CONTRIBUTION AND CONVEYANCE AGREEMENT
THIS
CONTRIBUTION AND CONVEYANCE AGREEMENT (this “Agreement”),
dated
as of June 26, 2008, by and among AR PRIME HOLDINGS LLC, a Delaware limited
liability company (“Transferor”),
LIGHTSTONE VALUE PLUS REIT, L.P., a Delaware limited partnership (“Transferee”),
and
LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC., a Maryland corporation
(the “REIT”).
WITNESSETH:
WHEREAS,
Transferor owns a membership interest (the “Interest”)
in
Prime Outlets Acquisition Company LLC, a Delaware limited liability company
(the
“Company”),
corresponding to a 25% Percentage of Membership Interest (as defined in the
POAC
Operating Agreement), pursuant to that certain Amended and Restated Limited
Liability Company Agreement of the Company, dated as of December 11, 2003,
as
amended by the Amendment to the Amended and Restated Limited Liability Company
Agreement of the Company, dated as of September 2007 (the “POAC
Operating Agreement”);
WHEREAS,
Transferor and Transferee desire to enter into a transaction whereby Transferor
shall transfer the Interest to Transferee in exchange for certain units of
limited partnership interest in Transferee;
WHEREAS,
for federal income tax purposes, it is intended that the transfer of the
Interest will be treated as a tax-free contribution by Transferor to Transferee
of the Interest in exchange for the Units (as defined below) under Section
721
of the Internal Revenue Code of 1986, as amended (the “Code”);
WHEREAS,
concurrently with the execution and delivery of this Agreement, Transferor,
Transferee and the Company are entering into a tax protection agreement with
respect to the sale or other disposition of properties indirectly owned by
the
Company (the “Tax
Protection Agreement”);
WHEREAS,
the REIT is the sole general partner of Transferee; and
WHEREAS,
the members of the Company have executed and delivered the Consent to Transfer,
Substitution and Withdrawal in the form attached hereto as Exhibit
I;
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which is hereby acknowledged, the parties covenant and agree as
follows:
1. Contribution
and Transfer; Additional Loan.
Subject
to the terms and conditions of this Agreement, at the Closing (as defined
below):
(a)Transferor
shall contribute and assign to Transferee all of Transferor’s right, title and
interest in and to the Interest, including, without limitation, all of
Transferor’s rights and interest in all profits, losses, Net Cash Receipts,
Capital Proceeds (as such terms are defined in the POAC Operating Agreement),
distributions and capital of the Company with respect to the Interest, free
and
clear of any liens, security interests and any other encumbrances (except for
those, if any, arising under the POAC Operating Agreement), in exchange for
the
issuance to Transferor by Transferee of:
(i) subject
to Section 4(d), a number of units of common limited partnership interest in
Transferee ( “Common
Units”)
equal
to (x) the Initial Common Amount (as defined below), divided by (y) $10
(the
“Base
Common Units”);
(ii) a
number
of units of Series A preferred limited partnership interest in Transferee
(“Series
A Units”)
having
an aggregate liquidation preference equal to the Initial Preferred Amount (as
defined below) (the “Base
Preferred Units”
and,
together with the Base Common Units, the “Base
Units”);
(iii) subject
to Section 4(d), a number of Common Units equal to (x) the Additional Common
Amount (as defined below), divided by (y) $10 (the “Additional
Common Units”);
and
(iv) a
number
of Series A Units having an aggregate liquidation preference equal to the
Additional Preferred Amount (as defined below) (the “Additional
Preferred Units”
and,
together with the Additional Common Units, the “Additional
Units”)
(the
Base Units and the Additional Units are collectively referred to herein as
the
“Units”);
provided,
however,
that
notwithstanding the foregoing, Transferor shall retain all right to
distributions paid and allocations made by the Company on account of the
Interest prior to the Closing;
(b)
Transferee
shall issue the Units to Transferor in exchange for Transferor’s contribution of
the Interest to Transferee;
(c)
The
REIT
shall make a loan to Transferor in an amount equal to 90% of the Additional
Amount (as defined below) (the “Additional
Loan”),
which
shall be advanced to Transferor on the Closing Date in immediately available
funds; and
(d)
Upon
the
contribution of the Interest to Transferee, (i) Transferee shall, upon
compliance with the conditions for substitution as a member set forth in the
POAC Operating Agreement, be admitted as a Member (as defined in the POAC
Operating Agreement) of the Company in substitution for Transferor in accordance
with the POAC Operating Agreement, and (ii) Transferee shall agree to be bound
by the POAC Operating Agreement as a Member in place of Transferor.
2. Representations
and Warranties.
(a)
Transferor
hereby represents and warrants to Transferee and the REIT that:
(i) Transferor
is the sole legal and beneficial owner of the Interest, subject to a security
interest in favor of the REIT;
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(ii) Transferor
has not previously assigned, transferred, sold, pledged or otherwise disposed
of
or hypothecated the Interest or any portion thereof or interest therein, except
for the granting of any security interests therein which have been released
on
or prior to the date hereof and the grant of a security interest therein to
the
REIT;
(iii) as
of the
execution hereof the Interest is free and clear of any liens, security interests
and other encumbrances, except for those, if any, arising under the POAC
Operating Agreement and for a security
interest in favor of the REIT;
(iv) the
execution of, and the transfer and assignment of the Interest pursuant to,
this
Agreement have been authorized by all necessary action on the part of
Transferor;
(v) at
the
Closing, the Transferor shall have record and beneficial ownership in and to
the
Interest, free and clear of any liens, security interests or any other
encumbrances, except for (A) those, if any, arising under the POAC Operating
Agreement, and (B) a security interest in favor of the REIT;
(vi) Transferor
has the full right, power and authority to execute and deliver this Agreement
and the Transferor Closing Documents, and to perform its obligations hereunder
and thereunder, without obtaining any consents or approvals from, or taking
any
actions with respect to, any governmental authorities or other third
parties,
except
for the approvals of the Members of the Company;
and
(vii) this
Agreement has been, and at the Closing the Transferor Closing Documents will
be,
duly and validly executed and delivered by Transferor and, when executed and
delivered by Transferee, will constitute the valid and binding agreements of
Transferor, enforceable against Transferor in accordance with their respective
terms; and
(viii) the
execution and delivery by Transferor of this Agreement and the Transferor
Closing Documents and the performance of Transferor’s obligations thereunder and
the transactions contemplated thereby do not violate or conflict with the
governing documents of Transferor or, subject to the approvals of the Members
of
the Company, any other instrument or agreement to which Transferor is a
party;
provided,
however,
that
notwithstanding anything herein to the contrary, Transferor is not making any
representation or warranty as to whether any third party consents are or are
not
required under any loan or other financing agreements, mortgages or other
instruments or agreements to which the Company or any entity directly or
indirectly owned by the Company is a party or to or by which any real or
personal property owned by the Company or by any entity directly or indirectly
owned by the Company is subject or encumbered.
(b)
Each
of
Transferee and the REIT, jointly and severally, hereby represents and warrants
to Transferor that:
(i) the
execution of this Agreement and the Tax Protection Agreement, the issuance
by
Transferee of the Units to Transferor, and the making by the REIT of the
Additional Loan, have been authorized by all necessary action on the part of
Transferee and the REIT, as applicable;
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(ii) each
of
Transferee and the REIT (as applicable) has the full right, power and authority
to execute and deliver this Agreement, the Tax Protection Agreement and the
Transferee Closing Documents, and to perform its obligations hereunder and
thereunder, without obtaining any consents or approvals from, or taking any
actions with respect to, any governmental authorities or other third
parties;
(iii) this
Agreement and the Tax Protection Agreement have been, and at the Closing the
Transferee Closing Documents will be, duly and validly executed and delivered
by
each of Transferee and the REIT (as applicable) and, when executed and delivered
by Transferor, will constitute the valid and binding agreements of each of
Transferee and the REIT (as applicable), enforceable against each of Transferee
and the REIT (as applicable) in accordance with the respective terms of such
agreements and Transferee Closing Documents;
(iv) a
true
and complete copy of the Amended and Restated Agreement of Limited Partnership
of Transferee, dated as of April 22, 2005, as amended by the First Amendment
to
the Amended and Restated Agreement of Limited Partnership of Transferee, dated
as of the date hereof, (as so amended, the “Partnership
Agreement”),
is
attached hereto as Annex
I,
and the
Partnership Agreement has been duly executed and delivered by all parties
thereto, is in full force and effect, and is binding and enforceable in
accordance with its terms;
(v) after
giving effect to the transactions contemplated by this Agreement and any other
transactions involving the Transferee that are consummated on or prior to the
date hereof, the capitalization of Transferee (including the number of each
class and series of units issued by Transferee and the related capital
contributed with respect to such units) will be as set forth on Annex
II
hereto;
(vi) at
the
Closing (as defined below):
(A)
the
execution of the Exchange Rights Agreement (as defined below) will have been
authorized by all necessary action on the part of Transferee and the REIT;
(B)
each of Transferee and the REIT will have full right, power and authority to
execute, deliver and perform the Exchange Rights Agreement without obtaining
any
consents or approvals from, or taking any actions with respect to, any
governmental authorities or other third parties; and (C) the Exchange Rights
Agreement will have been duly and validly executed and delivered by each of
Transferee and the REIT and, when executed and delivered by Transferor, will
constitute the valid and binding agreement of each of Transferee and the REIT,
enforceable against each of them in accordance with its terms;
(vii) the
execution and delivery by each of Transferee and the REIT of this Agreement
and
the applicable Transferee Closing Documents and the performance of the
obligations of Transferee and the REIT thereunder and the transactions
contemplated thereby do not violate or conflict with the governing documents
of
Transferee or the REIT or any other instrument or agreement to which either
of
them is a party, as the case may be;
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(viii) immediately
after the Closing: (1) Transferor will, simultaneously therewith, be
admitted as a limited partner in Transferee with respect to the Units;
(2) at the Closing, the 704(b) “book” capital account of Transferor in
Transferee will be equal to the Total Amount (as defined below); and
(3) the Units to be issued to the Transferor will be fully paid and
Transferor will have no further obligation to contribute any amounts to the
capital of Transferee or reimburse Transferee for any expenses in respect of
the
Units;
(ix) since
May
23, 2005, the REIT has been subject to the reporting requirements of Section
13
or 15 of the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the “1934
Act”)
and
has filed with the Securities and Exchange Commission (“SEC”)
all
documents required to be filed under the Securities Act of 1933, as amended,
and
the rules and regulations promulgated thereunder (the “1933
Act”),
and
the 1934 Act (the “REIT
SEC Documents”);
(x) as
of
their respective dates, the REIT SEC Documents complied in all material respects
with the requirements of the 1933 Act and the 1934 Act, as the case may be,
and
none of the REIT SEC Documents contained any untrue statement of a material
fact
or omitted a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, taking into account all corrections made by the REIT
in
subsequent filings with the SEC through the date of this Agreement;
(xi) the
prospectus of the REIT dated January 23, 2008 and the supplements thereto do
not
contain any untrue statement of material fact or omit a material fact required
to be stated therein or necessary to make the statements therein, in light
of
the circumstance under which they were made, not misleading as of the date
hereof;
(xii) as
of
their respective dates, the consolidated financial statements of the REIT
included in the REIT SEC Documents complied as to form in all material respects
with then applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated therein or in the notes
thereto) and fairly presented the consolidated financial position of the REIT
and its consolidated subsidiaries as at the dates thereof and the consolidated
results of their operations and statements of cash flows for the periods covered
by such statements (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described
therein);
(xiii) neither
the REIT nor Transferee has entered into or is a party to any instrument or
agreement granting any limited partner of Transferee registration rights with
respect to shares of stock in the REIT which such limited partner may own or
acquire; and
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(xiv) the
REIT
has been organized and operated in conformity with the requirements for
qualification and taxation as a “real estate investment trust” under Sections
856 through 860 of the Code for all taxable years commencing with its taxable
year of formation. The proposed method of operating of the REIT as described
in
the REIT SEC Documents will enable the REIT to continue to meet the requirements
for qualification and taxation as a “real estate investment trust” under the
Code. The REIT currently intends, and at the Closing the REIT will intend,
to
continue to operate in a manner which would permit it to qualify as a “real
estate investment trust” under the Code.
(c)
Each
of
Transferee and the REIT hereby acknowledges, represents and warrants that it
is
not relying on any information, representations or warranties furnished or
made
by Transferor or any of Transferor’s representatives or agents as to any matter
whatsoever concerning the Company or any entity that is directly or indirectly
owned by the Company or in which the Company has any direct or indirect interest
(including, without limitation, the legal status, good standing, organizational
documents, business, prospects, assets, liabilities, financial condition or
operations of, or the need for any third party consents to the transactions
contemplated by this Agreement from any lenders to or other persons having
any
contractual relationship with or jurisdiction over, the Company or such other
entity), or any matter (including, without limitation, physical condition,
operating results, financing, liabilities, title, encumbrances, leases, zoning
status, compliance with law, prospects and compliance with mortgages and other
instruments and agreements) relating to any properties in which any of the
Company or such other entities have a direct or indirect interest, and in
entering into this Agreement and (in the case of Transferee) in accepting the
Interest at the Closing, each of Transferee and the REIT is not and will not
be
relying upon any representations or warranties of Transferor or any of its
representatives or agents whatsoever, except for the representations of
Transferor expressly set forth in Section 2(a) hereof. Each of Transferee and
the REIT further acknowledges, represents, warrants and covenants that in
entering into this Agreement and (in the case of Transferee) in accepting the
Interest at the Closing, it is and will be relying solely on its own independent
investigation and due diligence with respect to the Company and any entity
or
property in which the Company has a direct or indirect interest, and each of
Transferee and the REIT further agrees that neither Transferee nor the REIT
shall seek to hold Transferor responsible or liable in any way for or in
connection with any representations or warranties or other information furnished
to Transferee or the REIT by any person or entity, other than the
representations and warranties of Transferor expressly set forth in Section
2(a)
hereof.
3. Closing.
(a)
The
closing of the transactions contemplated hereby (the “Closing”)
shall
occur at the New York offices of Xxxxxx Godward Kronish LLP, counsel to the
Transferor, at 10:00 am on the earlier of (i) the “Closing
Deadline”,
which
shall initially be December 15, 2008, and (ii) a date designated by Transferee,
by no less than fifteen (15) days’ prior written notice to Transferor, which
date must be a business day and must be no later than thirty (30) days after
the
date on which Transferee has received audited financial statements for the
Company for the years 2005, 2006 and 2007 (the “Audited
Statements”);
provided,
however,
that,
if Transferee has not received the Audited Statements at least fifteen (15)
days
prior to the Closing Deadline, then Transferee shall have the right to extend
the Closing Deadline, from time to time but no more than four times, by at
least
ten (10) days prior written notice to Transferor, to a date that is a business
day and is not later than June 26, 2009. TIME SHALL BE OF THE ESSENCE with
respect to the obligation of each of Transferor, Transferee and the REIT to
close the transactions contemplated hereby no later than June 26, 2009,
regardless of whether or not the Transferee has received the Audited Statements.
The date on which the Closing occurs is referred to herein as the “Closing
Date”.
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(b)
At
the
Closing, Transferor shall execute and deliver to Transferee and/or the REIT
(as indicated below) the following (the “Transferor
Closing Documents”):
(i) An
instrument of assignment of the Interest, in the form annexed hereto as
Exhibit
A
(the
“Assignment”)
(to
Transferee);
(ii) A
representation letter and agreement, in the form annexed hereto as Exhibit
B (the
“Representation
Letter and Agreement”)
(to
both Transferee and the REIT);
(iii) A
limited
partner signature page to the Partnership Agreement (as defined below), in
the
form annexed hereto as Exhibit
C
(to
Transferee);
(iv) An
exchange rights agreement, in the form annexed hereto as Exhibit
D (the
“Exchange
Rights Agreement”)
(to
both Transferee and the REIT)
(v) A
mutual
release agreement, in the form annexed hereto as Exhibit
E (the
“Release
Agreement”)
(to
Transferee);
(vi) A
promissory note evidencing the Additional Loan,
in the
form annexed hereto as Exhibit
F
(the
“Additional
Promissory Note”)
(to
the
REIT);
(vii) A
pledge
agreement, in the form annexed hereto as Exhibit
G
(the
“New
Pledge Agreement”)
(to
the REIT);
(viii) A
certificate confirming the accuracy as of the Closing Date of the
representations and warranties of Transferor set forth in Section 2(a) of this
Agreement (to both Transferee and the REIT); and
(ix) A
certified copy of Transferor’s resolutions approving the transactions
contemplated hereby (to both Transferee and the REIT).
(c)
At
the
Closing, the REIT shall advance to Transferor, in immediately available funds,
the Additional Loan, and each of Transferee and the REIT (as applicable) shall
execute and deliver to Transferor the following (together with the documents
referred to in Section 3(d), collectively the “Transferee
Closing Documents”):
(i) The
Assignment;
(ii) The
Representation Letter and Agreement;
7
(iii) An
amended Exhibit A to the Partnership Agreement, naming Transferor as a limited
partner of Transferee and indicating the number of Common Units and the number
of Series A Units held by Transferor after the consummation of the transactions
contemplated in this Agreement;
(iv) A
certificate evidencing action by the general partner of Transferee to issue
the
Units to Transferee, in the form annexed hereto as Exhibit
H;
(v) Certificates
representing the Series A Units required to be issued to Transferor at
Closing;
(vi) The
Exchange Rights Agreement;
(vii) The
Release Agreement;
(viii) The
New
Pledge Agreement;
(ix) A
certificate from each of the Transferee and the REIT confirming the accuracy
as
of the Closing Date of the representations and warranties set forth in Section
2(b) of this Agreement; and
(x) A
certified copy of the resolutions adopted by the board of directors of the
REIT
approving, both for the REIT itself and in the REIT’s capacity as general
partner of Transferee, the transactions contemplated hereby.
(d) At
the
Closing, each of Transferee and the REIT shall cause:
(i) Proskauer
Rose LLP (or another nationally recognized tax counsel experienced in such
matters and satisfactory to Transferor) to delivered to Transferor a tax
opinion, addressed to Transferor, that, as of the Closing Date, the REIT
qualifies as a real estate investment trust for U.S. federal income tax
purposes;
(ii) each
of
the Company and Lightstone Prime, LLC, a Delaware limited liability company
(“Lightstone
Prime”),
to
execute and deliver the Release Agreement; and
(iii) any
direct or indirect transferee of Lightstone Prime’s membership interest in the
Company to execute and deliver a counterpart signature page to the Consent
to
Transfer, Substitution and Withdrawal annexed hereto as Exhibit
I.
4. Adjustments.
(a)
The
“Initial
Common Amount”
means
an amount equal to $2,750,000. The “Initial
Preferred Amount”
means
an amount equal to (x) $52,250,000 minus (y) the aggregate amount of any
distributions by the Company of Net Cash Receipts or Capital Proceeds (as such
terms are defined in the POAC Operating Agreement) that are received by
Transferor from the date of this agreement through the Closing Date, plus (z)
the product of (i) 275,000 multiplied by (ii) the aggregate amount of any
distributions per Common Unit that are declared or paid by the Partnership
with
a record date that is after the date of this Agreement but on or before the
Closing Date. Neither the Initial Common Amount nor the Initial Preferred Amount
shall be adjusted on account of Transferor’s contributed capital or capital
account in the Company.
8
(b)
The
“Additional
Amount”
means
an amount equal to the aggregate distributions that would have accrued by the
Closing Date on a number of
Series A
Units
having
an aggregate liquidation preference equal to $52,250,000, had such Series A
Units been issued on the date of this Agreement. The “Additional
Common Amount”
means
an amount equal to 5% of the Additional Amount, and the “Additional
Preferred Amount”
means
an amount equal to 95% of the Additional Amount.
(c)
The
“Total
Amount”
means
an amount equal to the sum of (w) the Initial Common Amount, (x) the Additional
Common Amount, (y) the Initial Preferred Amount, and (z) the Additional
Preferred Amount.
(d)
In
the
event that Transferee at any time or from time to time after the date hereof
shall declare or pay any distribution on the Common Units payable in Common
Units (or in any other securities or property other than cash, including without
limitation the right to acquire Common Units), or shall effect a subdivision
of
the outstanding Common Units into a greater number of Common Units (by split,
reclassification or otherwise), or in the event the outstanding Common Units
shall be combined or consolidated, and so long as the record date for any of
the
foregoing is after the date of this Agreement but on or before the Closing
Date,
then the Base Common Units and the Additional Common Units to be issued pursuant
to Sections 1(a)(i) and 1(a)(iii), respectively, shall be adjusted to equal
the
number of Common Units (and any other securities and property) that a limited
partner of Transferee would have on the Closing Date had such limited partner
been issued the Base Common Units and the Additional Units (before giving effect
to the adjustments contemplated by this paragraph), as the case may be, on
the
date hereof.
5. Closing
Conditions.
(a)
Transferor’s
obligations to consummate the transactions contemplated hereby and to deliver
the Transferor Closing Documents at the Closing shall be conditioned upon the
satisfaction of the following conditions (any of which may be waived by
Transferor, in whole or in part) (the “Transferor
Closing Conditions”):
(i) The
REIT
shall advance the Additional Loan to Transferor in immediately available
funds;
(ii) Transferee
and the REIT shall have tendered delivery, and shall have caused each of the
persons referred to in Section 3(d), as applicable, to tender delivery, of
all
of the Transferee Closing Documents, including in each case a tender which
may
be conditioned on the satisfaction of the Transferee Closing Conditions (as
defined below); and
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(iii) Each
of
the representations and warranties of Transferee set forth in Section 2(b)
of
this Agreement must be accurate in all materials respects as of the Closing
Date.
(b)
Transferee’s
obligations to consummate the transactions contemplated hereby and to deliver
(or cause the delivery of) the Transferee Closing Documents at the Closing,
and
the REIT’s obligation to advance the Additional Loan at the Closing, shall be
conditioned upon the satisfaction of the following conditions (any of which
may
be waived by Transferee, in whole or in part) (the “Transferee
Closing Conditions”):
(i) Transferor
shall have tendered delivery (including a tender which may be conditioned on
the
satisfaction of the Transferor Closing Conditions) of all of the Transferor
Closing Documents; and
(ii) Each
of
the representations and warranties of Transferor set forth in Section 2(a)
of
this Agreement must be accurate in all materials respects as of the Closing
Date.
(c)
Transferee’s
receipt of the Audited Statements is not a condition to Transferee’s obligation
to consummate the transactions contemplated hereby at the Closing.
6. Initial
Unit Distributions; Unit Redemption.
Transferor and Transferee acknowledge and agree that the first quarterly
distribution paid by Transferee in respect of the Series A Units, after they
are
issued to Transferor, shall (a) be with respect to the quarter in which the
Closing occurs and (b) be prorated based on the number of days during such
quarter after the date of the Closing. Transferor acknowledges that
notwithstanding anything to the contrary herein or in the Partnership Agreement,
Transferor shall not have the right to convert any Series A Units to Common
Units prior to June 26, 2013.
7. Termination;
Remedies.
(a)
If
on the
Closing Deadline (or any earlier date designated for the Closing in accordance
with Section 3(a) hereof):
(i) the
Transferee Closing Conditions have been satisfied; and
(ii) either
of
Transferee or the REIT shall fail or refuse to close the transactions
contemplated hereby (including, in the case of the REIT, advancing the
Additional Loan), whether due
to
the failure of Transferee to obtain the Audited Financials or
for
any other reason or for no reason; and
(iii) Transferor
is ready, willing and able to close the transactions contemplated hereby (or,
in
the event that any of the Transferor Closing Conditions shall not have been
satisfied, Transferor would be ready, willing and able to close the transactions
contemplated hereby but for such unsatisfied Transferor Closing
Conditions),
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then
Transferor may elect one of the following as its sole and exclusive remedy:
(x)
to commence and prosecute an action for specific performance of Transferee’s
obligations hereunder; or (y) to terminate this Agreement by
written notice to Transferee,
whereupon Transferee shall forthwith pay to Transferor the amount of $6,082,000
as liquidated damages, and the parties hereto shall have no further rights
or
obligations to each other under this Agreement, except for Section 7(d) hereof;
provided,
however,
that if
the failure or refusal of Transferee or the REIT to close is due to the failure
of Transferee to obtain the Audited Financials, then Transferor will be entitled
to terminate this Agreement and receive liquidated damages from Transferee
as
provided by clause (y), above, but shall not be entitled to seek specific
performance.
(b)
If
on the
Closing Deadline (or any earlier date designated for the Closing in accordance
with Section 3(a) hereof):
(i) the
Transferor Closing Conditions have been satisfied; and
(ii) Transferor
shall fail or refuse to close the transactions contemplated hereby;
and
(iii) each
of
Transferee and the REIT is ready, willing and able to close the transactions
contemplated hereby (or, in the event that any of the Transferee Closing
Conditions shall not have been satisfied, each of Transferee and the REIT would
be ready, willing and able to close the transactions contemplated hereby but
for
such unsatisfied Transferee Closing Conditions),
then,
Transferee and the REIT may collectively, as their sole and exclusive remedy,
commence and prosecute an action for specific performance of Transferor’s
obligations hereunder; provided,
however,
that if
the conditions in Section 7(b)(i) through (iii) are all satisfied and a court
of
competent jurisdiction holds that the remedy of specific performance is not
available to Transferee and the REIT and such court’s order becomes a final and
non-appealable order (whether through the lapse of time or the exhaustion of
appeals), then, Transferor and Transferee shall each have the right to terminate
this Agreement by written notice to the other, whereupon, except as provided
below, Transferor shall pay to Transferee the amount of $6,082,000 as liquidated
damages, and the parties hereto shall have no further rights or obligations
to
each other under this Agreement, except for Section 7(d) hereof; provided
further,
however,
that
Transferee and the REIT shall not be entitled to any damages (liquidated or
otherwise), and either Transferee or Transferor shall be entitled to terminate
this Agreement, if Transferor’s failure or refusal to close the transactions
contemplated hereby is due to any of the following: (A) the existence of an
order, injunction or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
by Transferor of the transactions contemplated by this Agreement, or (B) the
existence of a statute, rule, regulation, order, injunction or decree enacted,
entered, promulgated or enforced by any Governmental Authority which prohibits
or makes illegal the consummation by Transferor of the transactions contemplated
hereby, unless in the case of the matters described in the foregoing clause
(A)
or (B), the restraint or prohibition is the result of wrongful acts or omissions
by Transferor to avoid its obligations under this Agreement or is the result
of
a breach of any of Transferor’s representations and warranties (other than a
breach that is caused by any of the situations described in the foregoing
clauses (A) or (B)) or, in the case of an injunction or other proceeding to
prevent the consummation of the transactions contemplated hereby, if Transferor
did not vigorously defend against the imposition of such injunction or such
other proceeding.
11
(c)
Subject
to the proviso set forth at the end of Section 7(a), Transferee acknowledges
that in the event that the conditions set forth in Section 7(a)(i), (ii) and
(iii) are satisfied: (x) Transferor will have no adequate remedy at law for
the
damages caused to Transferor thereby, in part because the transaction
contemplated by this Agreement is for a transfer of property representing
indirect interests in real estate; and (y) the damages caused to Transferor
thereby will not be readily ascertainable, and that the liquidated damages
remedy provided by Section 7(a) is a reasonable approximation of Transferor’s
prospective damages, and not a penalty for non-performance, and Transferee
hereby waives (A) all objections to Transferor’s right to elect the liquidated
damages remedy, and (B) all challenges to the amount of liquidated damages
provided for herein, in each case whether on the grounds that damages are
readily ascertainable, that the remedy constitutes an unenforceable penalty,
or
otherwise.
(d)
Subject
to the proviso set forth at the end of Section 7(b), Transferor acknowledges
that in the event that the conditions set forth in Section 7(b)(i), (ii) and
(iii) are satisfied: (x) Transferee will have no adequate remedy at law for
the
damages caused to Transferee thereby, in part because the transaction
contemplated by this Agreement is for a transfer of property representing
indirect interests in real estate; and (y) the damages caused to Transferee
thereby will not be readily ascertainable, and that the liquidated damages
remedy provided by Section 7(b) is a reasonable approximation of Transferee’s
prospective damages, and not a penalty for non-performance, and if Transferee
is
entitled to liquidated damages pursuant to Section 7(b), Transferor hereby
waives any challenge to the amount of liquidated damages provided for herein,
in
each case whether on the grounds that damages are readily ascertainable, that
the remedy constitutes an unenforceable penalty, or otherwise.
(e)
If
on the
Closing Deadline (x) the transactions contemplated hereby have not been
consummated, and (y) neither Transferor nor Transferee are entitled to elect
liquidated damages as a remedy pursuant to Sections 7(a) or 7(b), respectively,
then this Agreement shall terminate, and the parties hereto shall have no
further rights or obligations to each other under this Agreement.
(f)
If
either
Transferee or Transferor fails to pay to the other any amounts payable under
this Section 7 within ten (10) days after the date in which a written notice
of
termination is delivered pursuant to clause (y) of Section 7(a) or 7(b) hereof,
as the case may be, (the “Default
Date”),
then
(i) the defaulting party shall reimburse the non-defaulting party for all costs
and expenses (including without limitation attorney’s fees) incurred in
connection with the collection of such overdue amount and the enforcement by
the
non-defaulting party of its rights under this Section 7, and (ii) the defaulting
party shall pay to the non-defaulting party interest on such overdue amount
at a
rate of 15% per annum for the period commencing on the Default Date and ending
on the date such overdue amount is actually paid to the non-defaulting party
in
full.
(g)
For
purposes of this Section 7, “Governmental
Authority”
means
any nation, state, territory, province, county, city or other unit or
subdivision thereof or any entity, authority, agency, department, board,
commission, instrumentality, court or other judicial body authorized on behalf
of any of the foregoing to exercise legislative, judicial, regulatory or
administrative functions and any governmental or nongovernmental self-regulatory
organization of which any of the parties to this Agreement was or is a member
or
to whose regulations any of the parties to this Agreement was or is
subject.
12
8. Tax
Reporting; Audits.
For
federal, state, and local income tax purposes, Transferee shall report
Transferor’s contribution of the Interest to the Transferee as a tax-free
contribution pursuant to Section 721 of the Code (or the corresponding provision
of state or local law, as applicable). Notwithstanding anything to the contrary
in this Agreement or the Partnership Agreement, neither Transferee nor the
REIT
shall settle any matter that involves the tax treatment of (i) the contribution
of the Transferred Interests or (ii) any other matter that would have a tax
impact on Transferor that is materially, adversely different from the tax impact
such matter would have on the REIT, without the prior written consent of
Transferor, which shall not be unreasonably withheld or delayed.
9. Maintenance
of REIT Status.
Transferee hereby acknowledges that it has been informed that Transferor is
a
subsidiary of an entity that qualifies as a “real estate investment trust” for
United States federal income tax purposes, and acknowledges that Transferor
may
transfer its Units to an affiliate of Transferor that is a “real estate
investment trust” or a subsidiary of a “real estate investment trust” (any such
entity, a “REIT
Entity”).
Transferee represents and warrants to Transferor that it currently operates
in a
manner that would not adversely affect the qualification as a “real estate
investment trust” of any partner of Transferee that otherwise qualifies as a
“real estate investment trust”, and Transferee covenants and agrees that both
before and after the Closing Date it shall operate (directly or indirectly
through entities owned or controlled by it) in a manner that would not adversely
affect the qualification as a “real estate investment trust” of any partner of
Transferee, or any direct or indirect parent entity of such partner, that
otherwise qualifies as a “real estate investment trust”. Transferee shall make
available, on a timely basis, to Transferor and to any other REIT Entity that
holds Units, such information as is reasonably requested by Transferor or such
REIT Entity or its direct or indirect parent to enable it to monitor and ensure
its compliance with the “real estate investment trust” qualification
requirements, on an ongoing basis, insofar as they relate to its investment
in
Transferee, including, without limitation (a) information regarding the nature
and amount of Transferee’s gross income and gross assets, and the portion
thereof that is allocable to Transferor for purposes of the gross asset and
income requirements applicable to “real estate investment trusts” (i.e. on the
basis of Transferor’s percentage interest in Transferee’s capital), and (b) an
organizational chart showing each entity in which the Transferee holds any
direct or indirect equity interest, and indicating the classification for United
States federal income tax purposes of each such entity. Notwithstanding anything
contained herein to the contrary, from and after the date hereof, Transferee
shall operate in a manner, taking into account any operations conducted through
lower-tier entities, such that at all times (i) Transferee would satisfy each
of
the asset tests and the income tests for “real estate investment trusts” as set
forth in Section 856(c) of the Code, determined as if Transferee were a
corporation for United States federal income tax purposes, (ii) no dispositions
of assets will give rise to a “prohibited transaction” as defined in Section
857(b)(6) of the Code, and (iii) no portion of Transferee or any lower-tier
entity will be classified as a “taxable mortgage pool” as defined in Section
7701(i) of the Code.
13
10. Registration
Rights.
Each
of
Transferee and the REIT agrees
that in the event that either of them enters into or becomes a party to any
instrument or agreement which grants registration rights to any limited partner
of Transferee with respect to shares of stock in the REIT which such limited
partner may own or acquire, or otherwise grants such registration rights to
any
limited partner of Transferee, then each of Transferee and the REIT shall
promptly notify Transferor and shall grant to Transferor, by entering into
a
registration rights agreement with Transferor that is in form and substance
reasonably acceptable to Transferor, registration rights with respect to any
shares issued by the REIT that Transferor may acquire in connection with a
transfer or redemption of any of its Units to or by Transferee or the REIT,
and
such registration rights shall be on terms that are no less favorable to
Transferor in any respect than the most favorable registration rights granted
to
any other limited partner of Transferee by Transferee or the REIT.
11. Notices.
All
notices shall be deemed to have been properly given if hand delivered or if
mailed by United States registered or certified mail, with return receipt
requested, postage prepaid, or by United States Express Mail or other comparable
overnight courier service to the parties at the addresses set forth below (or
at
such other addresses as shall be given in writing by any party to the others).
A
notice shall be deemed to have been given: in the case of hand delivery, at
the
time of delivery; in the case of registered or certified mail, two Business
Days
after mailing; or in the case of overnight courier service, on the Business
Day
after the same was sent. A party receiving a notice which does not comply with
the technical requirements for notice under this section may elect to waive
any
deficiencies and treat the notice as having been properly given.
|
If
to Transferor:
|
AR
Prime Holdings,
LLC
000
Xxxxx Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx,
XX 00000
Attention:
Xxx X. Xxxxxx, Xx.
|
|
|
With
a copy to:
|
Xxxxxx
Godward Kronish LLP
0000
Xxxxxx xx xxx Xxxxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxxxxx X. X’Xxxxxx, Esq.
|
|
|
If
to Transferee or the REIT:
|
Lightstone
Value Plus Real Estate Investment Trust Inc.
000
Xxxxx Xxxxxx
Xxxxxxxx,
XX 00000
Attention:
Xxxxxx X. Xxxxxxxx
|
|
|
With
a copy to:
|
Xxxxxxx,
Xxxxxxxxx LLP
0
Xxxx Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxxxxxx Xxxxxxxx, Esq.
|
14
12. Further
Assurances.
Each
party to this Agreement will execute, acknowledge and deliver, or cause to
be
executed, acknowledged and delivered, any such further conveyances, assignments,
approvals, consents and other documents, and do any other acts, as may be
reasonably necessary to carry out the intent and purpose of this Agreement.
Without limiting the generality of the foregoing, if, after the Closing, any
property, assets, collateral, funds, documents or other items which constitute
a
part of the Interest remains in or comes into either Transferor’s possession or
control or remains or become vested or titled in Transferor, Transferor shall
promptly take any and all actions necessary to transfer title and possession
thereof to Transferee, all at Transferee’s sole cost and expense.
13. Governing
Law.
This
Agreement shall be construed and enforced in accordance with the laws of the
State of New York.
14. Binding
Effect.
This
Agreement shall be binding upon, and shall inure to the benefit of, Transferor,
Transferee and their respective successors and assigns.
15. Severability.
In the
event that any phrase, clause, sentence, paragraph, section, article or other
portion of this Agreement shall become illegal, null or void, or against public
policy, for any reason, or shall be held by any court of competent jurisdiction
to be illegal, null or void, or against public policy, the remaining portions
of
this Agreement shall not be affected thereby and shall remain in force and
effect to the full extent permissible by law.
16. Counterparts.
This
Agreement may be executed in several counterparts, each of which shall
constitute an original and all of which, taken together, shall constitute one
and the same Agreement, binding on each party hereto regardless of whether
all
parties are signatories to the same counterpart.
[Remainder
of Page Intentionally Left Blank]
15
IN
WITNESS WHEREOF, the
parties hereto have executed this Agreement as of the date first above
written.
|
TRANSFEROR
AR
PRIME HOLDINGS LLC,
a
Delaware limited liability company
By
Arbor
Realty Member LLC, a Delaware limited liability company, its
manager
By
Arbor
Realty SR Inc., a Maryland corporation, its sole member
|
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| |
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|
|
By
|
||
|
Name:
|
||
|
Title:
|
||
|
TRANSFEREE:
LIGHTSTONE
VALUE PLUS REIT, L.P.,
a
Delaware limited partnership
By:
Lightstone
Value Plus Real Estate Investment Trust, Inc., a Maryland corporation,
its
general partner
|
||
| |
|
|
|
By:
|
||
|
Name: |
||
|
Title:
|
||
|
LIGHTSTONE
VALUE PLUS REAL ESTATE
INVESTMENT
TRUST, INC.,
a
Maryland corporation, its general partner
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| |
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| By: | ||
|
Name:
|
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| Title: | ||
16
ANNEX
I
PARTNERSHIP
AGREEMENT
[INCLUDING
ALL AMENDMENTS THERETO]
ANNEX
II
CAPITALIZATION
OF TRANSFEREE
EXHIBIT
A
ASSIGNMENT
OF INTEREST
EXHIBIT
B
REPRESENTATION
LETTER AND AGREEMENT
EXHIBIT
C
LIMITED
PARTNER SIGNATURE PAGE
TO
PARTNERSHIP AGREEMENT
EXHIBIT
D
EXCHANGE
RIGHTS AGREEMENT
EXHIBIT
E
RELEASE
AGREEMENT
EXHIBIT
F
ADDITIONAL
PROMISSORY NOTE
EXHIBIT
G
NEW
PLEDGE AGREEMENT
EXHIBIT
H
CERTIFICATE
EVIDENCING ACTION BY THE
GENERAL
PARTNER OF TRANSFEREE TO ISSUE
COMMON
UNITS AND SERIES A UNITS
TO
TRANSFEREE
EXHIBIT
I
CONSENT
TO TRANSFER, SUBSTITUTION AND WITHDRAWAL
