CONTRIBUTION AND CONVEYANCE AGREEMENT
THIS
CONTRIBUTION AND CONVEYANCE AGREEMENT (this “Agreement”), dated as of June 26,
2008, by and between ARBOR MILL RUN JRM LLC, a Delaware limited liability
company (“Transferor”), and LIGHTSTONE VALUE PLUS REIT, L.P., a Delaware limited
partnership (“Transferee”).
WITNESSETH:
WHEREAS,
Transferor owns a Class A membership interest in MILL RUN L.L.C., a Delaware
limited liability company (the “Company”), corresponding to a 22.08% Common
Interest (as defined in the Mill Run Operating Agreement), pursuant to that
certain Second Amended and Restated Operating Agreement of the Company, dated
as
of September 20, 2005 (as amended by a First Amendment dated as of January
1,
2006, the “Mill Run Operating Agreement”); and
WHEREAS,
in consideration of Transferor’s transferring the Transferred Interests (as
defined below) herewith to Transferee, Transferee shall issue to Transferor
96,000 units of common limited partnership interest in Transferee (“Common
Units”) and 18,240 units of Series A preferred limited partnership interest in
Transferee (“Series A Units”, and collectively with the Common Units, the
“Units”); and
WHEREAS,
Transferor has delivered on the date hereof a completed Representation Letter
and Agreement in the form attached as Exhibit
A
hereto;
and
WHEREAS,
in consideration of the receipt by Transferor of the Units, and the execution
and delivery by Transferee of a Tax Protection Agreement in
the
form attached as Exhibit
B
hereto
(the “Tax Protection Agreement”), Transferor desires to transfer and assign to
Transferee all of Transferor’s right, title and interest (x) in the Company and
(y) under the Mill Run Operating Agreement (collectively, the “Transferred
Interests”), and Transferee desires to accept such transfer and assignment, all
upon the terms and conditions hereinafter set forth; and
WHEREAS,
concurrently with the execution and delivery of this Agreement, Transferor,
Transferee and Lightstone Value Plus Real Estate Investment Trust, Inc. (the
“REIT”) are entering into an Exchange Rights Agreement with respect to the
exchange of Transferor’s Common Units (including units received upon conversion
of Series A Units) for cash or stock in the REIT (the “Exchange Rights
Agreement”); and
WHEREAS,
for federal income tax purposes, it is intended that the transfer of the
Transferred Interests will be treated as a tax-free contribution by Transferor
to Transferee of the Transferred Interests in exchange for the Units under
Section 721 of the Internal Revenue Code of 1986, as amended (the “Code”);
and
WHEREAS,
concurrently with the transfer and assignment of the Transferred Interests
to
Transferee, Transferor is withdrawing as a member of the Company.
NOW,
THEREFORE, the parties covenant and agree as follows:
1. Contribution
and Transfer.
(a) For
and
in consideration of the issuance by Transferee to Transferor of the Units,
Transferor hereby contributes and assigns to Transferee all of Transferor’s
right, title and interest in and to the Transferred Interests, including,
without limitation, all of Transferor’s rights and interest in all profits,
losses, Cash Flow, Capital Proceeds (as such terms are defined in the Mill
Run
Operating Agreement), distributions and capital of the Company with respect
to
such Transferred Interests, except that the Transferor is retaining all right
to
distributions previously paid and allocations made by the Company on account
of
the Transferred Interests prior to the date hereof. In connection with its
receipt of the Units, Transferor agrees to be bound by and comply with the
terms
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”), and delivers herewith an
executed counterpart of the Partnership Agreement.
(b) Transferee
hereby accepts Transferor’s contribution, transfer and assignment of the
Transferred Interests.
(c) Transferor
hereby withdraws as a Member of the Company and grants Transferee the right
to
be admitted as a substitute member of the Company in Transferor’s place in
accordance with the terms of the Mill Run Operating Agreement.
(d) The
Company hereby admits Transferee as a substitute member of the Company in
Transferor’s place.
2. Representations
and Warranties.
(a) Transferor
hereby represents and warrants to Transferee that (i) Transferor is the sole
legal and beneficial owner of the Transferred Interests; (ii) Transferor has
not
previously assigned, transferred, sold, pledged or otherwise disposed of or
hypothecated the Transferred Interests 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; (iii) the Transferred Interests
transferred hereby are free and clear of any liens, security interests and
other
encumbrances, except for those, if any, arising under the Mill Run Operating
Agreement; (iv) the execution of, and the transfer and assignment of the
Transferred Interests pursuant to, this Agreement have been authorized by all
necessary action on the part of Transferor; (v) Transferor has the full
right, power and authority to execute and deliver this Agreement and to perform
its obligations hereunder, without obtaining any consents or approvals from,
or
taking any actions with respect to, any governmental authorities or other third
parties; (vi) this Agreement has been duly and validly executed and
delivered by Transferor and, when executed and delivered by Transferee, will
constitute the valid and binding agreement of Transferor, enforceable against
Transferor in accordance with its respective terms; and (vii) the execution
and
delivery by Transferor of this Agreement and the performance of Transferor’s
obligations hereunder and the transaction contemplated hereby 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 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.
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(b) Transferee
hereby represents and warrants to Transferor that: (i) the execution of this
Agreement, the Tax Protection Agreement, the Partnership Agreement and the
Exchange Rights Agreement, and the issuance of the Units to Transferor, have
been authorized by all necessary action on the part of Transferee and the REIT,
as applicable; (ii) each of Transferee and the REIT, as applicable, has full
right, power and authority to execute, deliver and perform this Agreement,
the
Tax Protection Agreement, the Partnership Agreement and 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;
(iii) this Agreement, the
Tax
Protection Agreement, the Partnership Agreement and the Exchange Rights
Agreement have
been
duly and validly executed and delivered by Transferee and the REIT, as
applicable, and, when executed and delivered by Transferor, will constitute
the
valid and binding agreement of Transferee and the REIT, as applicable,
enforceable against Transferee and the REIT, as applicable, in accordance with
their respective terms; (iv) a true and complete copy of the Partnership
Agreement (including Exhibit A thereto updated to reflect the transactions
contemplated by this Agreement and any other transactions involving the
Transferee that are consummated on or prior to the date hereof) is attached
hereto as Exhibit C,
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) is set forth on Exhibit
D
hereto;
(vi) the execution and delivery by each of Transferee and the REIT of this
Agreement, the Tax Protection Agreement, the Partnership Agreement and the
Exchange Rights Agreement and the performance of the obligations of Transferee
and the REIT hereunder and thereunder and the transaction contemplated hereby
and 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 (vii) on the date hereof immediately after
the closing of the transfer and contribution by Transferor to Transferee
described in Section 1 of this Agreement: (1) Transferor is
simultaneously herewith being admitted as a limited partner in Transferee with
respect to the Units; (2) the 704(b) “book” capital account of Transferor
in Transferee is equal to $19,200,000; and (3) the Units have been duly
issued to the Transferor and are fully paid and Transferor has no further
obligation to contribute any amounts to the capital of Transferee or to
reimburse Transferee for any expenses in respect of the Units;
(viii) 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”); (ix) 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; (x) 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; (xi) 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); and (xii) neither Transferee nor
the
REIT have entered into or is a party to any instrument or agreement with any
limited partner of Transferee which grants registration rights with respect
to
shares in the REIT which such limited partner may own or acquire.
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(c) Transferee
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 accepting the Transferred Interests,
Transferee is not 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.
Transferee further acknowledges, represents, warrants and covenants that in
entering into this Agreement and in accepting the Transferred Interests, it
is
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 Transferee further agrees that Transferee
shall
not 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 by any person or entity, other than the representations and
warranties of Transferor expressly set forth in Section 2(a)
hereof.
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3. Release.
(a) Transferor
hereby releases and discharges Transferee,
BRM LLC, a New Jersey limited liability company, and the Company and their
respective past, present and future subsidiaries, directors, officers, partners,
shareholders, members, managers, affiliates, employees, beneficiaries, agents,
representatives, predecessors, successors and assigns (collectively, “Transferee
Releasees”) from any claims, liabilities, obligations, causes of action, suits,
debts, accounts, reckonings, contracts, agreements, promises, covenants,
damages, costs (including costs of suit and attorneys’ fees and expenses) and
demands (collectively, “Claims”) of whatever nature, character, type or
description, whether contingent, known or unknown, liquidated or unliquidated,
at law or in equity, which Transferor or its affiliates now
has,
has ever had or may hereafter claim to have against the Transferee Releasees,
provided that such release and discharge is specifically limited to only those
Claims that are on account of, relating to or arising from or under the
Company,
the
Transferred Interests or the Mill Run Operating Agreement. In amplification,
and
not in limitation, of the foregoing, BRM LLC and the Company are hereby released
by Transferor from, among other things, any obligation or liability to make
any
further distributions to Transferor. The release herein given shall be and
remain in effect as a full and complete release notwithstanding the discovery
or
existence of any such additional or different claims or facts.
(b) Transferee
and the Company hereby
release and discharge Transferor
and its respective past, present and future subsidiaries, directors, officers,
partners, shareholders, members, managers, affiliates, employees, beneficiaries,
agents, predecessors, representatives, successors and assigns (collectively,
“Transferor Releasees”) from any Claims, of whatever nature, character, type or
description, whether contingent, known or unknown, liquidated or unliquidated,
at law or in equity, which Transferee or the Company now has, has ever had
or
may hereafter claim to have against the Transferor Releasees, provided that
such
release and discharge is specifically limited to only those Claims that are
on
account of, relating to or arising from or under the Company,
the
Transferred Interests or the Mill Run Operating Agreement. In amplification,
and
not in limitation, of the foregoing, Transferor is hereby released by Transferee
and the Company from, among other things, any obligation or liability to make
any capital contributions to the Company or to return to the Company all or
any
portion of any distributions previously made to it by the Company. The release
herein given shall be and remain in effect as a full and complete release
notwithstanding the discovery or existence of any such additional or different
claims or facts.
(c) Notwithstanding
anything in this Section 3 to the contrary, in no event shall either Transferor
or Transferee or their respective affiliates, be deemed to release, discharge
or
waive, pursuant to this Section 3 or any other provision of this Agreement,
any
Claim against the other party (or its affiliates) that is not on account of,
relating to or arising from or under the Company, the Transferred Interests
or
the Mill Run Operating Agreement (“Unrelated Claims”), and all such Unrelated
Claims are hereby fully preserved and reserved in all respects, and all such
Unrelated Claims remain in full force and effect. In amplification, and not
in
limitation, of the foregoing, all rights, remedies, covenants and obligations
of
the parties under this Agreement and under the documents and agreements attached
as Exhibit
A,
Exhibit
B
and
Exhibit
C
hereto
(i) are hereby deemed to be Unrelated Claims, (ii) are not modified in any
manner by the release provisions set forth in this Section 3, and (iii) remain
in full force and effect.
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4. Indemnification.
(a) Transferee
shall defend, indemnify and hold harmless Transferor from and against any and
all loss, liability, damage, cost or expense (including, without limitation,
reasonable attorneys’ fees and disbursements) incurred or sustained by
Transferor on account of (i) any breach of any representation, warranty or
covenant of Transferee set forth herein, or (ii) the Transferred Interests,
provided and to the extent that such loss, liability, damage or cost accrues
on
or after the date hereof.
(b) Transferor
shall defend, indemnify and hold harmless Transferee from and against any and
all loss, liability, damage, cost or expense (including, without limitation,
reasonable attorneys’ fees and disbursements) incurred or sustained by
Transferee on account of any breach of any representation, warranty or covenant
of Transferor set forth herein, provided and to the extent that such loss,
liability, damage or cost accrues on or after the date hereof.
5. 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 shall (a)
be
with respect to the quarter ending June 30, 2008, and (b) be prorated based
on
the number of days during such quarter after the date hereof. Transferor
acknowledges that notwithstanding anything to the contrary herein or in the
Partnership Agreement, Transferor shall not have the right to convert or redeem
any Series A Units prior to June 26, 2013.
6. Tax
Reporting; Audits.
For
federal, state, and local income tax purposes, Transferee shall report
Transferor’s contribution of the Transferred Interests to 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 consent shall not be unreasonably withheld.
7. 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 with any limited partner
of
Transferee which grants registration rights with respect to shares 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.
8. 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 any property, assets,
collateral, funds, documents or other items which constitute a part of the
Transferred Interests 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.
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9. Governing
Law.
This
Agreement shall be construed and enforced in accordance with the laws of the
State of New York.
10. Binding
Effect.
This
Agreement shall be binding upon, and shall inure to the benefit of, Transferor,
Transferee and their respective successors and assigns.
11. 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.
12. 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.
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IN
WITNESS WHEREOF, Transferor
and Transferee have executed this Agreement as of the date first above
written.
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TRANSFEROR:
ARBOR
MILL RUN JRM LLC,
a
Delaware limited liability company
By:
Arbor Commercial Mortgage, LLC, a
New York limited liability company, its
sole member
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Title:
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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
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By:
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Title:
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MILL
RUN
L.L.C. is executing this
Agreement
for the sole purpose of
Sections
1(d) and 3(b) hereof.
MILL
RUN
L.L.C.
By:
BRM
LLC, its managing member
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By:
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Name:
Title:
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[SIGNATURES
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LIGHTSTONE
VALUE PLUS REAL
ESTATE
INVESTMENT TRUST, INC.,
is
executing this agreement for the sole
purpose
of Sections 6 and 7 hereof.
LIGHTSTONE
VALUE PLUS REAL
ESTATE
INVESTMENT TRUST, INC.,
a
Maryland Corporation
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Name:
Title:
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9
EXHIBIT
A
REPRESENTATION
LETTER AND AGREEMENT
EXHIBIT
B
TAX
PROTECTION AGREEMENT
EXHIBIT
C
PARTNERSHIP
AGREEMENT
EXHIBIT
D
CAPITALIZATION
OF TRANSFEREE
