PARTICIPATION AGREEMENT

Agreement dated as of January 4, 2007, by and between Gettinger Associates,
L.P., a New York limited partnership having an office at 1407 Broadway, New
York, New York 10018 (hereinafter referred to as “Gettinger”) and 1407 Broadway
Real Estate LLC, a Delaware limited liability company having an office at 326
Third Street, Lakewood, New Jersey 08701 (hereinafter referred to as
“Lightstone”).

Whereas, pursuant to a sale and purchase of leasehold agreement dated October
25, 2006 between Gettinger, as seller, and Lightstone, as purchaser, (the “Sale
and Purchase Agreement”), Gettinger’s interest in the Operating Lease (as such
term is hereinafter defined) and other real and personal property relating
thereto has been sold and transferred to Lightstone.

Whereas, the parties have agreed that, under certain circumstances, Gettinger
shall participate in and have an interest in certain profits, proceeds, rents
and revenues which might hereafter be derived by Lightstone, its successors and
assigns, from or relating to the Operating Lease.

Now, therefore, in consideration of the premises and the mutual covenants,
conditions and promises contained herein and in the Sale and Purchase Agreement,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:

1. Certain Definitions. For purposes of this Agreement, the terms set forth
below shall be defined as follows:

1.1. “Operating Lease” shall mean that certain Sub-Lease, dated February 1,
1954, between Webb & Knapp, Inc., as landlord, and Gettinger, as tenant, which
Sub-Lease was recorded in the Office of the Register of the City of New York,
New York County (the “Register”) on February 6, 1954, in Liber 4868 of
Conveyances, Page 339, as amended to date.

1.2. “Land” shall mean the land located at and known as 535 Seventh Avenue (also
known as 1407 Broadway) in the Borough of Manhattan, City, County and State of
New York, which is more particularly described on Exhibit A annexed hereto and
made a part hereof.

1.3. “Improvements” shall mean all buildings and improvements located on the
Land, together with all facilities located in said buildings and improvements or
on the Land (such buildings, improvements and facilities are hereinafter
collectively referred to as the “Improvements”).

1.4. “Premises” shall mean the Land and the Improvements.

1.5. “Transfer” shall mean a sale, transfer, exchange, conveyance, sublease,
sub-sublease, assignment or other disposition of any nature whatsoever.
 

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1.6. “Transferee” shall mean a party who shall offer or agree to purchase or
acquire all or any portion of or interest in the Operating Lease or the
membership, equity or other ownership interests in Lightstone, or to
sub-sublease all or substantially all of the Premises, or who shall purchase or
acquire all or any portion of or interest in the Operating Lease or the
membership, equity or other ownership interests in Lightstone, or who shall
sub-sublease all or substantially all of the Premises, in any case either
directly or indirectly or in one or more separate transactions. For purposes of
this Agreement, a sub-sublease of all or substantially all of the Premises shall
not be deemed to include an individual office space sub-sublease of a portion of
the Premises for use and occupancy by the sub-sublessee thereof.

1.7. “Net Adjusted Transfer Proceeds” shall mean the gross proceeds (including,
without limitation, all cash or cash equivalents and the net present value (as
determined pursuant to the provisions of paragraph 2 below) of all mortgages or
other forms of financing or other installment or deferred payment arrangements
granted or subject to which a Transfer is made) of a Transfer of the Operating
Lease or the membership, equity or other ownership interests in Lightstone or
any interest therein or portion thereof, less (i) reasonable brokerage
commissions actually paid by the transferor (not to exceed six (6%) percent of
the gross proceeds of the Transfer in the aggregate), (ii) New York State and
New York City real property transfer taxes actually paid by the transferor,
(iii) reasonable attorneys’ fees actually paid by the transferor, (iv) the
amount of any prepayment fee in respect of the transferor’s leasehold mortgage
loan actually paid by the transferor in connection with the Transfer (if any)
and (v) the sum of one hundred twenty-two million and 00/100 ($122,000,000.00)
dollars multiplied by the percentage interest (not to exceed 100%) in the
Operating Lease or in the aggregate membership, equity or other ownership
interests in Lightstone which is subject to the Transfer.

1.8. “Net Adjusted Sub-sublease Proceeds” shall mean all cash and other
consideration paid in connection with the granting of any sub-sublease of all or
substantially all of the Premises, plus the excess of all rent and additional
rent paid by or on behalf of the lessee throughout the entire term of the
sub-sublease over the amount of rent and additional rent paid by the lessee
under the Operating Lease throughout the entire term of the sub-sublease.

1.9. “Term” shall mean the two (2) year period commencing on the date of this
Agreement and terminating on the day immediately preceding the second (2nd)
anniversary of the date of this Agreement.
 
2. Gettinger’s Participation in Net Adjusted Transfer Proceeds. If, during the
Term, (i) Lightstone shall effect a Transfer of the Operating Lease or the
membership, equity or other ownership interests in Lightstone, or any interest
therein or portion thereof, to a Transferee (other than a Permitted Transferee,
as such term is defined in the Sale and Purchase Agreement), or (ii) Lightstone
shall enter into a contract or agreement for the Transfer of the Operating Lease
or the membership, equity or other ownership interest in Lightstone, or any
interest therein or portion thereof, to a Transferee or (iii) a mortgage
foreclosure proceeding in respect of the Operating Lease shall be commenced by
any leasehold mortgagee other than an independent institutional leasehold
mortgagee, or the Operating Lease or the membership, equity or other ownership
interests in Lightstone, or any interest therein or portion thereof, shall be
otherwise subject to a Transfer pursuant to judicial order or decree, then in
any such event, Lightstone shall pay to Gettinger, and Gettinger shall be
entitled to receive, at the closing of any such Transfer, an amount equal to
fifty (50%) percent of the Net Adjusted Transfer Proceeds in respect of such
Transfer. If any portion of the Net Adjusted Transfer Proceeds are payable by
the Transferee in installments or by means of one or more deferred payments,
then in addition to the portion of the Transfer Proceeds payable in cash or by
cash equivalents, Gettinger shall also receive, at the closing of such Transfer,
a lump sum payment from Lightstone equal to the then net present value of the
aggregate amount of all such installments and/or deferred payments thereafter
becoming due and payable, discounted at the rate then being paid on newly issued
U.S. Treasury Bonds having a maturity date most closely approximating the date
on which the last such installment or deferred payment shall become due and
payable.
 

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3. Gettinger’s Participation in Net Adjusted Sub-sublease Proceeds. If, during
the Term, Lightstone, as lessee under the Operating Lease, shall enter into a
sub-sublease agreement in respect of all or substantially all of the Premises
with a Transferee, regardless of the term of any such sub-sublease or
sub-sublease agreement, Lightstone shall pay to Gettinger, and Gettinger shall
be entitled to receive, as and when Lightstone shall receive same, amounts equal
to fifty (50%) percent of the Net Adjusted Sub-sublease Proceeds in respect of
such sub-sublease or sub-sublease agreement throughout the term thereof,
irrespective of whether such term shall extend beyond the Term.

4. Notice of Transfer. It shall be a condition precedent to the effectiveness of
any Transfer subject to this Agreement that Lightstone shall give notice to
Gettinger of such Transfer, together with true and complete copies of all
contracts, leases, subleases, and other agreements relating to such Transfer,
not less than fifteen (15) days prior to the effective date of such Transfer,
time being of the essence.

5. Intentionally Deleted.

6. Arbitration. If any dispute shall arise between or involving the parties
hereto with respect to any matter or thing relating to this Agreement, then such
dispute shall be promptly submitted to and decided by binding arbitration by the
American Arbitration Association in the County of New York in accordance with
the Expedited Procedures of the Commercial Arbitration Rules of the American
Arbitration Association, as same may hereafter be amended, supplemented,
supplanted or replaced. The award rendered by the arbitrators shall be final,
and judgment may be entered upon such award in accordance with applicable law in
any court having jurisdiction. Each party shall bear its own legal and
accounting fees in connection with such arbitration hearing and all filing fees
shall be borne equally by the parties; however, the arbitrators shall have the
power to award legal fees and costs to either party as the arbitrators may see
fit.
 
7. Guaranty of Lightstone’s obligations by Lightstone Holdings, LLC. By
execution of a copy of this Agreement below, and as a material inducement to
Gettinger to enter into and perform under this Agreement, Lightstone Holdings,
LLC (“Guarantor”) hereby absolutely, unconditionally and irrevocably guarantees
to Gettinger, and to Gettinger’s partners, agents, successors and assigns, the
full and timely performance, payment and observation by Lightstone of all of
Lightstone’s covenants, obligations, representations and warrantees under and/or
pursuant to this Agreement. Guarantor hereby waives notice of acceptance of the
provisions of this paragraph 7, notice of default under this Agreement or any
other notices required under this Agreement, and all other notices to which
Guarantor might otherwise be entitled, whether by statute, rule of law or
otherwise, and any demand for payment or performance under the provisions of
this paragraph 7. Guarantor’s obligations under this Agreement shall remain in
full force and effect without regard to, and shall not be impaired or affected
by: (a) any amendment, extension, renewal or modification of, or addition or
supplement to, any of the terms, conditions or provisions of this Agreement; (b)
any compromise, release, consent, extension, indulgence or other action or
inaction with respect to any of the terms, conditions or provisions of this
Agreement; (c) any exercise, non-exercise or delay in exercise by Gettinger of
any right, power or remedy under or in respect of this Agreement, or any waiver
of any such right, power or remedy; (d) any bankruptcy, insolvency,
reorganization, arrangement, adjustment, composition, liquidation, or the like
of Lightstone or any other guarantor, or the discharge or release of Lightstone
or any other guarantor in any such bankruptcy proceeding; (e) any sale, lease or
transfer of any or all of the assets, shares of stock, partnership interests or
other ownership interests of Lightstone or Guarantor or (f) any other
circumstance, whether or not Guarantor, Lightstone or Gettinger shall have had
actual or constructive notice or knowledge thereof. The liability of Guarantor
is coextensive with that of Lightstone and also joint and several with
Lightstone, and action or suit may be brought against Guarantor and carried to
final judgment and/or completion and recovery had, either with or without making
Lightstone a party thereto. Insofar as the payment by of any sums of money to
Gettinger is involved, the provisions of this paragraph 7 shall constitute a
guaranty of payment and not of collection.
 

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8. Miscellaneous. 

8.1.  Further Actions. Each of the parties shall do all things reasonably
necessary to consummate the transactions contemplated hereby. Without limitation
of the foregoing, Lightstone shall fully cooperate with Gettinger and shall
furnish, execute and deliver upon request therefor all information, documents
and forms relating to Lightstone, any Transferee, the Operating Lease, the
Premises, any Transfer or proposed Transfer in respect of the Operating Lease,
and/or this Agreement, as Gettinger or Gettinger’s attorneys shall deem
reasonably necessary or required in connection with this Agreement.

8.2.  Modification. This Agreement sets forth the entire understanding of the
parties with respect to the subject matter hereof, supersedes all existing
agreements between them concerning such subject matter, and may be modified only
by a written instrument duly executed by each party.

8.3.  Notices. Any notice or other communication made in connection with this
Agreement shall be in writing and shall be sent by overnight courier with
receipt of delivery obtained, mailed by certified mail, return receipt requested
or personally delivered against receipt to the party to whom it is to be given.
Any such notice shall be deemed to have been received on the date personal
delivery is effected, one (1) business day after deposit with an overnight
courier, or three (3) business days after deposit in the U.S. mail, as the case
may be, as follows:
 
To Gettinger:

Gettinger Associates, L.P. 
1407 Broadway
New York, New York 10018
Attention: Mr. Robert S. Gettinger
 

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With a copy sent in like manner to:

Gary S. Friedman, Esq.
Kaufman Friedman Plotnicki & Grun, LLP
300 East 42nd Street, 8th floor
New York, New York 10017

To Lightstone:

1407 Broadway Real Estate LLC
c/o The Lightstone Group
326 Third Street
Lakewood, New Jersey 08701

With a copy sent in like manner to:

Sheldon Chanales, Esq.
Herrick, Feinstein LLP
2 Park Avenue
New York, New York 10016

To Guarantor:

Lightstone Holdings, LLC
c/o The Lightstone Group
326 Third Street
Lakewood, New Jersey 08701

With a copy sent in like manner to:

Sheldon Chanales, Esq.
Herrick, Feinstein LLP
2 Park Avenue
New York, New York 10016

Any party may by notice given in accordance with this Paragraph to any other
party designate another address or person for receipt of notices hereunder.
Notices may be validly given by a party’s attorneys for all purposes hereunder.
 

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8.4.  Intentionally Deleted.

8.5.  Waiver. Any waiver by any party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of that provision or of any breach of any other provisions of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions will not be considered to be a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.

8.6.  Binding Effect; Recordation. The provisions of this Agreement shall be
deemed to be covenants running with the land with respect to the Premises and
shall be binding upon and inure to the benefit of Gettinger and Lightstone, and
any Transferee(s), and their respective immediate and remote successors, heirs,
legal representatives and assigns. It is the intention of the parties that this
Agreement be recorded by Gettinger, and Lightstone shall fully cooperate with
Gettinger and shall promptly execute and deliver all necessary documents and tax
returns in connection with such recordation. Gettinger shall pay any real
property transfer tax which may be imposed as a condition to the recordation of
this Agreement. Lightstone shall duly execute and deliver any transfer tax
returns or other documentation required for Gettinger to record this Agreement.

8.7.  Headings. The headings in this Agreement are solely for convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.

8.8.  Assignment. Gettinger shall have the right to assign all or any portion of
its interest in this Agreement.

8.9.  Void or Unenforceable Provisions. If any provision of this Agreement is
found to be void or unenforceable by a court of competent jurisdiction, the
remaining provisions of this Agreement shall nevertheless be binding upon the
parties with the same effect as though the void or unenforceable part had been
severed and deleted.

8.10.  Counterparts; Governing Law; Construction. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument. This
Agreement shall be governed by and construed and interpreted in accordance with
the laws of the State of New York, without giving effect to conflict of laws.
This Agreement shall be construed and interpreted without regard to any
presumption or rule requiring construction or interpretation against the party
causing this Agreement to be drafted.
 

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In witness whereof, the parties hereto have duly executed and delivered this
Agreement as of the date first above written.
 

      Gettinger Associates, L.P., Seller          
By: Gettinger Ltd., general partner
       

 
   
by:   /s/ Robert S. Gettinger

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Name: Robert S. Gettinger
   
Title: President

   

   
1407 Broadway Real Estate LLC
     
 
 
   
By:   /s/ David Lichtenstein

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Name: David Lichtenstein
   
Title: President

 

   
Lightstone Holdings, LLC
     
 
 
   
By:   /s/ David Lichtenstein

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Name: David Lichtenstein
   
Title: President

 

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EXHIBIT A

DESCRIPTION OF PREMISES

ALL that certain plot, piece or parcel of land, situate, lying and being in the
Borough of Manhattan, City, County and State of New York, bounded and described
as follows:

BEGINNING at the corner formed by the intersection of the Southerly side of 39th
Street with the Westerly side of Broadway;

RUNNING THENCE Southeasterly along the Westerly side of Broadway 205 feet more
or less to the corner formed by the intersection of the Northerly side of 38th
Street with the said Westerly side of Broadway;

THENCE Westerly along the Northerly side of 38th Street 156 feet 2-3/8 inches,
more or less to a point distant 200 feet East of 7th Avenue;

THENCE Northerly at right angles to 38th Street 98 feet 9 inches to the center
line of the block;

THENCE Westerly along said center line of the block and parallel with 39th
Street 200 feet to the Easterly side of 7th Avenue;

THENCE Northerly along the Easterly side of 7th Avenue 98 feet 9 inches to the
corner formed by the intersection of the said Easterly side of 7th Avenue with
the Southerly side of 39th Street;

THENCE Easterly along the Southerly side of 39th Street 301 feet 2-5/8 inches to
the corner aforesaid, the point or place of BEGINNING.
 

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PARTICIPATION AGREEMENT
 
Gettinger Associates, L.P.
 
-with-
 
1407 Broadway Real Estate LLC
 
Guarantor: Lightstone Holdings, LLC

Premises:
1407 Broadway
 
New York, New York
     
Block: 814
 
Lot: 15

 
Record and Return To:

Kaufman Friedman Plotnicki & Grun, LLP
300 East 42nd Street, 8th Floor
New York, New York 10017

Attention: Gary S. Friedman, Esq.
 

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