayment or paydown after the applicable Valuation Date and before the Revaluation Time (or, as provided by Section 1.5(d) , after the Revaluation Time and before the Closing Date) of the principal amount of any Indebtedness, other than Intercompany Indebtedness (but excluding, however, any Interest Payments, exit fees, prepayment premiums, LIBOR breakage fees, hedge breakage costs and similar amounts payable in connection therewith, and any other financing fees and closing costs paid in connection therewith) of a JBG Included Entity or a Vornado Included Entity, as applicable, which owns a direct or indirect interest in such Included Property, (D) land acquisition and development costs, including soft costs such as architect’s and engineering fees, pre- development fees, development fees, construction management fees, legal fees, marketing expenses, taxes and utilities during construction, brokerage fees, etc. and all

 

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hard costs, including amounts payable to contractors and subcontractors with respect to the development project, including but not limited to site costs, parking and garage costs and base building costs (“ Acquisition and Development Costs ”), paid for the Included Properties after the applicable Valuation Date and before the Revaluation Time (or, as provided by Section 1.5(d) , after the Revaluation Time and before the Closing Date), but excluding, however, (x) Interest Payments and capitalized interest for the Included Properties and (y) real estate taxes, insurance premiums and other carrying costs for the Included Properties (except that the exclusion described in this clause (y)  shall not apply to Under Construction and Predevelopment Properties, the amounts for which shall not be excluded), and (z) Acquisition and Development Costs paid to acquire an additional interest in an Included Property, to the extent the ownership percentage in such Included Property is thereby increased as contemplated by Section 1.5(b)(iii) , (E) with respect to the Vornado Included Properties only, an amount equal to the fees that would have been paid with respect to such Vornado Included Property between the applicable Valuation Date and the Revaluation Time had the Vornado Parties paid fees in accordance with the fee schedule set forth on Section 1.5(b)(i)(E)  of the Vornado Disclosure Letter, (F) costs spent for any purpose set forth on Section 1.5(b)(i)(F)  of the Vornado Disclosure Letter or Section 1.5(b)(i)(F)  of the JBG Disclosure Letter between the applicable Valuation Date and the Revaluation Time, (G) any overstatement on Schedule B of the debt balance of such Included Property’s debt amount as of the applicable Valuation Date, and (H) any positive Net Working Capital balance of a JBG Included Entity or Vornado Included Entity as of the Revaluation Time.

 

(ii) The Asset Value of each Included Property shall be decreased, without duplication, by the amount of (A) Leasing Costs that are not yet paid as of the Revaluation Time (or, as provided by Section 1.5(d) , as of the Closing Date) pursuant to any Vornado Lease or JBG Lease (including any amendments, extensions, expansions or renewals of a Vornado Lease or JBG Lease) existing as of the applicable Valuation Date, provided , that any liability for ongoing lease and other payment obligations related to the assumption of space on behalf of a tenant (net of any subleasing or other similar revenues) shall decrease Asset Value by only fifty percent (50%) of the outstanding liability; provided , further , that this clause (A) shall not apply to Under Construction and Predevelopment Properties, (B) new Indebtedness or advances with respect to existing Indebtedness, or the accrual of additional accrued and unpaid interest of any new or existing Indebtedness, of any JBG Included Entity or Vornado Included Entity, as applicable, which owns a direct or indirect interest in such Included Property incurred after the applicable Valuation Date and existing as of the Revaluation Time, but in each case, excluding any Intercompany Indebtedness, (C) exit fees, prepayment premiums, LIBOR breakage fees, hedge breakage costs and similar amounts payable in connection with the refinancing of Indebtedness pursuant to a Credit Facility Refinancing Draw as provided by Section 5.2(f)(i)  or Section 5.2(f)(ii) , (D) any understatement on Schedule B of the debt balance of such Included Property’s debt amount as of the applicable Valuation Date and (E) any negative Net Working Capital balance of a JBG Included Entity or Vornado Included Entity as of the Revaluation Time.

 

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(iii)  Schedule B sets forth the ownership percentage in each Included Property represented by the Vornado Included Interests or the JBG Included Interests, as applicable, as of the applicable Valuation Date. Any adjustments made pursuant to this Section 1.5(b)  shall take into account the percentage ownership such that the increase or decrease with respect to a particular item shall be in an amount equal to the product of the total amount paid multiplied by the “Contributed Percentage” with respect to such Included Property as specified on such Schedule B . If as of the Revaluation Time a Vornado Party or the applicable JBG Party owns a percentage of the direct or indirect interests in any Included Property that is different than the percentage specified on Schedule B , then the adjustments made pursuant to this Section 1.5(b)  as modified by this clause (iii) shall take into account the actual amount of such ownership as of the Revaluation Time. In addition, the initial Asset Values will be adjusted to reflect the actual amount of the Parties’ ownership in any Included Property as of the Revaluation Time.

 

(iv) Notwithstanding the foregoing, with respect to the Included Properties listed on Section 1.5(b)(iv)  of the JBG Disclosure Letter and on Section 1.5(b)(iv)  of the Vornado Disclosure Letter, there will be no increase to the Asset Value of such Included Properties on account of payments of amounts described in clauses (A) , (B)  or (D)  of Section 1.5(b)(i) , and the Asset Values of such Included Properties shall be decreased by the amount of any Acquisition and Development Costs and any Leasing Costs required to achieve stabilization of such Included Properties, in each case, that are still to be paid as of the Revaluation Time (or, as provided by Section 1.5(d) , as of the Closing Date).

 

(v) The Asset Value of the JBG management business shall be decreased by (A) the amount of any liabilities set forth on Section 1.5(b)(v)  of the JBG Disclosure Letter and (B) the amount of any further management fees to be paid by any JBG Fund to any JBG Party other than in cash.

 

(vi) The Asset Value of any Vornado Included Investment shall be increased by amounts actually contributed after September 30, 2016 and prior to the Revaluation Time by the Vornado Parties or their Subsidiaries (other than from one Vornado Included Entity to another) on account of unfunded capital commitments to the entities pertaining to such Vornado Included Investments.

 

(vii) The aggregate Asset Values of the JBG Included Assets (such decrease to be allocated among the individual JBG Included Properties on a pro rata basis, based on Asset Values as adjusted on the Revaluation Time pursuant to this Section 1.5 ) and the aggregate Asset Values of the Vornado Included Assets shall be decreased by the amounts set forth on Section 1.5(b)(vii)  of the JBG Disclosure Letter and Section 1.5(b)(vii)  of the Vornado Disclosure Letter, respectively.

 

(c) Each Group shall use Commercially Reasonable Efforts to prepare and provide to the other Group an interim calculation of the adjustments to its Asset Values

 

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described in Section 1.5(b)  with respect to the most recently ended fiscal quarter within thirty (30) days after the end of each such fiscal quarter, beginning with the quarter ending December 31, 2016. Promptly after the date hereof, the each Group will engage a “Big Four” accounting firm (each a “ Retained Accountant ”) to periodically review its interim calculations and the draft final adjustments to be made as of the Revaluation Time. Each Group will, and will instruct its Retained Accountant to, cooperate in good faith with the other Group and its Retained Accountant to agree upon sets of procedures that will be conducted on the calculations of the adjustments set forth in this Section 1.5 and the schedules and information supporting such calculations.

 

(d) With respect to each of its Included Properties, each Group shall be entitled to identify, reasonably and in good faith, the amount of any Leasing Costs, capital expenditures, debt amortization, and Acquisition and Development Costs that such Group anticipates to be paid with respect to such Included Property between the Revaluation Time and the Closing Date and that, had they been paid prior to the Revaluation Time, would have been the subject of an increase in such Included Property’s Asset Value pursuant to clauses (A) through (D) of Section 1.5(b)(i) , or any Leasing Costs, capital expenditures and Acquisition and Development Costs that such Group anticipates to be paid with respect to such Included Property between the Revaluation Time and the Closing Date and that, had they been paid prior to the Revaluation Time, would have averted a decrease in such Included Property’s Asset Value pursuant to clause (A) of Section 1.5(b)(ii)  or Section 1.5(b)(iv)  (collectively, “ Credited Post- Revaluation Time Amounts ”), itemizing the same in reasonable detail, and the applicable Included Property’s Asset Value will be increased, or will not be decreased, as applicable, on the Revaluation Time by such Credited Post-Revaluation Time Amounts. Between the Revaluation Time and the Closing Date, neither Group shall (x) declare, set aside or pay any Distribution on or with respect to Equity Interests of any of its Included Entities, except as may be expressly contemplated by the Pre-Combination Transactions, the Restructuring Transactions or the Combination Transactions, or (y) permit any of its Included Entities to incur any Indebtedness for borrowed money, in each case, without the approval of the other Group in its sole discretion (and if any Party shall do so in violation of this sentence, the amount of such Distribution shall be added to the amount of cash to be contributed by such Group pursuant to Section 2.2(o)  or Section 2.3(k) , as applicable).

 

(e) The Parties shall prepare and file their respective Tax Returns and any Transfer Tax returns or other filings consistent with the Asset Values of the Included Assets as adjusted pursuant to this Section 1.5 and otherwise in accordance with the methodology set forth on Section 1.5(e)  of the JBG Disclosure Letter and Section 1.5(e)  of the Vornado Disclosure Letter, and shall take no positions contrary thereto in any Tax Return or other Tax filing or proceeding unless otherwise required by applicable Law. Each Party’s Transfer Tax returns shall be subject to the approval of the other Group, such approval not to be unreasonably withheld, delayed or conditioned.

 

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Section 1.6.         Kickout of Included Interests; Designation of Additional Vornado Excluded Properties .

 

(a)          The Parties acknowledge that certain Included Interests may be Kickout Interests pursuant to Section 5.2(f)  or another provision of this Agreement. Notwithstanding anything to the contrary contained herein, no Kickout Interest shall be transferred at the Closing, and the Asset Value of a Kickout Interest shall not be taken into account when calculating the amount of Consideration payable at Closing.

 

(b)         At any time on or before the Revaluation Time, the Vornado Parties shall have the right, upon written notice to the JBG Parties, to designate any or all of the properties listed on Section 1.6(b)  of the Vornado Disclosure Letter as Vornado Excluded Properties or JBG Excluded Properties, as applicable. Following such designation, any such properties and any entities that own only a direct or indirect ownership interest in any such properties (and no direct or indirect ownership interest in any Vornado Included Assets or JBG Included Assets) shall constitute Vornado Excluded Assets or JBG Excluded Assets, as applicable, for all purposes of this Agreement (and the Parties shall reasonably modify the Pre-Combination Transactions as necessary to effect the same).

 

(c)         If any Vornado Included Interest is permanently designated as a Kickout Interest pursuant to the terms of this Agreement or if any JBG Included Asset listed on Section 1.6(c)  of the JBG Disclosure Letter (the “ Must-Have Properties ”) is permanently designated as a Kickout Interest pursuant to the terms of this Agreement, then for the period beginning on the Closing Date through the later of (i) the Outside Date and (ii) sixty (60) days after the Closing Date, the Vornado Parties or the JBG Parties (as applicable), Newco and Newco OP shall cooperate in good faith and use their Commercially Reasonable Efforts to obtain such Required Consent. If a Required Consent is obtained within such period, then the applicable Party shall cause the applicable Vornado Included Interest or JBG Included Interest to be contributed to Newco OP, and Newco OP shall accept such applicable Vornado Included Interest or JBG Included Interest from the applicable Party. In exchange for such contribution, Newco OP shall issue to the Vornado Parties or the applicable JBG Parties an amount of Issued OP Units or Issued Newco Shares (as elected by such Vornado Parties or such applicable JBG Parties) equal to the Post-Closing Consideration Number. Newco shall pay or reimburse the transferring Party for any Transfer Taxes or other Expenses (other than Consent Expenses, Financial Advisor Expenses and the expenses set forth in Section 6.1(f)  of the JBG Disclosure Letter below the cap described therein) owed on account of such contribution. The foregoing provisions of this Section 1.6(c)  shall survive the Closing.

 

(d)         If any Joint Venture Partner or ground lease counterparty exercises a right of first offer, right of first refusal, buy/sell right or other similar right to acquire the direct or indirect interest in an Included Property, then (i) the applicable Party shall notify the other Group of the same, (ii) the net purchase price paid or payable to the applicable Party with respect to the applicable Included Property shall be included in the Included Assets and (iii) the applicable Included Property shall not be a Kickout Interest.

 

 

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Section 1.7.           Determination and Election of Consideration to the JBG Parties; Requirements of Equity Consideration of the JBG Parties .

 

(a)           Promptly following the first filing of a Form 10 by the Vornado Parties with the SEC as contemplated by Section 5.19 (but in any event no later than ten (10) days after the date of such filing), the Parties shall cause an information statement regarding the Transactions and a JBG Investor Questionnaire to be distributed to each direct and indirect owner of such JBG Party (each, a “ JBG Designee ”). The JBG Parties shall use their Commercially Reasonable Efforts to obtain from each such JBG Designee within forty-five (45) days after such distribution a completed JBG Investor Questionnaire from such JBG Designee and an election, from each JBG Designee entitled to make such an election, with respect to the composition of the Consideration such JBG Designee may be entitled to pursuant to the Transactions. The JBG Parties shall periodically update the Vornado Parties regarding the status of the receipt of the above-referenced JBG Investor Questionnaires and elections. As soon as reasonably practicable following receipt by the JBG Parties of the above-referenced elections (but in any event no later than seventy-five (75) days after the distribution of the information statement to the JBG Designees), the JBG Parties shall deliver to the Vornado Parties a final schedule (the “ JBG Election Schedule ”), certified by such JBG Parties as true and complete, setting forth the election of each JBG Party or JBG Designee with respect to the composition (expressed as percentages) of the Consideration such JBG Designee may be entitled to and the name of each JBG Designee with respect thereto; provided , however , that if on the date the JBG Election Schedule is delivered the JBG Parties have not obtained completed JBG Investor Questionnaires (or otherwise received information to enable the Parties to reasonably conclude that the applicable JBG Investor is an Accredited Investor) from a sufficient number of JBG Designees to permit payment of Cash Consideration (as calculated in accordance with Section 1.7(b) ) equal to or less than the Cash Consideration Cap, then, unless the Vornado Parties agree that any Cash Consideration in excess of the Cash Consideration Cap may be drawn from the Credit Facility or otherwise borne by Newco and Newco OP in accordance with Section 1.7(b) , then the Revaluation Time will be extended until 11:59 p.m. Eastern time on the last day of the calendar month in which the Parties first determine that the Cash Consideration will be equal to or less than the Cash Consideration Cap; provided , that if the Parties first so determine in the last five (5) days of a calendar month, then the Revaluation Time will be extended until the date that is 11:59 p.m. (Eastern time) on the last day of the next calendar month; provided , further , that in no event may the Revaluation Time be extended pursuant to this sentence to a date later than April 30, 2017. The JBG Parties shall have the right to update from time to time the JBG Election Schedule after its initial delivery based on information received following such delivery, provided that any such updates shall not, in the Vornado Parties’ reasonable judgment, require any delay in the anticipated Closing Date.

 

(b)           The JBG Parties shall make available to the Vornado Parties each completed JBG Investor Questionnaire received by the JBG Parties with respect to each JBG Party or JBG Designee identified therein. To the extent that the Vornado Parties reasonably determine following a review of such JBG Investor Questionnaires that the issuance of Newco Shares and/or OP Units cannot be effected in a private placement satisfying the requirements of Regulation D of the Securities Act, then the Vornado Parties may require that, with respect to

 

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any JBG Party or JBG Designee as to which there is not a reasonable basis to conclude that such JBG Party or JBG Designee is an Accredited Investor, or as to which the JBG Parties do not timely furnish to the Vornado Parties a JBG Investor Questionnaire by the date that is forty-five (45) days prior to the anticipated Closing Date (or such later date as may be permitted by Section 1.7(a) ), Newco and Newco OP shall pay the Consideration owed to such JBG Party or JBG Designee in the form of cash (“ Cash Consideration ”) rather than Equity Consideration. Any such Cash Consideration shall be equal to the product of (x) the number of Issued Newco Shares and/or Issued OP Units that would otherwise have been payable to such JBG Party or JBG Designee multiplied by (y) the Trading Price. Any Cash Consideration shall be drawn from the Credit Facility or otherwise paid by Newco and Newco OP, up to a maximum amount equal to the Cash Consideration Cap (unless otherwise agreed pursuant to Section 1.7(a) ). Subject to Section 1.7(a) , any amount of Cash Consideration in excess of the Cash Consideration Cap shall be contributed to Newco by the JBG Parties. The amount of Cash Consideration shall be determined on the Closing Date and shall be paid to the applicable JBG Party or JBG Designee by Newco within ten (10) Business Days. In exchange for the JBG Parties’ contribution of any portion of the Cash Consideration, Newco or Newco OP shall deliver to the JBG Parties Equity Consideration equal to the Share Number that would have been payable to the applicable JBG Party or JBG Designee had such JBG Party or JBG Designee been entitled to receive Equity Consideration in accordance with this Section 1.7 .

 

(c)           With respect to the transactions described in Sections 1.2(a)  through 1.2(e) , the applicable JBG Party (or its JBG Designees) shall be entitled to receive either Issued Newco Shares or Issued OP Units, in each case payable in accordance with Section 1.7(d)  (subject, however, to the provisions of Section 1.7(b)  with respect to Cash Consideration). With respect to the transactions described in Section 1.2(f)(i) , (ii)  and (iii) , the applicable JBG Party (or its JBG Designees) shall be entitled to receive only Issued OP Units, payable in accordance with Section 1.7(d)  (subject, however, to the provisions of Section 1.7(b)  with respect to Cash Consideration). With respect to the transactions described in Section 1.2(f) , the individuals listed in Section 1.7(c)(i)  of the JBG Disclosure Letter must execute an agreement with Newco OP in the form set forth in Section 1.7(c)(ii)  of the JBG Disclosure Letter and the individuals listed in Section 1.7(c)(iii)  of the JBG Disclosure Letter must execute an agreement with Newco OP in the form set forth in Section 1.7(c)(iv)  of the JBG Disclosure Letter, in each case prior to or at the Closing in order to receive Issued OP Units pursuant to this Section 1.7(c) . Vornado agrees to cause Newco OP to enter into agreements in such form with such individuals prior to or at the Closing, provided that such individuals are willing to execute such an agreement with Newco OP.

 

(d)           With respect to any Newco Shares to be delivered by Newco OP to the applicable JBG Parties and/or one or more JBG Designees, Newco shall contribute to Newco OP and the JBG Parties (and/or JBG Designees, if applicable) shall receive from Newco OP, newly issued Newco Shares in a transaction to which Treasury Regulations Section 1.1032-3 is intended to apply, and with respect to any Newco Shares to be issued by Newco directly to the JBG Parties or JBG Designees, Newco shall issue newly issued Newco Shares (collectively, the “ Issued Newco Shares ”), which shall be validly issued, fully paid and non-assessable, and free and clear of all Liens (other than restrictions arising under the Governing Documents of Newco),

 

12

 

and which will be registered in the name of the applicable JBG Party (and/or JBG Designee) by book entry in an account or accounts with Newco’s transfer agent. With respect to any OP Units to be delivered by Newco OP to the applicable JBG Parties and/or one or more JBG Designees, Newco OP shall issue to the JBG Parties (and/or JBG Designees, if applicable), and the JBG Parties (and/or JBG Designees, if applicable) shall receive from Newco OP, a number of newly issued OP Units (collectively, the “ Issued OP Units ”), which shall be validly issued and free and clear of all Liens (other than restrictions arising under the Governing Documents of Newco OP), and which will be registered in the name of the applicable JBG Party (and/or JBG Designee) by book entry in an account or accounts with Newco OP’s transfer agent.

 

Section 1.8.           Distributions of Consideration to the Equityholders of the JBG Parties . The JBG Parties shall cause any Consideration received by the JBG Parties hereunder to be distributed in accordance with the allocation schedule set forth on Section 1.8 of the JBG Disclosure Letter and otherwise in accordance with the respective JBG Contribution Agreements and JBG Merger Agreements, the Restructuring Transactions and the applicable Governing Documents of the JBG Parties and their respective Affiliates.

 

Section 1.9.           JBG Representative .

 

(a)           Each JBG Party (on behalf of itself, its Subsidiaries, its JBG Designees and their respective successors, assigns and heirs) hereby irrevocably appoints JBG Properties as the representative of the JBG Parties (the “ JBG Representative ”) and to be the agent, proxy and attorney-in-fact for such Person regarding any matter relating to or arising from this Agreement, any Ancillary Document or the Transactions, including the full power and authority on such Person’s behalf (i) to execute the Partnership Agreement Amendment and Restatement and any other Ancillary Documents and otherwise to consummate the transactions contemplated herein and therein, (ii) to pay such Person’s expenses incurred in connection with the negotiation and performance of this Agreement, the Ancillary Documents and any other agreement entered into in connection herewith (whether incurred on or after the date hereof), (iii) to disburse any funds received hereunder to the JBG Parties (as applicable), (iv) to endorse and deliver any certificates or instruments representing the Equity Consideration and execute such further agreements or instruments of assignment as the Vornado Parties, Newco or Newco OP shall reasonably request or which the JBG Representative shall consider necessary or proper to effectuate the Transactions, all of which shall have the effect of binding the JBG Parties, their Subsidiaries and the JBG Designees as if such Person had personally executed such agreement or instrument, (v) to give and receive notices, communications and other deliverables hereunder or under any Ancillary Document on behalf of such Person, (vi) to take all other actions to be taken by or on behalf of such Person in connection herewith, including under any Ancillary Document, (vii) to dispute, compromise, settle and pay any claims made in connection with this Agreement or the Transactions, (viii) to retain legal and other professional advisors on behalf of, and at the expense of such Persons in connection with its actions hereunder and (ix) to take all actions necessary or appropriate in the judgment of the JBG Representative for the accomplishment of the foregoing. Each JBG Party agrees that such agency, proxy and attorney-in-fact and all authority granted hereunder are coupled with an interest, and are therefore irrevocable without the consent of the JBG Representative and shall survive the death, incapacity, bankruptcy,

 

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dissolution or liquidation of any Person. If, after the execution of this Agreement, any JBG Party, its Subsidiaries or its JBG Designee dies, dissolves or liquidates or becomes incapacitated or incompetent, then the JBG Representative is nevertheless authorized, empowered and directed to act in accordance with this Agreement as if that death, dissolution, liquidation, incapacity or incompetency had not occurred and regardless of notice thereof. All actions, decisions or determinations so made or taken by the JBG Representative (to the extent authorized by this Agreement) shall be deemed the actions, decisions or determinations of each such Person, and any notice, communication, document, certificate or information required (other than any notice required by Law or under any JBG Party’s or its Subsidiaries’ Governing Documents) to be given to any JBG Party, its Subsidiaries or its JBG Designees hereunder or pursuant to any other agreement entered into in connection herewith shall be deemed so given if given to the JBG Representative.

 

(b)           Each JBG Party will severally, for itself, its Subsidiaries, and its JBG Designees only, and not jointly, indemnify the JBG Representative and hold the JBG Representative harmless against all expenses (including reasonable attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred without gross negligence or willful misconduct on the part of the JBG Representative and arising out of or in connection with the good faith acceptance or administration of its duties hereunder, and any act done or omitted pursuant to the advice of counsel will be conclusive evidence of such good faith.

 

(c)           The JBG Representative hereby accepts its appointment as representative of the JBG Parties under this Agreement. The JBG Representative shall act in good faith. Subject to the JBG Representative’s right to pay expenses reasonably incurred in connection with the negotiation and performance of this Agreement or otherwise to satisfy the reasonable expenses and obligations of the JBG Parties, their Subsidiaries and their JBG Designees, the JBG Representative shall promptly disburse to each Person such Person’s share of any Cash Consideration and Equity Consideration (as applicable) received by the JBG Representative in accordance with the terms of this Agreement. The JBG Representative shall have only the duties expressly stated in this Agreement and shall have no other duty, express or implied. The JBG Representative is not, by virtue of serving as the JBG Representative, a fiduciary of the JBG Parties or any other Person. The JBG Representative, in its capacity as such, has no personal responsibility or liability for any representation, warranty or covenant of the JBG Parties.

 

(d)           The JBG Representative shall not be liable to any JBG Party or any other Person for any action taken or omitted by it or any agent employed by it hereunder or under any other document entered into in connection herewith, except that the JBG Representative shall not be relieved of any liability imposed by Law for fraud or bad faith. The JBG Representative shall not be liable to the JBG Parties or any other Person for any apportionment or distribution of consideration made by the JBG Representative in good faith, and, if any such apportionment or distribution is subsequently determined to have been made in error, the sole recourse of any Person to whom payment was due, but not made, shall be to recover from other JBG Parties any payment in excess of the amount to which they are determined to have been entitled. The JBG Representative shall not be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement. Neither the JBG

 

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Representative nor any agent employed by it shall incur any liability to any JBG Party or any other Person by virtue of the failure or refusal of the JBG Representative for any reason to consummate the Transactions or relating to the performance of its other duties hereunder, except for actions or omissions constituting fraud or bad faith.

 

(e)           The JBG Representative shall not be entitled to and shall not charge or collect from the JBG Parties or any other Person any fees or other compensation for its services as the JBG Representative under this Agreement. The JBG Representative, however, shall be entitled to reimbursement from the JBG Parties for its reasonable out-of-pocket expenses incurred in connection with its services as the JBG Representative under this Agreement.

 

(f)            If the JBG Representative resigns or is otherwise unable or unwilling to serve in such capacity, then the JBG Parties will appoint a new Person to serve as the JBG Representative and will provide prompt written notice thereof to Vornado, Newco and Newco OP. Until such notice is received, the Vornado Parties, Newco and Newco OP will be entitled to rely on the actions and statements of the previous JBG Representative.

 

Section 1.10.         Withholding . Notwithstanding anything to the contrary in this Agreement, Newco and Newco OP shall be entitled to deduct and withhold from any amounts otherwise payable in connection with this Agreement and the Transactions to any Person such amounts as are required to be deducted and withheld under the Code or any provision of applicable Law. Any amounts so withheld shall be paid over to the appropriate Governmental Entity to the extent required by Law. To the extent that amounts are so deducted and withheld, such deducted and withheld amounts shall be treated for all purposes of this Agreement as having been paid to such Person in respect of whom such deduction and withholding were made.

 

ARTICLE II

 

CLOSING

 

Section 2.1.           Closing . The closing of the Combination Transactions (the “ Closing ”) shall take place at 12:01 a.m. Eastern time on the fifteenth (15 th ) day of the calendar month immediately following the month in which the Revaluation Time occurs (or, if such day is not a Business Day, the next succeeding Business Day). Subject to the last sentence of Section 7.1(g) , the “Revaluation Time” shall be 11:59 p.m. Eastern time on the last day of the calendar month in which all of the conditions set forth in Sections 7.1 , 7.2 and 7.3 (other than those that by their terms are to be satisfied at the Closing) are satisfied or waived by the Parties entitled to grant such waiver; provided , that if such conditions are so satisfied or waived in the last five (5) days of a calendar month, then the Revaluation Time will be 11:59 p.m. (Eastern time) on the last day of the next calendar month. Notwithstanding the foregoing, (x) in no event shall the Closing take place before March 15, 2017, and (y) the Revaluation Time and the Closing shall be subject to extension as provided by Section 1.7(a) . If each of the closing conditions described in Sections 7.1 , 7.2 and 7.3 (other than those that by their terms are to be satisfied at the Closing) has been satisfied or waived by the Parties entitled to grant such waiver, then subject to the last sentence of Section 7.1(g) , (a) the Vornado Parties may set the Revaluation Time in accordance with the

 

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first two sentences of this paragraph to allow the date of Closing to be on or after March 15, 2017 once (i) no more than ten percent (10%) of the Vornado Included Properties are Kickout Interests and (ii) no more than twenty percent (20%) of the JBG Included Properties are Kickout Interests; (b) the Vornado Parties may set the Revaluation Time in accordance with the first two sentences of this paragraph to allow the date of Closing to be after May 1, 2017 once (i) no more than fifteen percent (15%) of the Vornado Included Properties are Kickout Interests and (ii) no more than thirty percent (30%) of the JBG Included Properties are Kickout Interests; (c) the JBG Parties may set the Revaluation Time in accordance with the first two sentences of this paragraph to allow the date of Closing to be after July 1, 2017 once (i) no more than ten percent (10%) of the Vornado Included Properties are Kickout Interests, (ii) no more than twenty percent (20%) of the JBG Included Properties are Kickout Interests and (iii) no more than twenty percent (20%) of the Must-Have Properties are Kickout Interests; and (d) the JBG Parties may set the Revaluation Time in accordance with the first two sentences of this paragraph to allow the date of Closing to be on or after March 15, 2017 once no Vornado Included Properties or JBG Included Properties are deemed Kickout Interests. For clarity, the percentages described in the immediately preceding sentence shall be calculated (x) with respect to the JBG Included Properties, on the basis of their initial Asset Values as a percentage of the aggregate initial Asset Values of all of the JBG Included Properties, including any Kickout Interests, (y) with respect to the Vornado Included Properties, on the basis of their initial Asset Values as a percentage of the aggregate initial Asset Values of all of the Vornado Included Properties, including any Kickout Interests, and (z) with respect to the Must-Have Properties, on the basis of their initial Asset Values as a percentage of the aggregate initial Asset Values of all of the Must-Have Properties, including any Kickout Interests. The date of the Closing hereunder is referred to herein as the “ Closing Date ”. The documents for the Closing shall be assembled at the offices of Hogan Lovells US LLP, 555 Thirteenth Street, NW, Washington, District of Columbia 20004, or at such other location as is mutually acceptable to the Vornado Parties and the JBG Parties, no later than the Business Day before the Closing Date.

 

Section 2.2.           Deliveries by the Vornado Parties at the Closing . Subject to the terms and conditions set forth herein, and on the basis of the representations, warranties, covenants and agreements set forth herein, at the Closing, the applicable Vornado Party shall deliver, or cause to be delivered, to the JBG Parties (and/or the JBG Designees, as applicable):

 

(a)           evidence of the issuance to the JBG Parties (and/or JBG Designees, as applicable) of the Newco Shares by Newco and/or OP Units by Newco OP issuable pursuant to Section 1.4 and Section 1.7 ;

 

(b)           the Separation and Distribution Agreement, in the form attached hereto as Exhibit D (the “ Separation and Distribution Agreement ”), duly executed by Vornado, Vornado OP, Newco and Newco OP (which, for the avoidance of doubt, will be signed no later than the time at which the Pre-Combination Transactions are effected pursuant to Section 5.8(a) );

 

(c)           the JBG Contribution Agreements referenced in Section 1.2 and the JBG Merger Agreements referenced in Section 1.2 , duly executed by Newco or its applicable Subsidiary;

 

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(d)           Registration Rights Agreements, each in the form attached hereto as Exhibit E (the “ Registration Rights Agreements ”), duly executed by Newco;

 

(e)           an amendment and restatement of the Partnership Agreement in the form attached hereto as Exhibit F (the “ Partnership Agreement Amendment and Restatement ”), duly executed by Newco in its capacity as the sole general partner of Newco OP and as the attorney- in-fact for the other partners of Newco OP, and effective as of the time during the Pre- Combination Transactions at which a third party is first admitted as a partner of Newco OP;

 

(f)                                    intentionally omitted;

 

(g)                                   a certificate executed by a duly authorized officer of Vornado pursuant to Section 7.3(c) ;

 

(h)                                  the Vornado REIT Opinions;

 

(i)            any Transfer Tax returns as may be necessary to comply with Title 42, Subtitle 1, Chapter 11 of the District of Columbia Code and the regulations applicable thereto, and Titles 12 and 13 of the Maryland Tax-Property Code and the regulations applicable thereto and any other required Transfer Tax declarations or similar documentation required to evidence the payment of any Tax imposed by any state, county or municipality together with any change of ownership statements required under any legal requirements;

 

(j)            the Employee Matters Agreement, in the form attached hereto as Exhibit G (the “ Employee Matters Agreement ”), duly executed by Vornado, Vornado OP, Newco and Newco OP;

 

(k)           the Transition Services Agreement, duly executed by Vornado OP, Newco and Newco OP;

 

(l)            the Tax Matters Agreement, in the form attached hereto as Exhibit H (the “ Tax Matters Agreement ”), duly executed by Vornado and Newco;

 

(m)          the Cleaning Services Agreements, duly executed by Newco and the applicable Vornado Affiliates;

 

(n)           intentionally omitted;

 

(o)           evidence of a cash contribution to Newco in an amount set forth on Section 2.2(o)  of the Vornado Disclosure Letter;

 

(p)           one or more subcontracts, in the form attached hereto as Exhibit I (the “ GP Subcontracts ”), duly executed by Newco or Newco’s Subsidiary, pursuant to which the managing members of each of the JBG Funds and of the general partners or managing members of JBG Investment Fund I, L.P., JBG Investment Fund II, L.P., JBG Investment Fund III, L.P., JBG Investment Fund IV, L.L.C., JBG Investment Fund V, L.L.C., JBG/Recap Investors, L.L.C.,

 

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JBG/SEFC Fund Investors, L.L.C. and JBG/SEFC Partners, L.L.C., as applicable, will subcontract asset management services to Newco or a Subsidiary thereof;

 

(q)         all documents, items or agreements required to be delivered by the Vornado Parties or their Affiliates under the Separation and Distribution Agreement, the JBG Merger Agreements and the JBG Contribution Agreements.

 

Section 2.3.         Deliveries by the JBG Parties at the Closing . Subject to the terms and conditions set forth herein, and on the basis of the representations, warranties, covenants and agreements set forth herein, at the Closing, the applicable JBG Party shall deliver, or cause to be delivered, to the Vornado Parties:

 

(a)         the Registration Rights Agreements, duly executed by each of the JBG Parties (and/or JBG Designees, as applicable);

 

(b)         a counterpart signature page to the Partnership Agreement Amendment and Restatement and all other documents or instruments as required by the terms of the Partnership Agreement for the admission of the JBG Parties (and/or JBG Designees, as applicable) as limited partners of Newco OP;

 

(c)         counterpart signature pages to JBG Contribution Agreements referenced in Section 1.2 and the JBG Merger Agreements referenced in Section 1.2 , duly executed by the applicable JBG Parties;

 

(d)         a certificate executed by a duly authorized officer of each of the JBG Parties or its general partner or manager pursuant to Section 7.2(c) ;

 

(e)         a certificate duly completed and executed by each of the transferor JBG Parties, dated as of the Closing Date, certifying in accordance with Section 1445 of the Code that each such JBG Party (or, if such JBG Party is a disregarded entity for U.S. federal income tax purposes, the Person treated as the owner of such JBG Party’s assets for such purposes) is not a “foreign person” within the meaning of such section, in substantially the form of Exhibit J hereto;

 

(f)         an Internal Revenue Service Form W-9 or relevant Form W-8, as applicable, completed and executed by each JBG Party or Affiliate directly receiving Equity Consideration pursuant to this Agreement;

 

(g)         any Transfer Tax returns as may be necessary to comply with Title 42, Subtitle 1, Chapter 11 of the District of Columbia Code and the regulations applicable thereto, and Titles 12 and 13 of the Maryland Tax-Property Code and the regulations applicable thereto and any other required Transfer Tax declarations or similar documentation required to evidence the payment of any Tax imposed by any state, county or municipality together with any change of ownership statements required under any legal requirements;

 

(h)                                  the JBG REIT Opinions;

 

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(i)            intentionally omitted;

 

(j)            Intentionally omitted;

 

(k)           evidence of a cash contribution to Newco in an amount set forth on Section 2.3(k)  of the JBG Disclosure Letter;

 

(l)            counterpart signature pages to the GP Subcontracts, duly executed by the managing members of each of the JBG Funds and of the general partners or managing members of JBG Investment Fund I, L.P., JBG Investment Fund II, L.P., JBG Investment Fund III, L.P., JBG Investment Fund IV, L.L.C., JBG Investment Fund V, L.L.C., JBG/Recap Investors, L.L.C., JBG/SEFC Fund Investors, L.L.C. and JBG/SEFC Partners, L.L.C., as applicable; and

 

(m)          all documents, items or agreements required to be delivered by the JBG Parties or their Affiliates under the Separation and Distribution Agreement, the JBG Merger Agreements and the JBG Contribution Agreements.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES
OF THE VORNADO PARTIES

 

The following representations and warranties by the Vornado Parties set forth in this Article III are qualified in their entirety by reference to the disclosures (i) in any document or instrument attached as an exhibit to, or incorporated by reference in, any publicly available Vornado SEC Filings filed or furnished on or after January 1, 2016 and prior to the second Business Day preceding the date hereof; provided , however , that such disclosures in the Vornado SEC Filings shall not be deemed to qualify the representations and warranties made in Sections 3.1(a)  and (c)  (Organization and Qualification; Subsidiaries), Section 3.2 (Organizational Documents), Section 3.4 (Authority), Section 3.5 (No Conflict; Required Filings and Consents), and Section 3.24 (Brokers; Expenses) and (ii) set forth in the disclosure letter delivered by the Vornado Parties to the JBG Parties immediately prior to the execution of this Agreement (the “ Vornado Disclosure Letter ”). Each disclosure set forth in the Vornado Disclosure Letter shall qualify or modify the Section to which it corresponds and any other Section to the extent the applicability of the disclosure to each other Section is reasonably apparent from the text of the disclosure made.

 

Section 3.1.           Organization and Qualification; Subsidiaries .

 

(a)           Each Vornado Party is duly incorporated or organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, as the case may be, and has the requisite organizational power and authority and any necessary governmental authorization to own, lease and, to the extent applicable, operate its properties and to carry on its business as it is now being conducted. Each Vornado Party is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, operated or leased by it or the nature of its business makes such qualification,

 

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licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, have not had and would not reasonably be expected to have a Vornado Material Adverse Effect. Each Vornado Party is in compliance in all material respects with the terms of its Governing Documents.

 

(b)           Each of Newco and Newco OP is, or as of the Closing will be, duly incorporated or organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, as the case may be, and has, or will have as of the Closing, the requisite organizational power and authority and any necessary governmental authorization to own, lease and, to the extent applicable, operate its properties and to carry on its business as it is now being conducted. Each of Newco and Newco OP is, or as of the Closing will be, duly qualified or licensed to do business, and is, or as of the Closing will be, in good standing, in each jurisdiction where the character of the properties owned, operated or leased by it or the nature of its business makes such qualification, licensing or good standing necessary. Each of Newco and Newco OP is, or as of the Closing will be, in compliance in all material respects with the terms of is Governing Documents.

 

(c)           Each Vornado Included Entity is duly incorporated or organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, as the case may be, and has the requisite organizational power and authority and any necessary governmental authorization to own, lease and, to the extent applicable, operate its properties (including its Vornado Included Assets) and to carry on its business as it is now being conducted, except for such failures to be so organized, in good standing or have certain power and authority that, individually or in the aggregate, have not had and would not reasonably be expected to have a Vornado Material Adverse Effect. Each Vornado Included Entity is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, operated or leased by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, have not had and would not reasonably be expected to have a Vornado Material Adverse Effect. Each Vornado Included Entity is in compliance in all material respects with the terms of its Governing Documents, except for such noncompliance that, individually or in the aggregate, have not had and would not reasonably be expected to have a Vornado Material Adverse Effect.

 

(d)           Section 3.1(d)  of the Vornado Disclosure Letter sets forth a true, correct and complete list of Newco, Newco OP and all of the Vornado Included Entities, including a list of each Vornado Included Entity that is a “qualified REIT subsidiary” within the meaning of Section 856(i)(2) of the Code (“ Qualified REIT Subsidiary ”), a “taxable REIT subsidiary” within the meaning of Section 856(l) of the Code (“ Taxable REIT Subsidiary ”) or a real estate investment trust within the meaning of Sections 856 — 860 of the Code (“ REIT ”), together with (i) the jurisdiction of incorporation or organization, as the case may be, of each Vornado Included Entity, (ii) the type of and percentage of voting, equity, profits, capital and other beneficial interest held, directly or indirectly, by Vornado OP in and to each Vornado Included Entity, (iii) the names of and the type of and percentage of voting, equity, profits, capital and other beneficial interest held by any Person other than Vornado or a Vornado Subsidiary in each

 

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Vornado Included Entity, and (iv) the classification for U.S. federal income tax purposes of each Vornado Included Entity. None of the Vornado Included Entities other than the Vornado REITs has elected or will elect to be treated as a REIT.

 

(e)           Newco and Newco OP have been organized solely for the purpose of, and have not engaged in activities except in preparation for, the Transactions. The Vornado Included Entities have not engaged in any activities except for the acquisition, construction, development, ownership, operation, management, leasing and repair of the Vornado Included Properties and the management of properties belonging to third parties, and other activities ancillary thereto.

 

Section 3.2.           Organizational Documents . Vornado has made available to the JBG Parties complete and correct copies of (i) Newco’s declaration of trust (the “ Newco Declaration ”) and Newco’s bylaws, as amended to date (the “ Newco Bylaws ”), the Partnership Agreement and the certificate of limited partnership of Newco OP, and (ii) the Governing Documents of each Vornado Included Entity, each as in effect on the date hereof.

 

Section 3.3.           Capital Structure; Subsidiaries .

 

(a)           As of the date hereof, (i) the authorized capital stock of Newco consists of 1,000 Newco Shares; (ii) the outstanding partnership interests of Newco OP consist of an undivided one hundred percent (100%) limited partnership interest and a zero percent (0%) noneconomic general partner interest, respectively; (ii) all such Newco Shares are issued and outstanding and owned by Vornado; (iii) the one hundred percent (100%) limited partnership interest in Newco OP is owned by Vornado OP; (iv) the zero percent (0%) noneconomic general partner interest in Newco OP is owned by Vornado DC Spinco GP LLC, a Delaware limited liability company (“ Newco GP ”); and (v) all of the membership interests in Newco GP are owned by Newco OP. Immediately prior to the Closing, (x) the number of authorized Newco Shares shall be sufficient to issue the Equity Consideration to the JBG Parties and the JBG Designees and (y) the number of authorized OP Units shall be sufficient to issue the Equity Consideration to the JBG Parties and JBG Designees.

 

(b)           All the outstanding shares of capital stock of each of Newco and any of the Vornado Included Entities that is a corporation or trust are, or in the case of Newco, will be as of the Closing, duly authorized, validly issued, fully paid and non-assessable. All Equity Interests in Newco OP and each of the Vornado Included Entities that is a partnership or limited liability company are, or in the case of Newco OP, will be as of the Closing, duly authorized and validly issued. All shares of capital stock of (or other ownership interests in) Newco, Newco OP and each of the Vornado Included Entities that may be issued upon exercise of outstanding options or exchange rights are, or in the case of Newco and Newco OP, will be as of the Closing, duly authorized and, upon issuance, will be validly issued and in the case of Newco, fully paid and non-assessable. Immediately prior to the Vornado Distribution (as defined in Section 1.1 of the Vornado Disclosure Letter), (i) Vornado will own all of the issued and outstanding Newco Shares, (ii) Newco will own all of the limited partnership interests in Newco OP except for those limited partnership interests in Newco OP previously distributed to the limited partners of Vornado OP pursuant to the Pre-Combination Transactions, (iii) Newco GP will own one

 

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hundred percent (100%) of the general partnership interests in Newco OP, and (iv) Newco will own one hundred percent (100%) of the limited liability company interests in Newco GP. Except as set forth in Section 3.3(b)  of the Vornado Disclosure Letter, Vornado OP owns, directly or indirectly, all of the issued and outstanding capital stock and other ownership interests of each of the Vornado Included Entities, free and clear of all Liens other than statutory or other Liens for Taxes or assessments which are not yet due or delinquent or the validity of which is being contested in good faith by appropriate proceedings and for which adequate reserves are maintained on Vornado’s Financial Statements in accordance with GAAP to the extent required under GAAP, and there are no existing options, warrants, calls, subscriptions, convertible securities or other securities, agreements, commitments (other than commitments to contribute capital to Joint Ventures) or obligations of any character relating to the outstanding capital stock or other securities of any Vornado Included Entity or which would require any Vornado Included Entity to issue or sell any shares of its capital stock, ownership interests or securities convertible into or exchangeable for shares of its capital stock or ownership interests.

 

(c)           Except as set forth in this Agreement or in Section 3.3(c)  of the Vornado Disclosure Letter, there are no securities, options, warrants, calls, rights, commitments, agreements, rights of first refusal, arrangements or undertakings of any kind to which Newco, Newco OP or any of the Vornado Included Entities is a party or by which any of them is bound, obligating Newco, Newco OP or any Vornado Included Entity to issue, deliver or sell or create, or cause to be issued, delivered or sold or created, additional Newco Shares, OP Units, or any other partnership units or other Equity Interests or phantom stock or other contractual rights the value of which is determined in whole or in part by the value of or in reference to any equity security of Newco, Newco OP or any Vornado Included Entity or obligating Newco, Newco OP or any Vornado Included Entity to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, right of first refusal, arrangement or undertaking. Except as set forth in this Agreement or in Section 3.3(c)  of the Vornado Disclosure Letter, there are no outstanding contractual obligations of Newco, Newco OP or any Vornado Included Entity to repurchase, redeem or otherwise acquire any Newco Shares, OP Units, or any other partnership units or other Equity Interests. None of Newco, Newco OP or any Vornado Included Entity is a party to or bound by any agreements or understandings concerning the voting (including voting trusts and proxies) of any capital stock of Newco, Newco OP or any Vornado Included Entity.

 

(d)           Section 3.1(d)  of the Vornado Disclosure Letter sets forth Vornado OP’s direct or indirect percentage ownership interests in Newco, Newco OP and each of the Vornado Included Entities as of the date hereof, and, subject to the exceptions set forth on Section 3.1(d)  of the Vornado Disclosure Letter, Vornado OP will own not less than such percentage immediately prior to the consummation of the Pre-Combination Transactions except as adjusted or modified as permitted under this Agreement. Except as set forth on Section 3.1(d)  of the Vornado Disclosure Letter, each Vornado Included Entity is and, immediately prior to the Pre- Combination Transactions, will be, directly or indirectly wholly owned by Vornado OP. Newco is and, immediately prior to the Vornado Distribution, will be directly or indirectly wholly owned by Vornado. Newco OP is and, immediately prior to the Pre-Combination Transactions, will be, directly or indirectly wholly owned by Vornado OP.

 

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(e)           With regard to the Vornado Included Interests, except as set forth in Section 3.3(e)  of the Vornado Disclosure Letter, all of the material capital obligations currently due and payable of Newco, Newco OP and any Vornado Included Entity and, to the knowledge of the Vornado Parties, all of the material capital obligations currently due and payable of any Joint Venture Partner have been fully funded. To the knowledge of the Vornado Parties, except as set forth in Section 3.3(e)  of the Vornado Disclosure Letter, no Joint Venture Partner has made or advanced any loans that would adversely impact the Vornado Parties’ share of distributions from the Joint Venture.

 

(f)            As of the date hereof, (i) no right of first offer, forced sale, buy/sell or similar right under any Joint Venture Agreement has been exercised by any Vornado Party or any Vornado Included Entity, on the one hand, or any Joint Venture Partner of a Vornado Party or Vornado Included Entity, on the other hand, or is the exercise of any such right now pending or proposed and (ii) no Joint Venture to which a Vornado Included Entity is party has been dissolved or liquidated and not reconstituted in accordance with the applicable Joint Venture Agreement and no event or condition which would trigger or result in the dissolution or liquidation of a Joint Venture has occurred and is continuing without the reconstitution of such Person in accordance with the applicable Joint Venture Agreement.

 

Section 3.4.         Authority .

 

(a)           Each of the Vornado Parties, Newco and Newco OP has all necessary corporate, trust or limited partnership power and authority, as applicable, to execute and deliver this Agreement, and each Ancillary Document to be executed and delivered by it at the Closing, to perform its obligations hereunder and thereunder, and to consummate the Transactions. The execution, delivery and performance by the Vornado Parties, Newco and Newco OP of this Agreement and the execution, delivery and performance by such Vornado Party, Newco or Newco OP of each Ancillary Document to which such Vornado Party, Newco or Newco OP is or will be a party and the consummation by the Vornado Parties, Newco and Newco OP of the Transactions have been duly and validly authorized by all necessary corporate, trust and limited partnership action, and no other corporate, trust or limited partnership proceedings on the part of the Vornado Parties, Newco or Newco OP, as applicable, are, or in the case of Newco and Newco OP, will be as of the Closing, necessary to authorize the execution and delivery by any Vornado Party, Newco and Newco OP of this Agreement, any such Ancillary Document and the consummation by it of the Transactions, subject to the filing with and acceptance by, the applicable Governmental Entity, of any certificate or articles of merger for any merger contemplated by the Transactions. This Agreement has been, and each Ancillary Document to which it is or will be contemplated that such Vornado Party, Newco or Newco OP will be party is or will be, duly executed and delivered by such Vornado Party, Newco or Newco OP (as applicable) and, assuming due and valid authorization, execution and delivery hereof and thereof by such JBG Parties party thereto, is or will be a valid and binding obligation of such Vornado Party, Newco or Newco OP, enforceable against such Vornado Party, Newco or Newco OP in accordance with its terms, except as the enforcement hereof or thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar Laws, now or hereafter in

 

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effect, relating to creditors’ rights generally and (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at Law).

 

(b)           Each of the Vornado Board and the Newco Board, at a duly held meeting, has duly and validly authorized the execution and delivery of this Agreement and each Ancillary Document to be executed and delivered by Vornado and Vornado OP at the Closing, which resolutions remain in full force and effect and have not been subsequently rescinded, modified or withdrawn in any way.

 

Section 3.5.         No Conflict; Required Filings and Consents .

 

(a)           Except as set forth in Section 3.5(a)  of the Vornado Disclosure Letter, none of the execution, delivery or performance of this Agreement or the Ancillary Documents to which any Vornado Party, Newco or Newco OP is a party, the consummation of the Transactions or compliance by such Vornado Parties, Newco or Newco OP with any of the provisions of this Agreement or any Ancillary Document will (i) conflict with or result in any breach of any provision of (A) the Newco Declaration, the Newco Bylaws, the certificate of limited partnership of Newco OP or the Partnership Agreement or (B) any Governing Documents of any Vornado Party or Vornado Included Entity, (ii) assuming that all consents, approvals, authorizations and permits described in Section 3.5(b)  have been obtained, all filings and notifications described in Section 3.5(b)  have been made and any waiting periods thereunder have terminated or expired, require any filing by the Vornado Parties, Newco or Newco OP with, or the obtaining of any permit, authorization, consent or approval of, any court, arbitral tribunal, administrative agency or commission or other governmental or other regulatory authority or agency, whether foreign, federal, state or local (a “ Governmental Entity ”) (except for (x) compliance with applicable requirements of the Exchange Act and (y) such filings as may be required in connection with state and local Transfer Taxes), (iii) automatically result in a modification, violation or breach of, or material increase in cost or obligation of any Vornado Included Entity, Newco or Newco OP under, or constitute (with or without notice or lapse of time or both) a default (or give rise to any right to others, including, but not limited to, any right of termination, amendment, cancellation or acceleration) under, or give rise to any right of purchase, first offer or forced sale under or result in the creation of a Lien on any property or asset of any Vornado Included Entity, Newco or Newco OP pursuant to any note, bond, mortgage, debt instrument, indenture, contract, agreement, ground lease, license, permit or other legally binding obligation to which any Vornado Included Entity, Newco or Newco OP is a party, (iv) assuming that all consents, approvals, authorizations and permits described in Section 3.5(b)  have been obtained, all filings and notifications described in Section 3.5(b)  have been made and any waiting periods thereunder have terminated or expired, violate any order, writ, injunction, decree or Law applicable to such Vornado Parties, Newco or Newco OP or any of their respective properties or assets, (v) require any consent or approval of, or notice to, any other Person, under any of the terms, conditions or provisions of (x) any Vornado Ground Lease other than any Vornado Ground Lease set forth in Section 3.5(a)(v)(x)  of the Vornado Disclosure Letter (the “ Required Vornado Ground Lease Consents ”), (y) any Joint Venture Agreement of a Vornado Included Entity other than any Joint Venture Agreement set forth on Section 3.5(a)(v)(y)  of the Vornado Disclosure Letter (the “ Required Vornado JV Consents ”), or (z) any Contract constituting an Indebtedness obligation

 

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of a Vornado Included Entity that relates to any of the Vornado Included Assets or pursuant to which any Vornado Included Entity could become an obligor pursuant to the Transactions other than any such Contract set forth on Section 3.5(a)(v)(z)  of the Vornado Disclosure Letter (the “ Required Vornado Debt Consents ”), or (vi) require any consent or approval of, or notice to, any other Person, including, without limitation, from limited partners, members or parties to leases or other agreements or commitments, except, as to clauses (i)(B), (ii), (iii), (iv) and (vi), respectively, for any such conflicts, violations, breaches, defaults or other occurrences which, individually or in the aggregate, have not had and would not reasonably be expected to have a Vornado Material Adverse Effect.

 

(b)           The execution and delivery of this Agreement or the Ancillary Documents to which any Vornado Party, Newco or Newco OP is a party does not, and the performance of this Agreement, any Ancillary Document or the Ancillary Documents to which any Vornado Party, Newco or Newco OP is a party will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity, except for (i) such reports under, and compliance with, the Exchange Act (and the rules and regulations promulgated thereunder) and the Securities Act (and the rules and regulations promulgated thereunder) as may be required in connection with this Agreement and the Transactions, (ii) as may be required under the rules and regulations of the NYSE, (iii) filings, permits, authorizations, consents, waiting period expirations or terminations, and approvals as may be required under the Hart- Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”), (iv) the filing with SDAT of an amendment and restatement of the Newco Declaration (the “ Declaration of Trust Amendment and Restatement ”) and any articles of merger and the acceptance for record by SDAT of the Declaration of Trust Amendment and Restatement and any such articles of merger, or the filing of any certificate of merger with the Delaware Secretary of State, in each case, as required in connection with any merger contemplated by the Transactions, (v) such filings and approvals as may be required by any applicable state securities or “blue sky” Laws, (vi) such filings as may be required in connection with state and local Transfer Taxes and ordinary course information reporting filings required to be made with the IRS, and (vii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, individually or in the aggregate, has not had and would not reasonably be expected to have a Vornado Material Adverse Effect.

 

Section 3.6.         Financial Statements .

 

(a)           Attached as Section 3.6(a)  of the Vornado Disclosure Letter are copies of the following: balance sheets, statements of income, statements of changes in equity and statements of cash flows with respect to the Vornado Included Assets on an aggregate basis, each unaudited and with any footnotes in draft format only, as of and for the fiscal years ended December 31, 2015, 2014 and 2013 and the unaudited consolidated balance sheet as of June 30, 2016 and the related consolidated statements of operations and comprehensive income, consolidated statements of changes in partners’ deficit and consolidated statements of cash flows as of and for the six months ended June 30, 2016 and 2015, each unaudited and with any footnotes in draft format only (collectively, the “ Newco Financial Statements ”). The Newco Financial Statements were derived from the books and records of the Vornado Parties and their

 

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Subsidiaries and were prepared in accordance with GAAP (it being understood, however, that the Vornado Included Entities have not been operating historically as a separate “standalone” entity or reporting segment and, therefore, when the Newco Financial Statements (including footnotes) are audited and filed in connection with the Form 10 (in such form, the “ Newco Audited Financial Statements ”), they will reflect certain adjustments necessary to be presented on a stand-alone basis in accordance with GAAP and SEC requirements), subject in the case of unaudited combined financial statements, to normal year-end adjustments, as at the dates and for the periods presented, and present fairly in all material respects the financial position, results of operations and cash flows of the Vornado Included Assets as at the dates and for the periods presented. The Newco Financial Statements present fairly, in all material respects, the combined financial position and the combined results of operations of the Vornado Included Entities (taken as a whole and assuming none of them had been designated as Kickout Interests), as of the respective dates thereof or the periods then ended, in each case except as may be noted therein (it being understood, however, that the Vornado Included Entities have not been operating historically as a separate “standalone” entity or reporting segment and, therefore, the Newco Audited Financial Statements will reflect certain adjustments necessary to be presented on a stand-alone basis in accordance with GAAP and SEC requirements).

 

(b)           When delivered, the Newco Audited Financial Statements will present fairly, in all material respects, the combined financial position and the combined results of operations of the Vornado Included Entities (taken as a whole and assuming none of them had been designated as Kickout Interests) as of the dates thereof or for the periods covered thereby, and will have been prepared in accordance with GAAP consistently applied based on the historic practices and accounting policies of Vornado to the extent compliant with GAAP (it being understood, however, that the Vornado Included Entities have not been operating historically as a separate “standalone” entity or reporting segment and, therefore, the Newco Audited Financial Statements will reflect certain adjustments necessary to be presented on a stand-alone basis in accordance with GAAP and SEC requirements). The Newco Audited Financial Statements will conform in all material respects to the published rules and regulations of the SEC applicable to financial statements for each of the periods that will be required to be included in the Form 10.

 

(c)           With respect to Newco and Newco OP, Vornado and its Subsidiaries maintain, and have maintained, a standard system of accounting established and administered in accordance with GAAP applied on a consistent basis. Vornado and its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions in the Vornado Included Entities, Newco and Newco OP are executed in accordance with management’s general or specific authorizations; (ii) transactions in the Vornado Included Entities, Newco and Newco OP are recorded as necessary to permit preparation of Newco Financial Statements in conformity with GAAP applied on a consistent basis and to maintain accountability for assets of the Vornado Included Entities, Newco and Newco OP; (iii) access to assets of the Vornado Included Entities, Newco and Newco OP is permitted only in accordance with management’s general or specific authorizations; and (iv) the recorded accountability for assets of the Vornado Included Entities, Newco and Newco OP is compared with the existing assets at reasonable intervals and appropriate action is to be taken with respect to any differences.

 

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(d)           Vornado and Vornado OP maintain disclosure controls and procedures required by Rule 13a-15 or Rule 15d-15 under the Exchange Act, including in relation to the Vornado Included Assets, and such controls and procedures are effective to ensure that all material information concerning Vornado and Vornado OP and their subsidiaries in relation to the Vornado Included Assets is made known on a timely basis to the individuals responsible for the preparation of Vornado SEC Filings and other public disclosure documents. As used in this Section 3.6 , the term “filed” shall be broadly construed to include any manner in which a document or information is furnished, supplied or otherwise made available to the SEC.

 

Section 3.7.           No Undisclosed Liabilities . Except as reflected or reserved against on the most recent balance sheet (or in the notes thereto) included in the Newco Financial Statements, none of Newco, Newco OP or any Vornado Included Entity has any liabilities or obligations of any nature (whether accrued, contingent or otherwise) which are required by GAAP to be reflected in a consolidated balance sheet, except for liabilities or obligations (i) expressly contemplated by, or arising out of, or under this Agreement, (ii) incurred in the ordinary course of business consistent with past practice since the most recent balance sheet set forth in the Newco Financial Statements made through and including the date of this Agreement, (iii) described in Section 3.7 of the Vornado Disclosure Letter or (iv) that, individually or in the aggregate, have not had and would not reasonably be expected to have a Vornado Material Adverse Effect.

 

Section 3.8.           Absence of Certain Changes or Events . Between June 30, 2016 and the date hereof, (a) except as contemplated by this Agreement or as set forth in Section 3.8 of the Vornado Disclosure Letter, Newco, Newco OP and each Vornado Included Entity has conducted its business in the ordinary course in all material respects consistent with past practice and (b) there has not been any Vornado Material Adverse Effect, or any effect, event, development or circumstance that, individually or in the aggregate with all other effects, events, developments and changes, would reasonably be expected to result in a Vornado Material Adverse Effect.

 

Section 3.9.           Litigation . Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Vornado Material Adverse Effect or adversely affect the ability of Newco, Newco OP, any Vornado Included Entity, any Vornado Party or any other Subsidiary of a Vornado Party to perform its obligations hereunder or under any Ancillary Documents to which such Person is a party, or prevent or materially delay the consummation of the Transactions, and except as set forth in Section 3.9 of the Vornado Disclosure Letter, as of the date hereof, (a) there is no litigation, claim, action, suit, arbitration, alternative dispute resolution action, order, decree, writ, injunction, government investigation, proceeding or any other judicial or administrative proceeding, in Law or equity (each, an “ Action ”), pending against (or to the knowledge of the Vornado Parties, threatened in writing against), Newco, Newco OP, any Vornado Included Entity or their Included Assets or any Vornado Party, nor, to the knowledge of the Vornado Parties, is there any investigation by a Governmental Entity pending or threatened in writing against Newco, Newco OP or any Vornado Included Entity, and (b) none of Newco, Newco OP, any Vornado Included Entity or with respect to any Included Assets thereof or any Vornado Party is subject to any outstanding order, writ, injunction, decree or arbitration ruling or judgment or award of any Governmental Entity.

 

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Section 3.10.         Taxes . Except as expressly set forth in Section 3.10 of the Vornado Disclosure Letter:

 

(a)           Newco, Newco OP and each Vornado Included Entity each has (i) duly and timely filed (or caused to be filed on its behalf) with the appropriate Governmental Entity all U.S. federal and all other material Tax Returns required to be filed by it, taking into account any extensions of time within which to file such Tax Returns, and all such Tax Returns were and are true, correct and complete in all material respects and (ii) duly and timely paid in full (or there has been duly and timely paid in full on its behalf), or made adequate provision for, all material amounts of Taxes required to be paid by it.

 

(b)           Each Vornado REIT and Newco (i) for its First Applicable Year and through and including its taxable year ended December 31, 2015 (and, for purposes of Section 7.3(a) , through and including its taxable year ended December 31, 2016, if the Closing Date occurs in the taxable year ending December 31, 2017) has been subject to taxation as a REIT and has satisfied all requirements to qualify as a REIT for such taxable years; (ii) has operated since January 1, 2016 (and, for purposes of Section 7.3(a) , January 1, 2017, if the Closing Date occurs in the taxable year ending December 31, 2017) to the date hereof in such a manner so as to qualify as a REIT; (iii) intends to continue to operate through the Closing Date in such a manner so as to qualify as a REIT; and (iv) has not taken or omitted to take any action that would reasonably be expected to result in a challenge by the IRS or any other Governmental Entity to its status as a REIT, and no such challenge is pending or threatened in writing.

 

(c)           Since the later of its acquisition or formation by Vornado, Newco, Newco OP and each Vornado Included Entity has been and continues to be treated for U.S. federal Tax purposes as a (A) a partnership (or a disregarded entity) and not as a corporation or an association or publicly traded partnership taxable as a corporation, (B) a Qualified REIT Subsidiary, (C) a Taxable REIT Subsidiary, or (D) a REIT.

 

(d)           Other than H Street, UBI and their respective Subsidiaries (and any successors thereof), none of Newco, Newco OP nor any Vornado Included Entity holds, directly or indirectly, any asset the disposition of which would be subject to (or to rules similar to) Section 1374 of the Code or, taking into account the Transactions, Treasury Regulations Section 1.337(d)-7 and Temporary Treasury Regulations Section 1.337(d)-7T.

 

(e)           (i) There are no audits, investigations or proceedings pending (or threatened in writing) for and/or in respect of any material Taxes or material Tax Returns of Newco, Newco OP or any Vornado Included Entity and none of Newco, Newco OP or any Vornado Included Entity is a party to any litigation or administrative proceeding relating to a material amount of Taxes; (ii) no deficiency for a material amount of Taxes of Newco, Newco OP or any Vornado Included Entity has been claimed, proposed or assessed in writing or, to the knowledge of Vornado, threatened in writing, by any Governmental Entity, which deficiency has not yet been settled, except for such deficiencies which are being contested in good faith; (iii) none of Newco, Newco OP or any Vornado Included Entity has extended or waived (nor granted any extension or waiver of) the limitation period for the assessment or collection of any material

 

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amount of Tax that has not since expired; and (iv) none of Newco, Newco OP or any Vornado Included Entity has entered into any “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax Law) regarding a material amount of Tax.

 

(f)            Since its formation, (i) none of Newco, Newco OP or any Vornado Included Entity has incurred any material liability for Taxes under Sections 857(b), 860(c) or 4981 of the Code that has not been previously paid; and (ii) none of Newco, Newco OP or any Vornado Included Entity has incurred any material liability for any other Taxes other than (x) in the ordinary course of business, or (y) transfer or similar Taxes arising in connection with acquisitions or dispositions of property. No event has occurred, and no condition or circumstance exists, which presents a material risk that any material amount of Tax described in the previous sentence will be imposed upon Newco, Newco OP or any Vornado Included Entity (other than transfer or similar Taxes arising in connection with the Transactions).

 

(g)           Newco, Newco OP and each Vornado Included Entity have complied in all material respects with all applicable Laws relating to the payment and withholding of Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 1445, 1446 and 3402 of the Code or similar provisions under any state and foreign Laws) and have duly and timely withheld and, in each case, have paid over to the appropriate Governmental Entities any and all material amounts required to be so withheld and paid over on or prior to the due date thereof under all applicable Laws.

 

(h)           Except as described on Section 3.10(h)  of the Vornado Disclosure Letter, there are no Vornado Included Entity Tax Protection Agreements (as hereinafter defined) in force as of the date of this Agreement, and, as of the date of this Agreement, no Person has raised in writing a material claim against any Vornado Included Entity for any breach of any Vornado Included Entity Tax Protection Agreement. As used herein, “ Vornado Included Entity Tax Protection Agreement ” means any written agreement which Newco, Newco OP or any Vornado Included Entity is a party to or is otherwise bound by or subject to pursuant to which: (i) any liability to holders of limited partnership interests in a Vornado Included Entity that is a partnership for U.S. federal income tax purposes relating to Taxes may arise, whether or not as a result of the consummation of the Transactions; and/or (ii) in connection with the deferral of income Taxes of a holder of limited partnership interests in a Vornado Included Entity that is a partnership for U.S. federal income tax purposes, Newco, Newco OP or the Vornado Included Entities have agreed to (A) maintain a minimum level of debt, continue a particular debt or provide rights to guarantee debt, (B) retain or not dispose of assets for a period of time that has not since expired, (C) make or refrain from making Tax elections, and/or (D) only dispose of assets in a particular manner.

 

(i)            There are no material Tax Liens upon any property or assets of Newco, Newco OP or any Vornado Included Entity except Liens for Taxes not yet due and payable or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP.

 

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(j)            None of Newco, Newco OP or any Vornado Included Entity (A) has been a member of an affiliated group filing a consolidated U.S. federal income Tax Return or (B) has any liability for material amounts of Taxes of any Person (other than Vornado, Newco, Newco OP or any Vornado Included Entity) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor.

 

(k)           None of Newco, Newco OP or any Vornado Included Entity has participated in any “listed transaction” within the meaning of Treasury Regulations Section 1.6011-4(b)(2).

 

(l)            Other than in connection with the distribution by Vornado of its Equity Interests in Urban Edge Properties to its stockholders on January 15, 2015 and the Pre- Combination Transactions, none of Vornado, Newco, Newco OP or any of the Vornado Included Entities has constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code in the two (2) years prior to the date of this Agreement.

 

(m)          None of Newco, Newco OP or any of the Vornado Included Entities (other than Taxable REIT Subsidiaries and other than, in the case of any Vornado REITs, during any taxable year before its First Applicable Year) currently has or, as of December 31 of any taxable year through and including the taxable year ended December 31 immediately prior to the Closing Date, has had any earnings and profits attributable to such entity or any other corporation in any non-REIT year within the meaning of Section 857(a) of the Code.

 

Section 3.11.      Material Contracts .

 

(a)           Except for contracts listed in Section 3.11(a)  of the Vornado Disclosure Letter or publicly filed by Vornado or Newco with the SEC, as of the date of this Agreement, none of Newco, Newco OP or any Vornado Included Entity is a party to or bound by or subject to any contract that, as of the date hereof:

 

(i)          obligates Newco, Newco OP or such Vornado Included Entity to make non-contingent aggregate annual expenditures (other than principal and/or interest payments or the deposit of other reserves with respect to debt obligations) in excess of $500,000 and is not cancelable within ninety (90) days without material penalty to such Vornado Included Entity, except for any lease under which such Vornado Included Entity is lessee or any ground lease affecting any Vornado Included Property or relates to tenant improvement expenses under a Vornado Lease;

 

(ii)         contains any non-compete or exclusivity provisions with respect to any line of business or geographic area that restricts the business of Newco, Newco OP or such Vornado Included Entity in any material respect, or would otherwise limit the freedom of such Persons with respect to, or restrict the lines of business conducted by Newco, Newco OP or such Vornado Included Entity or the geographic area in which

 

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Newco, Newco OP or such Vornado Included Entity may conduct business in any material respect, excluding any such contract that is a Vornado Lease;

 

(iii)        is an agreement which obligates Newco, Newco OP or such Vornado Included Entity to indemnify any past or present directors, officers, trustees, employees and agents of Vornado, Newco, Newco OP or such Vornado Included Entity pursuant to which Newco, Newco OP or such Vornado Included Entity is the indemnitor, in each case, other than pursuant to any Governing Documents, operating agreements, property management agreements, advisory agreements or any similar agreement;

 

(iv)        obligates Newco, Newco OP or such Vornado Included Entity to any material continuing contractual obligation (i) for indemnification under any agreements relating to the sale of real property, or any other business or material assets, previously owned, whether directly or indirectly, by Newco, Newco OP or such Vornado Included Entity that are reasonably likely to involve a Liability of $1,000,000 or more or (ii) to make payments, contingent or otherwise, on account of prior acquisitions or sales of any Vornado Included Property;

 

(v)         constitutes an Indebtedness obligation of Newco, Newco OP or such Vornado Included Entity with a principal amount outstanding as of the date hereof greater than $500,000, other than any such Indebtedness for which all parties are Vornado Included Entities;

 

(vi)        requires Newco, Newco OP or such Vornado Included Entity to dispose of or acquire assets or properties (other than in connection with the expiration of a Vornado Lease or a ground lease affecting a Vornado Included Property) with a fair market value in excess of $1,000,000, or involves any pending or contemplated merger, consolidation or similar business combination transaction, except for any Vornado Lease or any ground lease affecting any Vornado Included Property;

 

(vii)       constitutes an interest rate cap, interest rate collar, interest rate swap or other contract or agreement relating to a hedging transaction that relates to any of Newco, Newco OP or a Vornado Included Entity or to Indebtedness secured by any Vornado Included Asset;

 

(viii)      is an agreement, arrangement or understanding between Newco, Newco OP or such Vornado Included Entity, on the one hand, and any other Vornado Party, any Affiliate of Vornado, Newco, Newco OP, any other Vornado Included Entity, or any Vornado Party’s respective current directors, officers, trustees, partners, members or other Affiliates, on the other hand, other than any such agreement (A) where all parties are Vornado Included Entities, (B) which will be terminated on or before the Closing or (C)  which will otherwise not be binding on Newco, Newco OP or a Vornado Included Entity following Closing;

 

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(ix)        sets forth the operational terms of a joint venture, partnership, limited liability company or strategic alliance of Newco, Newco OP or such Vornado Included Entity with any party other than a Vornado Included Entity;

 

(x)         constitutes a loan to any Person (other than a wholly owned Vornado Included Entity) by Newco, Newco OP or such Vornado Included Entity (other than advances made pursuant to the Vornado Leases or any disbursement agreement, development agreement, or development addendum entered into in connection with a Vornado Lease with respect to the development, construction, or equipping of Vornado Included Properties or the funding of improvements to Vornado Included Properties) in an amount in excess of $500,000;

 

(xi)        is an agreement obligating Newco, Newco OP or such Vornado Included Entity to provide any funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any other Person in excess of $500,000;

 

(xii)       is an agreement entered into by Newco, Newco OP or such Vornado Included Entity with or for the benefit of any Governmental Entity requiring payment in excess of $500,000 in any calendar year remaining in its term or requires total remaining payment in excess of $500,000, other than any such agreement that is a Vornado Lease or Vornado Ground Lease;

 

(xiii)      is a gross maximum price contract or an agreement for any construction or development work (including any additions or expansions) which are currently in effect and under which Newco, Newco OP or such Vornado Included Entity currently has an obligation in excess of $5,000,000;

 

(xiv)     is a management agreement (i.e., contracts providing for or otherwise governing the management and/or operation of any Vornado Included Entities or Vornado Included Properties), including, without limitation, leasing, asset management, construction management and property management agreements pursuant to which Newco, Newco OP or such Vornado Included Entity are obligated to pay to another party an amount in excess of $1,000,000, other than any such agreement where all parties are Vornado Included Entities;

 

(xv)      is a leasing, development management or property management agreement pursuant to which Newco, Newco OP or any Vornado Included Entity perform such services for a third-party, other than any Vornado Lease or any such agreement where all parties are Vornado Included Entities; or

 

(xvi)     is an agreement that obligates payments to any Person contingent on the future operating results or other similar future events having a material economic effect relating to the Vornado Included Assets or arising out of prior results, leases, acquisitions or sales in respect of the Vornado Included Assets pursuant to which Newco,

 

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Newco OP or such Vornado Included Entity could become an obligor pursuant to the Transactions.

 

Each contract of the type described above in this Section 3.11(a) , whether or not listed on Section 3.11(a)  of the Vornado Disclosure Letter, to which Newco, Newco OP or any Vornado Included Entity is a party or by which it is bound as of the date hereof is referred to herein as a “ Vornado Material Contract ”. True and complete copies of each Vornado Material Contract listed on Section 3.11(a)  of the Vornado Disclosure Letter have been provided or made available to the JBG Parties.

 

(b)         Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Vornado Material Adverse Effect, each Vornado Material Contract is legal, valid, binding and enforceable on Newco, Newco OP or each Vornado Included Entity that is a party thereto and, to the knowledge of Vornado, each other party thereto, and is in full force and effect, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at Law). Except as, individually or in the aggregate, have not had and would not reasonably be expected to have a Vornado Material Adverse Effect, Newco, Newco OP and each Vornado Included Entity has performed all obligations required to be performed by it prior to the date hereof under each Vornado Material Contract and, to the knowledge of Vornado, each other party thereto has performed all obligations required to be performed by it prior to the date hereof under each Vornado Material Contract. None of Newco, Newco OP or any Vornado Included Entity, nor, to the knowledge of Vornado, any other party thereto, is in material breach or violation of, or default under, any Vornado Material Contract, and no event has occurred that, with notice or lapse of time or both, would constitute a violation or breach of, or default under, any Vornado Material Contract, except where in each case such breach, violation or default is not reasonably likely to have, individually or in the aggregate, reasonably be expected to have a Vornado Material Adverse Effect. None of Newco, Newco OP or any Vornado Included Entity has given or received notice of any violation or default under any Vornado Material Contract, except for violations or defaults that would not, individually or in the aggregate, reasonably be expected to have a Vornado Material Adverse Effect.

 

Section 3.12.      Environmental Matters . Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Vornado Material Adverse Effect, or as set forth in Section 3.12 of the Vornado Disclosure Letter: (a) Newco, Newco OP and each Vornado Included Entity is in compliance with all Environmental Laws; (b) none of Vornado, Vornado OP, Newco, Newco OP or any Vornado Included Entity has received any written notice, demand, letter or claim alleging that Vornado, Newco, Newco OP or any such Vornado Included Entity is in violation of, or liable under, any Environmental Law or with respect to Hazardous Substances or that any judicial, administrative or compliance order has been issued against Newco, Newco OP or any Vornado Included Entity, in each case, which remains unresolved and which relates to any of the Vornado Included Assets; and (c) none of Newco, Newco OP or any Vornado Included Entity has entered into or agreed to any consent decree or order or is subject to any judgment, decree or judicial, administrative or compliance order

 

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relating to compliance with Environmental Laws, Environmental Permits or the investigation, claim, sampling, monitoring, treatment, remediation, removal or cleanup of Hazardous Substances and no investigation, litigation or other proceeding is pending or, to the knowledge of Vornado, threatened against Newco, Newco OP or any Vornado Included Entity under any Environmental Law, in each case, that relates to the Vornado Included Assets. This Section 3.12 contains the exclusive representations and warranties of Vornado with respect to environmental matters.

 

Section 3.13.      Compliance with Laws; Permits .

 

(a)         As of the date hereof, (i) Newco, Newco OP and each Vornado Included Entity has complied and is in compliance with all Laws applicable to Newco, Newco OP or such Vornado Included Entity or by which their Vornado Included Assets and Vornado Included Properties are bound and (ii) no notice, charge or assertion has been received by or, to the knowledge of Vornado, threatened against, Newco, Newco OP or any Vornado Included Entity alleging any non-compliance with any such Laws, except in each case above for such non- compliance that has not had and would not reasonably be expected to have a Vornado Material Adverse Effect. Notwithstanding anything to the contrary in this Section 3.13(a) , the provisions of this Section 3.13(a)  shall not apply to matters covered by Section 3.12 (Environmental Matters).

 

(b)         Newco, Newco OP and each Vornado Included Entity is in possession of all authorizations, licenses, permits, certificates, approvals variances, exemptions, orders, franchises, certifications and clearances of any Governmental Entity necessary for Newco, Newco OP or such Vornado Included Entity to own, lease and operate its properties or to carry on its respective business as currently conducted (the “ Vornado Permits ”), and all such Vornado Permits are valid, and in full force and effect, individually or in the aggregate, except where the failure to possess and maintain such Vornado Permits in full force and effect, individually or in the aggregate, has not had and would not reasonably be expected to have a Vornado Material Adverse Effect. All applications required to have been filed for the renewal of the Vornado Permits have been filed on a timely basis with the appropriate Governmental Entity, and all other filings required to have been made with respect to such Vornado Permits have been duly made on a timely basis with the appropriate Governmental Entity, except in each case, where such failure to do so, individually or in the aggregate, has not had and would not reasonably be expected to have a Vornado Material Adverse Effect. None of Newco, Newco OP or any Vornado Included Entity has received any claim or notice, nor has any knowledge indicating, that Newco, Newco OP or such Vornado Included Entity currently is not in compliance with the terms of any Vornado Permit, except where the failure to be in compliance with the terms of any such Vornado Permit, individually or in the aggregate, would not have had and would not reasonably be expected to have a Vornado Material Adverse Effect.

 

(c)         None of Newco, Newco OP or any Vornado Included Entity is an “investment company” within the meaning of the Investment Company Act.

 

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Section 3.14.         Intellectual Property . Except as set forth on Section 3.14 of the Vornado Disclosure Letter or, as individually or in the aggregate, has not had and would not reasonably be expected to have a Vornado Material Adverse Effect, (a) Newco, Newco OP and the Vornado Included Entities own or are licensed or otherwise possess valid rights to use all Intellectual Property used in the conduct of their business as it is currently conducted, (b) the conduct of the business of Newco, Newco OP and the Vornado Included Entities as it is currently conducted does not infringe, misappropriate or otherwise violate and, to the knowledge of Vornado, is not alleged to infringe, misappropriate or otherwise violate, the Intellectual Property rights of any third party, (c) there are no pending or, to the knowledge of Vornado, threatened claims with respect to any of the Intellectual Property rights owned by Newco, Newco OP or any Vornado Included Entity, and (d) to the knowledge of Vornado, no third party is currently infringing or misappropriating Intellectual Property rights of Newco, Newco OP or any Vornado Included Entity. This Section 3.14 contains the exclusive representations and warranties of Vornado with respect to Intellectual Property matters.

 

Section 3.15.         Properties .

 

(a)           Section 3.15(a)  of the Vornado Disclosure Letter sets forth a list of (i) each Vornado Included Property, and (ii) whether the applicable Vornado Included Entity directly or indirectly owns such Vornado Included Property in fee simple or directly or indirectly holds such Vornado Included Property pursuant to a leasehold, ground leasehold or some other property interest. Except as expressly set forth in Section 3.15(a)  of the Vornado Disclosure Letter, as of the date hereof there are no real properties that Newco, Newco OP or any Vornado Included Entity is obligated to buy, lease or sublease at some future date, or otherwise enter into any contract for sale, ground lease or letter of intent to sell or ground lease any such Vornado Included Property or any portion thereof (in each case, excluding any Vornado Leases and the Vornado Ground Leases), and no commissions, fees or other amounts are payable (or are to become payable) in connection with the acquisition or disposition of any Vornado Included Property.

 

(b)           The applicable Vornado Included Entity owns good and marketable fee simple title or leasehold title (as applicable) to each of the Vornado Included Properties, in each case, free and clear of Liens, except for Vornado Permitted Liens. Except as set forth on Section 3.15(b)  of the Vornado Disclosure Letter, the Vornado Included Entities have not granted, and to the knowledge of Vornado, none of the Vornado Included Properties is subject to, unexpired option to purchase agreements, rights of first refusal or first offer or any other rights to purchase or otherwise acquire any Vornado Included Property or any portion thereof.

 

(c)           To the knowledge of the Vornado Parties, except as may be disclosed in the third party physical condition reports with respect to the Vornado Included Properties which have been delivered or otherwise made available to the JBG Parties (it being understood and agreed that a reference in a physical condition report to a document not otherwise delivered or made available to the JBG Parties shall not be deemed to constitute disclosure of the contents of such document), as of the date hereof, with respect to each Vornado Included Property, (i) such Vornado Included Property is supplied with utilities and other services as necessary to permit its

 

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continued operation as it is now being operated, (ii) such Vornado Included Property is in good working order sufficient for its normal operation in the manner currently being conducted, (iii) such Vornado Included Property has not suffered any casualty or other damage that has not been repaired, and (iv) there are no patent or latent structural, mechanical or other significant defects or deficiencies in the improvements on any Vornado Included Property, in each case, except as has not had and would not reasonably be expected to have a Vornado Material Adverse Effect; provided , however , that this Section 3.15(c)  shall not apply to any Vornado Included Property that is an Under Construction and Predevelopment Property or is otherwise raw land, under development or not otherwise in active operation.

 

(d)           No Vornado Included Entity has received (i) written notice that any certificate, permit or license from any Governmental Entity having jurisdiction over any of the Vornado Included Properties necessary to permit the lawful use and operation of the buildings and improvements on any of the Vornado Included Properties as currently used and operated or that is necessary to permit the lawful use and operation of all utilities and means of egress and ingress to and from any of the Vornado Included Properties for the current use and operation of the Vornado Included Properties is not in full force and effect as of the date of this Agreement, except for such failures to be in full force and effect that, individually or in the aggregate, has not had and would not reasonably be expected to have a Vornado Material Adverse Effect, or of any pending written threat of modification or cancellation of any of same, that would reasonably be expected to have a Vornado Material Adverse Effect, or (ii) written notice of any uncured violation of any Laws affecting any of the Vornado Included Properties which, individually or in the aggregate, has had or would reasonably be expected to have a Vornado Material Adverse Effect.

 

(e)           Except as set forth in Section 3.15(e)  of the Vornado Disclosure Letter, no condemnation, eminent domain or similar proceeding has occurred or to the knowledge of the Vornado Included Entities is pending with respect to any Vornado Included Property and, except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Vornado Material Adverse Effect, no Vornado Included Entity has received any written notice to the effect that (i) any condemnation or rezoning proceedings are threatened with respect to any of the Vornado Included Properties, or (ii) any zoning regulation or ordinance (including with respect to parking), Board of Fire Underwriters rules, building, fire, health or other Law has been violated (and remains in violation) for any Vornado Included Property.

 

(f)            Section 3.15(f)  of the Vornado Disclosure Letter sets forth all ground leases affecting the interest of the Vornado Included Entities in any Vornado Included Property, other than ground leases as to which a Vornado Included Entity is both lessor and lessee, and all amendments, modifications (including pursuant to any estoppel), guarantees, renewals and extensions exercised related thereto (collectively, the “ Vornado Ground Leases ”). Vornado hereby represents that (a)  Section 3.15(f)  of the Vornado Disclosure Letter contains a true, complete and correct list of all Vornado Ground Leases to which any Vornado Included Entity is bound; (b) true, complete and correct copies of such Vornado Ground Leases have been delivered or made available to the JBG Parties; and (c) each such Vornado Ground Lease is valid, binding and enforceable in accordance with its terms and is in full force and effect with

 

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respect to the applicable Vornado Included Entity and, to the knowledge of Vornado, with respect to the other parties thereto, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at Law). As of the date hereof, there are no monetary or non-monetary material defaults under any Vornado Ground Lease to which any Vornado Included Entity is bound, by any Vornado Included Entity or any other party thereto. As of the date hereof, no Vornado Included Entity has sent or received any notice of any violation or breach of, or default under, any Vornado Ground Lease to which any Vornado Included Entity is bound.

 

(g)           Except for discrepancies, errors or omissions that, individually or in the aggregate, would not reasonably be expected to have a Vornado Material Adverse Effect, the rent rolls for each of the Vornado Included Properties as of September 1, 2016 (with respect to office and retail properties) or as of September 29, 2016 (with respect to residential properties) that have been previously made available to the JBG Parties by the Vornado Included Entities, are true and correct and (i) correctly reference each tenant under each lease that was in effect as of as the respective dates of such rent rolls, and to which a Vornado Included Entity is a party as lessor with respect to each of the Vornado Included Properties (all leases, together with all amendments, modifications, supplements, renewals and extensions related thereto, the “ Vornado Leases ”) and (ii) identify the rent payable under the Vornado Lease as of such date. Except for discrepancies, errors or omissions that, individually or in the aggregate, would not reasonably be expected to have a Vornado Material Adverse Effect, the Vornado Included Entities have made available to the JBG Parties a list of all security deposit amounts currently held under the Vornado Leases as of September 30, 2016.

 

(h)           True and complete (in all material respects) copies of all (x) Vornado Ground Leases and (y) Vornado Leases for space in excess of 25,000 square feet in or at any Vornado Included Properties (the “ Material Vornado Leases ”) (it being understood that a Vornado Lease shall constitute a Material Vornado Lease if there are other Vornado Leases with the same tenant at the same Vornado Included Property that, if aggregated with such Vornado Lease, would exceed 25,000 square feet), in each case in effect as of the date hereof and to the extent within Vornado’s possession and control, have been made available to the JBG Parties. Except as would not, individually or in the aggregate, reasonably be expected to have a Vornado Material Adverse Effect, (i) no Vornado Included Entity has given or received written notice of any violation or breach of, or default under, any Material Vornado Lease, which violation or breach remains outstanding and uncured, (ii) except as set forth on Section 3.15(h)  of the Vornado Disclosure Letter, no tenant under a Material Vornado Lease is in monetary or non- monetary material default under such Material Vornado Lease, which default remains outstanding and uncured, and (iii) each Material Vornado Lease is valid, binding and enforceable in accordance with its terms and is in full force and effect with respect to a Vornado Included Entity and, to the knowledge of Vornado, with respect to the other parties thereto, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at Law). Except as set forth on Section 3.15(h)  of the Vornado Disclosure Letter, any and all material leasing commissions or brokerage

 

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fees payable by Vornado Included Entities with respect to any Material Vornado Leases have been paid in full. To the knowledge of Vornado, except as set forth on Section 3.15(h)  of the Vornado Disclosure Letter, all material tenant improvement allowances, relocation allowances or other inducements due with respect to the current unexpired term of each Material Vornado Lease have been paid in full. As of June 30, 2016, except as set forth on Section 3.15(h)  of the Vornado Disclosure Letter, there are no other material Leasing Costs to be paid in the future with respect to any Material Vornado Leases.

 

(i)            Except as set forth on Section 3.15(i)  of the Vornado Disclosure Letter, there are no material Tax abatements or exemptions specifically affecting the Vornado Included Properties, and the Vornado Included Entities have not received any written notice of (and the Vornado Included Entities do not have any knowledge of) any proposed increase in the assessed valuation of any of the Vornado Included Properties, except in each case for any such Taxes or assessment that have not had and would not reasonably be expected to have, individually or in the aggregate, a Vornado Material Adverse Effect.

 

(j)            Except for Vornado Permitted Liens, as set forth in Vornado Leases and title documents made available to the JBG Parties prior to the date hereof or as would not reasonably be expected to have, individually or in the aggregate, a Vornado Material Adverse Effect and except as set forth on Section 3.15(j)  of the Vornado Disclosure Letter, no Vornado Included Entity is a party to any (i) unexpired option to purchase agreements, rights of first refusal or first offer or any other rights to purchase or otherwise acquire any Vornado Included Property or any portion thereof that would materially adversely affect any Vornado Included Entity’s, ownership, ground lease or right to use a Vornado Included Property subject to a Material Vornado Lease, and (ii) other outstanding rights or agreements to enter into any contract for sale, ground lease or letter of intent to sell or ground lease any Vornado Included Property or any portion thereof that is owned by any Vornado Included Entity, which, in each case, is in favor of any party other than a Vornado Included Entity.

 

(k)           No written unresolved claim has been made against any title insurance policy evidencing title insurance with respect to a Vornado Included Property which, individually or in the aggregate, would be material to such Vornado Included Property.

 

(l)            Schedule B accurately states the outstanding principal amount of the Indebtedness secured by each Vornado Included Property as of the applicable Valuation Date.

 

(m) Newco and Newco OP do not directly own any real or personal property.

 

Section 3.16.         Intentionally Omitted .

 

Section 3.17.         Personal Property . The Vornado Included Entities have good and valid title to, or a valid and enforceable leasehold interest in, or other right to use, all personal property owned, used or held for use by them which constitutes part of the “Vornado Included Assets” (other than property owned by tenants and used or held in connection with the applicable tenancy), except as, individually or in the aggregate, has not had and would not reasonably be

 

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expected to have a Vornado Material Adverse Effect. The Vornado Included Entities’ ownership of or leasehold interest in any such personal property is not subject to any Liens, except for Vornado Permitted Liens and Liens that have not had and would not reasonably be expected to have a Vornado Material Adverse Effect.

 

Section 3.18.         Approval Required . No approval of the Vornado stockholders, Newco stockholders or any other vote of holders of securities in Vornado or Newco or holders of limited partnership units in Vornado OP or Newco OP is required to approve this Agreement, the transactions contemplated hereby and the Transactions.

 

Section 3.19.         Insurance . Except for those matters that, individually or in the aggregate, have not had and would not reasonably be expected to have a Vornado Material Adverse Effect, there is no claim for coverage by Newco, Newco OP or any Vornado Included Entity pending under any of the material insurance policies (including title insurance policies) and all material fidelity bonds or other insurance service contracts in Vornado’s possession providing coverage for all material Vornado Included Properties (the “ Vornado Insurance Policies ”) that has been denied or disputed by the insurer. Except for those matters that have not had and would not reasonably be expected to have a Vornado Material Adverse Effect, all premiums due and payable under all Vornado Insurance Policies have been paid, and Newco, Newco OP and the Vornado Included Entities have otherwise complied in all material respects with the terms and conditions of all the Vornado Insurance Policies. To the knowledge of Vornado, such Vornado Insurance Policies are valid and enforceable in accordance with their terms and are in full force and effect and no written notice of cancellation or termination has been received by Vornado, Newco, Newco OP or any Vornado Included Entity with respect to any such policy which has not been replaced on substantially similar terms prior to the date of such cancellation.

 

Section 3.20.         Intentionally Omitted .

 

Section 3.21.         Information in SEC Filings . None of the information supplied or to be supplied by or on behalf of Vornado, Vornado OP, Newco, Newco OP or any Vornado Included Entity for inclusion or incorporation by reference in any registration statement on Form 10, or such other form as required by the SEC, to be filed with the SEC by Newco or Vornado OP (any such registration statement, a “ Form 10 ”) will at the time such Form 10 is filed and declared effective under the Exchange Act contain any untrue statement of any material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading. None of the information supplied or to be supplied by or on behalf of Vornado, Newco, Newco OP or any Vornado Included Entity for inclusion in any of the filings made or to be made by the Vornado Parties, Newco, Newco OP or their Affiliates with the SEC or with any stock exchange of or other regulatory authority will, at the time filed with the SEC, any stock exchange or other regulatory authority, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they are made, not misleading. All documents that Vornado is responsible for filing with the SEC in connection with the Transactions, including any Form 10,

 

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to the extent relating to Newco, Newco OP or any Vornado Included Entity or other information supplied by or on behalf of Newco, Newco OP or any Vornado Included Entity for inclusion therein, will comply as to form, in all material respects, with the provisions of the Securities Act or Exchange Act, as applicable, and the rules and regulations of the SEC thereunder and each such document required to be filed with any Governmental Entity (other than the SEC) will comply in all material respects with the provisions of any applicable Law as to the information required to be contained therein. The representations and warranties contained in this Section 3.21 will not apply to statements or omissions included any of the filings to be made by the Vornado Parties, Newco, Newco OP or their Affiliates with the SEC or with any stock exchange of or other regulatory authority to the extent based upon information supplied in writing to Vornado by or on behalf of the JBG Parties for use therein.

 

Section 3.22.         Bankruptcy . None of Newco, Newco OP or any Vornado Included Entity has (i) made a general assignment for the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or suffered the filing of any involuntary petition by its creditors, (iii) suffered the appointment of a receiver to take possession of all, or substantially all, of its assets, which remains pending as of such time, (iv) suffered the attachment or other judicial seizure of all, or substantially all, of its assets, which remains pending as of such time, (v) admitted in writing its inability to pay its debts as they come due, or (vi) made an offer of settlement, extension or composition to its creditors generally.

 

Section 3.23.         Employee Benefit Plans .

 

(a)           The Vornado Included Entities do not sponsor, maintain or contribute to any Plans. Except as set forth on Section 3.23(a)  of the Vornado Disclosure Letter, no Vornado Service Provider is party to an individual employment Contract with any of the Vornado Parties.

 

(b)           Each Vornado Benefit Plan (other than a Multiemployer Plan) that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service or is the subject of a favorable opinion letter from the Internal Revenue Service on the form of such Vornado Benefit Plan, a copy of such letter has been made available to the JBG Parties, and, to the Vornado Parties’ knowledge, there are no facts or circumstances that would be reasonably likely to adversely affect the qualified status of any such Vornado Benefit Plan.

 

(c)           Section 3.23(c)  of the Vornado Disclosure Letter sets forth, as of the date of this Agreement, each (i) Multiemployer Plan, or (ii) single employer plan or other pension plan that is subject to Title IV or Section 302 of ERISA or Section 412 of the Code, in each case, that any Vornado Party or any of their respective Subsidiaries or ERISA Affiliates, sponsors, maintains or contributes to, or has within the last six (6) years prior to the date hereof sponsored, maintained or contributed to. For any Vornado Benefit Plan subject to the minimum funding requirements of Section 412 of the Code or Title IV of ERISA (other than a Multiemployer Plan), (i) no such plan has failed to satisfy the minimum funding standards of Section 302 of ERISA or Sections 412 or 418(B) of the Code, respectively, (ii) no unsatisfied liability (other than for premiums to the Pension Benefit Guaranty Corporation (the “ PBGC ”)) under Title IV of

 

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ERISA has been, or is expected to be, incurred by a Vornado Party or any of its Subsidiaries or ERISA Affiliates, (iii) the PBGC has not instituted proceedings to terminate any such Vornado Benefit Plan and (iv) no “reportable event” within the meaning of Section 4043 of ERISA (excluding any such event for which the thirty (30) day notice requirement has been waived under the regulations to Section 4043 of ERISA) has occurred for which there remains any outstanding liability, nor has any event described in Sections 4062, 4063 or 4041 of ERISA occurred. Except as set forth on Section 3.23(c)  of the Vornado Disclosure Letter, neither such Vornado Party nor any of its Subsidiaries or ERISA Affiliates have incurred or would be likely to incur (whether as a result of the Transactions or otherwise) any liability (including any indirect, contingent or secondary liability) to or on account of a Multiemployer Plan pursuant to Sections 515, 4201, 4204 or 4212 of ERISA; and Vornado Parties and each of their respective Subsidiaries and ERISA Affiliates have made all required contributions and are not delinquent in any contributions to any Multiemployer Plan.

 

(d)           No assets of the Vornado Parties or any of their ERISA Affiliates constitute “plan assets” for purposes of Title I of ERISA or Section 4975 of the Code or any applicable similar Law.

 

(e)           Except as described on Section 3.23(e)  of the Vornado Disclosure Letter, neither the execution and delivery of this Agreement, nor the consummation of the Transactions, either alone or in combination with another event (whether contingent or otherwise) will (i) entitle any current or former Vornado Service Provider to any payment; (ii) increase the amount of compensation or benefits due to any such Vornado Service Provider; (iii) accelerate the vesting, funding or time of payment of any compensation, equity award or other benefit to any Vornado Service Provider; or (iv) result in the payment of any amount to any Vornado Service Provider that could, individually or in combination with any other such payment, constitute an “excess parachute payment” as defined in Section 280G(b)(1) of the Code.

 

Section 3.24.         Brokers; Expenses . No broker, investment banker, financial advisor or other Person (other than Goldman, Sachs & Co. and Morgan Stanley Incorporated), is entitled to receive any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with this Agreement or the Transactions based upon arrangements made by or on behalf of the Vornado Parties, Newco, Newco OP or any Vornado Included Entity. Other than the arrangements described in the engagement letters with Goldman, Sachs & Co. and Morgan Stanley Incorporated, Section 3.24 of the Vornado Disclosure Letter sets forth the outside legal, accounting and financial advisors retained as of the date hereof by any Vornado Party, Newco, Newco OP or any Vornado Included Entity (on its own behalf or on behalf of any other Person) in connection with the Transactions with which such Vornado Party has any contingent payment arrangements requiring payments to be made after December 31, 2015 in connection with the Transactions that are contingent upon the execution of this Agreement or the Transactions or, in the case of advisors customarily compensated on the basis of hourly time charges, are not based on actual time charges and expense reimbursement and describes such arrangements. Since December 31, 2015, none of the Vornado Parties, Newco, Newco OP or any Vornado Included Entities or their respective Affiliates has made any material payments in excess of the amounts contemplated by this Section 3.24 to any such advisors.

 

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Section 3.25.         Labor and Other Employment Matters .

 

(a)           Section 3.25(a)  of the Vornado Disclosure Letter sets forth, as of the date of this Agreement, each collective bargaining or similar agreement by which a Vornado Party or any Affiliate thereof is, or has, within the past six (6) years been bound with respect to any Vornado Service Providers. As of the date hereof, there is no, and since January 1, 2014, there has not been any, labor strike, work stoppage, picketing, lockout, walkout or other organized work interruption pending, or to the knowledge of the Vornado Parties threatened in writing or anticipated against any Vornado Included Entity or any Affiliate thereof relating to any Vornado Service Providers. Except as specified in Section 3.25(a)  of the Vornado Disclosure Letter, there are no labor unions or other organizations certified or recognized to represent any Vornado Service Providers and as of the date hereof, to the Vornado Parties’ knowledge, no union organization campaign is in progress with respect to, any Vornado Service Providers at any of the Vornado Included Assets. As of the date hereof, there are no unfair labor practice charges pending before the National Labor Relations Board or any other Governmental Entity, any grievances, complaints, claims or judicial or administrative proceedings, in each case, which are pending, or to the Vornado Parties’ knowledge threatened in writing or, anticipated by or on behalf of any current or former Vornado Service Providers at any of the Vornado Included Assets.

 

(b)           No Vornado Service Provider has been improperly excluded from participation in any Vornado Benefit Plan. Each Vornado Service Provider has been properly classified under the Fair Labor Standards Act with respect to any classification of any person as an independent contractor rather than as an employee, with respect to any classification of any employee as exempt versus non-exempt, and with respect to any employee leased from another employer, and neither the Vornado Parties nor any of their Subsidiaries has any written notice or knowledge of any pending or threatened material claim by any Vornado Service Provider that he/she is or was misclassified for any purpose.

 

(c)           The Vornado Parties and their Subsidiaries are in compliance in all material respects with all applicable Laws, statutes, rules and regulations respecting employment and employment practices, terms and conditions of employment of current and former Vornado Service Providers, wages and hours, discrimination in employment, wrongful discharge, collective bargaining, the Worker Adjustment Retraining and Notification Act of 1988, as amended or similar state or local Law, statute, rule or regulation (the “ WARN Act ”), fair labor standards, occupational health and safety, and any other labor and employment-related matters, in each case, with respect to all Vornado Service Providers.

 

(d)           During the three (3) years prior to the date of this Agreement, no Vornado Party nor any of their respective Subsidiaries have engaged in or effectuated any “plant closing” or employee “mass layoff” (in each case, as defined in the WARN Act), or any similar state or local Law, statute, rule or regulation affecting any current or former Vornado Service Providers.

 

Section 3.26.         OFAC . None of Newco, Newco OP or any of the Vornado Included Entities constitute a Person with whom a U.S. Person is prohibited from transacting business of

 

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the type contemplated by this Agreement, whether such prohibition arises under United States Laws and lists published by Office of Foreign Assets Control, Department of the Treasury (“ OFAC ”) (including those executive orders and lists published by OFAC with respect to Persons that have been designated by executive order or by the sanction regulations of OFAC as Persons with whom U.S. Persons may not transact business or must limit their interactions to types approved by OFAC) or otherwise.

 

Section 3.27.         Patriot Act . None of the Vornado Parties, Newco, Newco OP or the Vornado Included Entities nor, to the knowledge of Vornado, any Person that owns more than twenty-five percent (25%) of the direct or indirect ownership interests in any Vornado Party (a) is under investigation by any Governmental Entity for, or has been charged with, or convicted of, money laundering, drug trafficking, terrorist related activities, any crimes which in the United States would be predicate crimes to money laundering, or any violation of any Anti-Money Laundering Laws; (b) has been assessed civil or criminal penalties under any Anti-Money Laundering Laws; or (c) has had any of its funds seized or forfeited in any action under any Anti- Money Laundering Laws. For purposes of this Agreement, “ Anti-Money Laundering Laws ” means all Laws, regulations and sanctions, state and federal, criminal and civil, that (i) limit the use of and/or seek the forfeiture of proceeds from illegal transactions; (ii) limit commercial transactions with designated countries or individuals believed to be terrorists, narcotics dealers or otherwise engaged in activities contrary to the interests of the United States; (iii) require identification and documentation of the parties with whom a financial institution conducts business; or (iv) are designed to disrupt the flow of funds to terrorist organizations. Such laws, regulations and sanctions shall be deemed to include the USA PATRIOT Act of 2001, Pub. L. No. 107-56, the Bank Secrecy Act, 31 U.S.C. Section 5311 et seq., the Trading with the Enemy Act, 50 U.S.C. App. Section 1 et seq., the International Emergency Economic Powers Act, 50 U.S.C. Section 1701 et seq., and the sanction regulations promulgated pursuant thereto by the OFAC, as well as laws relating to prevention and detection of money laundering in 18 U.S.C. Sections 1956 and 1957.

 

Section 3.28.         Anti-Corruption . The Vornado Parties, Newco, Newco OP and the Vornado Included Entities have complied, are in compliance with, and will continue to comply with applicable anti-bribery/anti-corruption laws, including the US Foreign Corrupt Practices Act. None of the Vornado Parties, Newco, Newco OP or any Vornado Included Entity nor, to the knowledge of Vornado, any of their respective principals, owners, officers, directors, trustees, or agents, in each case, acting at the direction or on behalf of a Vornado Party, its Subsidiaries or any of their respective Affiliates, has engaged, promised to engage, will promise to engage, or will cause to be engaged, in any transaction or activity involving a direct or indirect improper inducement to any Person (including but not limited to a government official) to obtain or keep business or to secure some other advantage, in violation of applicable anti-bribery/anti- corruption laws.

 

Section 3.29.         Capital Commitments for Vornado Included Investments . Section 3.29 of the Vornado Disclosure Letter sets forth, for each Vornado Included Investment, the amount of capital commitments that the Vornado Parties or the Vornado Included Entities have made to each Vornado Included Investment through the date hereof and any outstanding capital

 

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commitments of the Vornado Parties or the Vornado Included Entities with respect to each Vornado Included Investment.

 

Section 3.30.         No Other Representations or Warranties . Except for the representations and warranties expressly set forth in this Article III or in any Ancillary Document, no Vornado Party nor any other Person makes any express or implied representation or warranty with respect to the Vornado Parties, the Vornado Included Entities, Newco, Newco OP or the Vornado Included Assets, or with respect to any other information provided to the JBG Parties in connection with (i) the Transactions or (ii) the businesses, affairs, operations, assets, Liabilities, condition (financial or otherwise) or prospects or any other matter relating to the Vornado Parties, Newco, Newco OP, the Vornado Included Entities and the Vornado Included Assets, including with respect to any documentation, forecasts, budgets, projections, estimates or other information (including the accuracy or completeness of, or the reasonableness of the assumptions underlying, such documentation, forecasts, budgets, projections, estimates or other information) provided by the Vornado Parties or any other Person to the JBG Parties. For clarity, none of the representations and warranties set forth in this Article III pertains to or purports to disclose any information with respect to any Vornado Excluded Asset (other than with respect to Liabilities that apply to or could reasonably be expected to adversely impact Newco, Newco OP or any Vornado Included Entity after the Closing), even if such Vornado Excluded Asset is owned by a Vornado Included Entity prior to the Closing.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES
OF THE JBG PARTIES

 

The following representations and warranties by the JBG Parties set forth in this Article IV are qualified in their entirety by reference to the disclosures set forth in the disclosure letter delivered by the JBG Parties immediately prior to the execution of this Agreement (the “ JBG Disclosure Letter ”). Each disclosure set forth in the JBG Disclosure Letter shall qualify or modify the Section to which it corresponds and any other Section to the extent the applicability of the disclosure to each other Section is reasonably apparent from the text of the disclosure made. Except as set forth in the JBG Disclosure Letter, each JBG Party, severally and not jointly, represents to the Vornado Parties as follows; provided , that with respect to any representation or warranty made by any JBG Fund, such representation or warranty is made jointly and severally by such JBG Fund and JBG Operating Partners:

 

Section 4.1.           Organization .

 

(a)           Such JBG Party is a limited partnership, limited liability company or other legal entity duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it is organized and has the requisite organizational power, as the case may be, and authority and any necessary governmental authorization to own, lease and operate its properties (including its JBG Included Assets) and to conduct its business as it is now being conducted. Such JBG Party and each of its Subsidiaries is duly qualified or licensed to do

 

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business, and is in good standing, in each jurisdiction where the character of the assets owned, operated or leased by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, have not had and would not reasonably be expected to have a JBG Material Adverse Effect. Such JBG Party and each of its Subsidiaries is in compliance in all material respects with the terms of its Governing Documents.

 

(b)           Each Subsidiary of such JBG Party is a limited partnership, limited liability company or other legal entity duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it is organized and has the requisite organizational power, as the case may be, and authority and any necessary governmental authorization to own, lease and operate its properties (including its JBG Included Assets) and to conduct its business as it is now being conducted, except for such failures to be so organized, in good standing or have certain power and authority that, individually or in the aggregate, have not had and would not reasonably be expected to have a JBG Material Adverse Effect. Each Subsidiary of such JBG Party is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the assets owned, operated or leased by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, have not had and would not reasonably be expected to have a JBG Material Adverse Effect. Each Subsidiary of such JBG Party is in compliance in all material respects with the terms of its Governing Documents, except for such noncompliance that, individually or in the aggregate, have not had and would not reasonably be expected to have a JBG Material Adverse Effect.

 

(c)           Section 4.1(c)  of the JBG Disclosure Letter sets forth a true, correct and complete list of all of the Subsidiaries of such JBG Party, including a list of each Subsidiary of such JBG Party that is a Qualified REIT Subsidiary, a Taxable REIT Subsidiary, a REIT or an “S corporation” within the meaning of Section 1361(a)(1) of the Code (an “ S Corporation ”), together with (i) the jurisdiction of incorporation or organization, as the case may be, of each Subsidiary of such JBG Party and (ii) the classification for U.S. federal income tax purposes of each Subsidiary of such JBG Party. As of the date hereof, Exhibit B-2 sets forth for each JBG Included Property, a true, correct and complete organizational chart identifying each JBG Fund, Subsidiary of a JBG Fund, Joint Venture or Subsidiary of a Joint Venture through which any JBG Party holds a direct or indirect ownership interest in such JBG Included Property. None of the JBG Included Entities other than the JBG REITs has elected or will elect to be treated as a REIT. Other than JBG Properties, none of the JBG Included Entities has elected or will elect to be treated as an S Corporation.

 

(d)           Except as set forth on Section 4.1(d)  of the JBG Disclosure Letter, no Person, other than a JBG Managing Member Entity, a JBG Included Entity or a JBG Management Entity, is a managing member or holds any managing member or similar interest in any JBG Included Entity. Section 4.1(d)  of the JBG Disclosure Letter sets forth, for each JBG Managing Member Entity, each Person owning Equity Interests therein and the percentage interest of each such Person in such JBG Managing Member Entity.

 

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Section 4.2.           Authorization; Validity of Agreement .

 

(a)           Such JBG Party and each of its Subsidiaries has all necessary organizational power and authority to execute and deliver this Agreement, the JBG Contribution Agreement, the JBG Merger Agreements and each Ancillary Document to be executed and delivered by it at the Closing, to perform its obligations hereunder and thereunder and to consummate the Transactions. The execution, delivery and performance by such JBG Party of this Agreement and the execution, delivery and performance by such JBG Party or any of its Subsidiaries of each Ancillary Document to which such JBG Party or any such Subsidiary will be a party, and the consummation by such JBG Party and each of its Subsidiaries of the Transactions, have been duly and validly authorized by the general partner or managing member of such JBG Party or each such Subsidiary (as applicable), and each other member or partner or committee of members or partners or their representatives (as applicable and as necessary), and no other organizational action on the part of such JBG Party or any of its Subsidiaries is necessary to authorize the execution and delivery by such JBG Party or any of its Subsidiaries of this Agreement, any such Ancillary Document and the consummation by it of the Transactions. Each JBG Management Entity has obtained all required consents from its stockholders, board of directors or other governing body with respect to the Transactions to be effected by such JBG Management Entity pursuant to this Agreement, including the applicable merger to be effected by such JBG Management Entity, and true, complete and correct copy of such consents have been delivered to the Vornado Parties. This Agreement has been, and each Ancillary Document to which it is contemplated that such JBG Party or any of its Subsidiaries will be party will be, duly executed and delivered by such JBG Party or its Subsidiaries (as applicable) and, assuming due and valid authorization, execution and delivery hereof and thereof by each of the Vornado Parties party thereto, is or will be a valid and binding obligation of such JBG Party or each such Subsidiary, enforceable against such JBG Party or each such Subsidiary in accordance with its terms, except as the enforcement hereof or thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar Laws, now or hereafter in effect, relating to creditors’ rights generally and (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at Law).

 

(b)           Pursuant to a valid power of attorney to be granted by each of its direct and indirect equityholders (as applicable), the JBG Party designated as attorney in fact in such power of attorney will have full power and authority to execute and deliver the Partnership Agreement and any other Ancillary Document so executed and delivered by such JBG Party on each such equityholder’s behalf, and the execution and delivery by such JBG Party of such Ancillary Documents on any such equityholder’s behalf will be binding on such Person as fully as if such Person had executed and delivered such Ancillary Documents.

 

Section 4.3.           No Conflict; Consents . Except as set forth in Section 4.3 of the JBG Disclosure Letter, none of the execution, delivery or performance of this Agreement or any Ancillary Document to which such JBG Party or any of its Subsidiaries is a party, the consummation by such JBG Party and its Subsidiaries of the direct or indirect sale of its JBG Included Assets, the Equity Issuance or any other Transaction or compliance by such JBG Party or any of its Subsidiaries with any of the provisions of this Agreement or any Ancillary

 

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Document will (i) conflict with or result in any breach of any provision of such JBG Party’s or any of its Subsidiaries’ Governing Documents, (ii) require any filing by such JBG Party or any of its Subsidiaries with, or the obtaining of any permit, authorization, consent or approval of, any Governmental Entity (except for (x) compliance with any applicable requirements of the Exchange Act, (y) filings, permits, authorizations, consents, waiting period expirations or terminations, and approvals as may be required under the HSR Act or (z) such filings as may be required in connection with state and local Transfer Taxes), (iii) automatically result in a modification, violation or breach of, or material increase in cost or obligation of such JBG Party or any of its Subsidiaries, or constitute (with or without notice or lapse of time or both) a default (or give rise to any right to others, including, but not limited to, any right of termination, amendment, cancellation or acceleration) under, any of the terms, conditions or provisions of any JBG Ground Lease, JBG Lease or other material contract to which such JBG Party or any of its Subsidiaries is a party or by which any of their JBG Included Assets are bound, (iv) assuming that all consents, approvals, authorizations, and permits described in Section 4.3(ii)(y)  have been obtained, and all filings and notifications described in Section 4.3(ii)(y)  have been made and any waiting periods thereunder have terminated or expired, violate any order, writ, injunction, decree or Law applicable to such JBG Party or any of its Subsidiaries or any of their respective properties or assets, (v) require any consent or approval of, or notice to, any other Person, under any of the terms, conditions or provisions of (x) any JBG Ground Lease other than any JBG Ground Lease set forth in Section 4.3(v)(x)  of the JBG Disclosure Letter (the “ Required JBG Ground Lease Consents ”), (y) any Joint Venture Agreement of a JBG Party or any of its Subsidiaries other than any Joint Venture Agreement set forth on Section 4.3(v)(y)  of the JBG Disclosure Letter (the “ Required JBG JV Consents ”), or (z) any Contract constituting an Indebtedness obligation of such JBG Party or any of its Subsidiaries that relates to any of the JBG Included Assets or pursuant to which Newco or any of its Subsidiaries (including, after the Closing, the JBG Included Entities and the JBG Management Entities) could become an obligor pursuant to the Transactions other than any such Contract set forth on Section 4.3(v)(z)  of the JBG Disclosure Letter (the “ Required JBG Debt Consents ”), or (vi) require any consent or approval of, or notice to, any other Person, including, without limitation, from limited partners, members or parties to leases or other agreements or commitments, except as to clauses (i), (ii), (iv) and (vi), respectively, for any such conflicts, violations, breaches, defaults or other occurrences which, individually or in the aggregate, would not materially and adversely affect any JBG Included Asset or JBG Management Entity or the consummation of any contribution or merger contemplated herein or in any JBG Contribution Agreement or JBG Merger Agreements.

 

Section 4.4.           Capital Structure; Subsidiaries .

 

(a)           Except as set forth on Section 4.4(a)  of the JBG Disclosure Letter, JBG Operating Partners directly or indirectly wholly owns each of its Subsidiaries. Other than through its Equity Interests in JBG Operating Partners, JBG Properties owns no Equity Interests in any Person. As of the date hereof, with respect to each JBG Management Entity and each Subsidiary of each JBG Party, all of the outstanding Equity Interests have been duly authorized and validly issued and (i) in the case of outstanding shares of capital stock of any Subsidiary of such JBG Party that is a corporation, are fully paid and non-assessable and (ii) are free of preemptive or other similar rights under Law, any applicable organization document and any

 

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Contract or instrument to which such JBG Party or any of its Subsidiaries is a party or by which it is bound.

 

(b)           Except as set forth in this Agreement or Section 4.4(b)  of the JBG Disclosure Letter, there are no securities, options, warrants, calls, rights, commitments, agreements, rights of first refusal, arrangements or undertakings of any kind to which such JBG Party or any of its Subsidiaries is a party or by which any of them is bound, obligating such JBG Party or any of its Subsidiaries to issue, deliver or sell or create, or cause to be issued, delivered or sold or created, additional Equity Interests, phantom stock or other contractual rights, the value of which is determined in whole or in part by the value of or in reference to any equity security of such JBG Party or any of its Subsidiaries or obligating such JBG Party or any of its Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, right of first refusal, arrangement or undertaking. Except as set forth in Section 4.4(b)  of the JBG Disclosure Letter, there are no outstanding contractual obligations of such JBG Party or any of its Subsidiaries to repurchase, redeem or otherwise acquire any partnership units or other Equity Interests. Neither such JBG Party nor any of its Subsidiaries is a party to or bound by any agreements or understandings concerning the voting (including voting trusts and proxies) of any capital stock or other Equity Interests of such JBG Party or any of its Subsidiaries.

 

(c)           Section 4.4(c)  of the JBG Disclosure Letter sets forth each JBG Funds’ direct or indirect percentage interests in the JBG Included Properties as of the date hereof and, subject to the exceptions set forth on Section 4.4(c)  of the JBG Disclosure Letter and after giving effect to the Restructuring Transactions, such JBG Fund will own not less than such percentage immediately prior to the consummation of the Closing except as adjusted or modified as permitted under this Agreement. The JBG Funds own such percentage interests through the JBG Included Entities. Except as set forth on Section 4.4(c)  of the JBG Disclosure Letter, each Subsidiary of JBG Operating Partners is and, immediately prior to the Closing, will be, directly or indirectly wholly owned, beneficially and of record by JBG Operating Partners and neither JBG Operating Partners nor any of its Subsidiaries owns directly or indirectly any other capital stock, limited liability company or partnership interest, joint venture interest or other Equity Interest in any other Person.

 

(d)           With regard to the JBG Included Interests, all of the material capital obligations currently due and payable of any JBG Party and, to the knowledge of the JBG Parties, all of the material capital obligations currently due and payable of any Joint Venture Partner have been fully funded. To the knowledge of the JBG Parties, no Joint Venture Partner has made or advanced any loans that would adversely impact the JBG Parties’ share of distributions from the Joint Venture.

 

(e)           The JBG Parties own, directly or indirectly, beneficially and of record all of the JBG Included Interests. Each of the Persons on Section 4.4(e)  of the JBG Disclosure Letter owns, directly or indirectly, beneficially and or record each of the Equity Interests in each of the JBG Management Entities set forth opposite his, her or its name on Section 4.4(e)  of the JBG Disclosure Letter. All of the JBG Included Interests, Managing Member Interests and the

 

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Equity Interests in each of JBG Operating Partners and JBG Properties, are duly authorized, validly issued (and with respect to any corporate or trust Equity Interests, fully paid and non-assessable), and free and clear of all Liens, except for JBG Permitted Liens. Immediately prior to the Closing, the Transferred LLCs will own beneficially and of record all of the JBG Included Interests, free and clear of all Liens, except for JBG Permitted Liens. Upon the consummation of the transactions contemplated by the JBG Merger Agreements and JBG Contribution Agreements, the applicable JBG Parties will own beneficially and of record all of the JBG Included Interests (other than any Kickout Interest) free and clear of any Liens, except for JBG Permitted Liens.

 

(f)            Each Equity Interest in each Subsidiary of a JBG Management Entity has been duly authorized, validly issued (and with respect to any corporate or trust Equity Interests, fully paid and non-assessable), and is free and clear of any Liens, except as otherwise set forth in this Agreement.

 

(g)           As of the date hereof and only with respect to JBG Included Interests, (i) no right of first offer, forced sale, buy/sell or similar right under any Joint Venture Agreement has been exercised by any JBG Party or any Subsidiary thereof, on the one hand, or any Joint Venture Partner of a JBG Party or any Subsidiary thereof, on the other hand, or is the exercise of any such right now pending or proposed and (ii) no Joint Venture of a JBG Party or any Subsidiary thereof has been dissolved or liquidated and not reconstituted in accordance with the applicable Joint Venture Agreement and no event or condition which would trigger or result in the dissolution or liquidation of a Joint Venture of a JBG Party or any Subsidiary thereof has occurred and is continuing without the reconstitution of such Person in accordance with the applicable Joint Venture Agreement.

 

Section 4.5.           Securities Laws Matters .

 

(a)           Such JBG Party acknowledges (on behalf of itself and the JBG Designees) that the Issued OP Units and Issued Newco Shares have not been registered under the Securities Act or under any state securities Laws. Such JBG Party acknowledges (on behalf of itself and its JBG Designees) that the Issued OP Units and Issued Newco Shares to be acquired by such JBG Party or any of its Subsidiaries or any JBG Designee pursuant hereto are “restricted securities” as that term is defined by Rule 144(a)(3) under the Securities Act and under applicable state securities Laws and that, pursuant to such Laws, such JBG Party and its JBG Designees must hold such Issued OP Units and Issued Newco Shares until they are registered with the SEC and qualified by state authorities, or an exemption from such registration and qualification requirements is available and, other than as set forth in the Registration Rights Agreements, the Vornado Parties, Newco and Newco OP have no obligation to register or qualify such units or shares for resale.

 

(b)           Such JBG Party (i) acknowledges that it or any of its Subsidiaries or any JBG Designee is acquiring the Issued OP Units and Issued Newco Shares pursuant to an exemption from registration under the Securities Act solely for investment with no present intention to distribute any of the Issued OP Units and Issued Newco Shares to any Person in

 

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violation of applicable securities Laws, (ii) will not sell or otherwise dispose of any of the Issued OP Units and Issued Newco Shares, except in compliance with the registration requirements or exemption provisions of the Securities Act and any other applicable securities Laws, (iii) is an Accredited Investor, and (iv) (x) has had access to and has received such financial and other information regarding the Parties, Newco, Newco OP, the Issued Newco Shares and/or the Issued OP Units, as applicable, that it deems necessary to make an informed investment decision regarding such Issued OP Units and Issued Newco Shares and (y) can bear the economic risk of an investment in the Issued OP Units and/or Issued Newco Shares indefinitely. Such JBG Party will have obtained investor questionnaires (each, a “ JBG Investor Questionnaire ”) from each of its JBG Designees to which the Issued OP Units and Issued Newco Shares will be issued, which questionnaires shall contain, for the benefit of Newco and Newco OP (as applicable), acknowledgements with respect to the matters covered in Section 4.5(a)  and written representations from each such JBG Designee to the effect that that such JBG Designee is an Accredited Investor (or, in the event any non-Accredited Investor is permitted to receive Equity Consideration consistent with Regulation D pursuant to Section 1.7(b) , that such non-Accredited Investor is a Sophisticated Investor) and that the preceding representations and warranties in this Section 4.5(b)  are otherwise true, complete and correct with respect to such JBG Designee. To the knowledge of such JBG Party, each such Investor Questionnaire is true, complete and correct.

 

(c)           Each JBG Party acknowledges that the Issued Newco Shares to be acquired by such JBG Party and its JBG Designees pursuant hereto, if certificated, shall bear the following legends (in addition to any legend required under applicable state securities Laws):

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND MAY NOT BE ENCUMBERED, PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF WITHIN THE UNITED STATES EXCEPT PURSUANT TO THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS AND, IN EACH CASE, IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS.”

 

(d)           Each JBG Party acknowledges that the Issued OP Units to be acquired by such JBG Party and its JBG Designees pursuant hereto, if certificated, shall bear the following legends (in addition to any legend required under applicable state securities Laws):

 

“THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE PARTNERSHIP AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE

 

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SATISFACTORY TO THE PARTNERSHIP, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS.

 

IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.”

 

(e)           In addition, such JBG Party acknowledges that the Issued Newco Shares are subject to restrictions on ownership and transfer set forth in the Newco Declaration, and the Newco Shares to be acquired by such JBG Party and its JBG Designees pursuant hereto, if certificated, shall bear the following legends, or such other legend as may be required from time to time by the Newco Declaration:

 

“THE EQUITY SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND OWNERSHIP FOR THE PURPOSE, AMONG OTHERS, OF THE TRUST’S MAINTENANCE OF ITS STATUS AS A REAL ESTATE INVESTMENT TRUST (A “REIT”) UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”). SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS EXPRESSLY PROVIDED IN THE TRUST’S DECLARATION OF TRUST, (I) NO PERSON MAY BENEFICIALLY OWN EQUITY SHARES IN EXCESS OF THE OWNERSHIP LIMIT; (II) NO PERSON MAY CONSTRUCTIVELY OWN EQUITY SHARES IN EXCESS OF THE CONSTRUCTIVE OWNERSHIP LIMIT; (III) NO PERSON MAY TRANSFER EQUITY SHARES IF SUCH TRANSFER WOULD RESULT IN THE EQUITY SHARES OF THE TRUST BEING OWNED BY FEWER THAN 100 PERSONS; AND (IV) NO PERSON MAY TRANSFER EQUITY SHARES IF SUCH TRANSFER WOULD RESULT IN THE TRUST BEING “CLOSELY HELD” UNDER SECTION 856(H) OF THE CODE OR OTHERWISE CAUSE THE TRUST TO FAIL TO QUALIFY AS A REIT. ANY PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS OR ATTEMPTS TO BENEFICIALLY OR CONSTRUCTIVELY OWN EQUITY SHARES WHICH CAUSES OR WILL CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY OWN EQUITY SHARES IN EXCESS OR IN VIOLATION OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE TRUST. ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS DESCRIBED ABOVE WILL BE VOID AB INITIO, AND IF THE BENEFICIAL OWNERSHIP, CONSTRUCTIVE OWNERSHIP OR TRANSFER OF THE EQUITY SHARES REPRESENTED HEREBY VIOLATES

 

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THE RESTRICTIONS ON TRANSFER OR OWNERSHIP SET FORTH IN CLAUSES (I), (II) OR (IV), THE EQUITY SHARES REPRESENTED HEREBY WILL BE AUTOMATICALLY TRANSFERRED TO A SPECIAL TRUST FOR THE BENEFIT OF ONE OR MORE BENEFICIARIES. IN ADDITION, THE TRUST MAY REDEEM EQUITY SHARES UPON THE TERMS AND CONDITIONS SPECIFIED BY THE BOARD OF TRUSTEES IN ITS SOLE AND ABSOLUTE DISCRETION IF THE BOARD OF TRUSTEES DETERMINES THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE RESTRICTIONS DESCRIBED ABOVE. ALL CAPITALIZED TERMS IN THIS LEGEND HAVE THE MEANINGS SET FORTH IN THE DECLARATION OF TRUST, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH HOLDER OF EQUITY SHARES OF THE TRUST ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH A COPY MAY BE DIRECTED TO THE SECRETARY OF THE TRUST AT ITS PRINCIPAL OFFICE.”

 

Section 4.6.           Financial Statements . The JBG Parties have delivered to Vornado (i) a copy of the audited consolidated balance sheets and the related consolidated statements of operations and comprehensive income, consolidated statements of changes in partners’ deficit and consolidated statements of cash flows as of and for the fiscal years ended December 31, 2015, 2014 and 2013 and the unaudited consolidated balance sheet as of March 31, 2016 and the related consolidated statements of operations and comprehensive income, consolidated statements of changes in partners’ deficit and consolidated statements of cash flows as of and for the three months ended March 31, 2016 and 2015 (the “ JBG Operating Partners Financial Statements ”); (ii) a copy of the audited balance sheet of the JBG/Rosenfeld Retail Properties, LLC and the related statements of operations and comprehensive income, statements of changes in partners’ deficit and statements of cash flows as of and for the fiscal years ended December 31, 2015 and 2014 (the “ JBG Retail Financial Statements ”); and (iii) the audited combined statements of revenues and expenses from real estate operations of the JBG Included Properties listed on Section 4.6 of the JBG Disclosure Letter for the years ended December 31, 2015, 2014 and 2013 and the unaudited combined statements of revenues and expenses from real estate operations of the JBG Included Properties listed on Section 4.6 of the JBG Disclosure Letter for the three months ended March 31, 2016 (the “ 3-14 Financial Statements ” and together with the JBG Operating Partners Financial Statements and the JBG Retail Financial Statements, collectively, the “ JBG Financial Statements ”). The JBG Financial Statements (x) have been prepared from the books and records of the JBG Parties and their Subsidiaries (as applicable), (y) have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of interim financial statements, for normal and recurring year-end adjustments), and (z) with respect to the JBG Operating Partners Financial Statements, fairly present, in all material respects, the financial position and the results of operations of JBG Operating Partners and its Subsidiaries, with respect to the JBG Retail Financial Statements, fairly present, in all material respects, the financial position and the results of operations of JBG/Rosenfeld Retail Properties, LLC and with respect to the 3-14 Financial Statements, fairly present, in all material respects, the revenues and expenses from the real estate operations presented therein as of the times and for the periods

 

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referred to therein (subject, in the case of unaudited quarterly financial statements, to normal year-end adjustments).

 

Section 4.7.           No Undisclosed Liabilities . Neither the JBG Included Entities nor the JBG Management Entities has any liabilities or obligations of any nature (whether accrued, contingent or otherwise) which are required by GAAP to be reflected in a consolidated balance sheet, except for liabilities or obligations (a) reflected or reserved against on the most recent balance sheet included in the JBG Operating Partners Financial Statements and the JBG Retail Financial Statements, (b) under the Indebtedness disclosed in Section 4.16(a)(v)  of the JBG Disclosure Letter, (c) under the JBG Leases and JBG Ground Leases, (d) incurred in the ordinary course of business consistent with past practice since March 31, 2016, (e) set forth on Section 4.7 of the JBG Disclosure Letter, (f) expressly contemplated by, or arising out of, or under this Agreement, or (g) that, individually or in the aggregate, have not had and would not reasonably be expected to have a JBG Material Adverse Effect. Other than as reflected in the JBG Operating Partners Financial Statements, the JBG Management Entities do not have any material amount of Indebtedness.

 

Section 4.8.           Absence of Certain Changes or Events . Between March 31, 2016 and the date hereof, (a) except as contemplated by this Agreement or as set forth in Section 4.8 of the JBG Disclosure Letter, each JBG Management Entity, and with respect to the JBG Included Assets other than the JBG Management Entities each JBG Fund and its Subsidiaries, have conducted their businesses in the ordinary course in all material respects consistent with past practice and (b) there has not been any JBG Material Adverse Effect or any effect, event, development or circumstance that, individually or in the aggregate with all other effects, events, developments and changes, would reasonably be expected to result in a JBG Material Adverse Effect.

 

Section 4.9.           JBG Included Properties .

 

(a)           Section 4.9(a)(i)  of the JBG Disclosure Letter sets forth a list of (i) each JBG Included Property, and (ii) whether such JBG Party or its Subsidiary directly or indirectly owns such JBG Included Property in fee simple or directly or indirectly holds such JBG Included Property pursuant to a leasehold, ground leasehold or some other property interest, including purchase options. With respect to each JBG Party, Section 4.9(a)(i)  of the JBG Disclosure Letter sets forth a true, complete and correct list of all JBG Included Properties in which such JBG Party owns a direct or indirect interest. Except as expressly set forth in Section 4.9(a)(ii)  of the JBG Disclosure Letter, as of the date hereof, neither such JBG Party nor its Subsidiaries is obligated to buy, sell, lease or sublease any JBG Included Properties at some future date, or otherwise enter into any contract for sale, ground lease or letter of intent to sell or ground lease any such JBG Included Property or any portion thereof (in each case, excluding any JBG Leases and the JBG Ground Leases), and no commissions, fees or other amounts are payable (or are to become payable) in connection with the acquisition or disposition of any JBG Included Property.

 

(b)           Such JBG Party and its Subsidiaries owns good and marketable fee simple title or leasehold title (as applicable) to each of their respective JBG Included Properties, in each

 

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case, free and clear of Liens, except for JBG Permitted Liens. Except as set forth on Section 4.9(b)  of the JBG Disclosure Letter, such JBG Party and its Subsidiaries have not granted, and to the knowledge of such JBG Party, none of its or its Subsidiaries’ JBG Included Properties is subject to, unexpired option to purchase agreements, rights of first refusal or first offer or any other rights to purchase or otherwise acquire any JBG Included Property of such JBG Party or its Subsidiaries or any portion thereof.

 

(c)           To the knowledge of such JBG Party, except as may be disclosed in the third party physical condition reports with respect to its and its Subsidiaries’ JBG Included Properties which have been delivered or otherwise made available to the Vornado Parties (it being understood and agreed that a reference in a physical condition report to a document not otherwise delivered or made available to the Vornado Parties shall not be deemed to constitute disclosure of the contents of such document), as of the date hereof, with respect to each JBG Included Property of such JBG Party and its Subsidiaries, (i) such JBG Included Property is supplied with utilities and other services as necessary to permit its continued operation as it is now being operated, (ii) such JBG Included Property is in good working order sufficient for its normal operation in the manner currently being conducted, (iii) such JBG Included Property has not suffered any casualty or other damage that has not been repaired, and (iv) there are no patent or latent structural, mechanical or other significant defects or deficiencies in the improvements on any JBG Included Property, in each case, except as has not had and would not reasonably be expected to have a JBG Material Adverse Effect; provided , however , that this Section 4.9(c)  shall not apply to any JBG Included Property that is raw land, is a JBG Development Property or is not otherwise in active operation.

 

(d)           Neither such JBG Party or any of its Subsidiaries has received (i) written notice that any certificate, permit or license from any Governmental Entity having jurisdiction over any of its JBG Included Properties necessary to permit the lawful use and operation of the buildings and improvements on any of its JBG Included Properties as currently used and operated or that is necessary to permit the lawful use and operation of all utilities and means of egress and ingress to and from any of its JBG Included Properties for the current use and operation of the JBG Included Property is not in full force and effect as of the date of this Agreement, except for such failures to be in full force and effect that, individually or in the aggregate, have not had and would not reasonably be expected to have a JBG Material Adverse Effect, or of any pending written threat of modification or cancellation of any of same, that has had or would reasonably be expected to have a JBG Material Adverse Effect, or (ii) written notice of any uncured violation of any Laws affecting any of its JBG Included Properties which, individually or in the aggregate, has had or would reasonably be expected to have a JBG Material Adverse Effect.

 

(e)           Except as set forth in Section 4.9(e)  of the JBG Disclosure Letter, no condemnation, eminent domain or similar proceeding has occurred or to the knowledge of such JBG Party is pending with respect to any JBG Included Property of such JBG Party or any of its Subsidiaries and, except as, individually or in the aggregate, has not had and would not reasonably be expected to have a JBG Material Adverse Effect, neither such JBG Party nor any of its Subsidiaries has received any written notice to the effect that (i) any condemnation or

 

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rezoning proceedings are threatened with respect to any of its JBG Included Properties, or (ii) any zoning regulation or ordinance (including with respect to parking), Board of Fire Underwriters rules, building, fire, health or other Law has been violated (and remains in violation) for any of its JBG Included Properties.

 

(f)            Except as set forth on Section 4.9(f)  of the JBG Disclosure Letter, there are no material Tax abatements or exemptions specifically affecting the JBG Included Properties of such JBG Party or any of its Subsidiaries, and such JBG Party and its Subsidiaries have not received any written notice of (and such JBG Party and its Subsidiaries do not have any knowledge of) any proposed increase in the assessed valuation of any of the JBG Included Properties, except in each case for any such Taxes or assessment that have not had and would not reasonably be expected to have, individually or in the aggregate, a JBG Material Adverse Effect.

 

(g)           No written unresolved claim has been made against any title insurance policy evidencing title insurance with respect to a JBG Included Property which, individually or in the aggregate, would be material to such JBG Included Property.

 

(h)           Section 4.9(h)  of the JBG Disclosure Letter sets forth all ground leases affecting the interest of each JBG Party or its Subsidiaries in any JBG Included Property, other than ground leases as to which a JBG Included Entity is both lessor and lessee, and all amendments, modifications (including pursuant to any estoppel), guarantees, renewals and extensions exercised related thereto (collectively, the “ JBG Ground Leases ”). With respect to each JBG Party, such JBG Party hereby represents that (i)  Section 4.9(h)  of the JBG Disclosure Letter contains a true, complete and correct list of all JBG Ground Leases to which such JBG Party or any of its Subsidiaries is bound; (ii) true, complete and correct copies of such JBG Ground Leases have been delivered or made available to the Vornado Parties; and (iii) each such JBG Ground Lease is valid, binding and enforceable in accordance with its terms and is in full force and effect with respect to such JBG Party or its Subsidiary and, to the knowledge of such JBG Party, with respect to the other parties thereto, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at Law). As of the date hereof, there are no monetary or non- monetary material defaults under any JBG Ground Lease to which such JBG Party or any of its Subsidiaries is bound, by such JBG Party or its Subsidiaries or any other party thereto. As of the date hereof, such JBG Party and its Subsidiaries have not sent or received any notice of any violation or breach of, or default under, any JBG Ground Lease to which such JBG Party or any of its Subsidiaries is bound.

 

(i)            Except for discrepancies, errors or omissions that, individually or in the aggregate, would not reasonably be expected to have a JBG Material Adverse Effect, the rent rolls for each of the JBG Included Properties as of September 15, 2016 that have previously been made available to the Vornado Parties by such JBG Party or its Subsidiaries, are true and correct and (i) correctly reference each tenant under each lease that was in effect as of September 15, 2016, and to which any JBG Party is a party as lessor with respect to each of the JBG Included Properties (all leases, together with, in the case of JBG Leases for non-residential JBG Included

 

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Properties, for all amendments, modifications, supplements, renewals and extensions related thereto, the “ JBG Leases ”) and (ii) identify the rent payable under the JBG Lease as of such date. Except for discrepancies, errors or omissions that, individually or in the aggregate, would not reasonably be expected to have a JBG Material Adverse Effect, such JBG Party or its Subsidiaries have made available to the Vornado Parties a list of all security deposits currently held under the JBG Leases as of September 15, 2016.

 

(j)            True and complete (in all material respects) copies of all JBG Leases for space in excess of 25,000 square feet in or at any JBG Included Properties (the “ Material JBG Leases ”) (it being understood that a JBG Lease shall constitute a Material JBG Lease if there are other JBG Leases with the same tenant at the same JBG Included Property that, if aggregated with such JBG Lease, would exceed 25,000 square feet), in each case in effect as of the date hereof and to the extent within JBG’s possession and control, have been made available to the Vornado Parties. Except as would not, individually or in the aggregate, reasonably be expected to have a JBG Material Adverse Effect, (i) neither such JBG Party nor any of its Subsidiaries has given or received written notice of any violation or breach of, or default under, any JBG Lease, which violation or breach remains outstanding and uncured, (ii) except as set forth on Section 4.9(j)  of the JBG Disclosure Letter, no tenant under a JBG Lease is in monetary or other material default under such JBG Lease, which default remains outstanding and uncured, and (iii) each JBG Lease is valid, binding and enforceable in accordance with its terms and is in full force and effect with respect to any JBG Party and, to the knowledge of any JBG Party, with respect to the other parties thereto, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at Law). Except as set forth on Section 4.9(j)  of the JBG Disclosure Letter, any and all material leasing commissions or brokerage fees payable by such JBG Party or any of its Subsidiaries with respect to any Material JBG Leases have been paid in full. To the knowledge of such JBG Party, except as set forth on Section 4.9(j)  of the JBG Disclosure Letter, all material tenant improvement allowances, relocation allowances or other inducements due with respect to the current unexpired term of each Material JBG Lease have been paid in full. As of March 31, 2016, except as set forth on Section 4.9(j)  of the JBG Disclosure Letter, there are no other material Leasing Costs to be paid in the future with respect to any Material JBG Leases.

 

(k)           Other than any economic rights assigned to a JBG Included Entity or the JBG Management Entities, the Managing Member Interests do not include any economic rights in any Joint Venture to which such Managing Member Interests are attributable, except as set forth on Section 4.9(k)  of the JBG Disclosure Letter.

 

(l)            As of the date hereof, the JBG Included Properties and the JBG Excluded Assets constitute all of the real property interests held by the JBG Parties and their controlled Affiliates.

 

(m)          Except as (i) set forth on Section 4.9(m)  of the JBG Disclosure Letter and (ii) by virtue of their interest in the JBG Management Entities, no member of the executive committee of JBG Operating Partners is entitled to receive compensation for providing

 

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development, asset and property management, leasing, construction management or other real estate-related services.

 

(n)           Except for JBG Permitted Liens, as set forth in JBG Leases and title documents made available to the Vornado Parties prior to the date hereof or as would not reasonably be expected to have, individually or in the aggregate, a JBG Material Adverse Effect and except as set forth on Section 4.9(n)  of the JBG Disclosure Letter, no such JBG Party nor any of its Subsidiaries is a party to any (i) unexpired option to purchase agreements, rights of first refusal or first offer or any other rights to purchase or otherwise acquire any JBG Included Property or any portion thereof that would materially adversely affect any JBG Included Entity’s, ownership, ground lease or right to use a JBG Included Property subject to a Material JBG Lease, and (ii) other outstanding rights or agreements to enter into any contract for sale, ground lease or letter of intent to sell or ground lease any JBG Included Property or any portion thereof that is owned by any JBG Party or its Subsidiaries, which, in each case, is in favor of any party other than a JBG Included Entity.

 

(o)           Schedule B accurately states the outstanding principal amount of the Indebtedness secured by each JBG Included Property as of the applicable Valuation Date.

 

Section 4.10.         JBG Development Properties .

 

(a)           Section 4.10(a) of the JBG Disclosure Letter (i) lists each JBG Included Property (x) which is under construction or (y) which is subject to a binding agreement for development or commencement of construction (each, a “ JBG Development Property ”) and (ii) sets forth the estimated completion date for each JBG Development Property.

 

(b)           Except as would not reasonably be expected to have, in the aggregate, a JBG Material Adverse Effect, to the knowledge of such JBG Party, no circumstances exist that would (i) prevent or unreasonably delay the development or construction of any of its or its Subsidiaries’ JBG Development Properties or (ii) prevent or unreasonably delay the attainment of any entitlements required to commence or complete construction or development of such JBG Development Properties, in each case, in accordance with the estimated completion date set forth on Section 4.10(a)  of the JBG Disclosure Letter, subject, in the case of any JBG Development Property where the development or construction is not “by right,” to (A) any delays in the receipt of all required approvals, (B) failure to receive all required approvals and (C) receipt of approvals with conditions that are unacceptable to the applicable JBG Party in its good faith business discretion.

 

(c)           Except as would not reasonably be expected to have, in the aggregate, a JBG Material Adverse Effect, (i) all development and construction required to be completed with respect to any JBG Development Property (and any Contract related to such development or construction) (A) has been completed timely and on budget (or such requirement has been waived by the party benefiting from such covenant), or (B) is on schedule to be completed timely and on budget, and all payments, expenses and fees required in connection therewith have been made, in each case, in accordance therewith and (ii) neither such JBG Party nor any of its

 

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Subsidiaries is and, to the knowledge of such JBG Party, no other party is in breach or violation of, or default under, any such JBG Lease or Contract related to such development or construction, nor has any event occurred which would result in a breach or violation of, or a default under, any such JBG Lease or Contract by such JBG Party or any of its Subsidiaries, or, to the knowledge of such JBG Party, any other party thereto (in each case, with or without notice or lapse of time or both).

 

Section 4.11.         Personal Property . Such JBG Party and its Subsidiaries have good and valid title to, or a valid and enforceable leasehold interest in, or other right to use, all personal property owned, used or held for use by them which constitutes part of the “JBG Included Assets” (other than property owned by tenants and used or held in connection with the applicable tenancy), except as, individually or in the aggregate, has not had and would not reasonably be expected to have a JBG Material Adverse Effect. Neither such JBG Party’s nor any of its Subsidiaries’ ownership of or leasehold interest in any such personal property is subject to any Liens, except for JBG Permitted Liens and Liens that have not had and would not reasonably be expected to have a JBG Material Adverse Effect.

 

Section 4.12.         Litigation . Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a JBG Material Adverse Effect or adversely affect the ability of such JBG Party or any of its Subsidiaries to perform their obligations hereunder or under any Ancillary Documents to which such Persons are a party, or prevent or materially delay the consummation of the Transactions, and except as set forth in Section 4.12 of the JBG Disclosure Letter, as of the date hereof, (a) there is no Action, pending against (or to the knowledge of such JBG Party, threatened in writing against), such JBG Party, any of its Subsidiaries or their Included Assets nor, to the knowledge of such JBG Party, is there any investigation by a Governmental Entity pending or threatened in writing against such JBG Party or any of its Subsidiaries or, with respect to any Included Assets of such JBG Party or its Subsidiaries, and (b) neither such JBG Party nor any of its Subsidiaries is subject to any outstanding order, writ, injunction, decree or arbitration ruling or judgment or award of a Governmental Entity.

 

Section 4.13.         Taxes . Except as expressly set forth in Section 4.13 of the JBG Disclosure Letter:

 

(a)           The JBG Parties and their Subsidiaries each has (i) duly and timely filed (or caused to be filed on its behalf) with the appropriate Governmental Entity all U.S. federal and all other material Tax Returns required to be filed by it, taking into account any extensions of time within which to file such Tax Returns, and all such Tax Returns were and are true, correct and complete in all material respects and (ii) duly and timely paid in full (or there has been duly and timely paid in full on its behalf), or made adequate provision for, all material amounts of Taxes required to be paid by it.

 

(b)           Each JBG REIT (i) for its First Applicable Year and through and including its taxable year ended December 31, 2015 (and, for purposes of Section 7.2(a) , through and including its taxable year ended December 31, 2016, if the Closing Date occurs in the taxable

 

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year ending December 31, 2017) has been subject to taxation as a REIT and has satisfied all requirements to qualify as a REIT for such taxable years; (ii) has operated since January 1, 2016 (and, for purposes of Section 7.2(a) , January 1, 2017, if the Closing Date occurs in the taxable year ending December 31, 2017) to the date hereof in such a manner so as to qualify as a REIT; (iii) intends to continue to operate through the Closing Date in such a manner so as to qualify as a REIT; and (iv) has not taken or omitted to take any action that would reasonably be expected to result in a challenge by the IRS or any other Governmental Entity to its status as a REIT, and no such challenge is pending or threatened in writing.

 

(c)           Each of the JBG Parties and their Subsidiaries, other than the JBG Corporate Entities, has been since the later of its acquisition or formation and continues to be treated for U.S. federal Tax purposes as a partnership (or a disregarded entity (other than a Qualified REIT Subsidiary)) and not as a corporation or an association or publicly traded partnership taxable as a corporation.

 

(d)           None of the JBG Parties nor any of their Subsidiaries holds, directly or indirectly, any asset the disposition of which would be subject to (or to rules similar to) Section 1374 of the Code or, taking into account the Transactions, Treasury Regulations Section 1.337(d)-7 and Temporary Treasury Regulations Section 1.337(d)-7T.

 

(e)           (i) There are no audits, investigations or proceedings pending (or threatened in writing) for and/or in respect of any material Taxes or material Tax Returns of a JBG Party or any of their Subsidiaries and none of the JBG Parties nor any of their Subsidiaries is a party to any litigation or administrative proceeding relating to a material amount of Taxes; (ii) no deficiency for a material amount of Taxes of the JBG Parties or any of their Subsidiaries has been claimed, proposed or assessed in writing or, to the knowledge of the JBG Parties, threatened in writing, by any Governmental Entity, which deficiency has not yet been settled, except for such deficiencies which are being contested in good faith; (iii) none of the JBG Parties nor any of their Subsidiaries has extended or waived (nor granted any extension or waiver of) the limitation period for the assessment or collection of any material amount of Tax that has not since expired; and (iv) none of the JBG Parties nor any of their Subsidiaries has entered into any “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax Law) regarding a material amount of Tax.

 

(f)            Since formation of the JBG REITs, (i) none of the JBG REITs nor any of their Subsidiaries has incurred any material liability for Taxes under Sections 857(b), 860(c) or 4981 of the Code that has not been previously paid; and (ii) none of the JBG REITs nor any of their Subsidiaries has incurred any material liability for any other Taxes other than (x) in the ordinary course of business, or (y) transfer or similar Taxes arising in connection with acquisitions or dispositions of property. No event has occurred, and no condition or circumstance exists, which presents a material risk that any material amount of Tax described in the previous sentence will be imposed upon the JBG REITs or any of their Subsidiaries (other than transfer or similar Taxes arising in connection with the Transactions).

 

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(g)           The JBG Parties and each of their Subsidiaries have complied in all material respects with all applicable Laws relating to the payment and withholding of Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 1445, 1446 and 3402 of the Code or similar provisions under any state and foreign Laws) and have duly and timely withheld and, in each case, have paid over to the appropriate Governmental Entities any and all material amounts required to be so withheld and paid over on or prior to the due date thereof under all applicable Laws.

 

(h)           None of the JBG Parties, the JBG Designees, and the members or owners of the JBG Parties is a “foreign person” within the meaning of Treasury Regulations Section 1.1445-2.

 

(i)            There are no JBG Tax Protection Agreements (as hereinafter defined) in force as of the date of this Agreement, and, as of the date of this Agreement, no Person has raised in writing a material claim against the JBG Parties or any of their Subsidiaries for any breach of any JBG Tax Protection Agreement. As used herein, “ JBG Tax Protection Agreement ” means any written agreement which the JBG Parties or any of their Subsidiaries is a party to or is otherwise bound by or subject to pursuant to which: (i) any liability to holders of limited partnership interests in a JBG Subsidiary Partnership relating to Taxes may arise, whether or not as a result of the consummation of the Transactions; and/or (ii) in connection with the deferral of income Taxes of a holder of limited partnership interests in a JBG Subsidiary Partnership, the JBG Parties or any of their Subsidiaries have agreed to (A) maintain a minimum level of debt, continue a particular debt or provide rights to guarantee debt, (B) retain or not dispose of assets for a period of time that has not since expired, (C) make or refrain from making Tax elections, and/or (D) only dispose of assets in a particular manner. As used herein, “ JBG Subsidiary Partnership ” means a JBG Party or a Subsidiary of a JBG Party that is a partnership for United States federal income tax purposes.

 

(j)            Section 4.13(j)  of the JBG Disclosure Letter sets forth, for each JBG Included Property, the relevant JBG Party’s adjusted tax basis in such JBG Included Property.

 

(k)           There are no material Tax Liens upon any property or assets of the JBG Parties or any of their Subsidiaries except Liens for Taxes not yet due and payable or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP.

 

(l)            Neither the JBG Parties nor any of their Subsidiaries (A) has been a member of an affiliated group filing a consolidated U.S. federal income Tax Return or (B) has any liability for the Taxes of any Person (other than the JBG Parties or any of their Subsidiaries) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, or otherwise.

 

(m)          Neither the JBG Parties nor any of their Subsidiaries has participated in any “listed transaction” within the meaning of Treasury Regulations Section 1.6011-4(b)(2).

 

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(n)           Neither the JBG Parties nor any of their Subsidiaries has constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code in the two (2) years prior to the date of this Agreement.

 

(o)           None of the JBG REITs nor any of their Subsidiaries (other than Taxable REIT Subsidiaries) currently has or, as of December 31 of any taxable year through and including the taxable year ended December 31 immediately prior to the Closing Date, has had any earnings and profits attributable to such entity or any other corporation in any non-REIT year within the meaning of Section 857(a) of the Code.

 

(p)           The JBG Tax Group does not own any stock, or options to acquire stock of Vornado or Newco.

 

Section 4.14.         Compliance with Laws; Permits .

 

(a)           As of the date hereof (i) such JBG Party and its Subsidiaries, have complied and are in compliance with all Laws applicable to such JBG Party or any of its Subsidiaries or by which their JBG Included Assets (including, without limitation, any JBG Included Property) is bound, and (ii) no notice, charge or assertion has been received by such JBG Party or its Subsidiaries or, to the knowledge of such JBG Party, threatened against such JBG Party or its Subsidiaries alleging any non-compliance of any JBG Party or its Subsidiaries, except in each case above for such non-compliance that has not had and would not reasonably be expected to have a JBG Material Adverse Effect. Notwithstanding anything to the contrary in this Section 4.14(a) , the provisions of this Section 4.14(a)  shall not apply to matters covered by Section 4.17 (Environmental Matters), Section 4.19 (Employee Benefit Plans) and Section 4.20 (Labor and Other Employment Matters).

 

(b)           Such JBG Party and its Subsidiaries are in possession of all authorizations, licenses, permits, certificates, approvals, variances, exemptions, orders, franchises, certifications and clearances of any Governmental Entity necessary for such JBG Party and its Subsidiaries to own, lease and operate their respective JBG Included Assets (including, without limitation, the JBG Included Properties) and conduct their respective businesses as currently conducted (the “ JBG Permits ”), and all such JBG Permits are valid, and in full force and effect, except where the failure to possess and maintain such JBG Permits in full force and effect, individually or in the aggregate, has not had and would not reasonably be expected to have a JBG Material Adverse Effect. All applications required to have been filed for the renewal of the JBG Permits have been filed on a timely basis with the appropriate Governmental Entity, and all other filings required to have been made with respect to such JBG Permits have been duly made on a timely basis with the appropriate Governmental Entity, except in each case, where such failure to do so, individually or in the aggregate, has not had and would not reasonably be expected to have a JBG Material Adverse Effect. Neither any JBG Party nor any of their Subsidiaries has received any claim or notice, nor has any knowledge indicating, that such JBG Party or its Subsidiaries currently is not in compliance with the terms of any JBG Permit, except where the failure to be

 

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in compliance with the terms of any such JBG Permit, individually or in the aggregate, would not have had and would not reasonably be expected to have a JBG Material Adverse Effect.

 

(c)           Neither such JBG Party nor any of its Subsidiaries is an “investment company” within the meaning of the Investment Company Act.

 

Section 4.15.         Funds .

 

(a)           The Equity Interests of such JBG Party and any of its Subsidiaries have been issued and sold in compliance with applicable Law in all material respects.

 

(b)           Neither of the JBG Management Entities nor any of its Subsidiaries or any managing member of any JBG Fund currently acts as an adviser, sub-adviser, general partner, managing member, manager or sponsor to any pooled investment vehicle that would be required to be a registered “Investment Company” under the Investment Company Act. Section 4.15(b)(i)  of the JBG Disclosure Letter sets forth each material agreement pursuant to which such JBG Management Entity (or its Subsidiaries) or any other JBG Included Entity performs management, advisory or sub-advisory services for any Person, and each material Contract pursuant to which such JBG Management Entity (or its Subsidiaries) or JBG Included Entity receives compensation in respect of any such activities in connection with any such Person (each such agreement, a “ JBG Advisory Agreement ”), and each such JBG Advisory Agreement was duly approved and performed in all material respects in accordance with the applicable Governing Documents of such fund and applicable Law. There are no existing material violations by such JBG Management Entity or any of its Subsidiaries, such JBG Included Entity or their respective Affiliates or any managing member of any JBG Fund or, to the knowledge of such Persons, any other party thereto, of the Governing Documents of any fund or any JBG Advisory Agreement or any side letter with any investor in a JBG Fund. True and complete copies have been made available to the Vornado Parties prior to the date hereof of (i) each form of subscription agreement and private placement memorandum or other offering document in effect as of the date hereof for each JBG Fund, (ii) the Governing Documents of each JBG Fund, (iii) each JBG Advisory Agreement and (iv) all material side letters with any investor in any JBG Fund.

 

Section 4.16.         Material Contracts .

 

(a)           Except for contracts listed in Section 4.16(a)  of the JBG Disclosure Letter, as of the date of this Agreement, no such JBG Party or any of its Subsidiaries is a party to or bound by or subject to any contract that, as of the date hereof:

 

(i)            obligates such JBG Party or any of its Subsidiaries to make non-contingent aggregate annual expenditures (other than principal and/or interest payments or the deposit of other reserves with respect to debt obligations) in excess of $500,000 and is not cancelable within ninety (90) days without material penalty to such JBG Party or any of its Subsidiaries that relates to any of the JBG Included Assets or pursuant to which Newco or any of its Subsidiaries (including, after the Closing, the JBG

 

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Included Entities and the JBG Management Entities) could become an obligor pursuant to the Transactions, except for any lease under which such JBG Party or any of its Subsidiaries is lessee, any ground lease affecting any JBG Included Property or relates to tenant improvement expenses under a JBG Lease;

 

(ii)           contains any non-compete or exclusivity provisions with respect to any line of business or geographic area that restricts the business of such JBG Party or any of its Subsidiaries in any material respect, or would otherwise limit the freedom of such persons with respect to, or restrict, the lines of business conducted by such JBG Party or any of its Subsidiaries or the geographic area in which such JBG Party or any of its Subsidiaries may conduct business in any material respect that relates to any of the JBG Included Assets or pursuant to which Newco or any of its Subsidiaries (including, after the Closing, the JBG Included Entities and the JBG Management Entities) could become an obligor pursuant to the Transactions, excluding any such contract that is a JBG Lease;

 

(iii)          obligates any JBG Included Entity, JBG Management Entity or Subsidiary of a JBG Party to any material continuing contractual obligation (i) for indemnification under any agreements relating to the sale of real property, or any other business or material assets, previously owned, whether directly or indirectly, by a JBG Management Entity, a JBG Included Entity, or Subsidiary of a JBG Party that are reasonably likely to involve a Liability of $1,000,000 or more or (ii) to make payments, contingent or otherwise, on account of prior acquisitions or sales of any real property;

 

(iv)          is an agreement which obligates such JBG Party or any of its Subsidiaries to indemnify any past or present directors, officers, trustees, employees and agents of such JBG Party or any of its Subsidiaries pursuant to which such JBG Party or any of its Subsidiaries is the indemnitor, in each case, other than pursuant to any Governing Documents, operating agreements, property management agreements, development agreements, advisory agreements or any similar agreement;

 

(v)           constitutes an Indebtedness obligation of such JBG Party or any of its Subsidiaries with a principal amount outstanding as of September 30, 2016 greater than $500,000 that relates to any of the JBG Included Assets or pursuant to which Newco or any of its Subsidiaries (including, after the Closing, the JBG Included Entities and the JBG Management Entities) could become an obligor pursuant to the Transactions, other than any such Indebtedness for which both obligor and obligee are JBG Included Entities;

 

(vi)          requires such JBG Party or any of its Subsidiaries to dispose of or acquire assets or properties (other than in connection with the expiration of a JBG Lease or a ground lease affecting a JBG Included Property) with a fair market value in excess of $1,000,000, or involves any pending or contemplated merger, consolidation or similar business combination transaction, except for any JBG Lease or any ground lease affecting any JBG Included Property, that relates to any of the JBG Included Assets or pursuant to which Newco or any of its Subsidiaries (including, after the Closing, the JBG

 

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Included Entities and the JBG Management Entities) could become an obligor pursuant to the Transactions;

 

(vii)         constitutes an interest rate cap, interest rate collar, interest rate swap or other contract or agreement relating to a hedging transaction that relates to any of the JBG Included Assets or pursuant to which Newco or any of its Subsidiaries (including, after the Closing, the JBG Included Entities and the JBG Management Entities) could become an obligor pursuant to the Transactions or to Indebtedness secured by any JBG Included Asset;

 

(viii)        is a JBG Advisory Agreement;

 

(ix)          sets forth the operational terms of a joint venture, partnership, limited liability company or strategic alliance of a JBG Included Entity, a JBG Management Entity or Subsidiary of a JBG Party with any party other than a JBG Included Entity, JBG Management Entity or Subsidiary of a JBG Party;

 

(x)           constitutes a loan to any Person (other than to a wholly owned Subsidiary of a JBG Party) by a JBG Included Entity, JBG Management Entity or Subsidiary of a JBG Party (other than advances made pursuant to the JBG Leases or any disbursement agreement, development agreement, or development addendum entered into in connection with a JBG Lease with respect to the development, construction, or equipping of a JBG Included Property or the funding of improvements to JBG Included Properties) in an amount in excess of $500,000;

 

(xi)          is an agreement that obligates payments to any Person contingent on the future operating results or other similar future events having a material economic effect relating to the JBG Included Assets or arising out of prior results, leases, acquisitions or sales in respect of the JBG Included Assets pursuant to which Newco or any of its Subsidiaries (including, after the Closing, the JBG Included Entities and the JBG Management Entities) could become an obligor pursuant to the Transactions;

 

(xii)         is an agreement (other than a Joint Venture Agreement) obligating a JBG Included Entity, a JBG Management Entity or a Subsidiary of a JBG Party to provide any funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in any other Person in excess of $500,000;

 

(xiii)        is an agreement with or for the benefit of any Governmental Entity requiring payment by a JBG Included Entity, a JBG Management Entity or Subsidiary of a JBG Party in excess of $500,000 in any calendar year remaining in its term or requires total remaining payment in excess of $500,000 other than a ground lease that relates to any of the JBG Included Assets or pursuant to which Newco or any of its Subsidiaries (including, after the Closing, the JBG Included Entities and the JBG Management Entities) could become an obligor pursuant to the Transactions, other than any such agreement that is a JBG Lease or JBG Ground Lease;

 

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(xiv)        is a gross maximum price construction contract or an agreement for any construction or development work (including any additions or expansions) which are currently in effect and under which such JBG Party or any of its Subsidiaries currently has an obligation in excess of $5,000,000, unless a JBG Party or its Subsidiary is the developer, that relates to any of the JBG Included Properties or pursuant to which Newco or any of its Subsidiaries (including, after the Closing, the JBG Included Entities and the JBG Management Entities) could become an obligor pursuant to the Transactions;

 

(xv)         is an agreement between a JBG Management Entity or a JBG Included Entity, on the one hand, and the current directors, officers, trustees, partners, members or other Affiliates of any JBG Party (but not including as Affiliates any JBG Included Entities or JBG Management Entities), on the other hand, pursuant to which Newco or any of its Subsidiaries (including, after the Closing, the JBG Included Entities and the JBG Management Entities) could become an obligor pursuant to the Transaction, other than any such agreement (A) where all parties are JBG Included Entities, (B) which will be terminated on or before the Closing or (C) which will otherwise not be binding on Newco or any of its Subsidiaries following Closing; or

 

(xvi)        is a management agreement (i.e., contracts providing for or otherwise governing the management and/or operation of such JBG Party, its Subsidiaries or any of their JBG Included Assets (including their JBG Included Properties)), including, without limitation, asset management, construction management and property management agreements pursuant to which such JBG Party or its Subsidiaries are obligated to pay to another party (that is not a JBG Party or a JBG Party’s Subsidiary) an amount in excess of $1,000,000 that relates to any of the JBG Included Assets or pursuant to which Newco or any of its Subsidiaries (including, after the Closing, the JBG Included Entities and the JBG Management Entities) could become an obligor pursuant to the Transactions, other than any such agreement where all parties are JBG Included Entities.

 

Each contract of the type described above in this Section 4.16(a) , whether or not listed on Section 4.16(a)  of the JBG Disclosure Letter, to which such JBG Party or any of its Subsidiaries is a party is referred to herein as a “ JBG Material Contract ”. True and complete copies of each JBG Material Contract listed on Section 4.16(a)  of the JBG Disclosure Letter have been provided or made available to the Vornado Parties.

 

(b)           Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a JBG Material Adverse Effect, each JBG Material Contract is legal, valid, binding and enforceable on such JBG Party and each of its Subsidiaries that is a party thereto and, to the knowledge of such JBG Party, each other party thereto, and is in full force and effect, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at Law). Except as, individually or in the aggregate, have not had and would not reasonably be expected

 

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to have a JBG Material Adverse Effect, such JBG Party and each of its Subsidiaries has performed all obligations required to be performed by it prior to the date hereof under each JBG Material Contract and, to the knowledge of such JBG Party, each other party thereto has performed all obligations required to be performed by it prior to the date hereof under each JBG Material Contract. No such JBG Party or any of its Subsidiaries, nor, to the knowledge of such JBG Party, any other party thereto, is in material breach or violation of, or default under, any JBG Material Contract, and no event has occurred that, with notice or lapse of time or both, would constitute a violation or breach of, or default under, any JBG Material Contract, except where in each case such breach, violation or default is not reasonably likely to have, individually or in the aggregate, or reasonably be expected to have a JBG Material Adverse Effect. Neither such JBG Party nor any of its Subsidiaries has given or received notice of any violation or default under any JBG Material Contract, except for violations or defaults that would not, individually or in the aggregate, reasonably be expected to have a JBG Material Adverse Effect.

 

Section 4.17.         Environmental Matters . Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a JBG Material Adverse Effect, or as set forth in Section 4.17 of the JBG Disclosure Letter: (a) with respect to the JBG Included Assets, such JBG Party and its Subsidiaries are in compliance with all Environmental Laws; (b) neither such JBG Party nor any of its Subsidiaries has received any written notice, demand, letter or claim alleging that such JBG Party or any of its Subsidiaries is in violation of, or liable under, any Environmental Law or with respect to Hazardous Substances or that any judicial, administrative or compliance order has been issued against such JBG Party or any of its Subsidiaries, in each case, which remains unresolved and which relates to any of the JBG Included Assets; and (c) neither such JBG Party nor any of its Subsidiaries has entered into or agreed to any consent decree or order or is subject to any judgment, decree or judicial, administrative or compliance order relating to compliance with Environmental Laws, Environmental Permits or the investigation, claim, sampling, monitoring, treatment, remediation, removal or cleanup of Hazardous Substances and no investigation, litigation or other proceeding is pending or, to the knowledge of such JBG Party, threatened against such JBG Party or any of its Subsidiaries under any Environmental Law, in each case, that relates to the JBG Included Assets. This Section 4.17 contains the exclusive representations and warranties of such JBG Party with respect to environmental matters.

 

Section 4.18.         Bankruptcy . Neither such JBG Party nor any of its Subsidiaries has (i) made a general assignment for the benefit of creditors, (ii) filed any voluntary petition in bankruptcy or suffered the filing of any involuntary petition by such JBG Party’s or any such Subsidiary’s creditors, (iii) suffered the appointment of a receiver to take possession of all, or substantially all, of such JBG Party’s or any such Subsidiary’s assets, which remains pending as of such time, (iv) suffered the attachment or other judicial seizure of all, or substantially all, of such JBG Party’s or any such Subsidiary’s assets, which remains pending as of such time, (v) admitted in writing its inability to pay its debts as they come due, or (vi) made an offer of settlement, extension or composition to its creditors generally.

 

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Section 4.19.         Employee Benefit Plans .

 

(a)           Section 4.19(a)  of the JBG Disclosure Letter sets forth a correct and complete list of all material JBG Benefit Plans. For each material JBG Benefit Plan (other than any Multiemployer Plan), the JBG Parties have made available to the Vornado Parties, to the extent applicable, accurate and complete copies of (i) the Plan document, including any amendments thereto, and all related trust documents, insurance contracts or other funding vehicles, (ii) a written description, if not set forth in a written document, (iii) the most recently prepared actuarial report, and (iv) all material correspondence to or from any Governmental Entity received in the last three years.

 

(b)           (i) Each JBG Benefit Plan (other than any Multiemployer Plan) has been established and administered in accordance with its terms and in compliance in all material respects with all applicable Laws, including ERISA and the Code, (ii) all material contributions, benefits and premiums required by and due under the terms of each JBG Benefit Plan for current or prior plan years have been paid or accrued in accordance with GAAP, and (iii) there are no pending or, to the JBG Parties’ knowledge, threatened claims (other than routine claims for benefits) or proceedings by a Governmental Entity by, on behalf of or against any JBG Benefit Plan or any trust related thereto which could reasonably be expected to result in any material liability to any JBG Party or any of their Subsidiaries.

 

(c)           Each JBG Benefit Plan (other than any Multiemployer Plan) that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service or is the subject of a favorable opinion letter from the Internal Revenue Service on the form of such JBG Benefit Plan, a copy of such letter has been made available to the Vornado Parties, and, to the JBG Parties’ knowledge, there are no facts or circumstances that would be reasonably likely to adversely affect the qualified status of any such JBG Benefit Plan. Each trust established in connection with any JBG Benefit Plan which is intended to be exempt from federal income taxation under Section 501(a) of the Code is so exempt, and, to the JBG Parties’ knowledge, no fact or event has occurred that would reasonably be expected to adversely affect the exempt status of any such trust.

 

(d)           Section 4.19(d)  of the JBG Disclosure Letter sets forth, as of the date of this Agreement, each (i) Multiemployer Plan, or (ii) single employer plan or other pension plan that is subject to Title IV or Section 302 of ERISA or Section 412 of the Code, in each case, that any JBG Party or any of their respective Subsidiaries or ERISA Affiliates, sponsors, maintains or contributes to, or has within the last six (6) years prior to the date hereof sponsored, maintained or contributed to. For any JBG Benefit Plan subject to the minimum funding requirements of Section 412 of the Code or Title IV of ERISA (other than a Multiemployer Plan), (i) no such plan has failed to satisfy the minimum funding standards of Section 302 of ERISA or Sections 412 or 418(B) of the Code, respectively, (ii) no unsatisfied liability (other than for premiums to the PBGC) under Title IV of ERISA has been, or is expected to be, incurred by a JBG Party or any of its Subsidiaries or ERISA Affiliates, (iii) the PBGC has not instituted proceedings to terminate any such JBG Benefit Plan and (iv) no “reportable event” within the meaning of Section 4043 of ERISA ((excluding any such event for which the thirty (30) day notice

 

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requirement has been waived under the regulations to Section 4043 of ERISA) has occurred for which there remains any outstanding liability, nor has any event described in Sections 4062, 4063 or 4041 of ERISA occurred. Except as set forth on Section 4.19(d)  of the JBG Disclosure Letter, neither such JBG Party nor any of its Subsidiaries or ERISA Affiliates have incurred or would be likely to incur (whether as a result of the Transactions or otherwise) any liability (including any indirect, contingent or secondary liability) to or on account of a Multiemployer Plan pursuant to Sections 515, 4201, 4204 or 4212 of ERISA; and JBG Parties and each of their respective Subsidiaries and ERISA Affiliates have made all required contributions and are not delinquent in any contributions to any Multiemployer Plan.

 

(e)           No JBG Benefit Plan provides health, accident, disability, life insurance benefits to any JBG Service Provider (or any spouse, beneficiary or dependent of the foregoing) beyond the termination of service or retirement of such JBG Service Provider other than as required under Section 4980B of the Code or any similar applicable Law or at the sole expense of such JBG Service Provider.

 

(f)            No assets of the JBG Parties or any of their ERISA Affiliates constitute “plan assets” for purposes of Title I of ERISA or Section 4975 of the Code or any applicable similar Law.

 

(g)           Neither the execution and delivery of this Agreement, nor the consummation of the Transactions, either alone or in combination with another event (whether contingent or otherwise) will (i) entitle any current or former JBG Service Provider to any payment; (ii) increase the amount of compensation or benefits due to any such JBG Service Provider; (iii) accelerate the vesting, funding or time of payment of any compensation, equity award or other benefit to any JBG Service Provider; or (iv) result in the payment of any amount to any JBG Service Provider that could, individually or in combination with any other such payment, constitute an “excess parachute payment” as defined in Section 280G(b)(1) of the Code.

 

(h)           Neither such JBG Party nor any of its Subsidiaries is a party to, or has any obligation under, any Contract or JBG Benefit Plan to compensate any Person for additional taxes payable pursuant to Sections 409A or 4999 of the Code.

 

Section 4.20.         Labor and Other Employment Matters .

 

(a)           Section 4.20(a)  of the JBG Disclosure Letter sets forth, as of the date of this Agreement, each collective bargaining or similar agreement by which a JBG Party or any Affiliate thereof is, or has, within the past six (6) years been bound with respect to any JBG Service Providers. As of the date hereof, there is no, and since January 1, 2014, there has not been any, labor strike, work stoppage, picketing, lockout, walkout or other organized work interruption pending, or to the knowledge of the JBG Parties threatened in writing or anticipated against any JBG Party or any Affiliate thereof relating to any JBG Service Providers. Except as specified in Section 4.20(a)  of the JBG Disclosure Letter, there are no labor unions or other organizations certified or recognized to represent any JBG Service Providers and as of the date

 

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hereof, to the JBG Parties’ knowledge, no union organization campaign is in progress with respect to, any JBG Service Providers at any of the JBG Included Assets. As of the date hereof, there are no unfair labor practice charges pending before the National Labor Relations Board or any other Governmental Entity, any grievances, complaints, claims or judicial or administrative proceedings, in each case, which are pending, or to the knowledge of the JBG Parties threatened in writing or anticipated by or on behalf of any current or former JBG Service Providers at any of the JBG Included Assets.

 

(b)           No JBG Service Provider has been improperly excluded from participation in any JBG Benefit Plan. Each JBG Service Provider has been properly classified under the Fair Labor Standards Act with respect to any classification of any person as an independent contractor rather than as an employee, with respect to any classification of any employee as exempt versus non-exempt, and with respect to any employee leased from another employer, and neither the JBG Parties nor any of their Subsidiaries has any written notice or knowledge of any pending or threatened material claim by any JBG Service Provider that he/she is or was misclassified for any purpose.

 

(c)           The JBG Parties and their Subsidiaries are in compliance in all material respects with all applicable Laws, statutes, rules and regulations respecting employment and employment practices, terms and conditions of employment of current and former JBG Service Providers, wages and hours, discrimination in employment, wrongful discharge, collective bargaining, WARN Act, fair labor standards, occupational health and safety, and any other labor and employment-related matters, in each case, with respect to all JBG Service Providers.

 

(d)           During the three (3) years prior to the date of this Agreement, no JBG Party nor any of their respective Subsidiaries have engaged in or effectuated any “plant closing” or employee “mass layoff” (in each case, as defined in the WARN Act), or any similar state or local Law, statute, rule or regulation affecting any current or former JBG Service Providers.

 

Section 4.21.         Intellectual Property . Except as set forth on Section 4.21 of the JBG Disclosure Letter or, as individually or in the aggregate, has not had and would not reasonably be expected to have a JBG Material Adverse Effect, (a) such JBG Party and its Subsidiaries own or are licensed or otherwise possess valid rights to use all Intellectual Property necessary to conduct the business of such JBG Party and its Subsidiaries as it is currently conducted, (b) the conduct of the business of such JBG Party and its Subsidiaries as it is currently conducted does not infringe, misappropriate or otherwise violate and, to the knowledge of such JBG Party, is not alleged to infringe misappropriate or otherwise violate, the Intellectual Property rights of any third party (c) there are no pending or, to the knowledge of such JBG Party, threatened claims with respect to any of the Intellectual Property rights owned by such JBG Party or any of its Subsidiaries, and (d) to the knowledge of such JBG Party, no third party is currently infringing or misappropriating Intellectual Property rights of such JBG Party or any of its Subsidiaries. This Section 4.21 contains the exclusive representations and warranties of such JBG Party and its Subsidiaries with respect to Intellectual Property matters.

 

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Section 4.22.         OFAC . Neither such JBG Party nor any of its Subsidiaries constitutes a Person with whom a U.S. Person is prohibited from transacting business of the type contemplated by this Agreement, whether such prohibition arises under United States Laws and lists published by OFAC (including those executive orders and lists published by OFAC with respect to Persons that have been designated by executive order or by the sanction regulations of OFAC as Persons with whom U.S. Persons may not transact business or must limit their interactions to types approved by OFAC) or otherwise.

 

Section 4.23.         Patriot Act . Neither such JBG Party or any of its Subsidiaries nor, to the knowledge of such JBG Party, any Person providing funds to a JBG Party or any of its Subsidiaries (a) is under investigation by any Governmental Entity for, or has been charged with, or convicted of, money laundering, drug trafficking, terrorist related activities, any crimes which in the United States would be predicate crimes to money laundering, or any violation of any Anti-Money Laundering Laws; (b) has been assessed civil or criminal penalties under any Anti- Money Laundering Laws; or (c) has had any of its funds seized or forfeited in any action under any Anti-Money Laundering Laws.

 

Section 4.24.         Anti-Corruption . The JBG Parties have complied, are in compliance with, and will continue to comply with applicable anti-bribery/anti-corruption laws, including the US Foreign Corrupt Practices Act. Neither such JBG Party or any of its Subsidiaries nor, to the knowledge of such JBG Party, any of their principals, owners, officers, directors, trustees, or agents, in each case, acting at the direction or on behalf of such JBG Party, its Subsidiaries or any of their respective Affiliates, has engaged, promised to engage, will promise to engage, or will cause to be engaged, in any transaction or activity involving a direct or indirect improper inducement to any Person (including but not limited to a government official) to obtain or keep business or to secure some other advantage, in violation of applicable anti-bribery/anti- corruption laws.

 

Section 4.25.         Insurance . Except for those matters that, individually or in the aggregate, have not had and would not reasonably be expected to have a JBG Material Adverse Effect, there is no claim for coverage by such JBG Party or any of its Subsidiaries that relates to any of the JBG Included Assets pending under any of the material insurance policies (including title insurance policies) and all material fidelity bonds or other insurance service contracts in such JBG Party’s or its Subsidiaries’ possession providing coverage for all JBG Included Properties (the “ JBG Insurance Policies ”) that has been denied or disputed by the insurer. Except for those matters that have not had and would not reasonably be expected to have a JBG Material Adverse Effect, all premiums due and payable under all JBG Insurance Policies that relate to any of the JBG Included Assets have been paid, and such JBG Party and its Subsidiaries have otherwise complied in all material respects with the terms and conditions of all JBG Insurance Policies. To the knowledge of such JBG Party, such JBG Insurance Policies that relate to any of the JBG Included Assets are valid and enforceable in accordance with their terms and are in full force and effect and no written notice of cancellation or termination has been received by such JBG Party or any of its Subsidiaries with respect to any such policy which has not been replaced on substantially similar terms prior to the date of such cancellation.

 

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Section 4.26.         Information in the SEC Filings . None of the information supplied or to be supplied by or on behalf of such JBG Party or its Subsidiaries for inclusion in any of the filings made or to be made by the Vornado Parties or their Affiliates with the SEC or with any stock exchange of or other regulatory authority will, at the time filed with the SEC, any stock exchange or other regulatory authority, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they are made, not misleading.

 

Section 4.27.         Brokers; Expenses . No broker, investment banker, financial advisor or other Person (other than Bank of America Merrill Lynch), is entitled to receive any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with this Agreement or the Transactions based upon arrangements made by or on behalf of such JBG Party or any of its Subsidiaries. Other than the arrangements described in the engagement letters with Bank of America Merrill Lynch, Section 4.27 of the JBG Disclosure Letter sets forth the outside legal, accounting and financial advisors retained as of the date hereof by any JBG Party (on its own behalf or on behalf of any other Person) in connection with the Transactions with which such JBG Party has any contingent payment arrangements requiring payments to be made after December 31, 2015 in connection with the Transactions that are contingent upon the execution of this Agreement or the Transactions or, in the case of advisors customarily compensated on the basis of hourly time charges, are not based on actual time charges and expense reimbursement and describes such arrangements. Since December 31, 2015, none of the JBG Parties or any of their Subsidiaries or Affiliates has made any material payments in excess of the amounts contemplated by this Section 4.27 to any such advisors.

 

Section 4.28.         Capital Commitments . Section 4.28 of the JBG Disclosure Letter sets forth, for each JBG Fund, the aggregate amount of capital commitments that the general partner or managing member of the applicable JBG Fund has available to call from the direct and indirect limited partners or members of each JBG Fund.

 

Section 4.29.         Non-Controlled Subsidiaries . Each Subsidiary of the JBG Parties listed on Section 4.29 of the JBG Disclosure Letter is controlled, directly or indirectly, by a Person other than a JBG Party or its Affiliates. Notwithstanding anything to the contrary contained herein, the representations and warranties of the JBG Parties in this Article IV with respect to such Subsidiaries shall be qualified to the knowledge of the JBG Parties.

 

Section 4.30.         JBG Fund Credit Amounts . With respect to each JBG Fund, all further management fees to be paid by any JBG Fund to any JBG Party, will be paid entirely in cash.

 

Section 4.31.         No Other Representations or Warranties . Except for the representations and warranties expressly set forth in this Article IV or any Ancillary Document, no JBG Party nor any of its Subsidiaries or any other Person makes any other express or implied representation or warranty with respect to such JBG Party, its Subsidiaries, the JBG Included Properties, the JBG Included Entities, the JBG Included Interests, the Managing Member Interests, the JBG Included Assets, or with respect to any other information provided to the Vornado Parties in connection with (i) the Transactions or (ii) the businesses, affairs, operations,

 

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assets, Liabilities, condition (financial or otherwise) or prospects or any other matter relating to such JBG Party, its Subsidiaries or any of their JBG Included Properties, including with respect to any documentation, forecasts, budgets, projections, estimates or other information (including the accuracy or completeness of, or the reasonableness of the assumptions underlying, such documentation, forecasts, budgets, projections, estimates or other information) provided by such JBG Party, its Subsidiaries or any other Person to the Vornado Parties. For clarity, none of the representations and warranties set forth in this Article IV pertains to or purports to disclose any information with respect to any JBG Excluded Asset (other than with respect to Liabilities that apply to or could reasonably be expected to adversely impact Newco, Newco OP or any Vornado Included Entity after the Closing), even if such JBG Excluded Asset is owned by a JBG Included Entity prior to the Closing.

 

ARTICLE V

 

PRE-CLOSING COVENANTS

 

Each of the Parties covenants and agrees to the extent applicable to it as follows (it being understood that the covenants and agreements of any JBG Party are as to itself and not as to the other JBG Parties and are several and not joint; provided , that with respect to any covenant or agreement of any JBG Fund, such covenant or agreement is made jointly and severally by such JBG Fund and JBG Operating Partners).

 

Section 5.1.           Access; Notice of Certain Events .

 

(a)           Between the date of this Agreement and the Closing or the date, if any, on which this Agreement is terminated pursuant to Section 8.1 , to the extent permitted by applicable Law and contracts, the members of each Group shall, and shall cause each of their Subsidiaries to, afford to the other Group and its Representatives reasonable access during normal business hours and upon reasonable advance notice to all of their respective properties, offices, books, contracts, commitments and records to the extent related to such Group’s Included Assets and, during such period, the members of each Group shall, and shall cause each of their Subsidiaries to, furnish reasonably promptly to the other Group all information (financial or otherwise) concerning their business and properties and to the extent related to their Included Assets that the other Group may reasonably request. Notwithstanding the foregoing, the Parties shall not be required by this Section 5.1 to provide members of the other Group or their respective Representatives with access to or to disclose (i) material prepared in connection with or relating to the Transactions or any other strategic alternatives contemplated by the Parties, (ii) information that is subject to confidentiality obligations to a third party ( provided , however , that each Group shall use its Commercially Reasonable Efforts to obtain the required consent of such third party to such access or disclosure), (iii) information the disclosure of which would violate any Law, (iv) information that is subject to any attorney-client, attorney work product or other legal privilege, (v) information that the Group reasonably believes is competitively sensitive with respect to the other Group, (vi) information to the extent it relates solely to any Vornado Excluded Asset or JBG Excluded Asset (as applicable) or (vii) information pertaining to the activities or assets of Vornado and its Subsidiaries that are Vornado Assets (as defined in the

 

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Separation and Distribution Agreement). The members of each Group shall use their Commercially Reasonable Efforts to minimize any disruption to the business of the other Group or any of their Subsidiaries that may result from any requests for access, data or information hereunder. Any access to the properties of a Group or any of its Subsidiaries shall be subject to the other Group’s reasonable security measures and insurance requirements and shall not include the right to perform invasive testing without the members of such other Group’s prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned. Prior to the Closing, the members of each Group shall not, and shall cause their respective Representatives and Affiliates not to, contact or otherwise communicate with any tenants, lenders, Joint Venture Partners or other parties with which such other Group or any of its Subsidiaries has a business relationship regarding the business of such other Group and its Subsidiaries or this Agreement and the Transactions (other than in connection with efforts to obtain any Required Consent, in accordance with Section 5.2), in each case, without the prior consent of the other Group, not to be unreasonably withheld, delayed or conditioned.

 

(b)           Each Party agrees to give prompt written notice to the members of the other Group (i) of any notice or other communication received by such Party (A) from any Governmental Entity in connection with this Agreement or the Transactions, (B) from any Person alleging that the consent of such Person (or another Person) is or may be required in connection with the Transactions, or (C) of any written notice received from any Person in connection with any material violation or default under or notice to terminate, not renew or challenge the validity or enforceability of any Vornado Material Contract or JBG Material Contract, as applicable, (ii) of any legal proceeding commenced or, any written threat to commence against, such Party or any of its Subsidiaries or Affiliates or, to its knowledge, otherwise relating to, involving or affecting such Party or any of its Subsidiaries or Affiliates, in each case in connection with, arising from or otherwise relating to the Transactions, and (x) upon becoming aware of the occurrence or impending occurrence of any event, change, development or circumstance relating to it or any Vornado Subsidiary or any Subsidiary of such JBG Party, respectively, which makes or is reasonably likely to make any of the conditions set forth in Article VII to not be satisfied. The failure to deliver any such notice, in and of itself, shall not result in the failure of, or otherwise affect, any of the conditions set forth in Article VII .

 

Section 5.2.           Consents and Approvals .

 

(a)           Upon the terms and subject to the conditions set forth in this Agreement, each of the Parties shall use Commercially Reasonable Efforts (unless, with respect to any action, another standard is set forth herein) to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other Parties in doing, all things necessary, proper or advisable under applicable Law or pursuant to any contract or agreement to consummate and make effective, as promptly as practicable, the Transactions, including using Commercially Reasonable Efforts (i) to cause the conditions to Closing set forth in Article VII to be satisfied, (ii) to obtain all necessary actions or nonactions, waiting period expirations or terminations, waivers, consents, authorizations and approvals from Governmental Entities or other Persons necessary in connection with the consummation of the Transactions, including, with respect to the Vornado Parties, the consents listed on Section 3.5(a)  of the Vornado

 

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Disclosure Letter and with respect to the JBG Parties, the consents listed on Section 4.3 of the JBG Disclosure Letter, and the making of all necessary registrations and filings (including filings with Governmental Entities, if any) to obtain an approval, waiting period expirations or terminations or waiver from, or to avoid an action or proceeding by, any Governmental Entity or other Persons necessary in connection with the consummation of the Transactions, (iii) to defend any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the Transactions, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Entity vacated or reversed, and avoid each and every impediment under any antitrust, merger control, competition or trade regulation Law that may be asserted by any Governmental Entity with respect to the Transactions so as to enable the Closing to occur as soon as reasonably possible, and (iv) to execute and deliver any additional instruments necessary to consummate the Transactions and to fully carry out the purposes of this Agreement. Each Group shall keep the other Group reasonably apprised of the status of the matters related to the completion of the Transactions, including with respect to obtaining the Required Consents, and shall afford the other Group a reasonable opportunity to participate in discussions with lenders, Joint Venture Partners, ground lessors and other third parties with respect to the Required Consents.

 

(b)           In connection with and without limiting the foregoing, each Party shall give (or shall cause to be given) any notices to any Person, and the Parties shall use, and cause each of their respective Affiliates to use, Commercially Reasonable Efforts to obtain any consents, terminations, waivers, authorizations and approvals not covered by Section 5.2(a)  that are proper or advisable to consummate the Transactions.

 

(c)           Any material notices pursuant to Sections 5.2(a)  and (b)  shall be subject to the review and consent of the other Group, such consent not to be unreasonably withheld, delayed or conditioned. Any material notice with respect to any waiver, consent, authorization or approval shall be subject to the review and consent of the other Group, such consent not to be unreasonably withheld, delayed or conditioned.

 

(d)           The members of each Group will furnish to the other such necessary information and reasonable assistance as the other Group may request in connection with the preparation of any required governmental filings or submissions and will cooperate in responding to any inquiry from a Governmental Entity, including promptly informing the other Group of such inquiry, consulting in advance before making any presentations or submissions to a Governmental Entity, and supplying each other with copies of all material correspondence, filings, productions or communications between either Group and any Governmental Entity with respect to this Agreement. To the extent reasonably practicable, the other Group or its Representatives shall have the right to review in advance and each of the Parties will consult the other Group on, all the information relating to the other Group and each of its Affiliates that appears in any filing made with, or written materials submitted to, any Governmental Entity in connection with the Transactions, except that confidential competitively sensitive business information may be redacted from such exchanges. The Parties may, as they deem advisable and necessary, designate any commercially sensitive materials provided to the other Group under this Section 5.2 as “outside counsel only”. Such materials and the information contained therein

 

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shall be given only to outside counsel of the recipient and will not be disclosed by such outside counsel to employees, officers, or directors of the recipient without the advance written consent of the Party providing such materials. To the extent reasonably practicable, neither the Vornado Parties nor the JBG Parties shall, nor shall they permit their respective Representatives to, participate independently in any meeting or engage in any substantive conversation with any Governmental Entity in respect of any filing, investigation or other inquiry relating to the Transactions without giving the other Group prior notice of such meeting or conversation and, to the extent permitted by applicable Law and the Governmental Entity, without giving the other Group the opportunity to attend or participate (whether by telephone or in person) in any such meeting with such Governmental Entity. Subject to applicable law, each Party will consult and cooperate with the other Group in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, and proposals made or submitted to any Governmental Entity regarding the Transactions.

 

(e)           The Vornado Parties and the JBG Parties agree: (i) to make, or cause their ultimate parent entities as that term is defined in the HSR Act to make, or cause to be made, appropriate filings of the Notification and Report Form under the HSR Act if applicable, with respect to the Transactions as promptly as practicable; and (ii) to take all other actions reasonably necessary to cause the expiration or termination of the applicable waiting periods under the HSR Act as soon as practicable. The responsibility for the payment of any filings fees in connection with any filings under the HSR Act shall be apportioned between the JBG Parties and the Vornado Parties in proportion to the relative aggregate Asset Values of their Included Assets on the date hereof, in each case, including any Kickout Interests.

 

(f)                                    Additional Third Party Consent Procedures; Kickout Interests .

 

(i)            If a Required Debt Consent has not been obtained as to a JBG Included Asset within one hundred twenty (120) days of the date hereof, then, except with the consent of the Vornado Parties (not to be unreasonably withheld, conditioned or delayed), the JBG Parties shall use Commercially Reasonable Efforts either (x) to prepay the applicable Indebtedness with their own funds (which may, at the JBG Parties’ election and on notice to the Vornado Parties, be prepaid concurrently with Closing) or (y) to refinance the applicable Indebtedness (A) for a principal amount not to exceed the sum of the outstanding principal amount under the Indebtedness being refinanced plus all costs specifically necessary to accomplish such refinancing, (B) for a term that is no shorter than five (5) years (or three (3) years for Indebtedness related to an Included Asset under development), inclusive of extension terms and (C) on market terms and on terms which do not restrict the consummation of the Transactions (either of the foregoing provisions (x) and (y), a “ Debt Refinancin g”). The JBG Parties shall provide the Vornado Parties copies of any term sheets, commitments, agreements or instruments to be executed in connection with any Debt Refinancing prior to the execution thereof, shall keep the Vornado Parties reasonably apprised of the progress of and reasonably consult with the Vornado Parties regarding the terms of any Debt Refinancing prior to the consummation thereof, and shall promptly provide to the Vornado Parties written notice of the consummation of any Debt Refinancing. If a Required Debt Consent has not been

 

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obtained or a Debt Refinancing consummated as of the date that is twenty (20) days before the anticipated Closing Date, then (i) the JBG Parties may elect to draw on the Credit Facility on the Closing Date (in the event that it is reasonably expected that the Credit Facility will be in effect at or prior to the Closing) in an amount sufficient to repay the outstanding principal amount of such Indebtedness and to use such the proceeds of such draw to repay the Indebtedness under which such Required Debt Consent is required (a “ Credit Facility Refinancing Draw ”); provided , that the JBG Parties may not elect to effect Credit Facility Refinancing Draws in excess of one hundred million dollars ($100,000,000) in the aggregate for this purpose without the consent of the Vornado Parties, in the Vornado Parties’ sole discretion; and (ii) if the JBG Parties have not elected to effect a Credit Facility Refinancing Draw as to a given Included Property, but if they did so the applicable percentage thresholds specified in Section 2.1(a) , Section 2.1(b)  or Section 7.1(g)  would be met, then the Vornado Parties may elect to effect a Credit Facility Refinancing Draw in an amount sufficient to meet the applicable threshold; provided , that (x) the total amount of Credit Facility Refinancing Draws (including those drawn by the JBG Parties) shall not exceed one hundred million dollars ($100,000,000) in the aggregate for this purpose; and (y) Newco shall bear any prepayment fees or similar costs with respect to each separate Indebtedness in excess of the greater of (A) one hundred thousand dollars ($100,000) and (B) one percent (1%) of the principal amount of each separate Indebtedness to be repaid with the proceeds of a Credit Facility Refinancing Draw. Any Included Interest that is subject to a Required Debt Consent shall be deemed a Kickout Interest until such Required Debt Consent is obtained or until a Debt Refinancing is consummated or a Credit Facility Refinancing Draw is available with respect to the applicable Indebtedness as described above; provided , that if as of the date that is twenty (20) days before the anticipated Closing Date, the JBG Parties have not been able to obtain such Required Debt Consent or consummate a Debt Refinancing with respect to the applicable Indebtedness or it is not then reasonably expected that a Credit Facility Refinancing Draw can be made at Closing with respect to the applicable Indebtedness (or if it is reasonably expected that a Credit Facility Refinancing Draw can be made but then no such Credit Facility Refinancing Draw actually occurs at Closing), then (a) if the Closing occurs on the then-anticipated Closing Date, the Included Interest the contribution of which requires such Required Debt Consent will be permanently deemed a “Kickout Interest” for purposes of this Agreement and the contribution of such Kickout Interest shall not occur or (b) if the Closing does not occur on the then-anticipated Closing Date, then the provisions of this Section 5.1(f)(i)  will continue to apply in accordance with their terms (including as to such Required Debt Consent) in connection with the actual Closing Date.

 

(ii)           If a Required Debt Consent has not been obtained as to a Vornado Included Asset within one hundred twenty (120) days of the date hereof, then, except with the consent of the JBG Parties (not to be unreasonably withheld, conditioned or delayed), the Vornado Parties shall use Commercially Reasonable Efforts to consummate a Debt Refinancing with respect to the applicable Indebtedness. The Vornado Parties shall provide the JBG Parties copies of any term sheets, commitments, agreements or instruments to be executed in connection with any Debt Refinancing prior to the

 

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execution thereof, shall keep the JBG Parties reasonably apprised of the progress of and reasonably consult with the JBG Parties regarding the terms of any Debt Refinancing prior to the consummation thereof, and shall promptly provide to the JBG Parties written notice of the consummation of any Debt Refinancing. If a Required Debt Consent has not been obtained or a Debt Refinancing consummated as of the date that is twenty (20) days before the anticipated Closing Date, then (i) the Vornado Parties may effect a Credit Facility Refinancing Draw (in the event that it is reasonably expected that the Credit Facility will be in effect at or prior to the Closing); provided , that the Vornado Parties may not elect to effect a Credit Facility Refinancing Draws in excess of one hundred fifty million dollars ($150,000,000) in the aggregate for this purpose without the consent of the JBG Parties, in the JBG Parties’ sole discretion; provided further , that the Vornado Parties may elect to draw on the Credit Facility in an amount not to exceed the amount set forth on Section 5.2(f)(ii)  of the Vornado Disclosure Letter for the purpose identified on Section 5.2(f)(ii)  of the Vornado Disclosure Letter, which draw shall not be subject to the JBG Parties’ consent and which shall not count for purposes of the foregoing $150,000,000 cap or be otherwise restricted by the provisions of this paragraph; and (ii) if the Vornado Parties have not elected to effect a Credit Facility Refinancing Draw as to a given Included Property, but if they did so the percentage thresholds specified in Section 2.1(c)  or Section 7.1(g)  would be met, then the JBG Parties may elect to effect a Credit Facility Refinancing Draw in an amount sufficient to meet the threshold; provided , that (x) the total amount of Credit Facility Refinancing Draws (including those drawn by the Vornado Parties) shall not exceed one hundred fifty million dollars ($150,000,000) in the aggregate for this purpose; and (y) Newco shall bear any prepayment fees or similar costs with respect to each separate Indebtedness in excess of the greater of (A) one hundred thousand dollars ($100,000) and (B) one percent (1%) of the principal amount of each separate Indebtedness to be repaid with the proceeds of a Credit Facility Refinancing Draw. Any Included Interest that is subject to a Required Debt Consent shall be deemed a Kickout Interest until such Required Debt Consent is obtained or until a Debt Refinancing is consummated or a Credit Facility Refinancing Draw is available with respect to the applicable Indebtedness as described above; provided , that if as of the date that is twenty (20) days before the anticipated Closing Date, the Vornado Parties have not been able to obtain such Required Debt Consent or consummate a Debt Refinancing with respect to the applicable Indebtedness or it is not then reasonably expected that a Credit Facility Refinancing Draw can be made at Closing with respect to the applicable Indebtedness (or if it is reasonably expected that a Credit Facility Refinancing Draw can be made but then no such Credit Facility Refinancing Draw actually occurs at Closing), then (a) if the Closing occurs on the then-anticipated Closing Date, the Included Interest the contribution of which requires such Required Debt Consent will be permanently deemed a “Kickout Interest” for purposes of this Agreement and the contribution of such Kickout Interest shall not occur or (b) if the Closing does not occur on the then- anticipated Closing Date, then the provisions of this Section 5.1(f)(ii)  will continue to apply in accordance with their terms (including as to such Required Debt Consent) in connection with the actual Closing Date.

 

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(iii)          Until a Party is able to obtain any Required Ground Lease Consent, then the applicable Included Property shall be deemed a Kickout Interest. If such Required Ground Lease Consent is not obtained on or before the date that is twenty (20) days before the anticipated Closing Date, the applicable Included Interest the contribution of which requires such Required Ground Lease Consent will be permanently deemed a “Kickout Interest” for purposes of this Agreement and the contribution of such Kickout Interest shall not occur. If a Required Ground Lease Consent with respect to any JBG Included Interest holding a direct or indirect interest in the Included Properties set forth on Section 5.2(f)(iii)  of the JBG Disclosure Letter is not obtained on or before the date that is twenty (20) days before the anticipated Closing Date, then, notwithstanding anything to the contrary in this Agreement but subject to Section 5.2(f)(iii)  of the JBG Disclosure Letter, if the Closing occurs on the then-anticipated Closing Date such JBG Included Interest shall not be deemed a Kickout Interest but the Managing Member Interest with respect to any such JBG Included Interest will be deemed an “Excluded Managing Member Interest” for purposes of this Agreement and shall not be contributed to Newco OP or any Subsidiary thereof.

 

(iv)          Until a Party is able to obtain any Required JV Consent, the applicable Included Property shall be deemed a Kickout Interest. If such Required JV Consent is not obtained on or before the date that is twenty (20) days before the anticipated Closing Date, and if the Closing occurs on the then-anticipated Closing Date, the applicable Included Interest the contribution of which requires such Required JV Consent will be permanently deemed a “Kickout Interest” for purposes of this Agreement and the contribution of such Kickout Interest shall not occur. If a Required JV Consent with respect to any JBG Included Interest holding a direct or indirect interest in the Included Properties set forth on Section 5.2(f)(iv)  of the JBG Disclosure Letter is not obtained on or before the date that is twenty (20) days before the anticipated Closing Date, then, notwithstanding anything to the contrary in this Agreement but subject to Section 5.2(f)(iv)  of the JBG Disclosure Letter, such JBG Included Interest shall not be deemed a Kickout Interest but the Managing Member Interest with respect to any such JBG Included Interest will be deemed an “Excluded Managing Member Interest” for purposes of this Agreement and shall not be contributed to Newco OP or any Subsidiary thereof.

 

(v)           The JBG Parties shall use Commercially Reasonable Efforts to cause the actions specified on Section 5.2(f)(v)  of the JBG Disclosure Letter to occur with respect to the JBG Included Interests identified on Section 5.2(f)(v)  of the JBG Disclosure Letter. Until such an action is completed, the applicable JBG Included Interests shall be deemed to be a Kickout Interest. If any such action is not completed on or before the date that is twenty (20) days before the anticipated Closing Date for any reason, then, and if the Closing occurs on the then-anticipated Closing Date, then the applicable JBG Included Interest will be permanently deemed a “Kickout Interest” for purposes of this Agreement and the contribution of such Kickout Interest shall not occur.

 

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(vi)          Until the lease identified on Section 5.2(f)(vi)  of the Vornado Disclosure Letter is modified to eliminate any percentage rent payments to the relevant Vornado Included Entity, the Vornado Included Interest identified on Section 5.2(f)(vi)  of the Vornado Disclosure Letter shall be a Kickout Interest. If such lease is not so modified on or before the date that is twenty (20) days before the anticipated Closing Date, then the Vornado Included Interest identified on Section 5.2(f)(vi)  of the Vornado Disclosure Letter will be permanently deemed a “Kickout Interest” for purposes of this Agreement and the contribution of such Kickout Interest shall not occur. The Vornado Parties shall use Commercially Reasonable Efforts to obtain such lease modification.

 

(g)                                   Release of Vornado and JBG Guarantees .

 

(i)            On or prior to the Closing Date, or as soon as practicable thereafter, Newco shall, with the reasonable cooperation of the other Parties, use Commercially Reasonable Efforts to (A) have any Vornado Party or Affiliate of any Vornado Party related to a Vornado Included Asset removed as guarantor of, indemnitor of or obligor for any Indebtedness, including the removal of any security interest on or in any assets of the Vornado Parties and their Subsidiaries that are not Vornado Included Assets that may serve as collateral or security for any such Indebtedness; and (B) have any member(s) of any JBG Party or Affiliate of any JBG Party related to a JBG Included Asset removed as guarantor of, indemnitor of or obligor for any Indebtedness, including the removal of any security interest on or in any assets of the JBG Parties and their Subsidiaries that are not JBG Included Assets that may serve as collateral or security for any such Indebtedness.

 

(ii)           To the extent required to obtain a release from any such guarantee or indemnity described in Section 5.2(g)(i) , Newco or a suitable Newco Subsidiary shall execute a guarantee or indemnity agreement in the form of the existing guarantee or indemnity or such other form as is agreed to by the relevant parties to such guarantee or indemnity agreement, which agreement shall include the removal of any security interest on or in any assets of the Vornado Parties and their Subsidiaries or the JBG Parties and their Subsidiaries that are not Included Assets that may serve as collateral or security for any such Indebtedness, except to the extent that such existing guarantee or indemnity contains representations, covenants or other terms or provisions either (A) with which Newco or such Subsidiary would be reasonably unable to comply or (B) which Newco or such Subsidiary would not reasonably be able to avoid breaching.

 

(iii)          The reasonable consent of JBG Properties (with respect to Vornado Included Assets) or Vornado (with respect to JBG Included Assets) shall be required prior to Newco or a Newco Subsidiary undertaking any obligation in furtherance of clause (i) or (ii) of this Section 5.2(g)  that subjects Newco or a Newco Subsidiary to obligations that are materially different from those that the Vornado Parties or the JBG Parties, or their respective Affiliates, are currently subject to under the existing guaranty or indemnity arrangement, including entering into guarantee or indemnity agreements in a materially different form than any existing agreement, if such obligations or differences

 

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would adversely affect, in any material respect, the rights or obligations of Newco or such Newco Subsidiary under the existing guarantee or indemnity arrangement.

 

(iv)          From and after the Closing Date, until such time as Newco or a suitable Newco Subsidiary has obtained any removal or release as set forth in this Section 5.2(g) , (A) Newco, or a suitable Newco Subsidiary, will indemnify, defend and hold harmless the applicable JBG Party, Vornado Party or Affiliate thereof, as the case may be, and its respective agents, assigns and successors against or from any Liabilities arising under or relating to such guarantees or similar agreements described in Section 5.2(g)(i)  with respect to Liabilities arising thereunder from and after the Closing Date, and shall, as agent or subcontractor for such guarantor, indemnitor or obligor, pay, perform and discharge fully all the obligations or other Liabilities of such guarantor, indemnitor or obligor thereunder. Until such time as Newco or a suitable Newco Subsidiary has obtained any removal or release as set forth in this Section 5.2(g) , Newco agrees not to renew or extend the term of, increase any obligations under, or transfer to a third party, any loan, guarantee, lease, Contract or other obligation for which a Vornado Party, a JBG Party, Affiliates thereof, or their respective agents, assigns and successors, is or may be liable unless all obligations of such Vornado Party, JBG Party, Affiliate, agents, assigns and successors thereunder are thereupon terminated by documentation satisfactory in form and substance to the Vornado Parties or the JBG Parties (as the case may be).

 

(v)           Until such time as Newco or a Newco Subsidiary has obtained any removal or release as set forth in this Section 5.2(g) , Vornado and Newco (in the case of Vornado Included Assets) and JBG Properties and Newco (in the case of JBG Included Assets) shall coordinate with respect to contact with the beneficiary of such guarantee, afford each other a reasonable opportunity to participate in discussions with such beneficiaries prior to engaging therein, and keep the other Party reasonably informed of any discussions with such beneficiaries in which such other Party does not participate.

 

(vi)          For the avoidance of doubt, this Section 5.2(g)  shall not be construed in a manner as creating any Vornado Included Entity Tax Protection Agreement or a JBG Tax Protection Agreement, or otherwise causing the representations in Section 3.10(g)  and Section 4.13(j)  to be untrue.

 

(vii)                            The provisions of this Section 5.2(g)  shall survive Closing.

 

Section 5.3.           Publicity . So long as this Agreement is in effect, no Party, nor any Affiliate or Representative of a Party, shall issue or cause the publication of any press release or other public announcement with respect to the Transactions or this Agreement without the prior written consent of the other Group, unless such Party determines, after consultation with outside counsel, that it is required by applicable Law or by any listing agreement with or the listing rules of a national securities exchange or trading market to issue or cause the publication of any press release or other public announcement with respect to the Transactions or this Agreement, in which event such Party shall endeavor, on a basis reasonable under the circumstances, to provide

 

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a meaningful opportunity to the other Group to review and comment upon such press release or other public announcement and shall give due consideration to all reasonable additions, deletions or changes suggested thereto; provided , however , that this Section 5.3 does not apply to the information that the Parties are required to include in any notification required under the HSR Act or in connection with their responses to any inquiries from a Governmental Entity regarding the Transactions.

 

Section 5.4.           Conduct of Business by the Vornado Parties .

 

(a)           The Vornado Parties agree that between the date of this Agreement and the Closing or the date, if any, on which this Agreement is terminated pursuant to Section 8.1 , except (i) as set forth in Section 5.4 of the Vornado Disclosure Letter, (ii) as required pursuant to this Agreement, (iii) as may be required by Law or (iv) as consented to in writing by the JBG Parties (which consent shall not be unreasonably withheld, delayed or conditioned), they shall cause Newco, Newco OP and each of the Vornado Included Entities to (A) conduct their business in all material respects in the ordinary course of business consistent with past practices, (B) operate, manage and develop the Vornado Included Properties in the ordinary course and consistent with past practices (including, with respect to maintenance of insurance and the application of security deposits and the payment of obligations) in all material respects, provided that the foregoing shall not impose any obligation on any Vornado Included Entity to undertake any new capital improvement projects after the date hereof (other than to repair or replace any capital improvements requiring immediate repair or replacement or in connection with contractual lease obligations and Material Contracts) except as provided in Section 5.4 of the Vornado Disclosure Letter, (C) perform and otherwise comply, or cause their agents to perform and otherwise comply, in all material respects with, all of the obligations of the lessee under the ground leases affecting any Vornado Included Property and all obligations of the Vornado Included Entities under the Vornado Material Contracts, (D) use their respective Commercially Reasonable Efforts to maintain in all material respects the Vornado Included Properties in their current condition (ordinary wear and tear excepted), preserve their business organizations intact in all material respects, and maintain existing relations and goodwill with lenders, tenants, employees and business associates in all material respects, (E) maintain the status of Newco OP as a disregarded entity or a partnership for U.S. federal income tax purposes, (F) maintain the status of the Vornado REITs as REITs and the Vornado TRSs as Taxable REIT Subsidiaries and (G) from the time Newco makes its REIT election pursuant to Section 856(c)(1) of the Code, maintain the status of Newco as a REIT.

 

(b)           Without limiting the generality of the foregoing, and except (w) as set forth in Section 5.4 of the Vornado Disclosure Letter, (x) as required pursuant to this Agreement, (y) as required by Law or (z) as consented to in writing by the JBG Parties (which consent shall not be unreasonably withheld, delayed or conditioned), between the date of this Agreement and the Closing or the date, if any, on which this Agreement is terminated pursuant to Section 8.1 , the Vornado Parties shall not, and shall cause Newco, Newco OP and each Vornado Included Entity not to, directly or indirectly:

 

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(i)                                      amend the Governing Documents of Newco, Newco OP or any Vornado Included Entity, except as contemplated by the Declaration of Trust Amendment and Restatement, the Bylaws Amendment and Restatement or the Partnership Agreement Amendment and Restatement;

 

(ii)                                   adjust, split, combine, subdivide or reclassify any shares of the capital stock of Newco, Newco OP or any Vornado Included Entity;

 

(iii)                                redeem, purchase or otherwise acquire, or offer to redeem, purchase or otherwise acquire, directly or indirectly, any of the capital stock or other Equity Interests of Newco, Newco OP or any Vornado Included Entity;

 

(iv)                               grant, issue, deliver or sell any additional Equity Interests of Newco, Newco OP or any Vornado Included Entity;

 

(v)                                  cause or permit Newco, Newco OP or any Vornado Included Entity to enter into a line of business other than the line of business currently engaged in by it;

 

(vi)                               enter into a merger agreement, acquisition agreement or disposition agreement with respect to Newco, Newco OP or any Vornado Included Entity or any Vornado Included Property or authorize the liquidation, dissolution, consolidation, bankruptcy or other reorganization of Newco, Newco OP or any Vornado Included Entity;

 

(vii)                            with respect to Newco, Newco OP or any Vornado Included Entity, change any material method of Tax accounting, make or change any material Tax election, file any amended material Tax Return, settle or compromise any material Tax liability, agree to an extension or waiver of the statute of limitations with respect to the assessment or determination of a material amount of Taxes other than in the ordinary course of business, enter into any closing agreement with respect to a material amount of Tax or surrender any right to claim a material Tax refund;

 

(viii)                         take any action that (or fail to take any action the omission of which) would reasonably be expected to prevent the Pre-Combination Transactions from qualifying for the Agreed Treatment (provided that the Combination Transactions and Post-Closing Transactions shall be treated as in compliance with this clause (viii));

 

(ix)                               cause or permit Newco, Newco OP or any Vornado Included Entity to enter into any acquisition agreement or acquire any real property, or otherwise enter into any acquisition agreement for, or acquire, any real property in the Washington, D.C. metropolitan area;

 

(x)                                  except for the properties listed on Section 1.6(b)  of the Vornado Disclosure Letter, sell, transfer or assign any Vornado Included Property or any direct interest therein (other than pursuant to a buy-sell or other mandatory contractual

 

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obligation triggered by a third party) or encumber (other than in connection with Indebtedness permitted to be incurred hereunder) any Vornado Included Property with any mortgages, deeds of trust or other Liens which secure Indebtedness for borrowed money;

 

(xi)                               sell, transfer, assign or remove any material personal property from any Vornado Included Property, except in the ordinary course consistent with past practices, unless replaced by unencumbered personal property of equal or greater utility and value;

 

(xii)                            cause or permit Newco, Newco OP or any Vornado Included Entity to incur, create, assume, refinance, replace or prepay any Indebtedness for borrowed money or issue or amend the terms in any material respect of any Indebtedness for borrowed money or assume, guarantee or endorse, or otherwise become responsible (whether directly, contingently or otherwise) for any Indebtedness of any other Person other than in the ordinary course of business, except (A) the refinancing of existing Indebtedness within six (6) months of maturity, in a principal amount not to exceed the principal amount of such Indebtedness being refinanced, for a term that is no shorter than five (5) years (or three (3) years for Indebtedness related to a Vornado Included Asset under development), inclusive of extension terms, and on other market terms and on terms which do not restrict the Transactions, (B) as set forth on Section 5.4(b)(xii)  of the Vornado Disclosure Letter, (C) as contemplated by Section 5.2(f) , (D) the drawdown of unused amounts under existing construction loans and delayed draw mortgage loans that are available for draw in accordance with the terms of such facilities, (E) the repayment or prepayment of Indebtedness with cash and not with the proceeds of a refinancing and (F) the exercise of any as-of-right extension options with respect to existing Indebtedness;

 

(xiii)                         except as required by applicable Law or written Contract in effect as of the date of this Agreement that has been disclosed or made available to the JBG Parties, take or permit to be taken any action or commitment to enter into or amend any employment, severance, retention or change in control agreement or arrangement with any individual Vornado Service Providers that may result in any Liability to Newco or its Affiliates (other than any agreement or arrangement which is terminable upon ninety (90) days’ notice without incurring any obligation other than payment for the 90-day notice period);

 

(xiv)                        cause or permit any Vornado Included Entity to materially amend (except as required by applicable Law), adopt or establish any Plan for the benefit of the Vornado Service Providers, or the spouses, beneficiaries or other dependents thereof ;

 

(xv)                           cause or permit Newco, Newco OP or any Vornado Included Entity to enter into, or amend, extend, modify, terminate or consent to any such amendment, extension, modification or termination of, any agreement with any Related Party;

 

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(xvi)                        enter into, amend, extend, modify, terminate or consent to any such entry into, amendment, extension, modification or termination of (i) any lease affecting any Vornado Included Property demising square footage in excess of 25,000 square feet, other than any lease for which a written proposal was submitted to the tenant before the date hereof, (ii) any lease for premises in a building that is not in operation or substantially under construction as of the date hereof;

 

(xvii)                     enter into or extend the term of any retail lease affecting any Vornado Included Property described on Section 5.4(b)(xvii)  of the Vornado Disclosure Letter, other than any lease which is terminable by the landlord without penalty (other than a de minimis amount) either on no more than one hundred eighty (180) days’ notice or in connection with the demolition or significant renovation of the premises; provided , that with respect to any proposal to enter into or extend a lease described in this paragraph, such proposal shall be deemed approved by the JBG Parties if the JBG Parties fail to respond to a written request for approval within five (5) days of the delivery thereof; provided , further , that the Vornado Parties shall be liable to Newco for any damages to Newco or its Subsidiaries caused by a Willful Breach of this paragraph caused by a senior executive officer of the Vornado Parties, even if the Closing nevertheless occurs (This clause shall survive Closing.);

 

(xviii)                  amend, extend, modify, terminate or consent to any such amendment, extension, modification or termination of any ground lease affecting any Vornado Included Property in a manner that would materially and adversely affect such Vornado Included Property;

 

(xix)                        enter into, or amend, extend, modify, terminate or consent to, any such amendment, extension, modification or termination of, any Joint Venture Agreement affecting any Vornado Included Property in a manner that would materially and adversely affect such Vornado Included Property;

 

(xx)                           enter into a new agreement with a general contractor pertaining to, obtain or guarantee any construction financing with respect to, or actually commence, the development or construction of any Vornado Included Property;

 

(xxi)                        commence any new base building capital project with respect to a Vornado Included Property, the aggregate cost to the Vornado Parties of which is projected to exceed $2,000,000, other than a project commenced prior to the date hereof, a project that is under the control of a Joint Venture Partner, or a project required by law or a Vornado Lease or to address an emergency;

 

(xxii)                     amend or modify, or consent to the amendment or modification of, the zoning or entitlements use of any Vornado Included Property in a manner that would materially and adversely affect such Vornado Included Property;

 

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(xxiii)                  knowingly take any action, or knowingly fail to take any action, which action or failure would reasonably be expected to cause any of the Vornado REITs to fail to qualify as a REIT or that would reasonably be expected to cause Newco to fail to qualify as a REIT after the Closing;

 

(xxiv)                 waive, release, assign, commence, settle or compromise any pending or threatened legal proceeding by or against Newco, Newco OP or any Vornado Included Entity that (A) requires payment (not covered by insurance) by Newco, Newco OP or any Vornado Included Entity of an amount in excess of $1,000,000 in the aggregate or that would require the issuance of any Equity Interests, (B) entails the incurrence of any obligation or liability of in excess of such amount, including costs or revenue reductions or obligations that would impose any material restrictions on its business or operations, or (C) imposes any non-monetary relief or an admission of liability or wrongdoing or that would result in any supplement, modification to or amendment of the terms of (1) any agreement or document relating to the Transactions to which the JBG Parties or any of their Affiliates is a party or (2) any Vornado Material Contract;

 

(xxv)                    take any of the actions described on Section 5.4(b)(xxv)  of the Vornado Disclosure Letter; or

 

(xxvi)                 authorize, or enter into, any Contract, commitment or arrangement to do any of the foregoing.

 

(c)                                   Notwithstanding anything to the contrary set forth in this Agreement, nothing in this Agreement shall prohibit Vornado from taking, or causing Newco, Newco OP or any Vornado Included Entity to take, any action, at any time or from time to time, that in the reasonable judgment of Vornado is reasonably necessary for Vornado to maintain its and Newco’s qualification as REITs under the Code for any period or to avoid incurring entity level income or excise Taxes under the Code, including making dividend or other distribution payments to stockholders of Vornado in accordance with this Agreement or otherwise. If Vornado determines that it is necessary to take any such action, it shall notify the JBG Parties in writing as soon as reasonably practicable and the JBG Parties shall be given a reasonable opportunity to review and provide comments to such action, and Vornado shall give consideration, not to be unreasonably withheld, to such comments of the JBG Parties prior to the taking of such action.

 

(d)                                  Nothing in this Section 5.4 shall restrict the Vornado Parties’ rights with respect to any Vornado Excluded Assets or give the JBG Parties any approval, consent or other rights with respect thereto.

 

(e)                                   Nothing contained in this Agreement shall give the JBG Parties, directly or indirectly, the right to control or direct the Vornado Parties’ operations prior to the Closing. Prior to the Closing, the Vornado Parties shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over their operations. Notwithstanding

 

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anything to the contrary set forth in this Agreement, no consent of the JBG Parties shall be required with respect to any matter set forth in Section 5.4 or elsewhere in this Agreement to the extent that the requirement of such consent could violate any applicable Law.

 

Section 5.5.                           Conduct of Business by the JBG Parties .

 

(a)                                  Each JBG Party agrees that between the date of this Agreement and the Closing or the date, if any, on which this Agreement is terminated pursuant to Section 8.1 , except (i) as set forth in Section 5.5 of the JBG Disclosure Letter, (ii) as required pursuant to this Agreement, (iii) as may be required by Law or (iv) as consented to in writing by the Vornado Parties (which consent shall not be unreasonably withheld, delayed or conditioned), such JBG Party shall (A) conduct its business in all material respects in the ordinary course of business consistent with past practice (it being understood that this clause (A) shall not restrict any JBG Party from the issuance of any Equity Interests if such issuance is permitted by Sections 5.5(b)(iv) , 5.5(b)(vi)  and 5.5(b)(ix) ); (B) operate, manage and develop the JBG Included Properties in the ordinary course and consistent with past practices (including, with respect to maintenance of insurance and the application of security deposits and the payment of obligations) in all material respects, provided that the foregoing shall not impose any obligation on the JBG Parties to undertake any new capital improvement projects after the date hereof (other than to repair or replace any capital improvements requiring immediate repair or replacement or in connection with contractual lease obligations and Material Contracts) except as provided in Section 5.5 of the JBG Disclosure Letter; (C) perform and otherwise comply, or cause its agents to perform and otherwise comply, in all material respects with, all of the obligations of the lessee under the ground leases affecting any JBG Included Property and all obligations of the JBG Parties under the JBG Material Contracts; (D) use their respective Commercially Reasonable Efforts to maintain in all material respects the JBG Included Properties in their current condition (ordinary wear and tear excepted and except in relation to JBG Development Properties), preserve their business organizations intact in all material respects, and maintain existing relations and goodwill with lenders, tenants, employees and business associates in all material respects; (E) continue to implement the development plan for the JBG Included Properties that constitute properties under development in accordance with existing plans, specifications and budgets and past practice; and (F) maintain the status of the JBG REITs as REITs and the status of the JBG TRSs as Taxable REIT Subsidiaries and the status of other JBG Funds and the JBG Management Entities as partnerships or, in the case of JBG Properties Inc., as a corporation, for U.S. federal income tax purposes.

 

(b)                                  Without limiting the generality of the foregoing, and except (w) as set forth in Section 5.5 of the JBG Disclosure Letter, (x) as required pursuant to this Agreement, (y) as required by Law or (z) as consented to in writing by the Vornado Parties (which consent shall not be unreasonably withheld, delayed or conditioned), between the date of this Agreement and the Closing or the date, if any, on which this Agreement is terminated pursuant to Section 8.1 , the JBG Parties shall not, and shall cause each of their Subsidiaries not to:

 

(i)                                      amend the Governing Documents of any JBG Party or its Subsidiary, other than (x) in connection with the Restructuring Transactions, (y) in

 

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connection with obtaining a Required Debt Consent, Required JV Consent or Required Ground Lease Consent or (z) in a manner that would not materially adversely affect any JBG Included Asset;

 

(ii)                                   adjust, split, combine, subdivide or reclassify any shares of the capital stock of any JBG Included Entity other than in connection with the Restructuring Transactions;

 

(iii)                                redeem, purchase or otherwise acquire, or offer to redeem, purchase or otherwise acquire, directly or indirectly, any of the capital stock or other Equity Interests of any JBG Included Entity other than in connection with the Restructuring Transactions;

 

(iv)                               grant, issue, deliver or sell any additional Equity Interests of any JBG Included Entity; provided , however , that the JBG Parties may issue Equity Interests as required in connection with the Restructuring Transactions;

 

(v)                                  enter into a line of business other than the line of business currently engaged in by it;

 

(vi)                               enter into a merger agreement, acquisition agreement or disposition agreement or authorize the liquidation, dissolution, consolidation, bankruptcy or other reorganization of any JBG Party or its Subsidiary other than in connection with the Restructuring Transactions or Combination Transactions;

 

(vii)                            change any material method of Tax accounting, make or change any material Tax election, file any amended material Tax Return, settle or compromise any material Tax liability, agree to an extension or waiver of the statute of limitations with respect to the assessment or determination of a material amount of Taxes other than in the ordinary course of business, enter into any closing agreement with respect to a material amount of Tax or surrender any right to claim a material Tax refund with respect to the JBG Parties and the JBG Included Entities;

 

(viii)                         take any action that (or fail to take any action the omission of which) would reasonably be expected to prevent the Pre-Combination Transactions from qualifying for the Agreed Treatment (provided that the Combination Transactions and Post-Closing Transactions shall be treated as in compliance with this clause (viii));

 

(ix)                               enter into any acquisition agreement or acquire any real property, (or permit any fund or other investment vehicle advised, managed or controlled by any JBG Party to do the same, except for acquisitions of real property that are subject to a binding acquisition agreement as of the date hereof or that are related to and would reasonably be expected to directly enhance the value of a JBG Excluded Asset; provided , that the JBG Parties shall give the Vornado Parties at least five (5) days’ prior written notice before entering into any such acquisition agreement or consummating any such acquisition);

 

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(x)                                  sell, transfer or assign any JBG Included Property or any direct interest therein (other than pursuant to a buy-sell, forced sale or other mandatory contractual obligation triggered by a third party) or encumber (other than in connection with Indebtedness permitted to be incurred hereunder) any JBG Included Property with any mortgages, deeds of trust or other Liens which secure Indebtedness for borrowed money;

 

(xi)                               sell, transfer, assign or remove any material personal property from any JBG Included Property, except in the ordinary course consistent with past practices, unless replaced by unencumbered personal property of equal or greater utility and value;

 

(xii)                            take any action to cause the termination or material amendment or waiver of any provision of any JBG Advisory Agreement other than in connection with the Restructuring Transactions or Combination Transactions or in a manner that would not materially adversely affect any JBG Included Asset;

 

(xiii)                         incur, create, assume, refinance, replace or prepay any material Indebtedness for borrowed money or issue or amend the terms of any material Indebtedness for borrowed money or assume, guarantee or endorse, or otherwise become responsible (whether directly, contingently or otherwise) for any material Indebtedness of any other Person other than in the ordinary course of business, except (A) the refinancing of existing Indebtedness within six (6) months of maturity, in a principal amount not to exceed the principal amount of such Indebtedness being refinanced, for a term that is no shorter than five (5) years (or three (3) years for Indebtedness related to a JBG Included Asset under development), inclusive of extension terms, and on other market terms and on terms which do not restrict the Transactions, (B) as set forth on Section 5.5(b)(xiii)  of the JBG Disclosure Letter, (C) as contemplated by Section 5.2(f) , (D) the drawdown of unused amounts under existing construction loans and delayed draw mortgage loans that are available for draw in accordance with the terms of such facilities, (E) the repayment or prepayment of Indebtedness with cash and not with the proceeds of a refinancing and (F) the exercise of any as-of-right extension options with respect to existing Indebtedness;

 

(xiv)                        with respect to the JBG Management Entities only, have outstanding Indebtedness as of the Closing Date for borrowed money in excess of the aggregate amount of Expenses (other than Consent Expenses, Financial Advisor Expenses and the expenses set forth in Section 6.1(f)  of the JBG Disclosure Letter below the cap described therein) actually incurred and paid by the JBG Parties prior to the Closing;

 

(xv)                           except as required by applicable Law or written Contract in effect as of the date of this Agreement that has been disclosed or made available to the Vornado Parties, take or permit to be taken any action or commitment to enter into or amend any employment, severance, retention or change in control agreement or arrangement with any JBG Service Providers (other than any agreement or arrangement which is terminable

 

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upon ninety (90) days’ notice without incurring any obligation other than payment for the 90-day notice period);

 

(xvi)                        cause or permit any JBG Included Entity or JBG Management Entity to materially amend (except as required by applicable Law), adopt or establish any Plan (other than any “welfare plan” within the meaning of ERISA Section 3(1)) for the benefit of the JBG Service Providers, or the spouses, beneficiaries or other dependents thereof, except in connection with the Restructuring Transactions;

 

(xvii)                     enter into, or amend, extend, modify, terminate or consent to any such amendment, extension, modification or termination of, any agreement with any Related Party affecting any JBG Included Asset in a materially adverse manner;

 

(xviii)                  enter into, amend, extend, modify, terminate or consent to any such entry into, amendment, extension, modification or termination of (i) any lease affecting any JBG Included Property demising square footage in excess of 25,000 square feet, other than any lease for which a written proposal was submitted to the tenant before the date hereof, (ii) any lease for premises in a building that is not in operation or substantially under construction as of the date hereof;

 

(xix)                        other than as necessary to effect the Restructuring Transactions, amend, extend, modify, terminate or consent to any such amendment, extension, modification or termination of any ground lease affecting a JBG Included Property in a manner that would materially adversely affect such JBG Included Property;

 

(xx)                           enter into, or amend, extend, modify, terminate or consent to any such amendment, extension, modification or termination of, any Joint Venture Agreement affecting any JBG Included Property other than as provided in clause (i) of this Section 5.5(b) , or extend or permit the extension of the permitted investment period of any Joint Venture;

 

(xxi)                        enter into a new agreement with a general contractor pertaining to, obtain or guarantee any construction financing with respect to, or actually commence, the development or construction of any JBG Included Property;

 

(xxii)                     commence any new base building capital project with respect to a JBG Included Property, the aggregate cost to the JBG Parties of which is projected to exceed $2,000,000, other than a project commenced prior to the date hereof, a project that is under the control of a Joint Venture Partner, or a project required by law or a JBG Lease or to address an emergency;

 

(xxiii)                  amend or modify, or consent to the amendment or modification of, the zoning or entitlements use of any JBG Included Property in a manner that would materially adversely affect such JBG Included Property;

 

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(xxiv)                 knowingly take any action, or knowingly fail to take any action, which action or failure would reasonably be expected to cause any of the JBG REITs to fail to qualify as a REIT or that would reasonably be expected to cause Newco to fail to qualify as a REIT after the Closing;

 

(xxv)                    waive, release, assign, commence, settle or compromise any pending or threatened legal proceeding by or against the JBG Management Entities, any JBG Included Entity or any Transferred LLC that (A) requires payment (not covered by insurance) by the JBG Management Entities or any JBG Included Entity of an amount in excess of $1,000,000 in the aggregate or that would require the issuance of any Equity Interests, (B) entails the incurrence of any obligation or liability in excess of such amount, including costs or revenue reductions or obligations that would impose any material restrictions on its business or operations, or (C) imposes any non-monetary relief or an admission of liability or wrongdoing or that would result in any supplement, modification to or amendment of the terms of (1) any agreement or document relating to the Transactions to which the JBG Parties or any of their Affiliates is a party or (2) any JBG Material Contract;

 

(xxvi)                 take any of the actions described on Section 5.5(b)(xxvi)  of the JBG Disclosure Letter; or

 

(xxvii)              authorize, or enter into, any Contract, commitment or arrangement to do any of the foregoing.

 

(c)                                   Nothing in this Section 5.5 shall restrict the JBG Parties’ rights with respect to any JBG Excluded Assets or give the Vornado Parties any approval, consent or other rights with respect thereto.

 

(d)                                  Nothing contained in this Agreement shall give the Vornado Parties, directly or indirectly, the right to control or direct the JBG Parties’ operations prior to the Closing. Prior to the Closing, the JBG Parties shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over their operations. Notwithstanding anything to the contrary set forth in this Agreement, no consent of the Vornado Parties shall be required with respect to any matter set forth in this Section 5.5 or elsewhere in this Agreement to the extent that the requirement of such consent could violate any applicable Law.

 

(e)                                   Notwithstanding anything to the contrary set forth in this Agreement, nothing in this Agreement shall prohibit the JBG Parties from taking, or causing any JBG Party or a Subsidiary to take, any action, at any time or from time to time, that in the reasonable judgment of the JBG Parties is reasonably necessary for the JBG REITs to maintain their qualification as REITs under the Code for any period or to avoid incurring entity level income or excise Taxes under the Code, including making dividend or other distribution payments to shareholders of the JBG REITs in accordance with this Agreement or otherwise. If the JBG Parties determine that it is necessary to take any such action, it shall notify Vornado in writing as soon as reasonably

 

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practicable and Vornado shall be given a reasonable opportunity to review and provide comments to such action, and the JBG Parties shall give consideration, not to be unreasonably withheld, to such comments of Vornado prior to the taking of such action.

 

Section 5.6.                                  Compliance with Securities Regulations . Vornado shall use Commercially Reasonable Efforts to take any action required to be taken under the Securities Act, the Exchange Act, and any applicable foreign or state securities or “blue sky” Laws and regulations thereunder in connection with the Equity Issuance and the JBG Parties shall furnish all information as Vornado may reasonably request in connection with any such actions.

 

Section 5.7.                                  Credit Facility .

 

(a)                                  The Parties shall use Commercially Reasonable Efforts to cooperate to arrange a debt financing for Newco and Newco OP (the “ Credit Facility ”) and take, or cause to be taken, all actions and do, or cause to be done, all things that are within their respective control and are reasonably necessary or advisable to obtain the Credit Facility on or immediately prior to the Closing, on terms acceptable to the Parties in their reasonable discretion. Without limiting the generality of the foregoing, such actions shall include, to the extent reasonably necessary or advisable to obtain and close the Credit Facility, the following: (i) using Commercially Reasonable Efforts to identify and contact potential lenders; (ii) preparing any materials related to marketing the Credit Facility to the extent reasonably requested by the Financing Sources; (iii) participating in and assisting with the preparation of rating agency presentations and meetings with rating agencies; (iv) delivering to the Financing Sources all information related to the Included Properties reasonably requested by them and within the Parties’ possession or control; (v) at the reasonable request of the Financing Sources, using Commercially Reasonable Efforts to deliver any requests for, and reasonably cooperating in seeking to obtain, consents, landlord waivers and estoppels, or non-disturbance agreements to the applicable counterparties; (vi) granting the Financing Sources and their Representatives access to the Included Properties (including related documentation or other items in the Parties’ respective possession or control) in order to conduct field examinations, collateral audits, asset appraisals, surveys, environmental site assessments and engineering/property condition reports and other inspections that are reasonably necessary in connection with the Credit Facility, including taking and analyzing any samples of any environmental media or any building material, but only to the extent such sampling is reasonably recommended pursuant to a third party environmental report and reasonably required by such Financing Source; (vii) participating in negotiating definitive Credit Facility documentation; and (viii) paying reasonable and customary fees and expenses in connection with obtaining the Credit Facility.

 

(b)                                  Notwithstanding anything to the contrary contained in this Agreement, nothing contained in this Agreement shall require, and in no event shall the Commercially Reasonable Efforts of the Parties be deemed or construed to require in connection with the obtaining or assistance in obtaining the Credit Facility, a Party to provide assistance that (i) unreasonably interferes with such Party’s ongoing business; (ii) causes any representation or warranty of such Party in this Agreement to be breached; (iii) causes any closing condition set forth in Article VII to fail to be satisfied or otherwise causes the breach of this Agreement or any

 

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Contract to which such Party is a party; or (iv) requires such Party (other than Newco or Newco OP) or its directors, officers, trustees, managers or employees (except in their capacity, or contemplated capacity as directors, officers, trustees, managers or employees of Newco, Newco OP or any of their Subsidiaries) to execute, deliver or enter into, or perform any agreement, document or instrument, including any commitment letter, with respect to the Credit Facility prior to the Closing, except for (x) a customary UCC pre-filing authorization letter effective as of the Closing, (y) any customary payoff letters in connection with the payment in full of any Indebtedness and release of Liens securing such Indebtedness required to be delivered as a condition precedent to the closing of the Credit Facility, and (z) customary fee and expense reimbursement and/or indemnity agreements entered into in favor of the Financing Sources prior to the Closing (but which reimbursement and/or indemnity obligations shall expire upon the closing of the Credit Facility).

 

(c)                                   If Closing does not occur, then all costs, fees, expenses and indemnification obligations associated with pursuing the Credit Facility shall be apportioned between the JBG Parties and the Vornado Parties in proportion to the relative aggregate Asset Values of their Included Assets on the date hereof, in each case, including any Kickout Interests.

 

(d)                                  Newco and Newco OP shall use the proceeds from the Credit Facility for the purposes set forth in the definition of Closing Date Payments and in accordance with Section 5.2(f) , as applicable.

 

Section 5.8.                                  Certain Pre-Closing Actions .

 

(a)                                  Prior to the Closing (and in any event no later than 11:59 p.m. on the Business Day preceding the Closing Date), the Vornado Parties, Newco and Newco OP shall cause the Pre-Combination Transactions set forth on Section 5.8(a)  of the Vornado Disclosure Letter to be implemented as set forth therein. Immediately following the occurrence of the Pre- Combination Transactions, but prior to the Closing, the JBG Parties shall cause the actions set forth on Section 5.8(a)  of the JBG Disclosure Letter that are contemplated to be taken prior to the Closing (collectively, the “ Restructuring Transactions ”) to be implemented as set forth therein. The Parties will reasonably agree to modify the Restructuring Transactions, the Combination Transactions and the Pre-Combination Transactions as requested by either Party and agree further to reasonably cooperate with each other for four (4) weeks following the date hereof in respect of the “ Potential Restructuring ”, as set forth on Section 5.8(a)  of the Vornado Disclosure Letter, so long as (i) such modifications do not adversely affect the non-requesting Party in any material respect and (ii) such modifications would not reasonably be expected to affect the ability of the Vornado Parties to receive the opinions described in Section 7.2(e)  and Section 7.2(f)  and the ability of the JBG Parties to receive the opinions described in Section 7.3(e) . The Parties agree to amend the provisions of this Agreement, any schedule thereto, and any exhibit thereto to reflect any modifications described in the previous sentence. With the mutual consent of the Parties, the obligations of Newco hereunder may be assigned, to the extent necessary to reflect any modifications described herein, to a newly formed Subsidiary of Vornado.

 

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(b)                                  The Parties and their Subsidiaries shall use Commercially Reasonable Efforts prior to the Closing, to take such actions as may be necessary so that at Closing Newco has the capacity, after taking into account the services to be provided under the Transition Services Agreement and any available transition periods, to maintain material compliance with Section 404 of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder and related or similar rules and regulations promulgated by any other governmental or self-regulatory entity or agency with jurisdiction over Newco.

 

(c)                                   The JBG Parties shall take the actions set forth on Section 5.8(c)  of the JBG Disclosure Letter and shall otherwise use Commercially Reasonable Efforts to cause the closing condition set forth in Section 7.2(h)  to be satisfied on or before the Closing Date.

 

(d)                                  Prior to the Closing date, the JBG Parties shall take the actions set forth on Section 5.8(d)  of the JBG Disclosure Letter.

 

Section 5.9.                                  Rule 3-14/Regulation S-X Cooperation . Without limiting the obligations of the JBG Parties under this Section 5.9 , from the date of this Agreement and continuing through the first (1st) anniversary of the Closing Date, the JBG Parties shall, within thirty (30) days of the date of this Agreement, and thereafter from time to time, at Newco’s or Newco OP’s reasonable request, within thirty (30) days after a calendar quarter end, provide:

 

(a)                                  Newco, Newco OP and their Representatives with financial statements (prepared from the books and records of the JBG Parties, in accordance with GAAP applied on a consistent basis during the periods involved and fairly presenting, in all material respects, the financial position and results of operations of the JBG Management Entities and other JBG Included Entities, as of the times and for the periods referred to therein) and access to all financial and other information pertaining to the JBG Parties and the JBG Included Properties pertaining to the period of the JBG Parties’ ownership and operation of the JBG Included Properties to the extent in the JBG Parties’ possession or control (or to the extent the JBG Parties could obtain such information without unreasonable effort or expense), which information is relevant and reasonably necessary, in the opinion of Newco and Newco OP, for the preparation and filing of financial statements in compliance with the requirements of any or all of (x) Rules 3-12 and 3-14 of Regulation S-X of the SEC, or if required by the SEC, Rule 3-05 of Regulation S-X of the SEC, and enable the JBG Parties’ outside, third-party accountants (the “ Accountants ”) to audit such information, (y) any other rule issued by the SEC and applicable to Newco and Newco OP or their Affiliates, and (z) any registration statement, schedule, proxy statement, report or disclosure statement filed with the SEC by or on behalf of Newco and Newco OP or their Affiliates; and

 

(b)                                  reasonable assistance to Newco and Newco OP and the Accountants in completing audits and the preparation of such financial statements and any required pro forma financial statements. Without limiting the generality of the foregoing, if requested by Newco and Newco OP (A) the JBG Parties shall deliver a customary representation letter in such form as is reasonably required by the Accountants, with such facts and assumptions as reasonably determined by the Accountants in order to make such certificate accurate, signed by the

 

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individual(s) responsible for the JBG Parties’ financial reporting, as prescribed by GAAP promulgated by the Auditing Standards Division of the American Institute of Certified Public Accountants, which representation letter may be required to assist the Accountants in rendering an opinion on such financial statements in order to comply with subclauses (x), (y) and (z) of Section 5.9(a)  above and (B) to the extent that the JBG Parties’ financial statements have previously been audited, the JBG Parties shall use Commercially Reasonable Efforts to cause the auditor of the JBG Parties’ financial statements to provide its consent to the inclusion of its report, without exception or qualification, with respect to such audited financial statements, to provide to Newco and Newco OP and/or their Affiliates or the underwriters or initial purchasers in any financing with appropriate comfort letters in accordance with the American Institute of Public Accountants’ professional standards and to participate in due diligence sessions customarily conducted in connection with the provision of comfort letters.

 

Section 5.10.                           Exclusivity . From the date of this Agreement until the Closing or the date, if any, on which this Agreement is terminated pursuant to Section 8.1 , each Party shall not, and shall cause each of its Affiliates not to, and shall direct its Representatives not to, directly or indirectly, except as permitted under Section 5.4 or Section 5.5 , solicit, initiate, knowingly facilitate or otherwise enter into any discussions, negotiations or agreements which could reasonably be expected to lead to a possible sale or other disposition of (a) all or any of the Included Assets of its Group, other than as specifically required pursuant to the terms of any right of first refusal described in Section 6.1(b)  or Section 6.1(c) , or (b) except as contemplated by the Restructuring Transactions, all or any part of the ownership interests in any JBG Included Entity or Vornado Included Entity owned by such Party (whether by merger, reorganization, recapitalization or otherwise), in each case with any Person other than the other Group, or provide any non-public information regarding such Party’s Included Assets to any Person other than the other Group and its Affiliates and Representatives and Financing Sources other than as required by applicable Law or as specifically required pursuant to the terms of any Contract affecting an Included Property or Joint Venture Agreement, in each case excluding any information which is traditionally provided in the regular course of the such Party’s operation and management of its Included Properties to third parties where such Party and its Affiliates and Representatives have no reason to believe that such information may be utilized to evaluate any such transaction.

 

Section 5.11.                           NYSE Listing . Vornado shall cause Newco to use its Commercially Reasonable Efforts to cause the Issued Newco Shares to be approved for listing on the NYSE prior to the Closing Date, subject only to official notice of issuance. The Parties agree that Newco shall be listed on the NYSE under the ticker symbol listed on Section 5.11 of the Vornado Disclosure Letter.

 

Section 5.12.                           Equity Incentive Plan . Prior to Closing, the Newco Board shall adopt an equity incentive plan, in the form attached hereto as Exhibit K , to be effective as of Closing.

 

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Section 5.13.                           Newco Board of Trustees and Officers .

 

(a)                                  Immediately after the Pre-Combination Transactions, the Newco Board shall take or cause to be taken such action as may be necessary, in each case, to be effective as of the Closing, to (i) increase the number of trustees of Newco to twelve (12), (ii) cause six (6) individuals designated by the JBG Parties (such persons, and any replacement designees selected, the “ JBG Board Designees ”) and six (6) individuals designated by the Vornado Parties (such persons, and any replacement designees selected, the “ Vornado Board Designees ”, and together with the JBG Board Designees, the “ Board Designees ”) to compose the entire Newco Board, (iii) appoint the individual listed on Section 5.13(a)  of the Vornado Disclosure Letter as Chairman of the Newco Board; provided , that if such individual dies or becomes disabled or incapacitated prior to Closing, the Vornado Parties shall have the right to designate a replacement for such individual, subject to the consent of the JBG Parties (which consent shall not be unreasonably withheld, delayed or conditioned), (iv) appoint the individual listed on Section 5.13(a)  of the JBG Disclosure Letter as Vice Chairman of the Newco Board, and (v) appoint an equal number of JBG Board Designees and Vornado Board Designees to the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee (with the JBG Board Designees to serve on such committees being selected at the direction of the JBG Parties). The Vornado Board Designees shall include the individuals listed on Section 5.13(a)  of the Vornado Disclosure Letter, and the JBG Board Designees shall include the individuals listed on Section 5.13(a)  of the JBG Disclosure Letter. The remaining three (3) JBG Board Designees and four (4) Vornado Board Designees shall be independent as determined under the applicable NYSE independence rules. If any of such independent Board Designees is unable or unwilling to serve on the Newco Board, as of the Closing, the JBG Parties (in the case of any Board Designee initially designated by the JBG Parties) or the Vornado Parties (in the case of any Board Designee initially designated by the Vornado Parties) shall select, within a reasonable period of time prior to the Closing, a replacement, which designee shall (i) not violate any of the NYSE independence tests set forth in Section 303A.02(b) of the NYSE Listed Company Manual and (ii) not be subject to any disclosures required under Rule 401(f) of Regulation S-K. Subject to the foregoing, the Newco Board shall elect such replacement as a member of the Newco Board, as of the Closing. Immediately after the Pre-Combination Transactions, the Newco Board shall take or cause to be taken such action as may be necessary, in each case, to be effective as of the Closing, to elect the individuals set forth on Section 5.13(a)  of the Vornado Disclosure Letter as executive officers of Newco.

 

(b)                                  For a period of two (2) years following the Closing, if any Vornado Board Designee or JBG Board Designee is unable or unwilling to serve or is otherwise no longer serving as a member of the Newco Board, then the remaining Vornado Board Designees or JBG Board Designees, respectively, may designate a replacement individual reasonably satisfactory to the Nominating and Corporate Governance Committee of the Newco Board (a “ Replacement Designee ”) and the Newco Board shall promptly appoint such Replacement Designee to fill the vacancy created thereby. In connection with the first annual meeting of shareholders following the closing, the Newco Board shall, subject to the reasonable exercise of its duties, take all such actions as may be necessary to nominate the Vornado Board Designees and the JBG Board Designees (as they may have changed as the result of the appointment of any Replacement

 

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Designees) for election by Newco’s shareholders and shall use no less rigorous efforts to cause the election of each such Vornado Board Designee and JBG Board Designee than the manner in which Newco supports all other nominees of the Newco Board. In addition, for a period of two (2) years following the Closing, the Newco Board shall, to the extent reasonably practicable, appoint an equal number of Vornado Board Designees and JBG Board Designees (including, if applicable, their respective Replacement Designees) to the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee of the Newco Board.

 

Section 5.14.                           Newco Declaration and Bylaws . Prior to the Closing, the Newco Board shall adopt (a) the Declaration of Trust Amendment and Restatement, in the form attached hereto as Exhibit L , to be effective as of the Closing, and (b) an amendment and restatement of the Newco Bylaws, in the form attached hereto as Exhibit M (the “ Bylaws Amendment and Restatement ”), to be effective as of the Closing. The applicable Vornado Party shall cause the Declaration of Trust Amendment and Restatement and the Bylaws Amendment and Restatement to be authorized and approved.

 

Section 5.15.                           Intentionally Omitted .

 

Section 5.16.                           Newco Officer’s Certificate . Newco shall deliver to JBG REIT Counsel and Vornado REIT Counsel an officer’s certificate, dated as of the Closing Date, signed by an officer of Newco with the knowledge necessary to make the representations contained therein and in form and substance reasonably satisfactory to the JBG Parties and the Vornado Parties, respectively, containing representations of Newco as shall be reasonably necessary or appropriate to enable JBG REIT Counsel and Vornado REIT Counsel, respectively, to render the opinions described in Section 7.3(e)(ii)  and Section 7.2(e)(ii) , respectively, on the Closing Date.

 

Section 5.17.                           Vornado Officer’s Certificates .

 

(a)                                  Vornado shall deliver to Sullivan & Cromwell LLP an officer’s certificate, dated as of the Closing Date, signed by an officer of Vornado with the knowledge necessary to make the representations contained therein, containing representations of Vornado as shall be reasonably necessary or appropriate to enable Sullivan & Cromwell LLP to render the opinion described in Section 7.2(f)  on the Closing Date.

 

(b)                                  Vornado and the Vornado REITs shall each deliver to Vornado REIT Counsel an officer’s certificate, dated as of the Closing Date, signed by an officer of Vornado or such Vornado REIT, as applicable, with the knowledge necessary to make the representations contained therein and in form and substance reasonably satisfactory to the JBG Parties, containing representations of Vornado and the Vornado REITs as shall be reasonably necessary or appropriate to enable Vornado REIT Counsel to render the opinions described in Section 7.3(e)(i)  and Section 7.3(e)(iii)  on the Closing Date.

 

Section 5.18.                           JBG Officer’s Certificates .

 

(a)                                  The JBG REITs shall each deliver to JBG REIT Counsel an officer’s certificate, dated as of the Closing Date, signed by an officer of such JBG REIT with the

 

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knowledge necessary to make the representations contained therein and in form and substance reasonably satisfactory to the Vornado Parties, containing representations of the JBG REITs as shall be reasonably necessary or appropriate to enable JBG REIT Counsel to render the opinions described in Section 7.2(e)(i)  on the Closing Date.

 

Section 5.19.                           Form 10 Filing . As promptly as practicable following the execution of this Agreement, Vornado shall cause Newco to prepare and file with the SEC an initial registration statement on Form 10. Vornado shall, and shall cause Newco to, use Commercially Reasonable Efforts to have such Form 10 declared effective under the Exchange Act as promptly as practicable after the date hereof and keep the Form 10 effective for so long as necessary to consummate the Transactions. No filing of, or amendment or supplement to, any Form 10 will be made by Vornado or Newco without providing the JBG Parties a reasonable opportunity to review and comment thereon. Vornado shall promptly notify the JBG Parties upon the receipt of any comments from the SEC or any request from the SEC for amendments or supplements to such Form 10, and shall, as soon as reasonably practicable, provide the JBG Parties with copies of all correspondence between Vornado and its Representatives, on the one hand, and the SEC, on the other hand, and all written comments with respect to the Form 10 received from the SEC, and shall promptly advise the JBG Parties of any oral comments with respect to the Form 10 received from the SEC. Vornado shall use Commercially Reasonable Efforts to respond as soon as practicable to any comments from the SEC with respect to the Form 10 and to have such comments cleared by the SEC as soon as practicable. Notwithstanding the foregoing, prior to filing the Form 10 or responding to any comments of the SEC with respect thereto, Vornado shall cooperate and provide the JBG Parties a reasonable opportunity to review and comment on such document or response (including the proposed final version of such document or response) and shall give due consideration to all changes provided by the JBG Parties.

 

Section 5.20.                           Confidentiality .

 

(a)                                  Each of the JBG Parties, on the one hand, and the Vornado Parties, on the other hand, in the course of discussions and negotiations, have disclosed to the other Confidential Information relating to its business. Each Party shall use the Confidential Information of the other Party only for the purposes contemplated by this Agreement. The Receiving Party shall ensure that the Confidential Information of the Disclosing Party is not used, disclosed, published, released, transferred or otherwise made available in any form to, for the use or benefit of, any person (other than its Affiliates) except as provided in this Section 5.20 , without such Disclosing Party’s approval. Notwithstanding the foregoing, the Receiving Party may disclose Confidential Information in connection with any notification under the HSR Act that it is required to file to report any of the transactions described herein or to respond to any request for information or documents made by a Governmental Entity in connection with its investigation of the transactions described herein. In addition, the Receiving Party may disclose Confidential Information to any of its Representatives who need to know such Confidential Information for the purpose of evaluating the Transaction; provided , however , that the Receiving Party informs each such Representative of the confidential nature of the Confidential Information and the restrictive terms of this Section 5.20 and that the Receiving Party directs such Representative to comply with such restrictions. The Receiving Party shall be liable for any disclosure or use by

 

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any such Representative other than in accordance with this Section 5.20 . The obligations of this Section 5.20 shall not restrict any disclosure by any Receiving Party pursuant to applicable Law; provided , that the Receiving Party (including with respect to any notification under the HSR Act that it is required to file to report any of the transactions described herein or to respond to any request for information or documents made by a Governmental Entity in connection with its investigation of the transactions described herein) will (a) provide the Disclosing Party with prompt notice thereof; (b) consult with the Disclosing Party on the advisability of taking steps to resist or narrow such disclosure; (c) cooperate (following the Disclosing Party’s written request and at its expense) with the Disclosing Party in any attempt that the Disclosing Party may make to resist such disclosure or obtain an order or other reliable assurance that confidential treatment will be accorded to designated portions of the Confidential Information; and (d) subject to the foregoing, disclose only that portion of Confidential Information that the Receiving Party reasonably deems it is required to disclose. Nothing herein, however, will require the Receiving Party to become subject to criminal or civil liability or regulatory censure for failure to disclose information pursuant to applicable Law.

 

(b)                                  The Receiving Party acknowledges that significant portions of Confidential Information are proprietary in nature and that the Disclosing Party may suffer significant and irreparable harm in the event of the misuse or disclosure of Confidential Information and acknowledges that remedies other than injunctive relief may not be adequate. Accordingly, each Party has the right to seek the remedies of injunction, specific performance and other equitable relief for any breach, threatened breach or anticipatory breach of the provisions of this Section 5.20 by the Receiving Party or its Representatives. Notwithstanding the foregoing, any claim for damages hereunder shall be limited to actual damages and losses and shall not include punitive, consequential, special or indirect damages.

 

(c)                                   The confidentiality provisions contained in this Section 5.20 supersede any and all prior agreements or understandings, whether written or oral, between or among the parties with respect to the matters covered by this Section 5.20 , and shall survive the Closing for six (6) months.

 

ARTICLE VI

 

ADDITIONAL AGREEMENTS

 

Section 6.1.                                  ROFRs and Tenant Estoppels under Ground Leases and Joint Venture Agreements .

 

(a)                                  The JBG Parties and the Vornado Parties shall use Commercially Reasonable Efforts to obtain prior to the Closing from each of the ground lessors under the JBG Ground Leases listed on Section 4.9(h)  of the JBG Disclosure Letter and under the Vornado Ground Leases listed on Section 3.15(f)  of the Vornado Disclosure Letter, respectively, a ground lease estoppel substantially in the form of Exhibit N hereto or such other form or terms as is provided under the applicable JBG Ground Lease or Vornado Ground Lease, if applicable. The Parties shall keep the other Group reasonably informed regarding the status of the discussions

 

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with the applicable ground lessors regarding the foregoing matters from time to time prior to the Closing and shall within a reasonable period of time, provide the other Group with any estoppel received under this Section 6.1 . In no event will failure to obtain a ground lease estoppel be a condition to the Closing.

 

(b)                                  With regard to any Included Property located in Montgomery County, Maryland that is a multifamily property that already has leases, which Included Properties are listed on Section 6.1(b)  of the JBG Disclosure Letter and Section 6.1(b)  of the Vornado Disclosure Letter (the “ Montgomery County Multifamily Properties ”), the Parties acknowledge that the Transactions may be subject to the requirements imposed by Section 11C-18 and Chapter 53A of the Code of Ordinances (said referenced sections, the “ Ordinances ”) of Montgomery County, Maryland (the “ County ”), pursuant to which the County and certain other entities, organizations and persons (the County and such other entities, organizations and persons, collectively, the “ Montgomery County Rights Holders ”) may be entitled to notice of any sale of certain rental housing projects in the County, and may have a right of first refusal to acquire such a project on substantially the same terms and conditions as a pending bona fide contract of sale from a third party to buy the rental housing. For each Montgomery County Multifamily Property, to the extent a JBG Party or Vornado Party, as applicable, is required to provide a right of first refusal, said right of first refusal shall be for the purchase price set forth on Section 6.1(b)  of the JBG Disclosure Letter or Section 6.1(b)  of the Vornado Disclosure Letter, as applicable, or as otherwise required by the Ordinances.

 

(c)                                   With regard to any Included Property located in the District of Columbia that is a multifamily property that already has leases, which Included Properties are listed on Section 6.1(c)  of the JBG Disclosure Letter and Section 6.1(c)  of the Vornado Disclosure Letter (the “ DC Multifamily Properties ”), the Parties acknowledge that the Transactions may be subject to the requirements imposed by Subchapter IV of Section 42-3404 of the District of Columbia Code (“ TOPA ”) pursuant to which the tenants of said DC Multifamily Properties (collectively, the “ DC Rights Holders ”) are entitled to notice of any sale of certain rental housing projects in the District of Columbia. For each DC Multifamily Property, to the extent a JBG Party or Vornado Party, as applicable, is required to provide a right of first refusal, said right of first refusal shall be for the purchase price set forth on Section 6.1(c)  of the JBG Disclosure Letter or Section 6.1(c)  of the Vornado Disclosure Letter, as applicable.

 

(d)                                  The Party that directly or indirectly owns the affected Included Property shall prepare all notices and take all required steps as required under the Ordinances and TOPA as promptly as reasonably possible after the date hereof in consultation with the other Group and may enter into such settlements and agreements with the Montgomery County Rights Holders and the DC Rights Holders with the approval of the other Group, which shall not be unreasonably withheld.

 

(e)                                   Should Montgomery County Rights Holders or DC Rights Holders exercise their right to purchase and close such purchase of the applicable Included Property, (i) the applicable Party shall notify the other Group of the same, and (ii) the net purchase price paid or payable to the applicable Party with respect to the applicable Included Property shall be

 

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included in the Included Assets and such purchase price shall be conclusively deemed to be the Asset Value of such Included Property.

 

(f)                                    Each Group shall bear or reimburse Newco and Newco OP at Closing the expenses as set forth on Section 6.1(f)  of the JBG Disclosure Letter or Vornado Disclosure Letter.

 

Section 6.2.                                  Casualty and Condemnation . The risk of loss relating to the Included Assets prior to the Closing shall be borne by Newco and Newco OP if the Transaction closes and the Closing shall not be affected by a condemnation or casualty. If, prior to the Closing, (a) any Included Property is materially or totally destroyed or damaged by fire or other casualty or (b) any Included Property is materially or totally taken by eminent domain or through condemnation proceedings, then at Closing any sums collected (directly or indirectly) by the applicable Party, if any, under any policies of insurance or award proceeds relating to such casualty or condemnation, which have not been applied to repair or replacement of any such damage or destruction shall be paid to Newco, and all rights (directly or indirectly) of such Party to collect such sums as may then be uncollected shall be included in such Party’s Included Assets, except to the extent required for collection costs or repairs by such Party prior to the Closing Date; provided, however , that the Asset Value of any Included Property subject to a casualty shall be decreased for any deductible not applied or any remaining cost to repair any damage not covered by insurance.

 

Section 6.3.                                  Tax Matters .

 

(a)                                  The Vornado Parties and the JBG Parties and their respective Affiliates will timely and reasonably cooperate, to the extent reasonably requested by any of the Vornado Parties, JBG Parties and their respective Affiliates, in connection with any Tax matters relating to the JBG Included Assets, the Vornado Included Assets or the Transactions (including by the timely provision of reasonably relevant records or information reasonably available to such party, which shall include information regarding depreciation methodology and other Tax information necessary for the preparation and filing of any Tax Return); provided , however , that in recognition of the thorough cooperation and diligence that to date has been dedicated to REIT Diligence Matters, no further diligence in respect of such matters will be required, from this date forward, from the Vornado Parties by the JBG Parties, or from the JBG Parties by the Vornado Parties with respect to periods through the date of this Agreement (recognizing that, consistent with Section 6.3(e) , the Parties will cooperate to complete any diligence necessary with respect to the period from the date of this Agreement to Closing to facilitate consummation of the Transactions as contemplated by this Agreement). The Vornado Parties and the JBG Parties agree and shall cause their respective Affiliates (i) to retain all books and records with respect to Tax matters pertinent to the JBG Included Assets, the Vornado Included Assets and the Transactions relating to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and, to the extent notified by the Vornado Parties or JBG Parties, as applicable, any extensions thereof) of the respective taxable periods, and to substantially abide by all record retention agreements entered into with any Tax authority or other Governmental Entity, and (ii) to give the other Group reasonable written notice prior to transferring, destroying

 

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or discarding any such books and records and, upon reasonable request, the Vornado Parties or the JBG Parties or their respective Affiliates, as the case may be, shall furnish or cause to be furnished to the other Group or allow the other Group access to such books and records.

 

(b)                                  The Vornado Parties and the JBG Parties and their respective Affiliates will cooperate in the preparation, execution and filing of all returns, questionnaires, applications or other documents regarding any real property transfer or gains, sales, use, transfer, value added, stock transfer or stamp taxes, any transfer, recording registration and other fees and any similar taxes that become payable in connection with the Transactions (together with any related interest, penalties or additions to such Tax, “ Transfer Taxes ”). Newco shall pay or cause to be paid, without deduction or withholding from any consideration or amounts payable pursuant to this Agreement, all Transfer Taxes resulting from the Pre-Combination Transactions and the Combination Transactions, whether payable at or after the Closing; provided , that for the avoidance of doubt, the JBG Parties and their respective Affiliates shall be liable for and shall pay or cause to be paid all Taxes (excluding Transfer Taxes previously described in this Section 6.3(b) ) that may be incurred by them as a result of the Restructuring Transactions.

 

(c)                                   Newco, as general partner of Newco OP, shall adjust the Carrying Value (as defined in the Partnership Agreement) of Newco OP’s assets immediately prior to the consummation of the Combination Transactions (the “ Historic Vornado Assets ”) in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(f) and paragraph 1.D.(2) of Exhibit B of the Partnership Agreement, and the capital accounts of the partners of Newco OP who were partners immediately prior to the consummation of the Combination Transactions shall be adjusted to reflect such adjustment to the Carrying Value of the Historic Vornado Assets.

 

(d)                                  The Vornado Parties and the JBG Parties agree to report for U.S. federal income tax purposes (i) the Pre-Combination Transactions in accordance with the Agreed Treatment (as that term is defined in the Tax Matters Agreement) and (ii) the Combination Transactions in the manner set forth in the relevant JBG Contribution Agreement or JBG Merger Agreements.

 

(e)                                   The Vornado Parties and the JBG Parties will cooperate with each other in good faith and use reasonable best efforts to (i) cause the applicable Transactions to qualify for the Agreed Treatment (as that term is defined in the Tax Matters Agreement), including (x) refraining from any action that such Party knows is reasonably likely to prevent the Agreed Treatment, (y) executing such amendments to this Agreement or the Ancillary Documents as may be reasonably required in order for the applicable Transactions to qualify for the Agreed Treatment (it being understood that no Party will be required to agree to any such amendment that it determines in good faith materially adversely affects the value of the applicable Transactions to such Party or its stockholders or equityholders) and (z) permitting the Vornado Parties to obtain the opinions described in Section 7.2(e)  and Section 7.2(f)  and permit the JBG Parties to obtain the opinions described in Section 7.3(e) , and (ii) minimize the amount of any Taxes resulting from the Transactions. For the avoidance of doubt, the Parties shall reasonably cooperate with each other so that the activities and assets associated with the Vornado Included Interests and the JBG Included Interests, between the date hereof and the Closing, shall be

 

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consistent with the applicable REIT requirements and shall work with each to identify and remove any issues that may arise.

 

(f)                                    The JBG Parties shall not (and shall cause the other members of the JBG Tax Group not to) acquire any shares of Vornado or Newco stock prior to the Closing, it being understood that the receipt of the Equity Consideration as contemplated by this Agreement is not prohibited hereby.

 

Section 6.4.                                  Employee Matters .

 

(a)                                  Employees . Following the Closing, the Parties shall cause Newco or its Subsidiary to employ each JBG Employee who is employed by a JBG Party as of the Closing. Each JBG Employee who so remains in active employment with Newco or an Affiliate thereof shall hereinafter be referred to as a “ Continuing Employee ” as of the Closing.

 

(b)                                  No Severance Obligations . The Parties intend that the Transactions shall not result in a separation of employment of any Continuing Employee for purposes of any JBG Benefit Plan prior to or upon the consummation of the Transactions and that the Continuing Employees will have continuous and uninterrupted employment for such purposes immediately before and immediately after the Closing, and the Parties shall make reasonable efforts to ensure the same. Newco shall be responsible for all severance obligations for Newco employees (including the Continuing Employees) arising from employment terminations after the Closing, except as set forth in Section 6.4(b)  of the JBG Disclosure Letter or Section 6.4(b)  of the Vornado Disclosure Letter.

 

(c)                                   WARN Act . Without limiting any other provision hereof, the JBG Parties and Vornado Parties shall each be responsible for complying with the WARN Act and any and all obligations under other applicable Laws requiring notice of plant closings, relocations, mass layoffs, reductions in force or similar actions (and for any failures to so comply), in any case, applicable to their respective employees, provided that in the case of Vornado employees, this paragraph shall apply with respect to only those employees who are anticipated to continue as employees of Newco or an Affiliate thereof prior to, at or after Closing, as a result of any action by any JBG Party or Vornado Party with respect to such respective employees on or prior to the Closing Date.

 

(d)                                  Collective Bargaining Agreements . The JBG Parties shall, or shall cause their Affiliates, consistent with applicable Law, to bargain in good faith and consistent with past practice with any union that has been certified or recognized as the collective bargaining representative of any Continuing Employees who are employed by the JBG Parties and/or their Affiliates; to assume all obligations to any such employees under all collective bargaining, works council or other similar employee representative agreements; and to cooperate and take all reasonable steps and fulfill all of their respective obligations under applicable Law and the terms of such collective bargaining, works council or other similar employee representative agreements, including obtaining any prior approvals or consents, or engaging in any prior discussions or consultations, on a timely basis, as may be legally required in order for the JBG

 

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Parties and their Affiliates to assume such obligations. This Agreement shall only be subject to such agreements, if any, that result from such bargaining, if such agreements are approved by the Vornado Parties, in their sole and absolute discretion after discussions with the JBG Parties. The JBG Parties will retain, and will indemnify Newco for, any liability in respect of the items set forth in Section 6.4(d)  of the JBG Disclosure Letter.

 

(e)                                   Incentive Compensation . The Vornado Parties shall be responsible for all annual bonuses payable to Vornado Service Providers with respect to performance periods ending on or prior to the Closing, and the JBG Parties shall be responsible for all annual bonuses payable to JBG Service Providers with respect to performance periods ending on or prior to the Closing.

 

(f)                                    No Third Party Beneficiaries; No Continued Service or Service Terms . The provisions of this Section 6.4 are solely for the benefit of the Parties and nothing in this Section 6.4 , express or implied, shall confer upon any employee, consultant, manager or other service provider (or any dependent, successor, legal representative or beneficiary thereof), any rights or remedies, including any right to continuance of employment or any other service relationship with the Parties or any of their Affiliates, or any right to compensation or benefits of any nature or kind whatsoever under this Agreement. Nothing in this Section 6.4 , express or implied, shall be: (i) an amendment or deemed amendment of any Plan, (ii) construed to interfere with the right of the Vornado Parties, Newco or their Affiliates to terminate the employment or other service relationship of any of the Continuing Employees at any time, with or without cause, or restrict any such entity in the exercise of their independent business judgment in modifying any of the terms and conditions of the employment or other service arrangement of the Continuing Employees, or (iii) deemed to obligate the Parties or any of their Affiliates to adopt, enter into or maintain any Plan at any time.

 

Section 6.5.                                  Management of Vornado Excluded Assets . Following Closing, upon request of the Vornado Parties from time to time, Newco or its Subsidiary shall provide property management, asset management, leasing brokerage and other similar services with respect to any Vornado Excluded Asset (including any Vornado Included Asset that is designated as a Kickout Interest) consisting of real property located in the Washington, D.C. metropolitan area as of the Closing Date, except for any services that, as of the Closing Date, are provided to such property by a third party that is not an Affiliate of Vornado. Such services shall be provided pursuant to a management agreement reflecting the terms set forth on Section 6.5 of the Vornado Disclosure Letter and such other reasonable and customary terms as the Parties may agree in good faith. The foregoing provisions of this Section 6.5 shall survive the Closing.

 

Section 6.6.                                  Transition Services; Separation and Distribution Agreement; Cleaning Services Agreements .

 

(a)                                  Between the date of this Agreement and March 15, 2017, the Vornado, JBG Properties and Newco agree to negotiate in good faith and finalize, for execution and delivery at the Closing, the terms and conditions (including cost and duration) of a transition

 

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services agreement (the “ Transition Services Agreement ”) whereby Vornado, or its Subsidiaries, will provide transition services to Newco and Newco OP.

 

(b)                                  After the date of this Agreement, the Vornado Parties shall prepare all schedules to be attached to the Separation and Distribution Agreement when such Separation and Distribution Agreement is executed, and provide such schedules to the JBG Parties sufficiently in advance of the anticipated execution of the Separation and Distribution Agreement by the parties thereto so that the JBG Parties have a reasonable opportunity to review and provide comments on such schedules, which schedules shall be in form and substance reasonably acceptable to the JBG Parties.

 

(c)                                   Between the date of this Agreement and March 15, 2017, the Vornado, JBG Properties and Newco agree to negotiate in good faith and finalize, for execution and delivery at the Closing, the terms and conditions of agreement for cleaning services (the “ Cleaning Services Agreements ”) in accordance with the terms set forth on Schedule C .

 

Section 6.7.                                  Further Assurances . Upon the terms and subject to the conditions contained herein, the Parties agree, both prior to and following the Closing (for a period not to exceed twelve (12) months) (a) to use Commercially Reasonable Efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transfer of the JBG Included Interests contemplated hereunder, (b) to execute any documents, instruments or conveyances of any kind which may be reasonably necessary or advisable to carry out the transfer of the JBG Included Interests contemplated hereunder, and (c) to cooperate with each other in connection with the foregoing. The foregoing provisions of this Section 6.7 shall survive the Closing. In addition, if requested by a Party, the members of the other Group agree prior to Closing to use Commercially Reasonable Efforts to deliver requests for estoppels, waivers or other agreements under any covenants, conditions or restrictions or other encumbrances affecting any of the Included Properties and Joint Venture Agreements.

 

Section 6.8.                                  Other Post-Closing Matters . At all times from and after Closing, Newco and the JBG Parties shall, and shall cause their respective Affiliates to, take the actions set forth on Section 6.8 of the JBG Disclosure Letter. The provisions of this Section 6.8 shall survive the Closing.

 

ARTICLE VII

 

CONDITIONS TO CONSUMMATION OF THE TRANSACTIONS

 

Section 7.1.                                  Conditions to Each Party’s Obligations to Consummate the Transactions at the Closing . The respective obligations of each Party to consummate the Transactions contemplated at the Closing shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions, any and all of which may be waived in whole or in part by the Vornado Parties and the JBG Representative, as the case may be, to the extent permitted by applicable Law:

 

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(a)                                  Listing . The Issued Newco Shares and Newco Shares issuable in exchange for OP Units shall have been approved for listing on the NYSE, subject only to official notice of issuance.

 

(b)                                  Laws; Court Orders . No Law shall have been enacted or promulgated by any Governmental Entity of competent jurisdiction which prohibits or makes illegal the consummation of the Transactions, and there shall be no order or injunction of a court of competent jurisdiction in effect preventing the consummation of the Transactions.

 

(c)                                   Antitrust Laws . Any required waiting periods (or any extensions thereof) under any provision of the HSR Act, and all other all federal and state statutes, rules, regulations, orders, decrees, administrative and judicial doctrines, and other Laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade, shall have expired, been waived or been terminated.

 

(d)                                  Pre-Combination Transactions . Subject to Section 5.8(a) , the Pre- Combination Transactions shall have been consummated in all material respects in accordance with the Separation and Distribution Agreement.

 

(e)                                   Closing of Contribution and Merger Agreements . The closing of the transactions contemplated by the JBG Contribution Agreements and JBG Merger Agreements with respect to the other JBG Parties shall occur substantially contemporaneously with the Closing (but after the closing of the Pre-Combination Transactions).

 

(f)                                    Form 10 . The Form 10 shall have become effective in accordance with the Exchange Act and shall not be subject to any stop order or proceeding seeking a stop order.

 

(g)                                   Kickout Interests .

 

(i)                                      No more than forty percent (40%) (calculated on the basis of the initial Asset Values as a percentage of the aggregate initial Asset Values of all of the JBG Included Properties, including any Kickout Interests) of the JBG Included Properties shall be Kickout Interests.

 

(ii)                                   No more than twenty percent (20%) (calculated on the basis of the initial Asset Values as a percentage of the aggregate initial Asset Values of all of the Vornado Included Properties, including any Kickout Interests) of the Vornado Included Properties shall be Kickout Interests.

 

It being understood that even if the closing condition described in this Section 7.1(g)  has been satisfied before the Outside Date, the Closing may not occur before the Outside Date unless a Party has the right to set the Revaluation Time and require the Closing to occur at an earlier time pursuant to Section 2.1 .

 

Section 7.2.                                  Conditions to Obligations of the Vornado Parties . The obligations of the Vornado Parties to consummate the Transactions shall also be subject to the satisfaction or

 

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waiver by Vornado Parties (in writing) on or prior to the Closing Date of each of the following additional conditions:

 

(a)                                  Representations and Warranties . (i) Other than the representations and warranties set forth in Section 4.1 (Organization) (except to the extent such representations and warranties relate only to Subsidiaries of the JBG Parties), Section 4.2 (Authorization; Validity of Agreement), Section 4.4 (Capital Structure; Subsidiaries) (except to the extent such representations and warranties relate only to Subsidiaries of the JBG Parties) and Section 4.27 (Brokers; Expenses), each of the representations and warranties of each of the JBG Parties set forth in this Agreement shall be true and correct (without giving effect to any qualification as to materiality or JBG Material Adverse Effect contained in Article IV ) as of the date of this Agreement and as of the Closing as though made on and as of the Closing (except that representations and warranties that by their terms speak specifically as of the date of this Agreement or another date shall be true and correct (without giving effect to any qualification as to materiality or JBG Material Adverse Effect contained in Article IV ) as of such date), except where any failures of any such representations and warranties to be true and correct would not reasonably be expected to have, individually or in the aggregate, a JBG Material Adverse Effect, and (ii) the representations and warranties set forth in Section 4.1 (Organization) (except to the extent such representations and warranties relate only to Subsidiaries of the JBG Parties), Section 4.2 (Authorization; Validity of Agreement), Section 4.4 (Capital Structure; Subsidiaries) (except to the extent such representations and warranties relate only to Subsidiaries of the JBG Parties) and Section 4.27 (Brokers; Expenses) of each of the JBG Parties shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (except that representations and warranties that by their terms speak specifically as of the date of this Agreement or another date shall be true and correct as of such date).

 

(b)                                  Performance of Obligations of the JBG Parties . Each of the JBG Parties shall have performed or complied (i) with all obligations required to be performed or complied with by such JBG Party under Section 5.5 of this Agreement (other than the obligations set forth in Section 5.5(b)(xiv) ) at or prior to the Closing, except where such non-performance or non- compliance would not reasonably be expected to have, individually or in the aggregate, a JBG Material Adverse Effect, and (ii) in all material respects with all other obligations required to be performed or complied with by such JBG Party under this Agreement at or prior to the Closing (including, without limitation, their obligations set forth in Section 5.5(b)(xiv)  and in the last sentence of Section 9.4 ).

 

(c)                                   Officer’s Certificate . The JBG Parties shall have delivered to Vornado a certificate, dated the date of the Closing and signed by the chief executive officer or another senior officer of its general partner or managing member on behalf of each of the JBG Parties, certifying to the effect that the conditions set forth in Section 7.2(a)  and Section 7.2(b)  have been satisfied.

 

(d)                                  JBG Party Deliverables . The JBG Parties shall have delivered to the Vornado Parties at the Closing all other agreements and items set forth in Section 2.3 .

 

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(e)                                   REIT Opinions .

 

(i)                                      The Vornado Parties and Newco shall have received a written opinion of JBG REIT Counsel with respect to each JBG REIT on which Vornado REIT Counsel shall be entitled to rely in connection with its opinion rendered pursuant to Section 7.2(e)(ii)  and on which Newco and its REIT counsel shall be entitled to rely following the Closing Date for future opinions, dated as of the Closing Date and in form and substance reasonably satisfactory to the Vornado Parties, to the effect that, commencing with such JBG REIT’s First Applicable Year, such JBG REIT has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code and its actual method of operation has enabled such JBG REIT to meet, through the Closing Date, and its proposed method of operation will enable such JBG REIT to continue to meet, the requirements for qualification and taxation as a REIT under the Code (each, a “ JBG REIT Opinion ” and, collectively and together with the JBG Newco REIT Opinion, the “ JBG REIT Opinions ”), which opinion will (i) be subject to customary exceptions, assumptions and qualifications (including Reasonable Cause Exceptions) and (ii) be based on customary representations contained in an officer’s certificate from the JBG Parties (including Reasonable Cause Exceptions) provided pursuant to Section 5.18 , and executed by an officer with the knowledge necessary to make the representations contained therein.

 

(ii)                                   The Vornado Parties and Newco shall have received a written opinion of Vornado REIT Counsel, dated as of the Closing Date and in form and substance reasonably satisfactory to the Vornado Parties and on which Newco and its REIT counsel shall be entitled to rely following the Closing Date, to the effect that, commencing with Newco’s first taxable year and taking into account the Transactions and the Post-Closing Transactions, Newco will be organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code and its proposed method of operation will enable Newco to continue to meet the requirements for qualification and taxation as a REIT under the Code for the taxable year that includes the Closing and subsequent taxable years (the “ Vornado Newco REIT Opinion ”), which opinion will (i) be subject to customary exceptions, assumptions and qualifications (including Reasonable Cause Exceptions) and (ii) be based on customary representations contained in officer’s certificates from Newco (including Reasonable Cause Exceptions) provided pursuant to Section 5.16 , and executed by an officer with the knowledge necessary to make the representations contained therein.

 

(f)                                    Distribution Opinion . The Vornado Parties shall have received a written opinion of Sullivan & Cromwell LLP, special tax counsel to Vornado, satisfactory to the Vornado board of trustees, to the effect that the Vornado Contribution of OP Units (as defined in Section 1.1 of the Vornado Disclosure Letter) together with the Vornado Distribution (as defined in Section 1.1 of the Vornado Disclosure Letter), each as provided in the Separation and Distribution Agreement, and taking into account the other Transactions and the Post-Closing Transactions, will qualify (a) as a transaction described in Section 368(a)(1)(D) and Section 355 of the Code, (b) as a transaction in which the stock distributed by Vornado is “qualified

 

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property” for purposes of Section 355(d) and 355(e) of the Code, and (c) as a transaction in which shareholders of Vornado will not recognize gain or loss upon the distribution under Section 355(a) of the Code, which opinion will (i) be subject to customary exceptions, assumptions and qualifications, (ii) be based on customary representations contained in officer’s certificates from Vornado, provided pursuant to Section 5.17(a) , and executed by an officer with the knowledge necessary to make the representations contained therein.

 

(g)                                   Key Persons . Each of the individuals listed on Section 7.2(g)  of the Vornado Disclosure Letter shall have remained employed by the JBG Parties through the Closing Date, and no such individual shall have repudiated his or her Employment Agreement.

 

(h)                                  Licenses, Approvals, Permits and Registrations . Except as set forth on Section 7.2(h)  of the JBG Disclosure Letter, the JBG Parties shall have obtained all of the licenses, approvals, permits and registrations necessary to operate the management business of the JBG Parties following the Closing, except where the failure to have obtained the same would not reasonably be expected to have, individually or in the aggregate, a JBG Material Adverse Effect.

 

Section 7.3.                                  Conditions to Obligations of the JBG Parties . The obligations of the JBG Parties to consummate the Transactions contemplated at the Closing are also subject to the satisfaction or waiver (in writing) by the JBG Representative on or prior to the Closing Date of each of the following additional conditions:

 

(a)                                  Representations and Warranties . (i) Other than the representations and warranties set forth in Section 3.1 (Organization and Qualifications; Subsidiaries) (except, with respect to the representations and warranties in Section 3.1(e) , to the extent the same relate only to Vornado Included Entities), Section 3.3 (Capital Structure) (except to the extent such representations and warranties relate only to Vornado Included Entities), Section 3.4 (Authority) and Section 3.24 (Brokers; Expenses), each of the representations and warranties of the Vornado Parties set forth in this Agreement shall be true and correct (without giving effect to any qualification as to materiality or Vornado Material Adverse Effect contained in Article III ) as of the date of this Agreement and as of the Closing as though made on and as of the Closing (except that representations and warranties that by their terms speak specifically as of the date of this Agreement or another date shall be true and correct (without giving effect to any qualification as to materiality or Vornado Material Adverse Effect contained in Article III ) as of such date), except where any failures of any such representations and warranties to be true and correct would not reasonably be expected to have, individually or in the aggregate, a Vornado Material Adverse Effect, and (ii) the representations and warranties set forth in Section 3.1 (Organization and Qualifications; Subsidiaries) (except, with respect to the representations and warranties in Section 3.1(e) , to the extent the same relate only to Vornado Included Entities), Section 3.3 (Capital Structure) (except to the extent such representations and warranties relate only to Vornado Included Entities), Section 3.4 (Authority) and Section 3.24 (Brokers; Expenses) shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (except that representations and warranties

 

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that by their terms speak specifically as of the date of this Agreement or another date shall be true and correct as of such date).

 

(b)                                  Performance of Obligations of the Vornado Parties . The Vornado Parties shall have performed or complied (i) with all obligations required to be performed or complied with by them under Section 5.4 of this Agreement at or prior to the Closing, except where such non-performance or non-compliance would not reasonably be expected to have, individually or in the aggregate, a Vornado Material Adverse Effect, and (ii) in all material respects with all other obligations required to be performed or complied with by such Vornado Party under this Agreement at or prior to the Closing (including, without limitation, their obligations set forth in the last sentence of Section 9.4 ).

 

(c)                                   Officer’s Certificate . Vornado shall have delivered to the JBG Parties a certificate, dated the date of the Closing and signed by its chief executive officer or another senior officer on behalf of Vornado, certifying to the effect that the conditions set forth in Section 7.3(a)  and Section 7.3(b)  have been satisfied.

 

(d)                                  Vornado Party Deliverables . The Vornado Parties shall have delivered or caused to be delivered to the JBG Parties at the Closing the Equity Consideration and all agreements and other items set forth in Section 2.2 .

 

(e)                                   REIT Opinions .

 

(i)                                      The JBG Parties and Newco shall have received a written opinion of Vornado REIT Counsel with respect to each Vornado REIT on which JBG REIT Counsel shall be entitled to rely in connection with its opinion rendered pursuant to Section 7.3(e)(ii)  and on which Newco and its REIT counsel shall be entitled to rely following the Closing Date for future opinions, dated as of the Closing Date and in form and substance reasonably satisfactory to the JBG Parties, to the effect that, commencing with such Vornado REIT’s First Applicable Year, such Vornado REIT has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code and its actual method of operation has enabled such Vornado REIT to meet, through the Closing Date, and its proposed method of operation will enable such Vornado REIT to continue to meet, the requirements for qualification and taxation as a REIT under the Code (each, a “ Vornado REIT Opinion ” and, collectively and together with the Vornado Newco REIT Opinion, the “ Vornado REIT Opinions ”), which opinion will (i) be subject to customary exceptions, assumptions and qualifications (including Reasonable Cause Exceptions) and (ii) be based on customary representations contained in an officer’s certificate from the Vornado Parties (including Reasonable Cause Exceptions) provided pursuant to Section 5.17(b) , and executed by an officer with the knowledge necessary to make the representations contained therein.

 

(ii)                                   The JBG Parties and Newco shall have received a written opinion of JBG REIT Counsel, dated as of the Closing Date and in form and substance reasonably satisfactory to the JBG Parties and on which Newco and its REIT counsel shall be

 

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entitled to rely following the Closing Date, to the effect that, commencing with Newco’s first taxable year and taking into account the Transactions and the Post-Closing Transactions, Newco will be organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code and its proposed method of operation will enable Newco to continue to meet the requirements for qualification and taxation as a REIT under the Code for the taxable year that includes the Closing and subsequent taxable years (the “ JBG Newco REIT Opinion ”), which opinion will (i) be subject to customary exceptions, assumptions and qualifications (including Reasonable Cause Exceptions) and (ii) be based on customary representations contained in officer’s certificates from Newco (including Reasonable Cause Exceptions) provided pursuant to Section 5.16 , and executed by an officer with the knowledge necessary to make the representations contained therein.

 

(iii)                                The JBG Parties and Newco shall have received a written opinion of Vornado REIT Counsel on which JBG REIT Counsel shall be entitled to rely in connection with its opinion rendered pursuant to Section 7.3(e)(ii)  and on which Newco and its REIT counsel shall be entitled to rely following the Closing Date for future opinions, dated as of the Closing Date and in form and substance reasonably satisfactory to the JBG Parties, to the effect that, commencing with Vornado’s First Applicable Year, Vornado has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code and its actual method of operation has enabled Vornado to meet, through the Closing Date, and its proposed method of operation will enable Vornado to continue to meet, the requirements for qualification and taxation as a REIT under the Code, which opinion will (i) be subject to customary exceptions, assumptions and qualifications (including Reasonable Cause Exceptions) and (ii) be based on customary representations contained in an officer’s certificate from the Vornado Parties (including Reasonable Cause Exceptions) provided pursuant to Section 5.17(b) , and executed by an officer with the knowledge necessary to make the representations contained therein.

 

(f)                                    Newco Board Resignations . Each current member of the Newco Board who is not a JBG Board Designee or a Vornado Board Designee shall have delivered an irrevocable written resignation from the Newco Board or shall have otherwise ceased to be a member of the Newco Board.

 

Section 7.4.                                  Frustration of Closing Conditions . No Party may rely on the failure of any condition set forth in this Article VII to be satisfied if such failure was caused by the failure of such Party to comply with its obligations set forth in this Agreement or the Separation and Distribution Agreement.

 

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ARTICLE VIII

 

TERMINATION

 

Section 8.1.                                  Termination . This Agreement may be terminated at any time prior to the Closing, as follows:

 

(a)                                  by mutual written agreement of each of Vornado and the JBG Representative; or

 

(b)                                  by either Vornado or the JBG Parties, if:

 

(i)                                      the Closing shall not have occurred on or before December 29, 2017 (the “ Outside Date ”); provided , that the right to terminate this Agreement pursuant to this Section 8.1(b)(i)  shall not be available to any Party if the failure of such Party (and (A) in the case of Vornado, including the failure of any Vornado Party and (B) in the case of the JBG Parties, including the failure of any JBG Party) to perform any of its obligations under this Agreement has been a principal cause of, or resulted in, the failure of the Closing to be consummated on or before such date; or

 

(ii)                                   any Governmental Entity of competent jurisdiction shall have issued a judgment, injunction, order or decree or taken any other action permanently restraining, enjoining or otherwise prohibiting the Transactions, and such judgment, injunction, order or decree or other action shall have become final and non-appealable; provided , however , that the right to terminate this Agreement under this Section 8.1(b)(ii)  shall not be available to a Party if the issuance of such final, non-appealable judgment, injunction, order or decree was primarily due to the failure of such Party (and (A) in the case of Vornado, including the failure of any Vornado Party and (B) in the case of the JBG Parties, including the failure of any JBG Party) to perform any of its obligations under this Agreement; or

 

(c)                                   by the Vornado Parties if any JBG Party shall have breached or failed to perform any of its representations, warranties, covenants or other agreements set forth in this Agreement, which breach or failure to perform, either individually or in the aggregate, (x) would result in a failure of a condition set forth in Section 7.1 or Section 7.2 and (y) cannot be cured on or before the Outside Date or, if curable, is not cured by the JBG Parties within twenty (20) Business Days of receipt by the JBG Parties of written notice of such breach or failure; provided that Vornado shall not have the right to terminate this Agreement pursuant to this Section 8.1(c)  if any Vornado Party is then in breach of any of their respective representations, warranties, covenants or agreements set forth in this Agreement such that the conditions set forth in either Section 7.1 or Section 7.3 would not be satisfied; or

 

(d)                                  by the JBG Parties if any Vornado Party shall have breached or failed to perform any of its representations, warranties, covenants or other agreements set forth in this Agreement, which breach or failure to perform, either individually or in the aggregate, (x) would

 

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result in a failure of a condition set forth in Section 7.1 or Section 7.3 and (y) cannot be cured on or before the Outside Date or, if curable, is not cured by the Vornado Parties within twenty (20) Business Days of receipt by the Vornado Parties of written notice of such breach or failure; provided that the JBG Parties shall not have the right to terminate this Agreement pursuant to this Section 8.1(d)(i)  if any JBG Party is then in breach of any of its respective representations, warranties, covenants or agreements set forth in this Agreement such that the conditions set forth in either Section 7.1 or Section 7.2 would not be satisfied.

 

Section 8.2.                                  Effect of Termination . In the event that this Agreement is terminated and the Closing and the other Transactions are abandoned pursuant to Section 8.1 , written notice thereof shall be given to the other party or parties, specifying the provisions hereof pursuant to which such termination is made and describing the basis therefor in reasonable detail, and this Agreement shall forthwith become null and void and of no further force or effect whatsoever without Liability on the part of any party hereto (or any of the Vornado Subsidiaries, JBG Parties’ Subsidiaries or any of the Vornado Parties’ or the JBG Parties’ respective Representatives), and all rights and obligations of any party hereto shall cease; provided , however , that, notwithstanding anything in the foregoing to the contrary (a) no such termination shall relieve any party hereto of any Liability or damages resulting from or arising out of any fraud or Willful Breach of this Agreement prior to such termination of this Agreement, in which case the aggrieved party shall be entitled to all rights and remedies available at law or in equity; and (b)  Section 5.20 , this Section 8.2 , Article IX and the definitions of all defined terms appearing in such sections shall survive any termination of this Agreement pursuant to Section 8.1 for twelve (12) months. For avoidance of doubt, and without limiting the foregoing, any failure of the Vornado Parties or the JBG Parties (as applicable) to effect the Closing as required by Section 2.1 shall be a willful and intentional material breach of this Agreement by such parties and shall be deemed to constitute a Willful Breach. If this Agreement is terminated as provided herein, all filings, applications and other submissions made pursuant to this Agreement, to the extent practicable, shall be withdrawn from the Governmental Entity or other Person to which they were made.

 

ARTICLE IX

 

MISCELLANEOUS

 

Section 9.1.                                  Amendment . Subject to compliance with applicable Law, this Agreement may be amended by mutual agreement of the Parties hereto by action taken or authorized by their respective boards of directors, boards of trustees, general partners or other similar governing body or entity at any time prior to the Closing. This Agreement may not be amended except by an instrument in writing signed by each of the Parties hereto.

 

Section 9.2.                                  Waiver . At any time prior to the Closing, subject to applicable Law, any Party hereto may (a) extend the time for the performance of any obligation or other act of any other Party hereto, (b) waive any inaccuracy in the representations and warranties of the other Party contained herein or in any document delivered pursuant hereto, and (c) subject to the proviso of Section 9.1 , waive compliance with any agreement or condition contained herein.

 

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Any agreement on the part of a Party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the Party or Parties to be bound thereby. Notwithstanding the foregoing, no failure or delay by any Party hereto in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise of any other right hereunder.

 

Section 9.3.                                  Non-Survival . None of the representations, warranties, pre-Closing covenants or agreements in this Agreement or in any schedule, instrument or other document delivered pursuant to this Agreement shall survive the Closing; provided , however , that this Section 9.3 shall not limit any covenant or agreement of the Parties to the extent such covenant or agreement by its terms contemplates performance after the Closing, which shall survive the Closing.

 

Section 9.4.                                  Expenses . Except as may be otherwise expressly contemplated herein, all Expenses incurred in connection with this Agreement and the Transactions (including Financial Advisor Expenses) shall be paid by the Party incurring such Expenses in the event the Closing does not occur unless the Closing does not occur by reason of the other Party’s Willful Breach, breach of representation or warranty or breach or default of covenant which results in a condition in Section 7.1 , Section 7.2 or Section 7.3 not to be satisfied (it being agreed, for clarity, that a failure of the condition in Section 7.2(g)  to be satisfied on account of the death, disability or incapacity of one or more of the individuals listed on Section 7.2(g)  of the Vornado Disclosure Letter shall not be deemed a breach or default of covenant by the JBG Parties for purposes of this sentence). In the event that the Closing occurs, Newco and Newco OP shall pay all bona fide third party Expenses (which, for the avoidance of doubt, shall not include any expenses incurred by the JBG Parties or their Affiliates solely in connection with the proposed initial public offering of the JBG Parties or the proposed transaction between the JBG Parties and New York REIT, Inc.) incurred by the Parties in connection with this Agreement, the Restructuring Transactions and the other Transactions (and shall reimburse the JBG Parties and the Vornado Parties for any such Expenses previously paid by them), other than Consent Expenses, Financial Advisor Expenses and the expenses set forth in Section 6.1(f)  of the JBG Disclosure Letter and the Vornado Disclosure Letter below the cap described therein; provided , that if the JBG Management Entities incur Indebtedness in amounts permitted by Section 5.5(b)(xiv) , then the JBG Parties agree to apply any reimbursement for Expenses from Newco and Newco OP to the repayment of such Indebtedness until the same is fully repaid. On or before the Closing, the JBG Parties and the Vornado Parties shall pay their respective Consent Expenses, Financial Advisor Expenses and the expenses set forth in Section 6.1(f)  of the JBG Disclosure Letter and the Vornado Disclosure Letter below the cap described therein.

 

Section 9.5.                                  Notices . All notices, requests, demands, claims and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given (i) when received if delivered personally; (ii) when transmitted if transmitted by e-mail of a pdf attachment and the hard copy is sent by the next Business Day by reliable overnight delivery service (with proof of service) or hand delivery); and (iii) the Business Day after it is sent, if sent for next day delivery by reliable overnight delivery service (with proof of service), hand delivery or certified or registered mail (return

 

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receipt requested and first-class postage prepaid), addressed as follows (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 9.5 ):

 

if to the Vornado Parties, to:
	Vornado Realty Trust
	888 Seventh Avenue
	New York, New York 10019
	Attention:	Secretary and General Counsel
	E-mail:	arice@vno.com
	Vornado Realty
	888 Seventh Avenue
	New York, New York 10019
	Attention:	Executive Vice President — Chief Investment Officer
	E-mail:	mfranco@vno.com
	Vornado Realty Trust
	210 Route 4 East
	Paramus, New Jersey 07652
	Attention:	Executive Vice President — Finance and
		Chief Administrative Officer
	E-mail:	jmacnow@vno.com
with copies to (which shall not constitute notice):
	Sullivan & Cromwell LLP
	125 Broad Street
	New York, New York 10004
	Attention:	Arthur S. Adler, Esq.
	E-mail:	adlera@sullcrom.com
if to the JBG Parties, to:
	JBG Properties Inc.
	4445 Willard Avenue, Suite 400
	Chevy Chase, Maryland 20815
	Attention:	W. Matthew Kelly
	E-mail:	mkelly@jbg.com
with copies to (which shall not constitute notice):
	Hogan Lovells US LLP
	Columbia Square
	555 Thirteenth Street, NW
	Washington, District of Columbia 20004

 

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	Attention:	David W. Bonser, Esq.
	E-mail:	david.bonser@hoganlovells.com

 

Section 9.6.                                  Certain Definitions . For the purposes of this Agreement, the term:

 

“ Accredited Investor ” means an “accredited investor” as defined in Rule 501(a) promulgated under the Securities Act.

 

“ Affiliate ” of any Person means any other Person directly or indirectly controlling or controlled by or under common control with such Person. For the purposes of this definition, “control”, when used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

 

“ Agreed Treatment ” has the meaning ascribed to such term in the Tax Matters Agreement.

 

“ Ancillary Documents ” means the Separation and Distribution Agreement, the JBG Fund Contribution Agreements, the JBG Managing Member Contribution Agreements, the JBG Properties Contribution Agreement, the JBG Partnership Merger Agreement, the JBG LLC Merger Agreement, the Registration Rights Agreements, the Declaration of Trust Amendment and Restatement, the Bylaws Amendment and Restatement, the Partnership Agreement Amendment and Restatement, the Employment Agreements, the Employee Matters Agreement, the Transition Services Agreement, the Tax Matters Agreement, the GP Subcontracts, the Cleaning Services Agreement and each other document or instrument contemplated hereby to be executed and delivered by any of the Parties at or prior to the Closing.

 

“ Atlantic REIT ” means JBG/Atlantic REIT, L.L.C.

 

“ Business Day ” means any day that is not a Saturday, Sunday or other day on which banking institutions in New York City or Washington D.C. are authorized or required by Law to close.

 

“ Cash Consideration Cap ” means five million dollars ($5,000,000).

 

“ Cash Contributed at Closing by JBG ” means the product of (x) a fraction, the numerator of which is the aggregate of the Asset Values of the JBG Parties’ JBG Included Assets (as determined in accordance with Section 1.5 and Section 1.6(a) , and including, for clarity, all JBG Included Assets initially designated as Kickout Interests that are subsequently included in the transaction following the receipt of all applicable Required JBG Consents), and the denominator of which is the aggregate of the Asset Values of the Vornado Included Assets (as determined in accordance with Section 1.5 and Section 1.6(a) , and including, for clarity, all Vornado Included Assets initially designated as Kickout Interests that are subsequently included in the transaction following the receipt of all applicable Required Vornado Consents), multiplied by (y) $200,000,000.

 

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“ Cash Contributed at Closing by Vornado ” means $200,000,000.

 

“ Closing Date Payments ” means the payment in full, in cash, of the aggregate Expenses of the Parties other than Consent Expenses, Financial Advisor Expenses and the expenses set forth on Section 6.1(f)  of the JBG Disclosure Letter and the Vornado Disclosure Letter below the cap described therein.

 

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

 

“ Commercially Reasonable Efforts ” means the efforts that a commercially reasonable Person desirous of achieving a result would use in similar circumstances to achieve that result as expeditiously as reasonably practicable; provided , however , that, except as otherwise set forth herein (including, for clarity, any provision of this Agreement requiring a Person to expend funds in given amounts), a Person required to use Commercially Reasonable Efforts under this Agreement will not be thereby required to take any action that would result in a material adverse change in the benefits to such Person under this Agreement or the transactions contemplated hereby, to consummate the Closing at any time prior to the date determined in accordance with Section 2.1 , to make any change to its business, to incur any material fees or expenses (other than reasonable or customary consent fees not to exceed the amounts set forth on Section 9.6(a)  of the Vornado Disclosure Letter and Section 9.6(a)  of the JBG Disclosure Letter, normal and usual filing fees, processing fees and incidental expenses), to commence any litigation or to incur any other material obligation or liability.

 

“ Confidential Information ” means all confidential and proprietary information of the Disclosing Party, including, but not limited to, all documents, financial statements, reports, forecasts, projections, surveys, diagrams, records, engineering reports and all other written or oral information, as well as diskettes and other forms of electronically transmitted data, furnished or made available by the Disclosing Party to, or at the direction of, the Receiving Party, or the Receiving Party’s Representatives relating to the Disclosing Party, the Transaction or directly related matters to, as well as any written memoranda, notes, analyses, reports, compilations, or studies prepared by the Receiving Party or any of its Representatives (in whatever form of medium) that contain, or are derived from, such information. Confidential Information shall also include the fact that Confidential Information has been furnished or made available, that discussions or negotiations are taking place concerning the Transaction, or any of the terms, conditions or other facts with respect to the Transaction, including the status thereof. Notwithstanding the foregoing, Confidential Information does not include information furnished or made available by or on behalf of the Disclosing Party if such information (a) is or becomes generally available to the public, other than as a result of disclosure by or through the Receiving Party or its Representatives in violation of this agreement; (b) was already in the possession of the Receiving Party prior to its disclosure hereunder; (c) becomes available to the Receiving Party from a source (other than the Disclosing Party or its Representatives) not bound, to the knowledge of the Receiving Party or its Representatives, by any obligation of confidentiality to the Disclosing Party with respect to such information; or (d) is independently developed by the Receiving Party or its Representatives without the use of any Confidential Information. Consistent with the foregoing, (i) as to all Confidential Information about the Vornado Included

 

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Entities, Vornado Included Assets, JBG Included Entities and JBG Included Assets, from and after the Closing, such Confidential Information shall be Confidential Information of Newco and Newco OP, (ii) with respect to all Confidential Information about the JBG Excluded Assets or any of the JBG Parties (other than any JBG Included Entities, such Confidential Information shall remain be Confidential Information of the JBG Parties and (iii) with respect to all Confidential Information about the Vornado Excluded Assets or any of the Vornado Parties (other than the Newco, Newco OP and any Vornado Included Entities, such Confidential Information shall remain Confidential Information of the Vornado Parties.

 

“ Consent Expenses ” means (i) any assumption, consent or transfer fees owed or otherwise charged by the applicable counterparty (or its servicer or representative) in connection with obtaining any Required Consents, (ii) all refinancing costs and expenses (including, without limitation, brokerage fees, origination fees, title insurance premiums and other costs incurred or reimbursed to a lender) relating to any refinanced Indebtedness in respect of any Included Properties as a result of a Debt Refinancing, a Failed Loan Assumption or otherwise, (iii) all prepayment premiums and penalties and “make-wholes” that result from the refinancing of any Indebtedness in respect of any Included Property as a result of a Debt Refinancing, a Failed Loan Assumption or otherwise, (iv) all costs to provide replacement collateral required to defease any Indebtedness in respect of any Included Property as a result of a Debt Refinancing, a Failed Loan Assumption or otherwise, (v) all processing fees charged by a lender or a servicer in order to submit application packages relating to the assumption of any Indebtedness in respect of any Included Property, (vi) all applicable mortgage taxes, intangible taxes, documentary stamp taxes and recordation charges relating to any assumption of any Indebtedness in respect of any Included Property or a refinancing thereof, (vii) any third party, out-of-pocket costs and expenses, including attorneys’ fees and expenses charged by a lender in connection with the assumption of any Indebtedness relating to any Included Property or the refinancing thereof, and (viii) any third party, out-of-pocket costs and expenses, including attorneys’ fees and expenses charged by a lender, landlord or Joint Venture Partner in connection with the consideration of, and/or the documentation of, any Required Debt Consent, Required Ground Lease Consent or Required JV Consent, as applicable.

 

“ Consideration ” means, collectively, the Cash Consideration and the Equity Consideration.

 

“ Contract ” means any agreement, contract, instrument, commitment, lease, guaranty, indenture, license, or other arrangement or understanding (and all amendments, side letters, modifications and supplements thereto) between parties or by one party in favor of another party, whether written or oral, but excluding any Vornado Leases, JBG Leases and any ground lease affecting an Included Property.

 

“ Core REITs ” means 151 Q Street REIT, L.L.C., Fairways Residential REIT, L.L.C., JBG/Foundry Office REIT, L.L.C., JBG/Pickett Office REIT, L.L.C., and JBG/Woodbridge REIT, L.L.C.

 

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“ Disclosing Party ” means either the JBG Parties or the Vornado Parties, as applicable, when such Party is acting in its capacity as the provider of Confidential Information and any Representative thereof providing information hereunder.

 

“ Distributions ” means, during the applicable period, any of the following: (i) the declaration or payment of any dividend or any other distribution in respect of the partnership, membership or other ownership interests or any payment made to the direct or indirect holders (in their capacities as such) of the partnership, limited liability company or other entity, or (ii) the purchase, redemption or other acquisition or retirement for value by of any Equity Interest in such entity.

 

“ Environmental Law ” means any and all applicable Laws which (i) regulate or relate to the protection or clean-up of natural resources or the environment; the use, treatment, storage, transportation, handling, disposal or release of Hazardous Substances, the preservation or protection of waterways, groundwater, drinking water, air, wildlife, plants or other natural resources; or the health and safety of persons or property, including protection of the health and safety of employees, with respect to exposure to Hazardous Substances; or (ii) impose liability or responsibility with respect to any of the foregoing, including the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601 et seq.), or any other Law of similar effect.

 

“ Environmental Permits ” means any material permit, exemption, license, authorization or approval required under applicable Environmental Laws.

 

“ Equity Interest ” means, with respect to any entity, any share, capital stock, partnership, member or similar interest in such entity, and any option, warrant, right or security (including debt securities) convertible, exchangeable or exercisable therefor.

 

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and all regulations, rules and other guidance promulgated thereunder.

 

“ ERISA Affiliate ” means any Person (whether or not incorporated) which is (or at any relevant time was) a member of a “controlled group of corporations” with, under “common control” with, or a member of an “affiliated service group” with, any Party as defined in Section 414(b), (c), (m) or (o) of the Code.

 

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and all regulations, rules and other guidance promulgated thereunder.

 

“ Expenses ” means all reasonable out-of-pocket expenses (including all fees and expenses of counsel, accountants, experts and consultants to a Party and its affiliates, except to the extent constituting Financial Advisor Expenses) incurred by a Party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement, the solicitation of equityholder and stockholder approvals, the filing of any required notices under the HSR Act or other similar regulations, the obtaining of the licenses, approvals, permits and registrations described on Section 7.2(h)  of the JBG Disclosure Letter, any filings

 

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