Document:

exv10w7

Exhibit 10.7

EMPLOYMENT AGREEMENT

          THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of           , 2010, is entered
into by and between Younan Properties, Inc., a Maryland corporation (the “REIT”), Younan
Properties, L.P., a Maryland limited partnership (the “Operating Partnership”) and Andres
R. Gavinet (the “Executive”).

          WHEREAS, the REIT and the Operating Partnership (collectively, the “Company”) desire
to employ the Executive and to enter into an agreement embodying the terms of such employment; and

          WHEREAS, the Executive desires to accept employment with the Company, subject to the terms and
conditions of this Agreement.

          NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

          1. Employment Period. Subject to the provisions for earlier termination hereinafter
provided, the Executive’s employment hereunder shall be for a term (the “Employment
Period”) commencing on the Effective Date and ending on the third anniversary of the Effective
Date (the “Initial Termination Date”). If not previously terminated, the Employment Period
shall automatically be extended for one additional year on the Initial Termination Date, unless
either the Executive or the Company elects not to so extend the Employment Period by notifying the
other party, in writing, of such election not less than ninety (90) days prior to the last day of
the Employment Period as then in effect. For purposes of this Agreement, “Effective Date”
shall mean the date of the closing of the initial public offering of shares of the REIT’s common
stock.

          2. Terms of Employment.

          (a) Position and Duties.

          (i) During the Employment Period, the Executive shall serve as Chief Financial Officer
of the REIT and the Operating Partnership, and shall perform such employment duties as are
usual and customary for such position. The Executive shall report directly to the Company’s
Chief Executive Officer or to such other senior executive officer of the Company as the
Chief Executive Officer may designate. At the Company’s request, the Executive shall serve
the Company and/or its subsidiaries and affiliates in other capacities in addition to the
foregoing consistent with the Executive’s position as Chief Financial Officer of the REIT
and the Operating Partnership. In the event that the Executive, during the Employment Period, serves in any one or more of
such additional capacities, the Executive’s compensation shall not be increased beyond that
specified in Section 2(b) hereof. In addition, in the event the Executive’s service in one
or more of such additional capacities is terminated, the Executive’s compensation, as
specified in Section 2(b) hereof, shall not be diminished or reduced in any manner as a
result of such termination provided that the Executive otherwise remains employed under the
terms of this Agreement.

 

 

          (ii) During the Employment Period, and excluding any periods of vacation and sick leave
to which the Executive is entitled, the Executive agrees to devote his full business time
and attention to the business and affairs of the Company. During the Employment Period it
shall not be a violation of this Agreement for the Executive to (A) serve on corporate,
civic or charitable boards or committees, (B) fulfill limited teaching, speaking and writing
engagements, (C) engage in political activities or (D) manage other businesses or properties
and his personal investments, in each case, so long as such activities do not significantly
interfere or conflict with the performance of the Executive’s responsibilities as an
employee of the Company in accordance with this Agreement.

          (iii) During the Employment Period, the Executive shall perform the services required
by this Agreement at the Company’s principal offices located in Woodland Hills, California
(the “Principal Location”), except for travel to other locations as may be necessary
to fulfill the Executive’s duties and responsibilities hereunder.

          (b) Compensation, Benefits, Etc.

          (i) Base Salary. During the Employment Period, the Executive shall receive a
base salary (the “Base Salary”) of $300,000 per annum. The Base Salary shall be
reviewed annually by the Compensation Committee (the “Compensation Committee”) of
the Board of Directors of the REIT (the “Board”) and may be increased from time to
time by the Compensation Committee in its sole discretion. The Base Salary shall be paid in
accordance with the Company’s normal payroll practices for executive salaries generally.
During the Employment Period, the Base Salary shall be reviewed at least annually for
possible increase in the Company’s discretion. Any increase in Base Salary shall not serve
to limit or reduce any other obligation to the Executive under this Agreement. The Base
Salary shall not be reduced after any such increase and the term “Base Salary” as utilized
in this Agreement shall refer to Base Salary as so increased.

          (ii) Annual Bonus. In addition to the Base Salary, as an incentive for the
Executive to remain employed by the Company through the end of each of the Company’s fiscal years during the Employment Period and to contribute to the attainment
of certain performance objectives through the end of each such year, provided that the
Executive remains employed by the Company on the last day of each such year, the Executive
shall be eligible to earn, for each fiscal year of the Company ending during the Employment
Period, an annual cash performance bonus (an “Annual Bonus”) under the Company’s
bonus plan or program applicable to senior executives. The Executive’s target Annual Bonus
shall be 100% of his Base Salary actually paid for such year, but the actual amount of the
Annual Bonus shall be determined on the basis of the attainment of financial performance
metrics and/or individual performance objectives, in each case as established and approved
by the Compensation Committee of the Board in its sole discretion; provided,
however, that the Executive’s Annual Bonus with respect to the partial fiscal year
in which the Effective Date occurs shall be pro rated according to the Base Salary actually
paid for such partial fiscal year and may be determined on the basis of attainment of
individual objectives or subjective criteria approved by the Compensation Committee of the
Board.

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          (iii) LTIP Award. Subject to adoption by the Board and approval by the REIT’s
stockholders of the Company’s incentive award plan (the “Incentive Plan”), and
provided the Executive is employed by the Company on the date of the
grant, the Operating
Partnership shall, on or as soon as practicable following the Effective Date, issue to the Executive, and the Executive
agrees to accept from the Operating Partnership as part of his compensation for services
rendered to or for the benefit of the Operating Partnership, (A) a number of LTIP Units (as
defined the Amended and Restated Agreement of Limited Partnership of Younan Properties,
L.P.) which is equal to the quotient obtained by dividing (x) $750,000 by (y) the initial
public offering price of a share of the REIT’s common stock (the “Time Vesting LTIP
Units”), and (B) a number of LTIP Units which is equal to the quotient obtained by
dividing (x) $500,000 by (y) the product of the initial public offering price of a share of
the REIT’s common stock multiplied by            (the “Performance Vesting LTIP Units”).
Subject to the Executive’s continued employment with the Company, twenty percent (20%) of
the Time Vesting LTIP Units shall vest on each of the first five anniversaries of the date
of grant, and the Performance Vesting LTIP Units shall vest based on the satisfaction by the
REIT of “total shareholder return” hurdles established by the Company and set forth in the
applicable award agreement. The terms and conditions of the Time Vesting LTIP Units and the
Performance Vesting LTIP Units shall be set forth in separate award agreements (the
“LTIP Units Agreements”) in such forms as are prescribed by the Company, each to be
entered into by the Company and the Executive and which together shall evidence the grant of
such awards.

          (iv) Incentive, Savings and Retirement Plans. During the Employment Period,
the Executive shall be eligible to participate in all other incentive plans, practices, policies and programs, and all savings and retirement plans, practices, policies and
programs, in each case that are applicable generally to senior executives of the Company.

          (v) Welfare Benefit Plans. During the Employment Period, the Executive and the
Executive’s eligible family members shall be eligible for participation in the welfare
benefit plans, practices, policies and programs (including, if applicable, medical, dental,
disability, employee life, group life and accidental death insurance plans and programs)
maintained by the Company for its senior executives.

          (vi) Expenses. During the Employment Period, the Executive shall be entitled
to receive prompt reimbursement for all reasonable business expenses incurred by the
Executive in accordance with the policies, practices and procedures of the Company provided
to senior executives of the Company.

          (vii) Fringe Benefits. During the Employment Period, the Executive shall be
entitled to such fringe benefits and perquisites as are provided by the Company to its
senior executives from time to time, in accordance with the policies, practices and
procedures of the Company, and shall receive such additional fringe benefits and perquisites
as the Company may, in its discretion, from time-to-time provide.

          (viii) Vacation. During the Employment Period, the Executive shall be entitled
to paid vacation in accordance with the plans, policies, programs and practices of the
Company applicable to its senior executives but in no event less than four (4) weeks per
calendar year.

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          (ix) Indemnification Agreement. The parties hereby acknowledge that in
connection with the execution of this Agreement, they are entering into an Indemnification
Agreement (the “Indemnification Agreement”), substantially in the form attached
hereto as Exhibit A, which shall become effective as of the Effective Date.

          3. Termination of Employment.

          (a) Death or Disability. The Executive’s employment shall terminate automatically
upon the Executive’s death during the Employment Period. Either the Company or the Executive may
terminate the Executive’s employment in the event of the Executive’s Disability during the
Employment Period. For purposes of this Agreement, “Disability” shall mean the absence of
the Executive from the Executive’s duties with the Company on a full-time basis for ninety (90)
consecutive days or for a total of one hundred eighty (180) days in any twelve (12)-month period,
in either case as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its
insurers and reasonably acceptable to the Executive or the Executive’s legal representative.

          (b) Cause. The Company may terminate the Executive’s employment during the Employment
Period for Cause or without Cause. For purposes of this Agreement, “Cause” shall mean the
occurrence of any one or more of the following events unless the Executive fully corrects the
circumstances constituting Cause within a reasonable period of time after receipt of the Notice of
Termination (as defined below):

          (i) the Executive’s willful and continued failure to substantially perform his duties
with the Company (other than any such failure resulting from the Executive’s incapacity due
to physical or mental illness or any such actual or anticipated failure after his issuance
of a Notice of Termination for Good Reason), after written demand for substantial
performance is delivered to the Executive by the Board, which demand specifically identifies
the manner in which the Board believes that the Executive has not substantially performed
his duties;

          (ii) the Executive’s willful commission of an act of fraud or dishonesty resulting in
economic or financial injury to the Company;

          (iii) the Executive’s commission of, or entry by the Executive of a guilty or no
contest plea to, a felony or a crime involving moral turpitude;

          (iv) a willful breach by the Executive of his fiduciary duty to the Company which
results in economic or other injury to the Company;

          (v) the Executive’s willful and material breach of the Executive’s obligations under
this Agreement; or

          (vi) the Executive’s failure to competently perform his duties with the Company (other
than any such failure resulting from the Executive’s incapacity due to physical or mental
illness or any such actual or anticipated failure after his issuance of a Notice of
Termination for Good Reason); provided, that whether the Executive has

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performed competently
shall not be determined based solely on the financial performance (including, without
limitation, stock price performance) of the Company.

For purposes of this provision, no act or failure to act, on the part of the Executive, shall be
considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive’s action or omission was in the best interests of the
Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Executive in good faith and in the best
interests of the Company. The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than two-thirds of the entire membership of the
Board at a meeting of the Board called and held for such purpose (after reasonable notice is
provided to the Executive and the Executive is given an opportunity, together with counsel for the
Executive, to be heard before the Board), finding that, in the good faith opinion of the Board, the
Executive is guilty of any of the conduct described in this Section 3(b), and specifying the
particulars thereof in detail; provided, that if the Executive is a member of the Board, the
Executive shall not vote on such resolution nor shall the Executive be counted in determining the
“entire membership” of the Board.

          (c) Good Reason. The Executive’s employment may be terminated by the Executive for
Good Reason or by the Executive without Good Reason. The Executive’s termination of employment,
whether for Good Reason or without Good Reason, shall not be deemed to be a breach of this
Agreement. For purposes of this Agreement, “Good Reason” shall mean the occurrence of any
one or more of the following events without the Executive’s prior written consent, unless the
Company fully corrects the circumstances constituting Good Reason (provided such circumstances are
capable of correction) within thirty (30) days after the Company’s receipt of the Notice of
Termination delivered by the Executive:

          (i) the assignment to the Executive of any duties materially inconsistent in any
respect with the Executive’s position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by Section 2(a) hereof,
or any other action by the Company which results in a material diminution in such position,
authority, duties or responsibilities, except as permitted by Section 2(a) hereof and
excluding for this purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt of notice thereof
given by the Executive;

          (ii) the Company’s reduction of the Executive’s Base Salary as in effect on the date
hereof or as may be increased from time to time;

          (iii) the relocation of the Principal Location to a location more than thirty (30)
miles from such location, or the Company’s requiring the Executive to be based at a location
more than thirty (30) miles from the Principal Location, except for required travel on the
Company’s business;

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          (iv) the Company’s failure to obtain a satisfactory agreement from any successor to
assume and agree to perform this Agreement, as contemplated in Section 10 hereof; or

          (v) the Company’s failure to cure a material breach of its obligations under this
Agreement after written notice is delivered to the Board by the Executive which specifically
identifies the manner in which the Executive believes that the Company has breached its
obligations under the Agreement and the Company is given a reasonable opportunity to cure
any such breach.

For the avoidance of doubt, a reduction in the Executive’s Annual Bonus opportunity and/or any
applicable annual equity award opportunity shall not in and of itself constitute Good Reason.
Notwithstanding the foregoing, Executive will not be deemed to have resigned for Good Reason unless
(1) Executive provides the Company with written notice setting forth in reasonable detail the facts
and circumstances claimed by Executive to constitute Good Reason within sixty (60) days after the
date of the occurrence of any event that Executive knows or should reasonably have known
constitutes Good Reason, (2) the Company fails to cure such acts or omissions within thirty (30)
days following its receipt of such notice, and (3) the effective date of Executive’s termination
for Good Reason occurs no later than thirty (30) days after the expiration of the cure period.

          (d) Notice of Termination. Any termination by the Company for Cause, or by the
Executive for Good Reason, shall be communicated by a Notice of Termination to the other parties
hereto given in accordance with Section 12(b) hereof. For purposes of this Agreement, a
“Notice of Termination” means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of the Executive’s
employment under the provision so indicated and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the termination date (which date shall
be not more than thirty days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such
fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

          (e) Termination of Offices and Directorships. Upon termination of the Executive’s
employment by the Company for Cause, the Executive shall be deemed to have resigned from all
offices, directorships, and other employment positions if any, then held with
the Company, and shall take all actions reasonably requested by the Company to effectuate the
foregoing.

          4. Obligations of the Company upon Termination.

          (a) Without Cause or For Good Reason. Subject to Section 4(d) below, if, the
Executive incurs a “separation from service” from the Company (within the meaning of Section
409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (the “Code”), and
Treasury Regulation Section 1.409A-1(h)) (a “Separation from Service”) during the
Employment Period

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by reason of (1) a termination of the Executive’s employment by the Company
without Cause (other than by reason of the Executive’s Disability), or (2) a termination of the
Executive’s employment by the Executive for Good Reason:

          (i) The Executive shall be paid, in a single lump sum payment on the date of the
Executive’s termination of employment, the aggregate amount of the Executive’s earned but
unpaid Base Salary and accrued but unpaid vacation pay through the date of such termination
(the “Accrued Obligations”) and any Annual Bonus required to be paid to the
Executive pursuant to Section 2(b)(ii) above for any fiscal year of the Company that ends on
or before the Date of Termination to the extent not previously paid (the “Unpaid
Bonus”).

          (ii) In addition, the Executive shall be paid, in a single lump sum payment on the
sixtieth (60th) day after the date of Executive’s Separation from Service (such
date, the “Date of Termination”), an amount equal to one (1) (the “Severance
Multiple”) times the sum of (x) the Base Salary in effect on the Date of Termination
plus (y) the highest Annual Bonus earned by the Executive (regardless of whether such amount
was paid out on a current basis or deferred) for the three fiscal years (or such lesser
number of full fiscal years as the Executive has been employed by the Company) of the
Company immediately preceding the Date of Termination (or, in the event that the Date of
Termination occurs prior to the end of the completion of the first full fiscal year of the
Company during the Employment Period, then the amount in clause (y) shall be equal to the
Annual Bonus determined based on the extent to which the performance criteria applicable to
such Annual Bonus (pro rated based on the number of days in the fiscal year through the Date
of Termination and as if the entire Annual Bonus was based solely on such performance
criteria for such fiscal year) are actually achieved as of the Date of Termination) plus (z)
the highest Equity Award Value (as defined below) of any annual grant made to the Executive
by the Company for the three fiscal years (or such lesser number of full fiscal years as the
Executive has been employed by the Company) of the Company immediately preceding the Date of
Termination. For purposes of this Agreement, “Equity Award Value” shall mean (A)
with respect to stock options and stock appreciation rights, the grant date fair value, as computed in accordance with
FASB Accounting Standards Codification Topic 718, Compensation — Stock Compensation (or any
successor accounting standard), of a regular annual equity award granted to the Executive
for a given year, and (B) with respect to regular annual awards other than stock options and
stock appreciation rights (including, without limitation, restricted stock and Operating
Partnership units), the product of (x) the number of shares or units subject to such award,
times (y) the “fair market value” of a share of the REIT’s common stock on the date of grant
as determined under the Incentive Plan. For the avoidance of doubt, Equity Award Value
shall not include the Time Vesting LTIP Units or the Performance Vesting LTIP Units granted
pursuant to Section 2(b)(iii) above or the value of any equity award granted to the
Executive pursuant to a multi-year performance program, long-term performance program,
initial hiring award, retention award or similar non-recurring award.

          (iii) The Executive shall be paid, in a single lump sum payment on the sixtieth
(60th) day after the Date of Termination, a pro rata portion of the Annual Bonus

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for the partial fiscal year in which the Date of Termination occurs in an amount determined
based on (A) the extent to which the performance criteria applicable to such Annual Bonus
(pro rated based on the number of days in such fiscal year through the Date of Termination
and as if the entire Annual Bonus was based solely on such performance criteria for such
fiscal year) are actually achieved as of the Date of Termination, or (B) if such performance
criteria have not been established by the Compensation Committee, the Annual Bonus earned by
the Executive (regardless of whether such amount was paid out on a current basis or
deferred) for the fiscal year of the Company immediately preceding the Date of Termination
(pro rated based on the number of days in the fiscal year in which the Date of Termination
occurs through the Date of Termination) (a “Pro-Rated Annual Bonus”).

          (iv) All outstanding equity awards held by the Executive on the Date of Termination
shall immediately become fully vested and exercisable.

          (v) During the period commencing on the Date of Termination and ending on the earlier
of (i) the twelve (12) month anniversary of the Date of Termination and (ii) the expiration
of the Executive’s eligibility for benefits under Section 4980B of the Code and the
regulations thereunder (“COBRA”), the Company shall pay directly or reimburse the
Executive for COBRA premiums for group medical insurance coverage for the Executive and his
eligible family members.

Notwithstanding the foregoing, it shall be a condition to the Executive’s right to receive the
amounts provided for in Sections 4(a)(ii), 4(a)(iii) and 4(a)(v) above that the Executive execute
and deliver to the Company an effective release of claims in substantially the form attached hereto
as Exhibit B (the “Release”) within twenty-one (21) days (or, to the extent
required by law, forty-five (45) days) following the Date of Termination.

          (b) For Cause or Without Good Reason. If the Executive’s employment shall be
terminated by the Company for Cause or by the Executive without Good Reason during the Employment
Period, the Company shall pay to the Executive the Accrued Obligations in cash within thirty (30)
days after the Date of Termination (or by such earlier date as may be required by applicable law).

          (c) Death or Disability. Subject to Section 4(d) below, if the Executive incurs a
Separation from Service by reason of the Executive’s death or Disability during the Employment
Period:

          (i) The Accrued Obligations shall be paid to the Executive’s estate or beneficiaries or
to the Executive, as applicable, in cash on or as soon as practicable following the date of
the Executive’s termination; and

          (ii) Any Unpaid Bonus shall be paid to the Executive’s estate or beneficiaries or to
the Executive, as applicable, on the Date of Termination.

          (d) Six-Month Delay. Notwithstanding anything to the contrary in this Agreement, no
compensation or benefits, including without limitation any severance payments or benefits payable
under Section 4 or 5 hereof, shall be paid to the Executive during the six (6)-

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month period
following the Executive’s “separation from service” (within the meaning of Section 409A(a)(2)(A)(i)
of the Code) if the Company determines that paying such amounts at the time or times indicated in
this Agreement would be a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code. If
the payment of any such amounts is delayed as a result of the previous sentence, then on the first
business day following the end of such six (6)-month period (or such earlier date upon which such
amount can be paid under Section 409A of the Code without resulting in a prohibited distribution,
including as a result of the Executive’s death), the Company shall pay the Executive a lump-sum
amount equal to the cumulative amount that would have otherwise been payable to the Executive
during such period.

          5. Termination in Connection with a Change in Control. Subject to Section 4(d) above,
if a Change in Control (as defined in the Incentive Plan) occurs during the Employment Period and
the Executive incurs a Separation from Service by reason of a termination by the Company without
Cause or by the Executive for Good Reason, in each case within two (2) years after the effective
date of the Change in Control, then the Executive shall be entitled to the payments and benefits
provided in Section 4(a) hereof, subject to the terms and conditions thereof (including, without limitation, the requirement that a condition to the
Executive’s right to receive the amounts provided for in Sections 4(a)(ii), 4(a)(iii) and 4(a)(v)
is that the Executive execute, deliver and not revoke the Release), except that for purposes of
this Section 5, the Severance Multiple shall equal two (2).

          6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the
Executive’s continuing or future participation in any plan, program, policy or practice provided by
the Company and for which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any contract or agreement with the Company.
Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any
plan, policy, practice or program of or any contract or agreement with the Company at or subsequent
to the Date of Termination shall be payable in accordance with such plan, policy, practice or
program or contract or agreement except as explicitly modified by this Agreement.

          7. Full Settlement. The Company’s obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may
have against the Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement and, except as expressly provided, such amounts shall
not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as
incurred (within thirty (30) days following the Company’s receipt of an invoice from the
Executive), to the full extent permitted by law, all reasonable legal fees and expenses which the
Executive or his beneficiaries may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance thereof (including
as a result of any contest by the Executive or his beneficiaries about the amount of any payment
pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Code. The preceding sentence shall not
apply with respect to any

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such contest if the court having jurisdiction over such contest
determines that the Executive’s claim in such contest is frivolous or maintained in bad faith.

          8. Limitation on Payments.

          (a) Notwithstanding any other provision of this Agreement, in the event that any payment or
benefit received or to be received by the Executive (including any payment or benefit received in
connection with a termination of the Executive’s employment, whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement) (all such payments and benefits, including the payments and benefits under Section 4 hereof, being
hereinafter referred to as the “Total Payments”) would be subject (in whole or part), to
the excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the
“Code”) (the “Excise Tax”), then, after taking into account any reduction in the
Total Payments provided by reason of Section 280G of the Code in such other plan, arrangement or
agreement, the cash severance payments under this Agreement shall first be reduced, and the noncash
severance payments hereunder shall thereafter be reduced, to the extent necessary so that no
portion of the Total Payments is subject to the Excise Tax but only if (i) the net amount of such
Total Payments, as so reduced (and after subtracting the net amount of federal, state and local
income taxes on such reduced Total Payments and after taking into account the phase out of itemized
deductions and personal exemptions attributable to such reduced Total Payments) is greater than or
equal to (ii) the net amount of such Total Payments without such reduction (but after subtracting
the net amount of federal, state and local income taxes on such Total Payments and the amount of
Excise Tax to which the Executive would be subject in respect of such unreduced Total Payments and
after taking into account the phase out of itemized deductions and personal exemptions attributable
to such unreduced Total Payments). The Total Payments shall be reduced in the following order: (A)
reduction of any cash severance payments otherwise payable to the Executive that are exempt from
Section 409A of the Code; (B) reduction of any other cash payments or benefits otherwise payable to
the Executive that are exempt from Section 409A of the Code, but excluding any payments
attributable to any acceleration of vesting or payments with respect to any equity award that are
exempt from Section 409A of the Code; (C) reduction of any other payments or benefits otherwise
payable to Employee on a pro-rata basis or such other manner that complies with Section 409A of the
Code, but excluding any payments attributable to any acceleration of vesting and payments with
respect to any equity award that are exempt from Section 409A of the Code; and (D) reduction of any
payments attributable to any acceleration of vesting or payments with respect to any equity award
that are exempt from Section 409A of the Code, in each case beginning with payments that would
otherwise be made last in time.

          (b) For purposes of determining whether and the extent to which the Total Payments will be
subject to the Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which
the Executive shall have waived at such time and in such manner as not to constitute a “payment”
within the meaning of Section 280G(b) of the Code shall be taken into account; (ii) no portion of
the Total Payments shall be taken into account which, in the written opinion of independent
auditors of nationally recognized standing (“Independent Advisors”) selected by the
Company, does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the
Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax,
no portion of such Total Payments shall be taken into account

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which, in the opinion of Independent
Advisors, constitutes reasonable compensation for services actually rendered, within the meaning of
Section 280G(b)(4)(B) of the Code, in excess of the Base Amount (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable
compensation; and (iii) the value of any non cash benefit or any deferred payment or benefit
included in the Total Payments shall be determined by the Independent Advisors in accordance with
the principles of Sections 280G(d)(3) and (4) of the Code.

          9. Confidential Information and Non-Solicitation.

          (a) The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret
or confidential information, knowledge or data relating to the Company and its subsidiaries and
affiliates (collectively, the “Younan Group”), which shall have been obtained by the
Executive during the Executive’s employment by the Company and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of the Executive in violation of
this Agreement). After termination of the Executive’s employment with the Company, the Executive
shall not, without the prior written consent of the Company or as may otherwise be required by law
or legal process, communicate or divulge any such information, knowledge or data, to anyone other
than the Company and those designated by it; provided, that if the Executive receives actual notice
that the Executive is or may be required by law or legal process to communicate or divulge any such
information, knowledge or data, the Executive shall promptly so notify the Company.

          (b) While employed by the Company and, for a period of two (2) years after the Date of
Termination, the Executive shall not directly or indirectly solicit, induce, or encourage any
employee or consultant of any member of the Younan Group to terminate their employment or other
relationship with the Younan Group or to cease to render services to any member of the Younan Group
and the Executive shall not initiate discussion with any such person for any such purpose or
authorize or knowingly cooperate with the taking of any such actions by any other individual or
entity. During his employment with the Company and thereafter, Executive shall not use any trade
secret of any member of the Younan Group to solicit, induce, or encourage any customer, client,
vendor, or other party doing business with any member of the Younan Group to terminate its
relationship therewith or transfer its business from any member of the Younan Group and the
Executive shall not initiate discussion with any such person for any such purpose or authorize or
knowingly cooperate with the taking of any such actions by any other individual or entity.

          (c) In no event shall an asserted violation of the provisions of this Section 9 constitute a
basis for deferring or withholding any amounts otherwise payable to the Executive under this
Agreement. However, in recognition of the facts that irreparable injury will result to the Company
in the event of a breach by the Executive of his obligations under Sections 9(a) and (b) hereof,
that monetary damages for such breach would not be readily calculable, and that the Company would
not have an adequate remedy at law therefor, the Executive acknowledges, consents and agrees that in the event of such breach, or the threat thereof, the Company shall be
entitled, in addition to any other legal remedies and damages available, to specific performance
thereof and to temporary and permanent injunctive relief (without the necessity of posting a bond)
to restrain the violation or threatened violation of such obligations by the Executive.

11

 

          10. Successors.

          (a) This Agreement is personal to the Executive and without the prior written consent of the
Company shall not be assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s
legal representatives.

          (b) This Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns.

          (c) The Company will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or assets of the
Company to assume and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken place. As used in
this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation
of law, or otherwise.

          11. Payment of Financial Obligations. The payment or provision to the Executive by
the Company of any remuneration, benefits or other financial obligations pursuant to this Agreement
shall be allocated among the Operating Partnership, the REIT and any subsidiary or affiliate
thereof in such manner as such entities determine in order to reflect the services provided by the
Executive to such entities; provided, that the Operating Partnership and the REIT shall be
jointly and severally liable for such obligations.

          12. Miscellaneous.

          (a) Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of California, without reference to principles of conflict of laws. The
captions of this Agreement are not part of the provisions hereof and shall have no force or effect.

          (b) Notices. All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:

       If to the Executive: at the Executive’s most recent address on the records of the
Company.

If to the REIT or the Operating Partnership:

Younan Properties, Inc.

21700 Oxnard Street, Ste. 800

Woodland Hills, CA 91367

Attn: Chief Executive Officer

Attn: General Counsel

with a copy to:

12

 

Latham & Watkins

355 South Grand Ave.

Los Angeles, CA 90071-1560

Attn: Julian Kleindorfer

or to such other address as either party shall have furnished to the other in writing in accordance
herewith. Notice and communications shall be effective when actually received by the addressee.

          (c) Sarbanes-Oxley Act of 2002. Notwithstanding anything herein to the contrary, if
the Company determines, in its good faith judgment, that any transfer or deemed transfer of funds
hereunder is likely to be construed as a personal loan prohibited by Section 13(k) of the Exchange
Act and the rules and regulations promulgated thereunder, then such transfer or deemed transfer
shall not be made to the extent necessary or appropriate so as not to violate the Exchange Act and
the rules and regulations promulgated thereunder.

          (d) Section 409A of the Code.

          (i) To the extent applicable, this Agreement shall be interpreted in accordance with Section
409A of the Code and Department of Treasury regulations and other interpretive guidance issued
thereunder. Notwithstanding any provision of this Agreement to the contrary, if the Company
determines that any compensation or benefits payable under this Agreement may be subject to Section
409A of the Code and related Department of Treasury guidance, the Company may, with the Executive’s
prior written consent, adopt such amendments to this Agreement or adopt other policies and
procedures (including amendments, policies and procedures with retroactive effect), or take any
other actions, that the Company determines are necessary or appropriate to (i) exempt the
compensation and benefits payable under this Agreement from Section 409A of the Code and/or preserve the intended tax treatment of such
compensation and benefits, or (ii) comply with the requirements of Section 409A of the Code and
related Department of Treasury guidance; provided, however, that this Section 12(d)
shall not create an obligation on the part of the Company to adopt any such amendment, policy or
procedure or take any such other action, nor shall the Company have any liability for failing to do
so.

          (ii) To the extent permitted under Section 409A of the Code, any separate payment or benefit
under this Agreement or otherwise shall not be deemed “nonqualified deferred compensation” subject
to Section 409A of the Code and Section 4(d) hereof to the extent provided in the exceptions in
Treasury Regulation Section 1.409A-1(b)(4), Section 1.409A-1(b)(9) or any other applicable
exception or provision of Section 409A of the Code.

          (iii) To the extent that any payments or reimbursements provided to the Executive under this
Agreement, including, without limitation, pursuant to Section 2(b)(vii), are deemed to constitute
compensation to the Executive to which Treasury Regulation Section 1.409A-3(i)(1)(iv) would apply,
such amounts shall be paid or reimbursed reasonably promptly, but not later than December 31 of the
year following the year in which the expense was incurred. The amount of any such payments
eligible for reimbursement in one year shall not affect the payments or expenses that are eligible
for payment or reimbursement in any other taxable year,

13

 

and the Executive’s right to such payments
or reimbursement of any such expenses shall not be subject to liquidation or exchange for any other
benefit.

          (e) Severability. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

          (f) Withholding. The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant
to any applicable law or regulation.

          (g) No Waiver. The Executive’s or the Company’s failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any right the Executive or
the Company may have hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 3(c) hereof, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this Agreement.

          (h) Entire Agreement. As of the Effective Date, this Agreement, together with the
LTIP Units Agreements and the Indemnification Agreement, constitutes the final, complete and
exclusive agreement between the Executive and the Company with respect to the subject matter hereof and replaces and supersedes any and all other agreements, offers or
promises, whether oral or written, by any member of the Younan Group or any entity (a “Predecessor
Employer”), or representative thereof, whose business or assets any member of the Younan Group
succeeded to in connection with the initial public offering of the common stock of the REIT or the
transactions related thereto. The Executive agrees that any such agreement, offer or promise
between the Executive and a Predecessor Employer (or any representative thereof) is hereby
terminated and will be of no further force or effect, and the Executive acknowledges and agrees
that upon his execution of this Agreement, he will have no right or interest in or with respect to
any such agreement, offer or promise. In the event that the Effective Date does not occur, this
Agreement (including, without limitation, the immediately preceding sentence) shall have no force
or effect.

          (i) Amendment. No amendment or other modification of this Agreement shall be deemed
effective unless made in writing and signed by the parties hereto.

          (j) Counterparts. This Agreement and any agreement referenced herein may be executed
simultaneously in two or more counterparts, each of which shall be deemed an original but which
together shall constitute one and the same instrument.

[SIGNATURE PAGE FOLLOWS]

14

 

     IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the
authorization from the Board, each of the REIT and the Operating Partnership has caused these
presents to be executed in its name on its behalf, all as of the day and year first above written.

	 	 	 	 	 	 
	 	YOUNAN PROPERTIES, INC.,

a Maryland corporation

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 
	 
	 	YOUNAN PROPERTIES, L.P.,

a Maryland limited partnership

 	 
	 	      	By:	 
	 	 	Its:	 
	 	 	 	 
	 
	 	 	 
	 	 	 	By:	 	 
	 	 	 	 	Name:  	 	 
	 	 	 	 	Title:  	 	 
	 
	 
	 
	 	“EXECUTIVE”

 	 
	 	
 	 
	 	Andres R. Gavinet	 

15

 

EXHIBIT A

INDEMNIFICATION AGREEMENT

A-1

 

EXHIBIT B

GENERAL RELEASE

          For valuable consideration, the receipt and adequacy of which are hereby acknowledged, the
undersigned does hereby release and forever discharge the “Releasees” hereunder, consisting
of Younan Properties, Inc., a Maryland corporation, Younan Properties, L.P., a Maryland limited
partnership, and each of their partners, subsidiaries, associates, affiliates, successors, heirs,
assigns, agents, directors, officers, employees, representatives, lawyers, insurers, and all
persons acting by, through, under or in concert with them, or any of them, of and from any and all
manner of action or actions, cause or causes of action, in law or in equity, suits, debts, liens,
contracts, agreements, promises, liability, claims, demands, damages, losses, costs, attorneys’
fees or expenses, of any nature whatsoever, known or unknown, fixed or contingent (hereinafter
called “Claims”), which the undersigned now has or may hereafter have against the
Releasees, or any of them, by reason of any matter, cause, or thing whatsoever from the beginning
of time to the date hereof. The Claims released herein include, without limiting the generality of
the foregoing, any Claims in any way arising out of, based upon, or related to the employment or
termination of employment of the undersigned by the Releasees, or any of them; any alleged breach
of any express or implied contract of employment; any alleged torts or other alleged legal
restrictions on Releasees’ right to terminate the employment of the undersigned; and any alleged
violation of any federal, state or local statute or ordinance including, without limitation, Title
VII of the Civil Rights Act of 1964, the Age Discrimination In Employment Act, the Americans With
Disabilities Act, and the California Fair Employment and Housing Act. Notwithstanding the
foregoing, this Release shall not operate to release any rights or claims of the undersigned (i) to
payments or benefits under either Section 4(a) or 5 of that certain Employment Agreement, dated as
of May ___, 2010, between Younan Properties, Inc., Younan Properties, L.P. and the undersigned (the
“Employment Agreement”), whichever is applicable to the payments and benefits provided in
exchange for this release, (ii) to payments or benefits under the LTIP Units Agreements (as defined
in the Employment Agreement) and any other equity incentive award agreement(s), (iii) with respect
to Section 2(b)(vi), 6 or 7 of the Employment Agreement, (iv) to accrued or vested benefits the
undersigned may have, if any, as of the date hereof under any applicable plan, policy, practice,
program, contract or agreement with the Company, or (v) to indemnification and/or advancement of
expenses pursuant to the Indemnification Agreement (as defined in the Employment Agreement).

          THE UNDERSIGNED ACKNOWLEDGES THAT HE HAS BEEN ADVISED BY LEGAL COUNSEL AND IS FAMILIAR WITH
THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:

     “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW
OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR.”

B-1

 

THE UNDERSIGNED, BEING AWARE OF SAID CODE SECTION, HEREBY EXPRESSLY WAIVES ANY RIGHTS HE MAY HAVE
THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR COMMON LAW PRINCIPLES OF SIMILAR EFFECT.

          IN ACCORDANCE WITH THE OLDER WORKERS BENEFIT PROTECTION ACT OF 1990, THE UNDERSIGNED IS HEREBY
ADVISED AS FOLLOWS:

          (A) HE HAS THE RIGHT TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS RELEASE;

          (B) HE HAS TWENTY-ONE (21) DAYS TO CONSIDER THIS RELEASE BEFORE SIGNING IT; AND

          (C) HE HAS SEVEN (7) DAYS AFTER SIGNING THIS RELEASE TO REVOKE THIS RELEASE,
AND THIS RELEASE WILL BECOME EFFECTIVE UPON THE EXPIRATION OF THAT REVOCATION
PERIOD.

          The undersigned represents and warrants that there has been no assignment or other transfer of
any interest in any Claim which he may have against Releasees, or any of them, and the undersigned
agrees to indemnify and hold Releasees, and each of them, harmless from any liability, Claims,
demands, damages, costs, expenses and attorneys’ fees incurred by Releasees, or any of them, as the
result of any such assignment or transfer or any rights or Claims under any such assignment or
transfer. It is the intention of the parties that this indemnity does not require payment as a
condition precedent to recovery by the Releasees against the undersigned under this indemnity.

          The undersigned agrees that if he hereafter commences any suit arising out of, based upon, or
relating to any of the Claims released hereunder or in any manner asserts against Releasees, or any
of them, any of the Claims released hereunder, then the undersigned agrees to pay to Releasees, and
each of them, in addition to any other damages caused to Releasees thereby, all attorneys’ fees
incurred by Releasees in defending or otherwise responding to said suit or Claim.

          The undersigned further understands and agrees that neither the payment of any sum of money
nor the execution of this Release shall constitute or be construed as an admission of any liability
whatsoever by the Releasees, or any of them, who have consistently taken the position that they
have no liability whatsoever to the undersigned.

          IN WITNESS WHEREOF, the undersigned has executed this Release this ___day of _________,
___.

______________________

B-2exv10w26

Exhibit 10.26

PROPERTY MANAGEMENT AND LEASING AGREEMENT

Younan Plaza / 6464 Savoy Street, Houston, Texas

     THIS PROPERTY MANAGEMENT AND LEASING AGREEMENT (this “Agreement”) is made as of
                    , 2010, by and between YOUNAN PLAZA, LLC, a Delaware limited liability company
(“Owner”), and YOUNAN PROPERTIES, L.P., a Maryland limited partnership (“Manager”), with respect to
the following:

     WHEREAS, Owner owns certain parcels of improved land located at 6464 Savoy Street, Houston,
Texas, commonly referred to as Younan Plaza, and more particularly described on Schedule 1
(collectively, the “Project”); and

     WHEREAS, Owner desires to engage Manager to manage, operate and lease the Project, and Manager
desires to accept such engagement upon the terms set forth herein.

     NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises and
covenants contained herein, Owner and Manager hereby agree as follows:

1. Exclusive Agency.

     Owner hereby appoints Manager as its sole and exclusive leasing agent, rental agent and
manager of the Project and Manager hereby accepts such appointment, upon the terms set forth
herein. Such appointment is subject to the management rights and responsibilities reserved or
allocated to any tenant under the leases for the Project.

2. Term Of Agreement.

     The term of this Agreement shall commence on the date hereof, and shall continue for a period
of three (3) years thereafter (the “Initial Term”). Upon the expiration of the Initial Term, this
Agreement shall automatically renew on the identical terms set forth herein for successive periods
of two (2) years each unless terminated by either party by giving written notice of termination to
the other party no later than ninety (90) days prior to the expiration of the then current term.
The “Term” of this Agreement shall include the Initial Term and any successive period for which
this Agreement is in effect. Notwithstanding anything to the contrary set forth herein, Owner and
Manager agree that this Agreement shall terminate upon a sale of the Project.

3. Annual Plan.

     3.1 Annual Plan. On or before December 1 of each calendar year during the Term, Manager shall prepare and submit
to Owner for its approval a proposed annual plan for the promotion, operation, leasing, repair and
maintenance of the Project for the succeeding calendar year (the “Proposed Annual Plan”). For
purposes of this Agreement, a “Fiscal Year” shall mean a calendar year beginning on the first day
of January and ending on the last day of December. Each Proposed Annual Plan shall include, among
other matters:

1

 

          (a) an “Operating Budget” which shall set forth, among other matters, anticipated cash income
and expenditures and reserve additions for such Fiscal Year;

          (b) a “Capital Budget” which shall set forth, among other matters, anticipated and proposed
capital expenditures for such year and the source of funds in respect thereto;

          (c) a “Leasing Plan” which shall include, among other matters, a statement of the space that
Manager projects to be leased during such year, the projected minimum rent to be obtained for such
space and the other financial provisions of such projected leases (including free-rent periods,
rent abatements, contributions towards taxes and expenses and escalation provisions);

          (d) a “Capital Expense Timeline” setting forth anticipated estimated capital advances by Owner
to Manager, if any; and

          (e) a summary of any other significant activity Manager expects to undertake during such
Fiscal Year.

     3.2 Approval of Proposed Annual Plan. Within fifteen (15) days of Owner’s receipt of the Proposed Annual Plan, Owner shall deliver to
Manager its approval or disapproval of all matters contained in the Proposed Annual Plan for the
succeeding year, including a reasonably detailed explanation of the reasons for such disapproval.
If Owner disapproves of any Proposed Annual Plan, Manager shall submit to Owner a revised Proposed
Annual Plan within ten (10) days of its receipt of Owner’s written disapproval. Manager shall make
a good faith effort to have such revised Proposed Annual Plan satisfy each of the objections set
forth in Owner’s written disapproval. Upon written approval of a Proposed Annual Plan by Owner,
such plan shall thereafter be the “Annual Plan” for the succeeding year for the purposes of this
Agreement; provided, however, that if Owner and Manager cannot agree upon an Annual Plan or certain
aspects thereof prior to January 1 of the succeeding year, the Annual Plan from the prior year
shall govern to the extent of such disputed items (with appropriate adjustments based on increases
or decreases in the yearly Consumer Price Index as published each January by the U.S. Department of
Labor, Bureau of Labor Statistics and the actual amount of expenses not within the control of Owner
or Manager such as real property taxes and personal property taxes). The parties acknowledge and
agree that each Annual Plan shall provide sufficient funds for Manager to operate the Project in a
manner consistent with that for the operation of similar first-class office buildings in Houston,
Texas.

     3.3 Amendments to Annual Plan. Manager shall submit to Owner any proposed revisions in the Annual Plan, all of which shall be
subject to Owner’s approval. Any approved changes will be reflected in an amended Annual Plan
which shall be applicable for the remainder of the applicable Fiscal
Year. However, nothing in this Section 3.3 shall be construed as releasing Manager from
its obligation to manage the Project in accordance with the Annual Plan.

2

 

     3.4 Obligation and Authority to Implement Annual Plan. Once approved, Manager shall implement the Annual Plan, and shall be authorized without the need
of further approvals to make the expenditures and incur the obligations provided for in such Annual
Plan.

     3.5 Performance Within Annual Plan. Manager shall use reasonable diligence and employ commercially reasonable efforts to ensure that
the actual costs of maintaining and operating the Project shall not exceed the Annual Plan either
in total or in any accounting category. All expenses must be charged to the proper account on
either the operating budget or capital budget reflected in the Annual Plan, and no expense may be
classified or reclassified for the purpose of avoiding an excess in the annual budgeted amount of
an accounting category. Pursuant to Section 6.5 below, Manager shall obtain Owner’s prior
consent to any expenditure which costs (i) in excess of 5% for any line item in the budgets
included in the Annual Plan, or (ii) $25,000, whichever is less, and is not reasonably contemplated
in the Annual Plan.

4. Accounting.

     4.1 Books and Records. Manager shall maintain adequate and separate books and records for the Project on behalf of
Owner, with sufficient supporting documentation to ensure that all entries in the books and records
are accurate and complete. Such books and records shall be maintained by Manager at Owner’s
address stated herein or at such other location as may be mutually agreed upon in writing, except
such documents used in the day-to-day operation of the Project by Manager in the performance of its
obligations hereunder which may be maintained at the Project for the benefit of Owner. Manager
shall exercise such control over accounting and financial transactions as is reasonably required to
protect Owner’s assets from theft, error or fraudulent activity on the part of Manager’s associates
or employees. Losses arising from such instances are to be borne by Manager.

     4.2 Accounting, Reports and Financial Statements. Manager shall perform such accounting and financial reporting services regarding the Project
which is normally provided with respect to first-class office buildings in the area and any
additional accounting and financial reporting services which are required pursuant to the documents
and agreements governing Owner’s lending relationships (“Loan Compliance Requirements”). Without
limiting the generality of the foregoing, Manager shall, if requested by Owner or to the extent
required by the Loan Compliance Requirements (but in no event later than the twentieth
(20th) day of each month), prepare and provide to Owner monthly operating reports for
the immediately preceding month (each, a “Monthly Report”), including, (i) an unaudited
year-to-date financial statement, (ii) statement of net operating income, (iii) summary of all
leasing activity, (iv) a balance
sheet, (v) a calculation of the Management Fee (as defined in Section 9.1 below), (vi) a
comparison of monthly and year-to-date actual income and expense with the operating budget in the
Annual Plan, and (vii) on a quarterly basis only, an analysis of any significant variances between
budgeted and actual amounts. If requested by Owner or if required by the Loan Compliance
Requirements, Manager shall also, within ninety (90) days after the end of any Fiscal Year, prepare
and provide to Owner annual financial

3

 

statements and, at Owner’s cost and expense, cause such
statements to be audited. Upon request by Owner, Manager shall prepare and supply to Owner
periodic cash flow forecasts. Manager shall also provide to Owner coordination for external and
internal audits, tax planning and compliance in a manner and form mutually agreeable by Owner and
Manager, and Manager shall provide additional information reasonably required by individual
partners of Owner for their financial statement purposes for an amount equal to the cost of
obtaining such work.

     4.3 Copies of Documentation. Manager shall maintain, and make available to Owner upon reasonable notice at the place of
business maintained by Manager the following:

          (a) All bank statements, bank deposit slips and bank reconciliations;

          (b) Cash receipts and disbursement records;

          (c) Trial balance;

          (d) Paid invoices;

          (e) Summaries of adjusting journal entries; and

          (f) Supporting documentation for payroll, payroll taxes and employee benefits.

5. Leasing Activities.

     Manager shall be the Owner’s exclusive leasing agent of the Project, and shall perform all
leasing functions relating to the Project. As provided in Article 9 hereof, Manager shall
be paid for such leasing activities in conformity with Schedule 5 to this Agreement, which
amounts shall be in addition to the compensation otherwise payable to Manager hereunder. Without
limiting the generality of the foregoing, Manager’s leasing function shall include the following:

     5.1 Leasing. Manager shall use commercially reasonable efforts to lease all space in the Project which is now
vacant, becomes vacant or is projected to become vacant during the Term, subject to the limitations
imposed by the Annual Plan, and Manager’s responsibilities shall include lease negotiation
coordination, tenant improvement coordination, governmental liaison, opening activities, tenant
liaison, facilitating tenant move-in and
similar activities. Manager may, in its sole discretion, engage the services of other outside
cooperating real estate consultants and brokers to lease space in the Project on behalf of Owner
and who shall be paid by Owner such commissions as may be included in the Annual Plan or are
otherwise established by Owner and Manager from time to time. Manager shall, so far as possible,
procure references from prospective tenants, investigate such references and use its best judgment
in the selection of prospective tenants. Where appropriate, upon the occurrence of a vacancy or a
projected vacancy, Manager will prepare and disseminate adequate rental listings. After a vacancy
is listed, Manager will cooperate with brokers in an effort to aid

4

 

in successfully filling the
vacancy. Manager shall establish procedures to ensure that ample time is available to renew
existing leases or obtain new tenants in an effort to minimize vacancies and loss of income.

     5.2 Lease Negotiations. Owner shall refer all inquiries concerning the rental of space in the Project to Manager. All
negotiations with prospective tenants shall be conducted by Manager or under its direction. All
leases shall be prepared by Manager in the name of Owner and shall be in accordance with such
leasing guidelines as Owner and Manager shall agree upon from time to time. Manager shall secure
Owner’s prior written approval before finalizing any lease that is not in compliance with the
leasing plan set forth in the Annual Plan. All leases shall be presented to and executed by Owner.
Manager shall duly and punctually comply with all the obligations of Owner under all leases with
tenants of space in the Project, but solely on behalf of Owner and at Owner’s expense.

     5.3 Advertising and Promotion. Manager shall prepare all advertising and promotional materials for the Project, which materials
shall be used only after Owner’s approval and shall comply with all applicable laws, ordinances and
regulations. The costs of all advertising and promotional materials shall be at Owner’s sole cost
and expense and shall either be in accordance with the Approved Operating Budget or otherwise
approved by Owner in writing.

     5.4 Rates. Rental rates for space in the Project shall be established by Owner. Manager shall, promptly
following the execution of this Agreement and from time to time thereafter, provide market
information and general office space rental rate surveys and make recommendations to Owner with
respect to rental rates.

     5.5 Lender Approval. To the extent that Owner encumbers the Project with debt financing, the Manager shall assist
Owner, as requested, in obtaining any approvals of proposed leases for the Project, the tenants and
the terms thereof which may be required from the Project’s lenders, including senior financing,
mezzanine level financing or preferred equity (each, a “Lender” and collectively, “Lenders”) in
accordance with the terms of the applicable loan documents.

6. Management Of Project.

     Manager shall manage, operate and maintain the Project in accordance with the general
standards applicable to other first-class office buildings in the area and in accordance with Loan
Compliance Requirements, subject, however, to the management rights and responsibilities reserved
or allocated to any tenant under the leases for the Project. Without limiting the generality of
the foregoing, Manager’s functions hereunder shall include the following (to the extent not
otherwise reserved or allocated to any tenant under the leases for the Project):

     6.1 Manager Orientation. Manager has informed itself with respect to the layout, construction, location, character, plan
and operation of the lighting, heating, plumbing, ventilating and elevator systems and any other
mechanical equipment and

5

 

systems in the Project, and is familiar therewith, and shall be
responsible for enforcement of all warranties and guaranties pertaining to the equipment of the
Project, provided Owner has made available copies of all such warranties or guarantees to Manager.

     6.2 General Management Duties. Manager shall manage the Project in an efficient and businesslike manner having due regard for
the age and physical condition of the Project. Manager, through its employees, independent
contractors and subcontractors, shall supply complete operational services for the Project,
provided that the nature and costs of such services are included in the then current Approved
Budgets, and provided further that the cost of such services are comparable with general prevailing
market conditions. Notwithstanding anything contained in this Agreement to the contrary and as
reasonably requested by Owner, Manager shall perform its obligations under this Agreement in a
manner which does not cause Owner to violate any of its obligations under Owner’s organizational
documents or any loan documents with Lenders; provided, however, (i) that Owner shall make all such
documentation available to Manager for its review; and (ii) that such requests shall not materially
increase Manager’s obligations or its non-reimbursable expenses under this Agreement.

     6.3 Subcontracting for Services. Manager shall be entitled to subcontract with an affiliate of Manager or a third party (a
“Subcontractor”) to perform or cause to be provided any of the services required of Manager
hereunder; provided, however, that no such subcontract shall relieve Manager from its obligations
to Owner under this Agreement. All payments made by Manager to a Subcontractor pursuant to any
such subcontract shall be reimburseable by Owner in accordance with the Annual Plan and the terms
hereof.

     6.4 Rent Collection. Subject to the Loan Compliance Requirements and any “Cash Management System” (as defined in
Section 6.11 below), Manager shall use diligent efforts to collect for the
account of Owner all rents and other charges which may become due at any time from any tenant or
from others for services provided in connection with or for the use of the Project or any portion
thereof, and as directed by Owner, shall institute collection and legal proceedings in the name of
Owner for the collection thereof and for the dispossession of tenants and other persons from the
Project. All attorneys’ fees (including charges and disbursements incurred by counsel) and other
third party out-of-pocket costs incurred in connection with such proceedings shall be borne by
Owner. Manager shall collect and identify any income due Owner from miscellaneous services
provided to tenants or the public including, but not limited to, parking income, tenant storage,
and coin operated machines of all types. Notwithstanding the foregoing, Manager shall collect
rents and deposit same or cause rents to be collected and deposited in the manner required by the
Loan Compliance Requirements.

     6.5 Repairs and Maintenance. Manager shall, in the name of and at the expense of Owner, make or cause to be made on behalf of
Owner such ordinary maintenance, repairs and alterations as Manager may deem advisable or
necessary, subject to and within the limitations of the Operating Budget. Such duties shall
include, without limitation, interior and exterior cleaning, painting, plumbing, carpentry,

6

 

engineering, landscaping and such other normal maintenance and repair work as may be necessary or
desirable. However, unless contained in the Annual Plan, Manager shall secure Owner’s prior
written approval before making or authorizing any expenditure which costs (i) in excess of 5% for
any line item in the budgets included in the Annual Plan, or (ii) $25,000, whichever is less, and
is not reasonably contemplated in the Annual Plan; provided, however, that Manager may make
expenditures in excess of the foregoing restrictions in the event of an emergency if, in the
opinion of Manager, such repairs are necessary to (a) protect the Project, (b) maintain services to
tenants as called for in their leases, (c) avoid property damage to the Project or any improvements
benefiting or appurtenant thereto, and (d) avoid personal injury or death to persons at or around
the Project. Manager shall promptly advise Owner’s designated representative regarding any
expenditures for such emergency repairs by notifying a person designated by Owner for such purpose.
The authority provided to Manager in this Section 6.5 shall not extend to expenditures of
the type described in Section 6.6 below or to expenses to refurbish, rehabilitate or
remodel areas covered by new leases. The latter expenditures are subject to the prior approval of
Owner at the time of execution of new leases. Manager shall promptly inform Owner of major
increases in repair and maintenance costs not reflected in the Annual Plan.

     6.6 Capital Improvements; Tenant Improvements. Any significant development, capital improvement projects or tenant improvement projects shall
be administered and supervised by Manager or an affiliate thereof engaged by Owner pursuant to a
separate written development agreement. Notwithstanding the foregoing, Manager shall, in the name
of and at the expense of Owner, make or cause to be made such capital improvements to the Project
as are included in the Capital Budget or are otherwise approved by Owner, as well as all remodeling
and refurbishing of tenant premises as approved by Owner in connection with new leases. Manager
shall make
recommendations, select contractors and follow bid procedures as required, from time to time, by
Owner and shall supervise all such work to ensure compliance with contract requirements and
applicable law; provided, however, that contractors selected by Manager pursuant to this
Section 6.6 shall be limited to those included on a list of contractors which has been
pre-approved by Owner. For all such capital improvement projects, development work or tenant
improvement projects, Manager shall be paid a coordination fee as set forth on Schedule 2
attached hereto.

     6.7 Service Contracts. Manager shall, in the name of and at the expense of Owner, contract for those utilities and
other building operation and maintenance services Manager shall deem advisable; provided that no
service contract shall be for a term exceeding one year without the prior written approval of
Owner, and the cost of all such services shall be included in the Operating Budget or otherwise
approved in writing in advance by Owner. Further, at the time of execution of any service
contract, the cost of the services to be provided under such contract shall be comparable with
general prevailing market conditions. Manager shall, at the Owner’s expense, purchase and keep the
Project furnished with all necessary supplies. All expenses shall be charged to Owner at net cost,
and Owner shall be credited with all rebates, refunds, allowances and discounts allowed to Manager.
No service contracts with any

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affiliate of Manager or any affiliate of any of the members of Owner
shall be entered into except in accordance with the Loan Compliance Requirements and this
Agreement.

     6.8 Tax and Mortgage Payments. If requested by Owner, Manager shall obtain, verify and pay from Project Income (as defined in
Section 9.1 below) all bills for payments due under all mortgages, real estate, personal
property and improvement assessments with respect to the Project and Owner’s personal property
located therein. In such event, all such expenses shall be included in the Operating Budget.

     6.9 Insurance. Manager shall, at Owner’s cost and expense, obtain and maintain insurance with respect to the
Project in customary levels and in accordance with the Annual Plan, which may be provided through a
blanket policy. Manager shall also cooperate with Owner’s insurance carrier in the processing of
claims and defense and settlement of lawsuits with respect to the Project.

     6.10 Writeoffs and Abandonments. Manager shall obtain the approval of Owner for the writeoff, abandonment or reduction of any
amounts otherwise due Owner from Project operations.

     6.11 Lockbox and Cash Management Arrangements. Manager shall cooperate with Owner and the Lenders with respect to any lock box or cash
management arrangements established by Owner and any Lender (a “Cash Management System”). All
payments required to be made by Manager under this Agreement for taxes, insurance, operating
expenses, capital expenditures and other expenses relating to the Project shall be subject to the
terms and provisions of any such Cash Management System. At Owner’s direction, Manager shall
coordinate with the Lenders to cause all remaining funds, after all required payments and reserves
are made pursuant to any Cash Management System, to be deposited into one or more Project Accounts
(as defined in Section 9.1 below) established by Manager for the benefit of Owner pursuant
to Section 8.1 below.

     6.12 Monitoring Accounts. Manager shall monitor, through computer access to the extent available, all Project Accounts and
other accounts established by Manager on behalf of Owner and/or required by any Lender. In the
event Manager determines at any time that funds in such accounts are insufficient for such
purposes, Manager shall immediately inform Owner of such insufficiency and provide Owner with a
statement of outstanding amounts currently due. Unless otherwise required by the Loan Compliance
Requirements or any Cash Management System, all funds received by Manager for or on behalf of Owner
(less any sums properly deducted by Manager pursuant to any of the provisions of this Agreement and
the Annual Plan) shall be deposited in the appropriate Project Account maintained by Manager for
the deposit of funds of Owner and not commingled with the funds of Manager or any other project.

     6.13 Return of Excess Funds in Project Account. Subject to the terms of any Cash Management System and the Loan Compliance Requirements, on each
date that Manager provides Owner with a Monthly Report, Manager shall also remit to Owner all
funds, if any, that are available in the Project Accounts, after deducting the Management

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Fee,
Leasing Commissions (as defined below) and/or reimbursements due to Manager and any Contingency
Reserve or other amounts agreed to from time to time by Owner and Manager.

7. Methods of Operation.

     7.1 Contracting. All service contracts permitted to be entered into pursuant to Section 6.7 above, all
contracts for capital improvements and all contracts for the refurbishing and modeling of tenant
spaces which (a) cover expenditures included within the Annual Plan or expenditures which are
otherwise approved in advance by Owner or (b) which are approved in advance by Owner or otherwise
meet criteria established by Owner for such contracts, shall be executed by Manager as agent for
Owner. Without relieving it of its obligations hereunder, pursuant to Section 6.3 above,
Manager shall be entitled, in its discretion and at its cost, to enter in its own name into such
subcontracts with third parties or affiliates to perform any of the management functions which are
the subject of
this Agreement as it may determine. All other contracts with respect to the Project and all tenant
leases shall be executed by Owner. Upon any termination of this Agreement, Manager shall, if
requested by Owner, assign all assignable contracts executed by Manager to Owner.

     7.2 Compliance With Laws. Subject to the other provisions of this Agreement, Manager shall be responsible for operating
and maintaining the Project in compliance with known federal, state and municipal laws, ordinances,
regulations and orders relative to the leasing, use, operation, repair and maintenance of the
Project and with the rules, regulations or orders of the local Board of Fire Underwriters or other
similar body (collectively, the “Legal Requirements”) and in accordance with the Loan Compliance
Requirements. At Owner’s expense, Manager shall promptly remedy any violation of any Legal
Requirements or Loan Compliance Requirements which comes to its attention, and further agrees, at
Owner’s expense, to promptly provide to Owner written notice of any known actual, alleged or
threatened violation of or failure to comply with any Legal Requirement or Loan Compliance
Requirement. Expenses incurred in so complying and in correcting any such violation shall be
included in the Annual Plan or otherwise approved in advance by Owner. Subject to the following
sentence, Manager shall also be responsible for compliance with all terms and conditions contained
in any ground lease or space lease or security instrument affecting the Project and for remedying
any breach thereof. Notwithstanding the foregoing, however, Manager’s responsibilities under this
Section 7.2 shall not extend to matters (i) caused by Owner’s gross negligence or willful
misconduct, (ii) as to which the expenditure of Owner’s funds is required but disapproved by Owner,
or (iii) as to which any tenant of the Project has the express responsibility under its lease.
Manager shall assist Owner in Owner’s efforts to comply with Federal, State or other governmental
energy conservation laws, regulations, rules, etc., and, in addition, shall cooperate with Owner to
implement such energy conservation programs as Owner may desire to implement from time to time.

     7.3 Bonding. All employees of Manager who handle or are responsible for Owner’s funds shall, if requested by
Owner, be covered by a fidelity bond. The amount

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of such bond shall be determined by Owner and the
premium therefor shall be an operating expense of the Project.

     7.4 Legal Proceedings. Manager shall, at Owner’s request and expense, engage counsel and cause such legal proceedings
to be instituted as may be necessary to enforce payment of rent and compliance with leases or to
dispossess tenants. Manager shall use Owner’s legal counsel or other legal counsel approved by
Owner to institute such actions, and all compromises shall be subject to the prior approval of
Owner. Attorneys’ fees and costs so incurred shall be expenses of the Project but shall be
submitted to Owner for approval prior to payment. Manager shall deliver copies of all written
notices or other
documentation evidencing actual or threatened lawsuits to Owner promptly upon receipt by Manager.

     7.5 Employment of Personnel. Manager shall have in its employ at all times a sufficient number of capable employees to enable
it to properly, adequately, safely and economically manage, operate and maintain the Project;
provided, however, that Manager may cause Owner to directly employ the personnel listed on
Schedule 3 as and to the extent necessary to fulfill its obligations under this Agreement,
which personnel shall operate under the supervision and direction of Manager. The remaining
personnel on Schedule 3 shall also be under the supervision and direction of Manager.
Manager may, in its discretion, cause additional or fewer on-site employees to be employed either
by Owner, Manager or a subcontractor for the benefit of the Project as it deems necessary or
appropriate in order to manage the Project in a first-class manner consistent with comparable
projects in the area (after taking into consider the management rights and responsibilities
reserved or allocated to any tenant of the Project); provided, however, that employment of any
additional on-site employees for which no provision has been made in the Annual Plan must have the
prior written consent of Owner. All matters pertaining to the employment, supervision,
compensation, promotion and discharge of such employees, as well as union negotiation and
compliance with laws and regulations dealing with employee matters, shall be coordinated by
Manager; provided, however, that Owner shall have the right to request that any particular employee
be prohibited from working at or for the benefit of the Project. The wages, salaries and other
compensation paid to employees of the Project, and to others who perform special services for the
benefit of the Project, shall be paid in accordance with Article 9 hereof. This Agreement
is not one of employment of Manager by Owner, but one with Manager engaged as an independent
contractor in the business of property management. In the event that any expenses are attributable
in part to the Project and in part to other properties owned and managed by Manager, such expenses
shall be prorated by Manager as appropriate from time to time and in a manner agreeable to Owner
and Manager. Upon request by Owner, Manager will submit to Owner a report of all such prorations.

     7.6 Services to Existing Tenants. At Owner’s expense, Manager shall perform services for tenants of the Project which are normally
provided to tenants of other first class buildings in the area or which are specifically requested
by Owner. Manager shall use commercially reasonable efforts to render such services to tenants of
the Project in an effort to minimize any cost to Owner and in a manner that is consistent with the
standards set forth in this Agreement.

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8. Financial Matters.

     8.1 Bank Accounts. In coordination with Lenders and in compliance with the terms of any Cash Management System,
Manager (on behalf of Owner) shall establish an operating trust
account or accounts for the Project at such bank(s), under such designation(s) and with such
authorized signatures as Owner may approve from time to time (each, a “Project Account”) and,
subject to the Loan Compliance Requirements and any Cash Management System, all funds collected
from the operation of the Project, shall be deposited in the appropriate Project Account(s), to be
held in trust in such Project Account(s) for the benefit of Owner, after all required disbursements
and payments are made pursuant to any Cash Management System and the Loan Compliance Requirements.
All expenses of the Project, including Management Fees, Leasing Commissions and reimbursements to
be paid to Manager, to the extent not already made pursuant to the Cash Management System, shall be
paid by Manager from the Project Account(s). If required by law, Owner, any Cash Management
System, or the Loan Compliance Requirements, a separate account(s) for tenant security deposits
shall be established in the same manner as provided in the preceding sentence and shall be
maintained as required by law, any Cash Management System, Owner or the Loan Compliance
Requirements. Owner may require Manager to change banks, change accounts, change account
designations and make disbursements or distributions of Project funds from time to time, and
Manager shall promptly comply with all such directions from Owner.

     8.2 Audits. Owner reserves the right to audit all books and records maintained by Manager with respect to
the Project. All audits shall be at Owner’s cost, shall be conducted by appointment during normal
business hours and shall be conducted at Manager’s office where such books and records are located.
An audit may be conducted by Owner’s employees or by independent persons engaged by Owner. Any
discrepancies noted in any audit shall be promptly corrected.

9. Compensation of Manager.

     9.1 Compensation. For its services hereunder, Manager shall be paid a monthly management fee and other
compensation as specified in Schedule 2 attached hereto (collectively, the “Management
Fee”). For the purposes of this Agreement, “Project Income” means all Rent and all Other Income
(as those terms are defined below) actually collected from Project operations during such month.
“Rent” shall mean all amounts collected from Project tenants other than (i) security and other
tenant deposits (other than as applied to pay rent or additional rent) and (ii) rents paid in
advance by tenants, except the portion of any such advance payment applied to the rent due for the
current month. “Other Income” shall mean all income from the Project which shall include operating
expense reimbursements, fees, amounts paid for after hours or excess utilities and/or air
conditioning service, amounts paid for special services rendered to tenants and vending machine
rental charges, but shall not include Rent, amounts received by Owner or tenants in settlement of
insurance claims, costs and fees recovered in litigation (except amounts allocable to past due rent
or additional rent), refunds or returns

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of taxes paid, amounts
paid under construction contracts, or proceeds from any sale or financing of the Project or any
portion thereof.

     9.2 Employee Compensation. The wages, salaries and other compensation paid to employees who will be employed for the
benefit of the Project (whether such employees are located on-site or off-site), and to others who
perform special services for the benefit of the Project, to the extent not otherwise paid through a
Cash Management System, shall be paid by Owner from a Project Account pursuant to this Section
9.2.

          (a) All wages, salaries and other compensation paid to employees of the Project, including,
but not be limited to, unemployment insurance, social security, worker’s compensation, employee
benefit packages, recruiting costs, and other charges imposed by a governmental authority or
provided for in a union agreement, shall (a) as to employees of Manager or any Subcontractor, be
reimbursed by Owner to Manager (or directly to the applicable Subcontractor, if requested by
Manager) without profit or mark-up, and (b) as to employees of Owner, be paid directly by Owner.
Manager shall coordinate all disbursements and deposits for all compensation and other amounts
payable with respect to persons employed in connection with the operation of the Project from an
appropriate Project Account. Manager shall maintain complete payroll records for all employees.

          (b) In addition to the employment of employees necessary to perform Manager’s general
management duties hereunder, including, without limitation, those set forth on Schedule 3,
Manager may, in its discretion, from time to time employ personnel of its general operations to
perform direct special services for the benefit of the Project; provided, however, that Manager
shall obtain the prior approval of Owner for the employment of such special personnel, except in
emergency situations or when timing requirements do not allow for such prior approval. Owner shall
reimburse Manager for such direct services rendered by special personnel in an amount commensurate
with normal and customary charges for such services by similarly qualified persons. Persons whose
compensation may not be charged to Owner for services rendered to the Project includes the off-site
senior general asset management personnel of Manager above the asset manager level set forth on
Schedule 4 attached hereto.

     9.3 Reimbursable Expenses, Office, and Other Services. Owner shall reimburse Manager for all direct out-of-pocket expenses incurred by or on behalf of
Manager in connection with this Agreement without profit or mark-up, which expenses shall be
reflected in the Annual Plan, and shall include, but not be limited to, normal office expenses and
business and travel expenses associated with operating an on-site business office. Further, Owner
shall provide for the use of Manager a furnished management office in the Project, to be utilized
directly for the benefit of the Project, together with high speed internet service, e-mail,
telephone service, office janitorial service, printed form and customary office supplies and
equipment (such as computers, photocopying equipment and calculators). The method of finishing and
equipping such
office, and the total cost thereof, shall be determined by Owner from time to time based upon the
recommendations of Manager.

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     9.4 Non-Reimbursable Expenses. Except as otherwise set forth on Schedule 2, the following expenses or costs incurred by
or on behalf of Manager in connection with this Agreement shall be at the sole cost and expense of
Manager and shall not be reimbursed by Owner:

          (a) Cost of gross salary and wages, payments of all taxes, insurance, worker’s compensation
and other benefits of Manager’s off-site senior general asset management personnel above the asset
manager level that is identified on Schedule 4 attached hereto.

          (b) Cost attributable to losses arising from negligence or fraud on the part of Manager,
Manager’s associates or Manager’s employees.

     9.5 Payment of Fees and Expenses. Payment or reimbursement of the amounts described in Sections 9.1 through 9.3 above
shall be as follows:

          (a) The monthly Management Fee payable pursuant to Section 9.1 above shall be
calculated and paid concurrently with Manager’s submission of its monthly accounting to Owner and,
upon submission of such accounting, Manager may pay such fee from Project operating funds then in
its possession or control or in a Project Account.

          (b) Employee expenses and out of pocket expenses pursuant to Sections 9.2 and 9.3
shall be reimbursed to Manager at the time incurred by Manager, and, subject to the Cash Management
System, Manager may reimburse such expenses from time to time from Project operating funds under
its possession or control or in a Project Account. A detailed summary of such reimbursable
expenses shall be included on Manager’s monthly accounting to Owner.

10. Insurance and indemnification.

     10.1 Indemnity and Hold Harmless. Owner agrees to:

          (a) Hold and save Manager free and harmless from any damage or injuries to persons or property
by reason of any cause whatsoever either in and about the Project or elsewhere when Manager is
carrying out the provisions of this Agreement or acting under the express or implied directions of
Owner.

          (b) Reimburse Manager upon demand for any moneys which Manager is required to pay out for any
reason whatsoever, under this Agreement or in connection
with, or as an expense in defense of any claim, civil or criminal action, proceeding, charge
or prosecution made, instituted or maintained against Manager or Owner and Manager, jointly or
severally, affecting or due to the condition or use of the Project or acts or omissions of Manager
or employees of Owner or Manager, or arising out of or based upon any law, regulation, requirement,
contract, or award relating to the hours of employment, working conditions, wages or compensation
of employees or former employees.

13

 

          (c) Defend promptly and diligently, at Owner’s expense, any claim, action or proceeding
brought against Manager or Manager and Owner jointly or severally arising out of or connected with
any of the foregoing, and to hold harmless and fully indemnify Manager from any judgment, loss or
settlement on account thereof.

     The foregoing agreement of Owner shall expressly extend to any liabilities, claims and costs
of defense arising out of or resulting from failure or refusal of Owner to authorize compliance
with any law, rule, order or determination of any governmental authority with respect to the
Project, where such matter is promptly brought to Owner’s attention by Manager, and Owner declines
to comply with the same. Nothing contained herein, however, shall relieve Manager of
responsibility to Owner for Manager’s gross negligence or willful misconduct, unless such gross
negligence or willful misconduct is covered by Owner’s insurance. The provisions of this
Section 10.1 shall survive the expiration or termination of this Agreement.

     10.2 Insurance.

          (a) Owner’s Insurance. Owner agrees to carry commercial general liability, elevator
liability and contractual liability insurance (specifically insuring the indemnity provisions
contained in Section 10.1 above), and such other insurance as the parties agree to be
necessary or desirable for the protection of the interests of Owner and Manager. In each such
policy of insurance, Owner shall designate Manager as a party insured with Owner, and the carrier
and the amount of coverage in each policy shall be mutually agreed upon by Owner and Manager. A
certificate of each policy issued by the carrier shall be delivered promptly to Manager by Owner.
All policies shall provide for 30 days’ written notice to Manager and Owner prior to cancellation,
non-renewal or material amendment.

          (b) Manager’s Insurance. If requested by Owner at any time during the Term, Manager
(as a reimbursable expense under this Agreement) and any independent contractors employed by
Manager (at such contractor’s expense) shall maintain in full force and effect commercial general
liability, workers’ compensation, employer’s liability and such other insurance as Owner may
reasonably require with such limits as are customary for managers of similar first class projects
in the area.

     10.3 Conditions. Owner’s obligations under Sections 10.1 and 10.2 are upon the condition that Manager:

          (a) Notifies Owner within five (5) business days after Manager receives notice of any such
loss, damage or injury.

          (b) Takes no action (such as admission of liability) which might bar Owner from obtaining any
protection afforded by any policy Owner may hold or which might prejudice Owner in its defense to a
claim based on such loss, damage or injury.

          (c) Agrees that Owner shall have the exclusive right, at its option, to conduct the defense to
any claim, demand or suit within limits prescribed by the policy or policies of insurance.

14

 

          (d) Cooperates with Owner in disposition of claims, including furnishing all available
information to Owner’s carrier.

          (e) Recognizes that the foregoing shall not affect the general requirement of this Agreement
that the Project shall be managed, operated and maintained in a safe condition and in a proper and
careful manner.

     10.4 Insurance Provisions. Owner shall include, in its hazard policy covering the Project, personal property, fixtures and
equipment located thereon, and Manager shall include in any fire policies for its furniture,
furnishings or fixtures situated at the Project, appropriate clauses pursuant to which the
respective insurance carriers shall waive all rights of subrogation with respect to losses payable
under such policies. If such clauses are available and obtained in the respective insurance
policies of Owner and Manager, each of Owner and Manager waive any claim against the other covered
by their respective aforementioned policies of insurance.

     10.5 Third Party Insurance. If requested by Owner, Manager shall require that all contractors and service companies
operating in or on the Project maintain such worker’s compensation, employer’s liability and
commercial general liability insurance as may be reasonably required by Owner, including any
special coverage required by Owner in connection with hazardous operations.

11. Termination Of Agreement.

     11.1 Termination. Notwithstanding the provisions of Article 2 hereof, if either party defaults in
performance of any of its material obligations hereunder, which default continues for a period of
thirty (30) days after receipt of written notice thereof, then, subject to the proviso below, the
non-defaulting party may immediately terminate this Agreement by written notice to the other party
and the non-defaulting party may seek an action against the defaulting party for actual damages
only (and not for consequential damages, special damages, punitive damages or lost profits);
provided, however, if within the thirty (30)
day period noted above, the defaulting party diligently pursues a cure of the default, the
non-defaulting party will grant a thirty (30) day extension during which it will not terminate this
Agreement, so long as the defaulting party continues to diligently pursue a cure.

Notwithstanding

     11.2 Obligations Upon Termination. Upon the termination of this Agreement by any means:

          (a) Owner shall remain bound by all contracts entered into by Manager in the name of Owner
within the limitations contained in this Agreement and the Annual Plan, and shall remain obligated
to Manager for all Management Fees earned by Manager through the date of termination and for all
reimbursements due to Manager pursuant to this Agreement.

          (b) Manager shall remain obligated:

15

 

               (1) To render to Owner a final accounting of income and expenses of the Project as provided in
this Agreement through the effective date of such termination.

               (2) To deliver to Owner all income and all security deposits from the Project in Manager’s
possession after reimbursement of all expenses and payment of all management fees which Manager is
entitled to receive from such funds.

               (3) To deliver to Owner all keys, records, contracts, leases, receipts, unpaid bills and other
documents relative to the Project and in Manager’s possession at date of termination.

               (4) To assign to Owner all of its rights and obligations in any contracts entered into in
accordance with the terms of this Agreement, and Owner (or its designee) shall assume all of the
obligations thereunder.

12. General Provisions.

     12.1 Independent Contractor. It is expressly understood and agreed that Manager will act as an agent for Owner and as an
independent contractor in the performance of this Agreement.

     12.2 Notices. Any notice which must or may be given under this Agreement or by law shall, except as otherwise
provided, be in writing and shall be deemed to have been given (i) when physically received by
personal delivery (which shall include the confirmed receipt of a telecopied facsimile
transmission), or (ii) three (3) business days after being deposited in
the United States certified or registered mail, return receipt requested, postage prepaid, or (iii)
one (1) business day after being deposited with a nationally known commercial courier service
providing next day delivery service (such as Federal Express). All notices shall be addressed and
delivered to the addresses set forth on the signature page of this Agreement, or to such other
addresses which may be provided by any party hereto to the other in writing.

     12.3 Attorneys’ Fees. If suit or action is instituted in connection with any controversy arising out of this
Agreement, the prevailing party shall be entitled to recover, in addition to costs, such sum as the
court may adjudge reasonable as attorneys’ fees in such suit or action and on any appeal from any
judgment or decree entered therein.

     12.4 Assignment. This Agreement and the rights and obligations hereunder, shall not be assignable by either party
hereto without the written consent of the other; provided, however, that the foregoing shall not
extend to assignments by Manager to any affiliate of Younan Properties, Inc., assignments required
by any insurance carrier in any matter relating to subrogation or an assignment or other transfer
by Owner in connection with a sale or any Property Financings (as defined in Section
12.12); provided, further, that Manager may subcontract with affiliates of Manager and/or third
parties to assist in carrying out its duties hereunder as set forth in this Agreement.

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     12.5 Amendments. Except as otherwise provided herein, all amendments to this Agreement shall be in writing and
executed by the party to be charged.

     12.6 Integration. This Agreement, and the Schedules attached hereto and made a part hereof, supersede and take the
place of any and all previous management agreements entered into between the parties hereto
relating to the Project.

     12.7 Governing Law. This Agreement is executed with respect to a project located in the State of Texas and shall be
governed by and construed in accordance with the laws of such state.

     12.8 Cooperation. Should any claim, demand, action or other legal proceeding arising out of matters covered by
this Agreement be made or instituted by any third party against a party to this Agreement, the
other party to this Agreement shall furnish such information and reasonable assistance in defending
such proceeding as may be requested by the party against whom such proceeding is brought.

     12.9 Waiver of Rights. The failure of Owner or Manager to seek redress for violation, or to insist upon the strict
performance of any covenant, agreement, provision or condition of this Agreement, shall not
constitute a waiver of the terms of such covenant, agreement, provision or condition at any
subsequent time, or of the terms of any other covenant, agreement, provision or condition contained
in this Agreement.

     12.10 Successors and Assigns. This Agreement and each of the provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective heirs, executors, administrators, successors and
assigns.

     12.11 Non-Discrimination. There shall be no discrimination against or segregation of, any person, or group of persons on
account of race, color, creed, national origin or ancestry in the sale, lease, sublease, transfer,
use, occupancy, tenure or enjoyment of the Project, nor shall Owner, Manager or any person claiming
under or through them, establish or permit any such practice or practices of discrimination or
segregation with reference to the selection, location, number, use or occupancy of tenants,
lessees, subtenants, sublessees or vendees of the land.

     12.12 Subordination. This Agreement, and any and all rights of Manager hereunder, are and shall be subject and
subordinate to any financing (whether senior financing, mezzanine level financing, or preferred
equity) respecting the Project (or any portion thereof) (collectively, the “Property Financings”),
and any ground or master lease with respect to the Project or any portion thereof (collectively,
“Leases”), and all renewals, extensions, modifications, consolidations and replacements thereof,
and to each and every advance made or hereafter to be made under any such Property Financings or
Leases. This section shall be self-operative and no further instrument of subordination shall be
required. In confirmation of such subordination, Manager shall promptly execute, acknowledge and
deliver any instrument that Owner, the landlord under any of the Leases or the holder of any such
Property Financings or the trustee or beneficiary of any deed of trust or any of their respective
successors in interest may reasonably request

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to evidence such subordination. At any time and from
time to time, upon not less than ten (10) business days prior notice from Manager or Owner, the
certifying party shall furnish to the requesting party, or a designee thereof, an estoppel
certifying that this Agreement is unmodified and in full force and effect (or that this Agreement
is in full force and effect as modified and setting forth the modifications), the date to which
Manager has been paid hereunder, that to the knowledge of the certifying party, no default or an
event of default has occurred and is continuing or, if a default or an event of default shall
exist, specifying in reasonable detail the nature thereof and the steps being taken to remedy the
same, and such additional information as the requesting party may reasonably request. Any
subordination or estoppel furnished pursuant to this Section 12.12 may be relied upon by
Owner, and its affiliates, Lenders, and any prospective landlord or Lender of the Project or any
portion thereof. Manager shall not unreasonably withhold its consent to any amendment to this
Agreement reasonably required by such lender or lessor, provided that such amendment does not (i)
increase Manager’s financial obligations hereunder, or (ii) have a material adverse effect upon
Manager’s rights hereunder, or (iii) materially increase Manager’s non-economic obligations
hereunder.

     12.13 Dispute Resolution. The parties hereby agree that, in order to obtain prompt and expeditious resolution of any
disputes under this Agreement, each claim, dispute or controversy of whatever nature, arising out
of, in connection with, or in relation to the interpretation, performance or breach of this
Agreement (or any other agreement contemplated by or related to this Agreement or any other
agreement between the parties), including without limitation any claim based on contract, tort or
statute, or the arbitrability of any claim hereunder (an “Arbitrable Claim”), shall be settled by
final and binding arbitration conducted in Los Angeles, California. The arbitrability of any
Arbitrable Claims under this Agreement shall be resolved in accordance with a two-step dispute
resolution process administered by Judicial Arbitration & Mediation Services, Inc. (“JAMS”)
involving, first, mediation before a retired judge from the JAMS panel, followed, if necessary, by
final and binding arbitration before the same, or if requested by either party, another JAMS
panelist. Such dispute resolution process shall be confidential and shall be conducted in
accordance with California Evidence Code Section 1119.

          (a) Mediation. In the event any Arbitrable Claim is not resolved by an informal
negotiation between the parties within fifteen (15) days after either party receives written notice
that a Arbitrable Claim exists, the matter shall be referred to the Los Angeles, California office
of JAMS, or any other office agreed to by the parties, for an informal, non-binding mediation
consisting of one or more conferences between the parties in which a retired judge will seek to
guide the parties to a resolution of the Arbitrable Claims. The parties shall select a mutually
acceptable neutral arbitrator from among the JAMS panel of mediators. In the event the parties
cannot agree on a mediator, the Administrator of JAMS will appoint a mediator. The mediation
process shall continue until the earliest to occur of the following: (i) the Arbitrable Claims are
resolved, (ii) the mediator makes a finding that there is no possibility of resolution through
mediation, or (iii) thirty (30) days have elapsed since the Arbitrable Claim was first scheduled
for mediation.

18

 

          (b) Arbitration. Should any Arbitrable Claims remain after the completion of the
mediation process described above, the parties agree to submit all remaining Arbitrable Claims to
final and binding arbitration administered by JAMS in accordance with the then existing JAMS
Arbitration Rules. Neither party nor the arbitrator shall disclose the existence, content, or
results of any arbitration hereunder without the prior written consent of all parties. Except as
provided herein, the California Arbitration Act shall govern the interpretation, enforcement and
all proceedings pursuant to this subsection. The arbitrator is without jurisdiction to apply any
substantive law
other than the laws selected or otherwise expressly provided in this Agreement. The
arbitrator shall render an award and a written, reasoned opinion in support thereof. Such award
may include reasonable attorneys’ fees to the prevailing party. Judgment upon the award may be
entered in any court having jurisdiction thereof.

          (c) Costs. The parties shall bear their respective costs incurred in connection with
the procedures described in this Section 12.13, except that the parties shall equally share
the fees and expenses of the mediator or arbitrator and the costs of the facility for the hearing.

          (d) Survivability. This dispute resolution process shall survive the termination of
this Agreement. The parties expressly acknowledge that by signing this Agreement, they are giving
up their respective right to a jury trial.

[Signature Pages Follow]

19

 

     IN WITNESS WHEREOF, Owner and Manager have executed this Property Management and Leasing
Agreement as of the day and year first above written.

	 	 	 	 	 	 	 	 	 

	 	 	“MANAGER”	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	YOUNAN PROPERTIES, L.P.
a Maryland limited partnership	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	Younan Properties, Inc.
a Maryland corporation
its General Partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	Name:
	 	 

	 	 
	 

	 	 	 	Title:
	 	 

	 	 
	 

	 	 	 	 	 	 

	 	 

NOTICE ADDRESS FOR MANAGER

21700 Topanga Canyon Blvd.

Suite 800

Woodland Hills, California 91367

Phone No: (818) 703-9600

Fax No.: (818)703-5907

 

 

	 	 	 	 	 	 	 

	 	 	“OWNER”	 	 
	 
	 	 	 	 	 	 
	 	 	YOUNAN PLAZA, LLC,
a Delaware limited liability company	 	 
	 
	 	 	 	 	 	 
	 
	 	By:	 	 	 	 
	 
	 	 	 	 
	 	 
	 
	 	Name:	 	 	 	 
	 
	 	Title:	 	 
	 	 
	 
	 	 	 	 
	 	 

NOTICE ADDRESS FOR OWNER

21700 Topanga Canyon Blvd.

Suite 800

Woodland Hills, California 91367

Phone No.: (818) 703-9600

Fax No.: (818)703-5907

 

 

SCHEDULE 1

LEGAL DESCRIPTION

S1-1

 

SCHEDULE 2

S2-1

 

SCHEDULE 3

(Schedule of Employees)

S3-1

 

SCHEDULE 4

(Non-Reimbursable Personnel)

	 

	

	 
	

	 
	

S4-1

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