Document:

exv10w24

 

 

Exhibit 10.24

AMENDED AND RESTATED

SUBSCRIPTION AGREEMENT

by and among

ZAYA S. YOUNAN

and

YOUNAN PROPERTIES, INC.

Dated as of                 , 2010

 

 

 

 

AMENDED AND RESTATED SUBSCRIPTION AGREEMENT

THIS AMENDED AND RESTATED SUBSCRIPTION AGREEMENT (this “Agreement”) is made and entered
into as of                  , 2010 by and among Younan Properties, Inc., a Maryland corporation
(the “Company”), and Zaya S. Younan (the “Investor”).

RECITALS

A. The Company proposes to undertake an underwritten initial public offering (the “IPO”) of
its common stock, par value $0.01 per share (the “Common Stock”).

B. On April 8, 2010, the Company and the Investor entered into a subscription agreement (the
“Original Agreement”) whereby the Investor agreed to purchase Common Stock of the Company
in a private placement transaction exempt from the registration requirements of the Securities Act
of 1933, as amended (the “Securities Act”), pursuant to Section 4(2) of the Securities Act
and Rule 506 of Regulation D (“Regulation D”) promulgated thereunder by the Securities and
Exchange Commission.

C. The Company and the Investor desire to amend and restate the Original Agreement in its entirety
in accordance with the terms set forth in this Agreement.

NOW, THEREFORE, for and in consideration of the foregoing premises, and the mutual undertakings set
forth below, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree
as follows:

TERMS OF AGREEMENT

ARTICLE I.

IRREVOCABLE SUBSCRIPTION FOR SHARES

     Section 1.1 The Investor irrevocably subscribes for and agrees to purchase the number of
shares of Common Stock indicated in this Agreement on the terms provided for herein. The Investor
agrees to and understands the terms and conditions upon which the Common Stock is being offered.
The price per share paid by the Investor shall be the initial public offering price for the Common
Stock in the IPO. The aggregate number of shares to be purchased by the Investor will be an amount
equal to $1 million divided by the midpoint of the range of prices set forth on the cover of the
red herring prospectus filed with the Securities and Exchange Commission in connection with the IPO
(the “Committed Share Amount”). The aggregate purchase price for the shares of Common Stock
purchased by the Investor will be an amount equal to the Committed Share Amount multiplied by the
initial public offering price per share for the Common Stock in the IPO. The date, time and place
of the consummation of the IPO shall be referred to herein as the “IPO Closing.”

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ARTICLE II.

CONDITIONS; CLOSING

     Section 2.1 Conditions to the Company’s Obligations. The obligations of the Company
to effect the transactions contemplated hereby shall be subject to the following conditions
precedent:

          (i) The representations and warranties of the Investor contained in this Agreement shall have
been true and correct in all material respects on the date such representations and warranties were
made, and on and as of the Closing Date (as hereinafter defined) as if made on and as of such date;

          (ii) The obligations of the Investor contained in this Agreement shall have been duly
performed on or before the Closing Date and the Investor shall not have breached any of his
covenants contained herein in any material respect;

          (iii) Concurrently with the Closing (as hereinafter defined), the Investor shall have executed
and delivered to the Company the documents required to be delivered by the Investor pursuant to
Section 2.4 hereof; and

          (iv) No order, statute, rule, regulation, executive order, injunction, stay, decree or
restraining order shall have been enacted, entered, promulgated or enforced by any court of
competent jurisdiction or governmental entity that prohibits the consummation of the transactions
contemplated hereby, and no litigation or governmental proceeding seeking such an order shall be
pending or threatened.

          Any or all of the foregoing conditions may be waived by the Company in its sole and absolute
discretion.

     Section 2.2 Conditions to the Investor’s Obligations. The obligations of the Investor
to effect the transactions contemplated hereby shall be subject to the following conditions
precedent:

          (i) The representations and warranties of the Company contained in this Agreement shall have
been true and correct in all material respects on the date such representations and warranties were
made, and on and as of the Closing Date as if made on and as of such date;

          (ii) The obligations of the Company contained in this Agreement shall have been duly performed
on or before the Closing Date and the Company shall not have breached any of its covenants
contained herein in any material respect;

          (iii) Concurrently with the Closing, the Company shall each have executed and delivered to the
Investor the documents required to be delivered pursuant to Section 2.4 hereof;

          (iv) No order, statute, rule, regulation, executive order, injunction, stay, decree or
restraining order shall have been enacted, entered, promulgated or enforced by any court of
competent jurisdiction or governmental entity that prohibits the consummation of the

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transactions contemplated hereby, and no litigation or governmental proceeding seeking such an
order shall be pending or threatened; and

          (v) The IPO Closing shall be occurring concurrently with the Closing (or the Closing shall
occur prior to, but be conditioned upon the immediate subsequent occurrence of, the IPO Closing).

     Section 2.3 Time and Place. The date, time and place of the consummation of the
transactions contemplated hereunder (the “Closing” or “Closing Date”) shall occur
concurrently with (or prior to, but conditioned upon the immediate subsequent occurrence of) the
IPO Closing, in the office of Latham & Watkins LLP, 355 South Grand Avenue, Los Angeles, California
90071.

     Section 2.4 Closing Deliveries. At the Closing, the Investor will pay the Committed
Purchase Amount in cash by wire transfer of immediately available funds to an account designated
upon reasonable advance notice by the Company. At the Closing, the parties shall make, execute,
acknowledge and deliver, or cause to be made, executed, acknowledged and delivered through such
third party as may be applicable, the legal documents and other items (collectively the
“Closing Documents”) necessary to carry out the intention of this Agreement and the other
transactions contemplated to take place in connection therewith, which Closing Documents and other
items shall include, without limitation, the following:

          (i) Share Certificates, evidence of delivery of uncertificated shares of Common Stock by
book-entry, and/or other evidence of the transfer of Common Stock to the Investor;

          (ii) The Registration Rights Agreement between the Investor, certain other parties and the
Company substantially in the form attached hereto as Exhibit A, (the “Registration Rights
Agreement”);

          (iii) The Investor shall have executed and delivered a letter to the Company setting forth
certain representations and undertakings related to the Investor’s ownership of Common Stock in a
form reasonably acceptable to the board of directors of the Company and which allows the board of
directors of the Company to reasonably conclude that the ownership waiver and Excepted Holder Limit
(as defined in the Company’s charter) described in Section 2.4(iv) will not jeopardize the
Company’s status as a real estate investment trust (a “REIT”) under the Internal Revenue
Code of 1986, as amended (the “Code”), and make the other determinations required by the
Company’s charter in connection with granting such waiver and Excepted Holder Limit;

          (iv) The Lock-up Agreement signed by the Investor substantially in the form attached hereto as
Exhibit B.

          If requested by the Company, on the one hand, or the Investor, on the other hand, each party
shall provide to the requesting party a certified copy of all appropriate corporate resolutions or
partnership actions authorizing the execution, delivery and performance by such party of this
Agreement, any related documents and the documents listed in this Section 2.4.

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ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

     The Investor represents and warrants to the Company as set forth below in this
Article 3, which representations and warranties are true and correct as of the date hereof and will
(except to the extent expressly relating to a specified date) be true and correct as of the date of
Closing:

     Section 3.1 Consents and Approvals. Except as shall have been satisfied prior to the
Closing Date, no consent, waiver, approval or authorization of any third party or governmental
authority or agency is required to be obtained by the Investor in connection with the execution,
delivery and performance of the Agreement and the transactions contemplated hereby.

     Section 3.2 No Violation. None of the execution, delivery or performance of the
Agreement, and the transactions contemplated hereby does or will, with or without the giving of
notice, lapse of time, or both, violate, conflict with, result in a breach of, or constitute a
default under or give to others any right of termination, acceleration, cancellation or other right
adverse to the Company of (A) any agreement, document or instrument to which the Investor is a
party or by which the Investor is bound, or (B) any term or provision of any judgment, order, writ,
injunction, or decree, or require any approval, consent or waiver of, or make any filing with, any
person or governmental or regulatory authority or foreign, federal, state, local or other law
binding on such Investor or by which such Investor or its assets are bound or subject; provided in
the case of (A) above, unless any such violation, conflict, breach, default or right would not have
a material adverse effect on the financial condition of the Investor.

     Section 3.3 Investment Purposes. The Investor acknowledges its understanding that the
offering and issuance of Common Stock to be acquired by it pursuant to this Agreement are intended
to be exempt from registration under the Securities Act and that the Company’s reliance on such
exemption is predicated in part on the accuracy and completeness of the representations and
warranties of such Investor contained herein. In furtherance thereof, the Investor represents and
warrants to the Company as follows:

          Section 3.3.1 Investment. The Investor is acquiring Common Stock hereunder solely for
its own account and not with a view to, or for offer or sale in connection with, any distribution
thereof. The Investor agrees and acknowledges that it will not, directly or indirectly, offer,
transfer, sell, assign, pledge, hypothecate or otherwise dispose of (hereinafter,
“Transfer”) any of the Common Stock acquired hereunder, unless (i) the Transfer is pursuant
to an effective registration statement under the Securities Act and qualification or other
compliance under applicable blue sky or state securities laws, or (ii) counsel for the Investor
(which counsel shall be reasonably acceptable to the Company) shall have furnished the Company with
an opinion, reasonably satisfactory in form and substance to the Company, to the effect that no
such registration is required because of the availability of an exemption from registration under
the Securities Act.

          Section 3.3.2 Knowledge. The Investor is knowledgeable, sophisticated and experienced
in business and financial matters and fully understands the limitations on transfer imposed by the
Federal securities laws and as described in the Agreement. The Investor is able to bear the
economic risk of holding the Common Stock for an indefinite period and is able to

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afford the complete loss of its investment in the Common Stock; the Investor has received and
reviewed all information and documents about or pertaining to the Company, the business and
prospects of the Company and the issuance of the Common Stock, as the Investor deems necessary or
desirable, and has been given the opportunity to obtain any additional information or documents and
to ask questions and receive answers about such information and documents, the Company, the
business and prospects of the Company and the Common Stock, which the Investor deems necessary or
desirable to evaluate the merits and risks related to its investment in the Common Stock. The
Investor has reviewed with its legal counsel and tax advisors the forms of Articles of Amendment
and Restatement and Amended and Restated Bylaws of the Company and the partnership agreement of the
Company’s operating partnership subsidiary.

          Section 3.3.3 Holding Period. The Investor acknowledges that it has been advised that
(i) the shares of Common Stock issued pursuant to this Agreement are “restricted securities”
(unless registered in accordance with applicable U.S. securities laws) under applicable federal
securities laws and may be disposed of only pursuant to an effective registration statement or an
exemption therefrom and the Investor understands that the Company has no obligation to register the
Investor’s Common Stock, except to the extent set forth in the Registration Rights Agreement;
accordingly, the Investor may have to bear indefinitely the economic risks of an investment in such
Common Stock, (ii) a restrictive legend in the form hereafter set forth shall be placed on the
Share Certificates, and (iii) a notation shall be made in the appropriate records of the Company
indicating that the shares of Common Stock issued hereunder are subject to restrictions on
transfer.

          Section 3.3.4 Accredited Investor. The Investor is an “accredited investor” (as such
term is defined in Rule 501 (a) of Regulation D under the Securities Act). The Investor has
previously provided the Company with a duly executed Accredited Investor Questionnaire. No event
or circumstance has occurred since delivery of such Investor’s Questionnaire to make the statements
contained therein false or misleading.

          Section 3.3.5 Legend. Each Share Certificate issued pursuant to this Agreement,
unless registered in accordance with applicable U.S. securities laws, shall bear the following
legend:

The securities evidenced hereby have not been registered under the Securities Act of 1933,
as amended (the “Act”), or the securities laws of any state and may not be sold,
transferred or otherwise disposed of in the absence of such registration, unless the
transferor delivers to the company an opinion of counsel satisfactory to the company, to the
effect that the proposed sale, transfer or other disposition may be effected without
registration under the Act and under applicable state securities or “Blue Sky” laws.

In addition to the foregoing legend, each Share Certificate shall bear a legend which generally
provides the following:

The shares represented by this certificate are subject to restrictions on Beneficial and
Constructive Ownership and Transfer for the purpose of the Corporation’s maintenance of its
status as a real estate investment trust under the Internal Revenue Code of 1986, as amended
(the “Code”). Subject to certain further restrictions and except as expressly

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provided
in the Corporation’s Charter, (i) no Person may Beneficially or Constructively Own shares of the Corporation’s Common Stock in excess of 9.8% (in value or number of shares) of
the outstanding shares of Common Stock of the Corporation unless such Person is an Excepted
Holder (in which case the Excepted Holder Limit shall be applicable); (ii) no Person may
Beneficially or Constructively Own shares of Capital Stock of the Corporation in excess of
9.8% of the value of the total outstanding shares of Capital Stock of the Corporation,
unless such Person is an Excepted Holder (in which case the Excepted Holder Limit shall be
applicable); (iii) no Person may Beneficially or Constructively Own Capital Stock that would
result in the Corporation being “closely held” under Section 856(h) of the Code or otherwise
cause the Corporation to fail to qualify as a REIT; and (iv) no Person may Transfer shares
of Capital Stock if such Transfer would result in the Capital Stock of the Corporation being
owned by fewer than 100 Persons. Any Person who Beneficially or Constructively Owns or
attempts to Beneficially or Constructively Own shares of Capital Stock which causes or will
cause a Person to Beneficially or Constructively Own shares of Capital Stock in excess or in
violation of the above limitations must immediately notify the Corporation. If any of the
restrictions on transfer or ownership set forth in (i) through
(iii) above are violated, the shares of Capital Stock represented hereby will be automatically transferred to a Trustee of
a Trust for the benefit of one or more Charitable Beneficiaries. In addition, the
Corporation may take other actions, including redeeming shares upon the terms and conditions
specified by the Board of Directors in its sole and absolute discretion if the Board of
Directors determines that ownership or a Transfer or other event may violate the
restrictions described above. Furthermore, upon the occurrence of certain events, attempted
Transfers in violation of the restrictions described above may be void ab initio. All
capitalized terms in this legend have the meanings defined in the Charter of the
Corporation, as the same may be amended from time to time, a copy of which, including the
restrictions on transfer and ownership, will be furnished to each holder of Capital Stock of
the Corporation on request and without charge. Requests for such a copy may be directed to
the Secretary of the Corporation at its Principal Office.

     Section 3.4 No Brokers. The Investor has not employed or made any agreement with any
broker, finder or similar agent or any person or firm which will result in the obligation of the
Company or any of its affiliates to pay any finder’s fee, brokerage fees or commissions or similar
payment in connection with the transactions contemplated by the Agreement.

Except as set forth in this Article III, the Investor does not make any representation or warranty
of any kind, express or implied, and the Company acknowledges that it has not relied upon any other
such representation or warranty.

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

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          The Company represents and warrants to the Investor as set forth below in this
Article 4, which representations and warranties are true and correct as of the date hereof and will
(except to the extent expressly relating to a specified date) be true and correct as of the date of
Closing:

     Section 4.1 Organization; Authority. The Company has been duly formed and is validly
existing under the laws of the jurisdiction of its formation, and has all requisite power and
authority to enter into this Agreement and, to the extent required under applicable law, is
qualified to do business and is in good standing in each jurisdiction in which the nature of its
business or the character of its property make such qualification necessary.

     Section 4.2 Due Authorization. The execution, delivery and performance of this
Agreement by the Company have been duly and validly authorized by all necessary action of the
Company. This Agreement constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, as such enforceability may be limited
by bankruptcy or the application of equitable principles.

     Section 4.3 Consents and Approvals. Assuming the accuracy of the representations and
warranties of the Investor made hereunder and except in connection with the IPO, no consent,
waiver, approval or authorization of any third party or governmental authority or agency is
required to be obtained by the Company in connection with the execution, delivery and performance
of this Agreement and the transactions contemplated hereby, except any of the foregoing that shall
have been satisfied prior to the Closing Date or the IPO Closing, as applicable, and except for
those consents, waivers and approvals or authorizations, the failure of which to obtain would not
have a material adverse effect on the business, financial condition or results of operations (a
“Material Adverse Effect”) on the Company.

     Section 4.4 Non-Contravention. Assuming the accuracy of the representations and
warranties of the Investor made hereunder, none of the execution, delivery or performance of this
Agreement by the Company and the consummation of the subscription transactions contemplated hereby
will (A) result in a default (or an event that, with notice or lapse of time or both would become a
default) or give to any third party any right of termination, cancellation, amendment or
acceleration under, or result in any loss of any material benefit, pursuant to any material
agreement, document or instrument to which the Company or any of its properties or assets may be
bound or (B) violate or conflict with any judgment, order, decree, or law applicable to the Company
or any of its properties or assets; provided in the case of (A) and (B), unless any such default,
violation or conflict would not have a Material Adverse Effect.

     Section 4.5 REIT Status. At the effective time of the IPO and Closing, the Company
shall be organized in a manner so as to qualify as a REIT within the meaning of Section 856 of the
Code. As described in the prospectus relating to the IPO, the Company intends to elect to be taxed
and to operate in a manner that will allow it to qualify as a REIT for federal income tax purposes
commencing with its taxable year ending December 31, 2010.

     Section 4.6 Common Stock. The Common Stock issuable at the Closing in accordance with
the terms of this Agreement will be duly authorized, validly issued, fully paid and

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nonassessable, and not subject to preemptive or similar rights created by statute or any
agreement to which the Company is a party or by which it is bound.

     Section 4.7 No Litigation. There is no action, suit or proceeding pending or, to the
Company’s knowledge, threatened against the Company that, if adversely determined, would have a
Material Adverse Effect on the ability of the Company to execute or deliver, or perform its
obligations under, this Agreement and the documents executed by it pursuant to this Agreement or to
consummate the transactions contemplated hereby or thereby.

     Section 4.8 No Prior Business. Since the date of its formation, the Company has not
conducted any business, nor has it incurred any liabilities or obligations (direct or indirect,
present or contingent), in each case except in connection with the formation transactions and the
IPO and as contemplated under this Agreement.

     Section 4.9 No Broker. Neither Company nor any of its officers, directors or
employees, to the extent applicable, has employed or made any agreement with any broker, finder or
similar agent or any person or firm which will result in the obligation of any Investor or any of
its respective affiliates to pay any finder’s fee, brokerage fees or commissions or similar payment
in connection with transactions contemplated by the Agreement.

Except as set forth in this Article 4, the Company does not make any representation or warranty of
any kind, express or implied, and the Investor acknowledges that it has not relied upon any other
such representation or warranty.

ARTICLE V.

MISCELLANEOUS

     Section 5.1 Information. The Company may request from the Investor such additional
information as the Company may deem necessary to evaluate the eligibility of the Investor to
acquire the Common Stock, and may request from time to time such information as the Company may
deem necessary to determine the eligibility of the Investor to hold the Common Stock or to enable
the Company to determine the Company’s compliance with applicable regulatory requirements or tax
status, and the Investor shall provide such information as may reasonably be requested.

     Section 5.2 Further Assurances. The Investor and the Company shall take such other
actions and execute such additional documents following the Closing as the other may reasonably
request in order to effect the transactions contemplated hereby.

     Section 5.3 Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall constitute one and the
same instrument.

     Section 5.4 Governing Law. This Agreement shall be governed by the internal laws of
the State of California, without regard to the choice of laws provisions thereof.

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     Section 5.5 Amendment; Waiver. Any amendment hereto shall be in writing and signed by
all parties hereto. No waiver of any provisions of this Agreement shall be valid unless in writing
and signed by the party against whom enforcement is sought.

     Section 5.6 Entire Agreement. This Agreement and the exhibits and schedules hereto
constitute the entire agreement and supersede conflicting provisions set forth in all other prior
agreements and understandings, both written and oral, among the parties with respect to the subject
matter hereof.

     Section 5.7 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties hereto and their respective heirs, legal
representatives, successors and assigns; provided, however, that this Agreement may not be assigned
(except by operation of law) by any party without the prior written consent of the other parties,
except to an affiliate, and no assignment shall relieve a party from its obligations under this
Agreement.

     Section 5.8 Titles. The titles and captions of the Articles, Sections and paragraphs
of this Agreement are included for convenience of reference only and shall have no effect on the
construction or meaning of this Agreement.

     Section 5.9 Third Party Beneficiary. Except as may be expressly provided or
incorporated by reference herein, including, without limitation, the indemnification provisions
hereof, no provision of this Agreement is intended, nor shall it be interpreted, to provide or
create any third party beneficiary rights or any other rights of any kind in any customer,
affiliate, stockholder, partner, member, director, officer or employee of any party hereto or any
other person or entity.

     Section 5.10 Severability. If any provision of this Agreement, or the application
thereof, is for any reason held to any extent to be invalid or unenforceable, the remainder of this
Agreement and application of such provision to other persons or circumstances will be interpreted
so as reasonably to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and enforceable provision that
will achieve, to the extent possible, the economic, business and other purposes of the void or
unenforceable provision and to execute any amendment, consent or agreement deemed necessary or
desirable by the Company to effect such replacement.

     Section 5.11 Reliance. Each party to this Agreement acknowledges and agrees that it
is not relying on tax advice or other advice from the other party to this Agreement, and that it
has or will consult with its own advisors.

     Section 5.12 Survival. It is the express intention and agreement of the parties
hereto that the representations, warranties and covenants of the Investor and the Company set forth
in this Agreement shall survive the consummation of the transactions contemplated hereby.

     Section 5.13 Notice. Any notice to be given hereunder by any party to the other shall
be given in writing by either (i) personal delivery, (ii) registered or certified mail, postage
prepaid, return receipt requested, or (iii) facsimile transmission (provided such facsimile is
followed by an original of such notice by mail or personal delivery as provided herein), and any

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such notice shall be deemed communicated as of the date of delivery (including delivery by
overnight courier, certified mail or facsimile). Mailed notices shall be addressed as set forth
below, but any party may change the address set forth below by written notice to other parties in
accordance with this paragraph.

To the Company:

Younan Properties, Inc.

5959 Topanga Canyon Boulevard

Woodland Hills, CA 91367

Phone: (818) 703-9600

Facsimile: (818) 703-5907

Attn: Adam I. Knowlton

 

To the Investor:

Zaya S. Younan

5959 Topanga Canyon Boulevard

Woodland Hills, CA 91367

Phone: (818) 703-9600

Facsimile: (818) 703-5907

     Section 5.14 Equitable Remedies. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not performed in accordance
with the specific terms hereof or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and
to enforce specifically the terms and provisions hereof in any federal or state court located in
California (as to which the parties agree to submit to jurisdiction for the purpose of such
action), this being in addition to any other remedy to which the parties are entitled under this
Agreement; provided, however, that nothing in this Agreement shall be construed to permit the
Investor to enforce consummation of the IPO.

     Section 5.15 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, subject to Section 5.14 above, be settled by final and binding
arbitration conducted in Los Angeles, California. 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

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process shall be confidential and shall be conducted in accordance with California Evidence
Code Section 1119.

     Section 5.16 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, an 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.

     Section 5.17 Arbitration. Should any Arbitrable Claim 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 subparagraph. 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. Judgment
upon the award may be entered in any court having jurisdiction thereof.

     Section 5.18 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.

     Section 5.19 Enforcement Costs. Should any party institute any action or proceeding
under Section 5.15 above (or, with respect to the Company, Sections 5.16 or 5.17 above), the
prevailing party shall be entitled to receive all reasonable costs and expenses (including
reasonable attorneys’ fees) incurred by such prevailing party in connection with such action or
proceeding. A party entitled to recover costs and expenses under this Section 5.19 shall also be
entitled to recover all costs and expenses (including reasonable attorneys’ fees) incurred in the
enforcement of any judgment or settlement obtained in such action or proceeding and provision (and
in any such judgment provision shall be made for the recovery of such post-judgment costs and
expenses).

[signature page to follow]

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

	 	 	 	 	 
	 	“COMPANY”

Younan Properties, Inc.

 	 
	 	By:  	 	 
	 	 	Name:  	Zaya S. Younan 	 
	 	 	Title:  	President 	 
	 
	 
	 	“INVESTOR”

 	 
	 	Zaya S. Younan

 	 
	 
	 
	 		 	 
	 	 	 	 
	 	 	 	 

S-1

 

EXHIBIT A

TO

SUBSCRIPTION AGREEMENT

FORM OF REGISTRATION RIGHTS AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit A-1

 

EXHIBIT B

TO

SUBSCRIPTION AGREEMENT

FORM OF LOCK-UP AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit B-1exv10w25

Exhibit 10.25

TAX PROTECTION AGREEMENT

          This TAX PROTECTION AGREEMENT (this “Agreement”) is entered into as of ____, 2010, by
and among Younan Properties, Inc., a Maryland corporation (the “REIT”), Younan Properties,
L.P., a Maryland limited partnership (the “Operating Partnership”), each Protected Partner
identified as a signatory on Schedule I, as amended from time to time, and each Guarantee Partner
identified as a signatory on Schedule II, as amended from time to time.

RECITALS

          WHEREAS, the REIT desires to consolidate the ownership of a portfolio of office and certain
other properties currently owned, directly or indirectly, by certain entities (collectively, the
“Single Asset Entities”) and managed by Younan Properties, Inc., a California corporation
(“YPI”), Younan Investment Properties LP, a Delaware limited partnership and subsidiary of
YPI (“YIP”), or another affiliate of YPI;

          WHEREAS, concurrently with the execution of this Agreement, the REIT will enter into an
agreement and plan of merger with YPI, pursuant to which YPI will merge with and into the REIT;

          WHEREAS, concurrently with the execution of this Agreement, the Operating Partnership will
enter into an agreement and plan of merger with YIP and certain other entities (the “SAE Entity
Members”) that are direct or indirect partners or members of certain of the Single Asset
Entities, pursuant to which, immediately following the merger identified in the preceding
paragraph, (i) YIP will merge with and into the Operating Partnership and (ii) thereafter, the
Operating Partnership will acquire all or a portion of the interests in each of the SAE Entity
Members pursuant to mergers of the SAE Entity Members with and into the Operating Partnership in
the order set forth in the merger agreement for each such SAE Entity Member;

          WHEREAS, YPI S/WL LLC, an affiliate of the Protected Partners’ Representative (as defined
below) will assign to the Operating Partnership its rights and obligations under that certain
purchase agreement (the “Fund Purchase Agreement”) between YPI S/WL LLC and Passco Younan
Fund I LLC, a Delaware limited liability company (the “Fund”), pursuant to which YPI S/WL
LLC has agreed to purchase certain interests held by the Fund, which rights and obligations will be
assigned to the Operating Partnership as a result of the merger of YPI S/WL LLC with and into the
Operating Partnership, and the Operating Partnership will purchase the interests from the Fund
pursuant to the terms of the Fund Purchase Agreement;

          WHEREAS, YGH Investments LLC, a California limited liability company and an SAE Entity Member
will assign to YPI its rights and obligations under that certain purchase agreement (the “CHI
Purchase Agreement”) to acquire all of Chung Hsein International LP’s interests in 4041 Central
Plaza LLC, a Delaware limited liability company, which rights and obligations will be assigned to
the Operating Partnership as a result of the merger of YPI into the REIT and the REIT’s
contribution of the assets of YPI to the Operating Partnership, and

 

 

immediately after such merger and contribution, the Operating Partnership will consummate the
transactions contemplated by the CHI Purchase Agreement;

          WHEREAS, concurrently with the execution of this Agreement, the REIT and the Operating
Partnership will enter into an agreement and plan of merger with certain of the Single Asset
Entities, pursuant to which, immediately following the transactions identified in the preceding
paragraphs, the Operating Partnership will acquire, directly or indirectly, certain of the
interests in the Single Asset Entities;

          WHEREAS, the Formation Transactions relate to the proposed initial public offering of the
common stock of the REIT, par value $.01 per share, following which the REIT will operate as a
self-administered and self-managed real estate investment trust within the meaning of Section 856
of the Code (as defined below); and

          WHEREAS, as a condition to engaging in the Formation Transactions with respect to each
Protected Property (as defined below), and as an inducement to do so, the parties hereto are
entering into this Agreement;

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

ARTICLE I

DEFINED TERMS

          For purposes of this Agreement the following terms shall apply:

          Section 1.1 “Affiliate” means, with respect to any Person, any Person directly or
indirectly controlling or controlled by or under common control with such Person. For the purposes
of this definition, “control” when used with respect to any Person means the possession, directly
or indirectly, of the power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or otherwise, and the terms
“controlling” and “controlled” have meanings correlative to the foregoing.

          Section 1.2 “Agreement” has the meaning set forth in the preamble.

          Section 1.3 “CHI Purchase Agreement” has the meaning set forth in the preamble.

          Section 1.4 “Closing Date” has the meaning assigned to it in the applicable Pre-Formation Transaction Documentation.

          Section 1.5 “Code” means the Internal Revenue Code of 1986, as amended.

          Section 1.6 “Collateral” has the meaning set forth in the definition of “Qualified
Liability.”

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          Section 1.7 “Debt Gross Up Amount” has the meaning set forth in definition of
“Make Whole Amount.”

          Section 1.8 “Debt Notification Event” means, with respect to a Qualified Liability,
any transaction in which such liability shall be refinanced, otherwise repaid (excluding for this
purpose, scheduled payments of principal occurring prior to the maturity date of such liability),
or guaranteed by any of the REIT, the Operating Partnership, or one or more of their Affiliates, or
guaranteed by one or more partners of the Partnership.

          Section 1.9 “Exchange” has the meaning set forth in Section 2.1(b) of this
Agreement.

          Section 1.10 “Formation Transaction Documentation” means all of the agreements and
plans of merger, substantially in the forms accompanying the Request for Consent dated March 12,
2010, pursuant to which all of the equity interests in the Younan Entities held by the
Pre-Formation Participants are to be acquired by the REIT or the Operating Partnership, directly or
indirectly, as part of the Formation Transactions.

          Section 1.11 “Formation Transactions” means the transactions contemplated by this
Agreement and the other Formation Transaction Documentation.

          Section 1.12 “Fund” has the meaning set forth in the preamble.

          Section 1.13 “Fund Purchase Agreement” has the meaning set forth in the preamble.

          Section 1.14 “Fundamental Transaction” means a merger, consolidation or other
combination of the Operating Partnership with or into any other entity, a transfer of all or
substantially all of the assets of the Operating Partnership, any reclassification,
recapitalization
or change of the outstanding equity interests of the Operating Partnership, or a conversion of
the Operating Partnership into another form of entity.

          Section 1.15 “Guarantee Partner” means: (i) each signatory on Schedule II attached
hereto, as amended from time to time; (ii) any person who holds OP Units and who acquired such OP
Units from another Guarantee Partner in a transaction in which such person’s adjusted basis in such
OP Units, as determined for Federal income tax purposes, is determined, in whole or in part, by
reference to the adjusted basis of the transferor Guarantee Partner in such OP Units; and (iii)
with respect to a Guarantee Partner that is Pass Through Entity, and solely for purposes of
computing the amount to be paid under Section 2.4 with respect to
such Guarantee Partner, any person who (y) holds an interest in such Guarantee Partner, either
directly or through one or more Pass Through Entities, and (z) is required to include all or a
portion of the income of such Guarantee Partner in its own gross income.

          Section 1.16 “Guarantee Opportunity” has the meaning set forth in Section
2.4(b).

3

 

          Section 1.17 “Guaranteed Liability” means any Qualified Liability that is guaranteed,
in whole or in part, by one or more Guarantee Partners in accordance with Section 2.4(b) of
this Agreement.

          Section 1.18 “Guarantee Permissible Liability” means a liability with respect to which
the lender permits a guarantee.

          Section 1.19 “Gross Up Amount” has the meaning set forth in definition of “Make
Whole Amount.”

          Section 1.20 “Make Whole Amount” means: (a) with respect to any Protected Partner that
recognizes gain under Section 704(c) of the Code as a result of a Tax Protection Period Transfer,
the sum of (i) the product of (x) the income and gain recognized by such Protected Partner under
Section 704(c) of the Code in respect of such Tax Protection Period Transfer (taking into account
any adjustments under Section 743 of the Code to which such Protected Partner is entitled)
multiplied by (y) the Make Whole Tax Rate, plus (ii) an amount equal to the combined Federal,
applicable state and local income taxes (calculated using the Make Whole Tax Rate) imposed on a
Protected Partner as a result of the receipt by a Protected Partner of a payment under Section
2.2 (the “Gross Up Amount”); provided, however, that the Gross Up Amount shall be
computed without regard to any losses, credit, or other tax attributes that a Protected Partner
might have that would reduce its actual tax liability; and (b) with respect to any Guarantee
Partner that recognizes gain as a result of a breach by the Operating Partnership of the provisions
of Section 2.4 hereof, the sum of (i) the product of (x) the income
and gain recognized by such Guarantee Partner by reason of such breach, multiplied by (y) the Make
Whole Tax Rate, plus (ii) an amount equal to the combined Federal, applicable state and local
income taxes (calculated using the Make Whole Tax Rate) imposed on a Guarantee Partner as a result
of the receipt by a Guarantee Partner of a payment under Section 2.4(e) (the “Debt
Gross Up Amount”); provided, however, that the Debt Gross Up Amount shall be computed without
regard to any losses, credit,
or other tax attributes that a Guarantee Partner might have that would reduce its actual tax
liability. For purposes of calculating the amount of Section 704(c) gain that is allocated to a
Protected Partner, (i) subject to clause (ii) below, any “reverse Section 704(c) gain” allocated to
such partner pursuant to Treasury Regulations § 1.704-3(a)(6) shall not be taken into account, and
(ii) if, as a result of adjustments to the Gross Asset Value (as defined in the OP Agreement) of
the Protected Properties pursuant to clause (b) of the definition of Gross Asset Value as set forth
in the OP Agreement, all or a portion of the gain recognized by the Operating Partnership that
would have been Section 704(c) gain without regard to such adjustments becomes or is treated as
“reverse Section 704(c) gain” or Section 704(b) gain under Section 704 of the Code, then such gain
shall continue to be treated as Section 704(c) gain; provided that the total amount of 704(c) gain
and income taken into account for purpose of calculating the Make Whole Amount shall not exceed the
initial Section 704(c) gain amount as of the Closing Date (whether or not equal to the estimated
amount set forth on Exhibit B).

          Section 1.21 “Make Whole Tax Rate” means, with respect to a Protected Partner who is
entitled to receive a payment under Section 2.2 and with respect to a Guarantee Partner who
is entitled to receive payment under Section 2.4(e), the highest
combined statutory Federal, state and local tax rate in respect of the income or gain that

4

 

gave
rise to such payment, taking into account the character of the income and gain in the hands of such
Protected Partner or Guarantee Partner, as applicable (reduced, in the case of Federal taxes, by
the deduction allowed for income taxes paid to a state or locality), for the taxable year in which
the event that gave rise to such payment under
Section 2.2 or Section 2.4 occurred. Notwithstanding the foregoing, if a Protected Partner or Guarantee
Partner demonstrates to the reasonable satisfaction of the Operating Partnership that such
Protected Partner or Guarantee Partner, as applicable, is not entitled to a Federal income tax
deduction for all or a portion of the income taxes paid to a state or locality, the Make Whole Tax
Rate applicable to such Protected Partner or Guarantee Partner shall be reduced only by the
deduction, if any, the Protected Partner or Guarantee Partner is entitled to take for such taxes.

          Section 1.22 “OP Agreement” means the Agreement of Limited Partnership of Younan
Properties, LP, as amended from time to time.

          Section 1.23 “OP Units” means common units of partnership interest in the Operating
Partnership.

          Section 1.24 “Operating Partnership” has the meaning set forth in the preamble.

          Section 1.25 “Pass Through Entity” means a partnership, grantor trust, or S
corporation for Federal income tax purposes.

          Section 1.26 “Permitted Disposition” means a sale, exchange or other disposition of OP
Units (i) by a Protected Partner or Guarantee Partner: (a) to such Protected Partner’s or Guarantee
Partner’s children, spouse or issue; (b) to a trust for such Protected Partner or Guarantee Partner
or such Protected Partner’s or Guarantee Partner’s children, spouse or issue; (c) in the case of a
trust which is a Protected Partner or Guarantee Partner, to its beneficiaries, or any of them,
whether current or remainder beneficiaries; (d) to a revocable inter vivos trust of which such
Protected Partner or Guarantee Partner is a trustee; (e) in the case of any partnership or limited
liability company which is a Protected Partner or Guarantee Partner, to its partners or members;
and/or (f) in the case of any corporation which is a Protected Partner or Guarantee Partner, to its
shareholders, and (ii) by a party described in clauses (a), (b), (c) or (d) to a partnership,
limited liability company or corporation of which the only partners, members or shareholders, as
applicable, are parties described in clauses (a), (b), (c) or (d); provided, that for purposes of
the definition of Tax Protection Period, such Protected Partner or Guarantee Partner shall be
treated as continuing to own any OP Units which were subject to a Permitted Disposition unless and
until there has been a sale, exchange or other disposition of such OP Units by a permitted
transferee which is not another Permitted Disposition.

          Section 1.27 “Person” means an individual or a corporation, partnership, trust,
unincorporated organization, association, limited liability company or other entity.

          Section 1.28 “Pre-Formation Interests” means the interests held by the Pre-Formation
Participants.

          Section 1.29 “Pre-Formation Participants” means the holders of the equity interests in
the relevant Younan Entities immediately prior to the Formation Transactions.

5

 

          Section 1.30 “Protected Partner” means: (i) each signatory on Schedule I attached
hereto, as amended from time to time; (ii) any person who holds OP Units and who acquired such OP
Units from another Protected Partner in a transaction in which such person’s adjusted basis in such
OP Units, as determined for Federal income tax purposes, is determined, in whole or in part, by
reference to the adjusted basis of the transferor Protected Partner in such OP Units; and (iii)
with respect to a Protected Partner that is Pass Through Entity, and solely for purposes of
computing the amount to be paid under Section 2.2 with respect to such Protected Partner,
any person who (y) holds an interest in such Protected Partner, either directly or through one or
more Pass Through Entities, and (z) is required to include all or a portion of the income of such
Protected Partner in its own gross income.

          Section 1.31 “Protected Partners’ Representative” means Zaya Younan.

          Section 1.32 “Protected Property” mean each property identified on Exhibit A hereto
and each property acquired in Exchange for a Protected Property as set forth in Section
2.1(b).

          Section 1.33 “Qualified Liability” means either:

               (a) A direct or indirect liability of the Operating Partnership (or of an entity whose
separate existence from the Operating Partnership is disregarded for Federal income tax purposes)
with respect to which all of the following requirements are satisfied:

                    (i) the liability is secured by real property or other assets (the “Collateral”) owned
directly or indirectly by the Operating Partnership (or by an entity whose separate existence from
the Operating Partnership is disregarded for Federal income tax purposes);

                    (ii) on the date on which the Operating Partnership designated such liability as a Qualified
Liability, the fair market value (as reasonably determined in good faith by the Operating
Partnership) of the Collateral was: (A) if the guarantee with respect to such liability is not on a
“bottom dollar” basis, at least 1.5 times greater than the outstanding principal amount (and any
accrued and unpaid interest) of the liability and any other Qualified Liabilities secured by such
Collateral at such time, provided that if interest on such liability is not required to be paid at
least annually or if the documents evidencing such liability permit the borrower to borrow
additional amounts that are secured by the Collateral, the outstanding principal amount of such
liability shall include the maximum amount that could be so added to the principal amount of such
liability; and (B) if the guarantee with respect to such liability is on a “bottom dollar” basis,
at least 1.5 times the aggregate amount of any Qualified Liabilities that is guaranteed by one or
more Guarantee Partners under Section 2.4(b) secured by such Collateral at such time;

                    (iii) the liability constitutes “qualified nonrecourse financing” as defined in Section
465(b)(6) of the Code with respect to the Protected Partners;

                    (iv) other than guarantees by the Guarantee Partners, no other person has executed any
guarantees with respect to such liability; and

6

 

                    (v) the Collateral does not provide security for another liability (other than another
Qualified Liability) that ranks senior to, or pari passu with, the liability described in clause
(i) above.

For purposes of determining whether clause (ii) has been satisfied in situations where one or more
potential Qualified Liabilities are secured by more than one item of Collateral, the Operating
Partnership shall allocate such liabilities among such items of Collateral in proportion to their
relative fair market values (as reasonably determined in good faith by the Operating Partnership);

               (b) A direct liability of the Operating Partnership that

                    (i) is not secured by any of the assets of the Operating Partnership and is a general,
recourse obligation of the Operating Partnership, and

                    (ii) is not provided by a lender that has an interest in the Operating Partnership or is
related to the Operating Partnership within the meaning of Section 465(b)(3)(C) or the Code; or

               (c) Any other indebtedness approved by the Protected Partners’ Representative (or his
successor or designee) in his sole and absolute discretion.

          Section 1.34 “Required Liability Amount” means, with respect to each Guarantee
Partner, 110% of such Guarantee Partner’s estimated “negative tax capital account” as of the
Closing Date, an estimate of which is set forth on Exhibit C hereto for each such Guarantee
Partner.

          Section 1.35 “REIT” has the meaning set forth in the preamble.

          Section 1.36 “SAE Entity Members” has the meaning set forth in the recitals.

          Section 1.37 “Section 2.4 Notice” has the meaning set forth in Section 2.4(c).

          Section 1.38 “Single Asset Entities” has the meaning set forth in the recitals.

          Section 1.39 “Tax Protection Period” means, with respect to each Protected Partner and
each Guarantee Partner, the period of time beginning on Closing Date and ending on the earlier to
occur of: (a) the tenth (10th) anniversary of the Closing and (b) the date on which fifty percent
(50%) or more of the OP Units originally received by the Protected Partner or Guarantee Partner, as
applicable, in the Formation Transactions have been sold, exchanged or otherwise disposed of by any
Protected Partner or Guarantee Partner, other than in a Permitted Disposition.

          Section 1.40 “Tax Protection Period Transfer” has the meaning set forth in Section
2.1(a) of this Agreement.

          Section 1.41 “Transfer” means any direct or indirect sale, exchange, transfer or other
disposition, whether voluntary or involuntary.

7

 

          Section 1.42 “Treasury Regulations” means the income tax regulations under the Code,
whether such regulations are in proposed, temporary or final form, as such regulations may be
amended from time to time (including corresponding provisions of succeeding regulations).

          Section 1.43 “YIP” has the meaning set forth in the recitals.

          Section 1.44 “YIP Merger Agreement” means the agreement and plan of merger pursuant to
which YIP will merge with and into the Operating Partnership.

          Section 1.45 “Younan Entities” means YPI, YIP, the SAE Entity Members and the Single
Asset Entities collectively.

          Section 1.46 “YPI” has the meaning set forth in the recitals.

ARTICLE II

TAX PROTECTIONS

          Section 2.1 Indemnification Upon Taxable Transfers.

               (a) Unless the Protected Partners’ Representative consents to a Tax Protection Period Transfer
(as defined below), during the Tax Protection Period, the Operating Partnership shall indemnify the
Protected Partners as set forth in Section 2.2 if the Operating Partnership or any entity
in which the Operating Partnership holds a direct or indirect interest shall cause or permit (i)
any Transfer of all or any portion of a Protected Property (including any interest therein or in
the entity owning, directly or indirectly, the Protected Property) in a transaction that would
result in the recognition of taxable income or gain by any Protected Partner under Section 704(c)
of the Code, or (ii) any Fundamental Transaction that would result in the recognition of taxable
income or gain to any Protected Partner (a Fundamental Transaction and a Transfer, collectively a
“Tax Protection Period Transfer”).

               (b) (a) shall not apply to any Tax Protection Period Transfer of a Protected Property
(including any interest therein or in the entity owning, directly or indirectly, the Protected
Property) (i) in a transaction in which no gain is required to be recognized by a
Protected Partner (an “Exchange”), including a transaction qualifying under Section
1031 or Section 721 (or any successor statutes) of the Code; provided, however, that any property
acquired by the Operating Partnership in the Exchange shall remain subject to the provisions of
this Article II in place of the exchanged Protected Property for the remainder of the Tax
Protection Period or (ii) as a result of the condemnation or other taking of any Protected Property
by a governmental entity in an eminent domain proceeding or otherwise, provided that the Operating
Partnership shall use commercially reasonable efforts to structure such disposition as either a
tax-free like-kind exchange under Section 1031 or a tax-free reinvestment of proceeds under Section
1033, provided that in no event shall the Operating Partnership be obligated to acquire or invest
in any property that it otherwise would not have acquired or invested in.

8

 

          Section 2.2 Indemnification for Taxable Transfers.

               (a) In the event of a Tax Protection Period Transfer described in Section 2.1(a), each
Protected Partner shall, within 30 days after the closing of such Tax Protection Period Transfer,
receive from the Operating Partnership an amount of cash equal to the estimated Make Whole Amount
applicable to such Tax Protection Period Transfer. If it is later determined that the true Make
Whole Amount applicable to a Protected Partner exceeds the estimated Make Whole Amount applicable
to such Protected Partner, then the Operating Partnership shall pay such excess to such Protected
Partner within 90 days after the closing of the Tax Protection Period Transfer, and if such
estimated Make Whole Amount exceeds the true Make Whole Amount, then such Protected Partner shall
promptly refund such excess to the Operating Partnership, but only to the extent such excess was
actually received by such Protected Partner.

               (b) Notwithstanding any provision of this Agreement to the contrary, the sole and exclusive
rights and remedies of any Protected Partner under Section 2.1(a) shall be a claim against
the Operating Partnership for the Make Whole Amount as set forth in this Section 2.2, and
no Protected Partner shall be entitled to pursue a claim for specific performance of the covenants
set forth in Section 2.1(a) or bring a claim against any person that acquires a Protected
Property from the Operating Partnership in violation of Section 2.1(a).

          Section 2.3 Section 704(c) Gains. A good faith estimate of the initial amount of
Section 704(c) gain allocable to each Protected Partner as of the Closing Date of each OP Merger is
set forth on Exhibit B hereto. The parties acknowledge that the initial amount of such
Section 704(c) gain may be adjusted over time as required by Section 704(c) of the Code and the
Regulations promulgated thereunder.

          Section 2.4 Debt Maintenance and Allocation.

               (a) During the Tax Protection Period, the Operating Partnership shall: maintain on a
continuous basis an amount of Qualified Liabilities at least equal to the aggregate Required
Liability Amount of the Guarantee Partners. For the avoidance of doubt, and notwithstanding any
other provision of this Agreement, the Operating Partnership shall not be
required to maintain any amount of Qualified Liabilities in excess of the aggregate Required
Liability Amount of all Guarantee Partners.

               (b) (i) During the Tax Protection Period, the Operating Partnership shall provide each
Guarantee Partner with the opportunity to execute a guarantee of one or more Qualified Liabilities
that are Guarantee Permissible Liabilities in an amount up to such Guarantee Partner’s Required
Liability Amount (each such opportunity and each opportunity required by Section 2.4(c), a
“Guaranty Opportunity”), and (ii) after the Tax Protection Period, and for so long as a
Guarantee Partner is a partner in the Operating Partnership, the Operating Partnership shall use
commercially reasonable efforts to make Guaranty Opportunities available to the Guarantee Partner,
provided that in the case of this clause (ii), the Operating Partnership shall not be required to
incur any indebtedness that it would not otherwise have incurred and shall not be required to
continue to maintain any indebtedness that it would not otherwise maintain, as determined by the
Operating Partnership in its reasonable discretion; provided,

9

 

however, that in the case of clauses
(i) and (ii) the aggregate amount of all guarantees executed by all Guarantee Partners shall not
exceed the aggregate Required Liability Amount of all Guarantee Partners. The Operating
Partnership shall have the discretion to identify the Qualified Liability or Qualified Liabilities
that shall be made available for guarantee by each Guarantee Partner. The Operating Partnership and
each Guarantee Partner shall cooperate in good faith to determine mutually acceptable form and
manner of the guarantee, provided such parties agree that the guarantee may be on a “bottom dollar”
basis if so requested by a Guarantee Partner. Each Guarantee Partner and its direct and indirect
owners may allocate the Guarantee Opportunity afforded to such Guarantee Partner in any manner they
choose. The Operating Partnership agrees to file its tax returns allocating any debt subject to a
Guarantee to the applicable Guarantee Partners, unless otherwise required by applicable law. Each
Guarantee Partner shall bear the costs incurred by it in connection with the execution of any
guarantee to which it is a party. To the extent a Guarantee Partner executes a guarantee, the
Operating Partnership shall deliver a copy of such guarantee to the lender under the Guaranteed
Liability promptly after receiving such copy from the relevant Guarantee Partner.

               (c) During the Tax Protection Period, the Operating Partnership shall not allow a Debt
Notification Event to occur unless the Operating Partnership provides at least thirty (30) days’
written notice (a “Section 2.4 Notice”) to each Guarantee Partner that may be affected
thereby. The Section 2.4 Notice shall describe the Debt Notification Event and designate and
provide a description of one or more Qualified Liabilities that may be guaranteed by the Guarantee
Partners pursuant to Section 2.4(b) of this Agreement in an amount equal to the amount of
the refinanced or repaid Qualifying Debt that was guaranteed by such Guarantee Partner immediately
prior to the date of the refinancing or repayment. Any Guarantee Partner that desires to execute a
guarantee following the receipt of a Section 2.4 Notice shall provide the Operating Partnership
with notice thereof within fifteen (15) days after the date of the Section 2.4 Notice.

               (d) Provided that the Operating Partnership satisfies its obligations under Section
2.4(a), (b) and (c) of this Agreement, it shall have no liability under
Section 2.4(e) for breach of Section 2.4, whether or not such Guarantee Partner
accepts such Guaranty Opportunity. Furthermore, the Operating Partnership makes no representation
or warranty to any Guarantee Partner concerning the treatment or effect of any guarantee under
Federal, state, local,
or foreign Tax law, and bears no responsibility for any Tax liability of any Guarantee Partner
or Affiliate thereof that is attributable to a reallocation, by a taxing authority, of debt subject
to a guarantee (other than an act or omission that is indemnifiable under Section 2.4(e) of
this Agreement).

               (e) If the Operating Partnership shall fail to comply with any provision of this Section
2.4, the Operating Partnership shall pay, within 30 days of such failure, a Make Whole Payment
to each Guarantee Partner who recognizes income or gain as a result of such failure equal to the
estimated Make Whole Amount applicable to such failure. If it is determined that the true Make
Whole Amount applicable to a Guarantee Partner exceeds the estimated Make Whole Amount paid to such
Guarantee Partner, then the Operating Partnership shall pay such excess to such Guarantee Partner
within thirty (30) days after the true Make Whole Amount has been determined, and if such estimated
Make Whole Amount exceeds the true Make Whole Amount, then such Guarantee Partner shall refund such
excess to the Operating Partnership

10

 

within thirty (30) days after the true Make Whole Amount has
been determined, but only to the extent such excess was actually received by such Guarantee
Partner.

               (f) Notwithstanding any provision of this Agreement to the contrary, the sole and exclusive
rights and remedies of any Guarantee Partner for a breach or violation of the covenants set forth
in Section 2.4 shall be a claim against the Operating Partnership for the Make Whole Amount
as set forth in Section 2.4(e), and no Guarantee Partner shall be entitled to pursue a
claim for specific performance of the covenants set forth in Section 2.4.

          Section 2.5 Dispute Resolution. Any controversy, dispute, or claim of any nature
arising out of, in connection with, or in relation to the interpretation, performance, enforcement
or breach of this Agreement (and any closing document executed in connection herewith) shall be
governed by Section 8.08 of the YIP Merger Agreement.

ARTICLE III

GENERAL PROVISIONS 

          Section 3.1 Notices. All notices, demands, declarations, consents, directions,
approvals, instructions, requests and other communications required or permitted by the terms of
this Agreement shall be given in the same manner as in the OP Agreement.

          Section 3.2 Titles and Captions. All Article or Section titles or captions in this
Agreement are for convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof. Except as
specifically provided otherwise, references to “Articles” and “Sections” are to Articles and
Sections of this Agreement.

          Section 3.3 Pronouns and Plurals. Whenever the context may require, any pronoun used in this Agreement shall include the
corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and
verbs shall include the plural and vice versa.

          Section 3.4 Further Action. The parties shall execute and deliver all documents,
provide all information and take or refrain form taking action as may be necessary or appropriate
to achieve the purposes of this Agreement.

          Section 3.5 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.

          Section 3.6 Creditors. Other than as expressly set forth herein, none of the
provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor
of the Operating Partnership.

          Section 3.7 Waiver. No failure by any party to insist upon the strict performance of
any covenant, duty, agreement or condition of this Agreement or to exercise any

11

 

right or remedy
consequent upon a breach thereof shall constitute waiver of any such breach or any covenant, duty,
agreement or condition.

          Section 3.8 Counterparts. This Agreement may be executed in counterparts, all of
which together shall constitute one agreement binding on all of the parties hereto, notwithstanding
that all such parties are not signatories to the original or the same counterpart. Each party
shall become bound by this Agreement immediately upon affixing its signature hereto.

          Section 3.9 Applicable Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of California, without regard to the
principles of conflicts of law.

          Section 3.10 Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality or enforceability
of other remaining provisions contained herein shall not be affected thereby.

          Section 3.11 Entire Agreement. This Agreement contains the entire understanding and
agreement among the Partners with respect to the subject matter hereof and amends, restates and
supersedes the OP Agreement and any other prior written or oral understandings or agreements among
them with respect thereto.

          Section 3.12 No Rights as Stockholders. Nothing contained in this Agreement shall be
construed as conferring upon the holders of the OP Units any rights whatsoever as stockholders of
the REIT, including, without limitation, any right to receive dividends or other distributions made
to stockholders of the REIT or to vote or to consent or to receive notice as stockholders in
respect of any meeting of stockholders for the election of directors of the REIT or any other
matter.

[Remainder of Page Left Blank Intentionally]

12

 

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

	 	 	 	 	 
	 	REIT:

YOUNAN PROPERTIES, INC.,

a Maryland corporation

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 
	 	OPERATING PARTNERSHIP:

YOUNAN PROPERTIES, L.P.,

a Maryland limited partnership

 	 
	 	By:  	YOUNAN PROPERTIES, INC.
 	 
	 	 	a Maryland corporation, 	 
	 	 	Its General Partner 	 
	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

Signature Page to Tax Protection Agreement

 

 

SCHEDULE I

PROTECTED PARTNERS

SEE
ATTACHED.

 

 

SCHEDULE II

GUARANTEE PARTNERS

	SEE ATTACHED.		

 

 

EXHIBIT A

PROTECTED PROPERTIES

	 	 	 
	Property Name	 	Property Address
	1600 Corporate Center

	 	1600 East Golf Road, Rolling Meadows, Illinois
	Bannockburn Corporate Center

	 	3000 Lakeside Drive, Bannockburn, Illinois
	KPMG Center

	 	717 N. Harwood, Dallas, Texas
	Meridian
Bank Tower

	 	3500 North Central Avenue, Phoenix,
Arizona
	Younan North LaSalle

	 	200 North LaSalle, Chicago, Illinois
	Younan West Loop

	 	1700 West Loop South, Houston, Texas

 

 

EXHIBIT B

ESTIMATED ALLOCATIONS OF SECTION 704(c) GAIN

SEE ATTACHED.

 

EXHIBIT C

REQUIRED LIABILITY AMOUNT

SEE ATTACHED.

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