Unassociated Document


    EXHIBIT
10.39

     

    TAX PROTECTION
AGREEMENT

     

    THIS TAX
PROTECTION AGREEMENT (“Agreement”), dated as of June 26, 2008, is made by
LIGHTSTONE VALUE PLUS REIT, L.P., a Delaware limited partnership (“LVP”), and
ARBOR NATIONAL CJ, LLC, a New York limited liability company (“ANCJ”) that will
become a limited partner of LVP as a result of the Contribution (defined
below).

     

    WHEREAS ANCJ
owns a membership interest in Mill Run
LLC (“MRL”)
corresponding to a .46% Common Interest (as defined in the Second Amended and
Restated Operating Agreement of Mill Run LLC, dated as of September 20, 2005, as
amended);

     

    WHEREAS
MRL owns, indirectly through entities that are treated as disregarded entities
for U.S. federal tax purposes, a property known as the Orlando Design Center and
a property known as Orlando Outlet World (collectively, the “Properties”);


     

    WHEREAS,
pursuant to that certain Contribution and Conveyance Agreement, dated as of the
date hereof, between ANCJ and LVP (the “Contribution Agreement”), ANCJ will
contribute all of its membership interest in MRL (the “Contributed Interest”) to
LVP in exchange for Units (as defined in the Contribution Agreement) of LVP (the
“Contribution”); 

     

    WHEREAS,
for federal income tax purposes, it is intended that the Contribution will be
treated as a tax-free contribution by ANCJ to LVP of the Contributed Interest in
exchange for Units under Section 721 of the Code;

     

    WHEREAS,
pursuant to the Contribution Agreement, LVP has agreed to make certain
undertakings to ANCJ as provided herein;

     

    NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, and intending to be legally bound hereby, the
parties agree as follows:

     

    1. Definitions. All
capitalized terms used and not otherwise defined in this Agreement shall have
the meaning set forth in the Partnership Agreement (as defined below). As used
herein, the following terms have the following meanings:

     

    “Approved
Firms” shall mean any of the following firms: Baker & McKenzie LLP, Deloitte
& Touche LLP, Dewey & LeBoeuf LLP, McKee Nelson LLP, Kaye Scholer LLP,
and DLA Piper; and if any of the aforementioned law firms shall disband, the
parties hereto shall each make a good faith effort to choose a replacement for
each such firm.

     

    “Built-in
Gain” means gain allocable under Section 704(c) of the Code or under so-called
“reverse” Section 704(c) principles pursuant to Treasury Regulation Section
1.704-1(b)(4)(i) to ANCJ with respect to the Properties or the Contributed
Interest (taking into account any special inside basis of ANCJ under Section
743(b) of the Code with respect to the Properties or the Contributed Interest).
For purposes of determining Built-in Gain with respect to the Properties, the
assets of MRL shall be deemed to have been revalued for federal income tax
purposes, and the capital accounts of the partners therein adjusted, immediately
prior to the Contribution pursuant to the principles of Treasury Regulation
Section 1.704-2(b)(2)(iv)(f) (notwithstanding that no event described in
Treasury Regulation Section 1.704-2(b)(2)(iv)(f)(5) occurs with respect to MRL
in connection with the Contribution). After the Closing Date, the Built-in Gain
shall be reduced from time to time pursuant to the principles set forth in the
Code and the Regulations thereunder.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Closing”
shall mean the closing of the exchange of the Contributed Interest for Units
pursuant to the Contribution Agreement.

     

    “Closing
Date” shall mean the date on which the Closing occurs. 

     

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

     

    “Contributed
Interest” shall have the meaning set forth in the Recitals.

     

    “Contribution”
shall have the meaning set forth in the Recitals.

     

    “Disposition”
shall
have the meaning set forth in Section 2(a).

     

    “Excluded
Transfer” shall have the meaning set forth in Section 2(g).

     

    “Nonrecourse
Built-in Gain” means gain recognized under Section 731(a)(1) of the Code as a
result of a deemed distribution under Section 752(b) of the Code or gain
recognized under Section 465(e) of the Code as a result of a reduction of the
amount of liabilities allocable to ANCJ under Section 752 of the Code below the
Protected Amount.

     

    “Partnership
Agreement” shall mean the Amended and Restated Agreement of Limited Partnership,
dated as of April 22, 2005, of LVP, as amended. 

     

    “Permitted
Transfer” shall mean (i) a
transfer of any of the Properties or the Contributed Interest in an involuntary
bankruptcy against MRL, (ii) the
condemnation or other taking of any of the Properties by a governmental entity
or authority in eminent domain proceedings, (iii) if LVP elects the Application
of Section 2(f), a transfer of the Orlando Design Center, or (iv) if LVP elects
the Application of Section 2(g), an Excluded Transfer.

     

    “Prohibited
Transaction” shall mean a transaction that is prohibited under Section
2(a).

     

    “Properties”
shall have the meaning set forth in the Recitals.

     

    “Protected
Amount” shall mean an amount equal to the product of (i) ANCJ’s negative tax
capital account in MRL as of the date hereof and (ii) negative one (-1), as such
amount may be reduced pursuant to the following sentence. Upon any other sale,
exchange, transfer or disposition either (a) by ANCJ of some or all of its Units
or (b) by any person or entity of some or all of its direct or indirect equity
interest in ANCJ, the Protected Amount shall be reduced to the extent of (x) in
situation (a), any gain recognized by ANCJ, but only to the extent such gain is
attributable to the amount of nonrecourse liabilities of LVP of which ANCJ is
deemed relieved under Section 752 of the Code and the regulations thereunder as
a result of such transaction, and (y) in situation (b), any gain recognized by
such person (or, in the case of a transfer resulting from the death of such
person, the difference between the adjusted tax basis, for federal income tax
purposes, of the transferee with respect to the transferred property and the
adjusted tax basis, for federal income tax purposes, of such person with respect
to such property), but only to the extent such gain is attributable to the
amount of nonrecourse liabilities of LVP of which such person is deemed relieved
under Section 752 of the Code and the regulations thereunder as a result of such
transaction. 

     

    
      
        
        

      

      
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    “Protected
Period” means the period beginning on the Closing Date, but after the Closing,
and ending on the date that is five (5) years after the Closing
Date.

     

    “Qualifying
Opinion” shall have the meaning set forth in Section 3(d).

     

    2. Restrictions on Disposition
of the Properties.

     

    (a) Subject
to Section 2(b), LVP agrees that during the Protected Period neither LVP, nor
any entity in which LVP holds a direct or indirect interest, will consummate a
sale, transfer, exchange or other disposition of all or any portion of the
Properties, the Contributed Interest, or any indirect interest in all or any
portion of the Properties or the Contributed Interest (a “Disposition”), or
engage in any other transaction, that results in the recognition and allocation
to ANCJ of all or any portion of its Built-in Gain that it would not otherwise
have recognized at such time as a result of the application of the Code and
Regulations in the absence of such transaction or any other transaction. In
addition, LVP shall not enter into any transaction described in the first
sentence of Section 3(d) unless LVP shall have first provided ANCJ with a
Qualifying Opinion in a timely manner pursuant to the requirements of Section
3(d). ANCJ shall have the right to seek and obtain specific performance or
injunctive relief as a remedy with respect to any breach or threatened breach of
the covenant set forth in the preceding sentence.

     

    (b) The first
sentence of Section 2(a) shall not apply to (i) a
transfer of any of the Properties or the Contributed Interest in an involuntary
bankruptcy against MRL or (ii) the
condemnation or other taking of any of the Properties by a governmental entity
or authority in eminent domain proceedings. 

     

    (c) Any
property that is exchanged for or replaces any of the Properties, the
Contributed Interest, or any portion thereof and that is “substituted basis
property,” as defined in Section 7701(a)(42) of the Code, with respect
thereto shall thereafter be treated as a “Property,” the “Contributed Interest,”
or a portion thereof, as the case may be, for all purposes of this Agreement;
however, the Property, the Contributed Interest, or the portion thereof that was
exchanged for or replaced by such new property shall continue to be treated as a
“Property,” the “Contributed Interest,” or a portion thereof to the extent that
a subsequent disposition of (or other transaction involving) the Property, the
Contributed Interest, or the portion thereof could result in the recognition and
allocation to ANCJ of any Built-in Gain.

     

    
      
        
        

      

      
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    (d) Within 18
weeks after the Closing Date, LVP shall provide to ANCJ a spreadsheet showing
its calculation of (i) the Built-in Gain with respect to the Properties and the
Contributed Interest and (ii) ANCJ’s negative tax capital account in MRL as of
the Closing Date. The calculation of the Built-in Gain shall be based on the
fair market values for the Properties and the Contributed Interest shown on
Schedule A hereto. The calculation of the Built-in Gain shall also reflect any
Section 704(c) or “reverse” Section 704(c) gain or loss existing with respect to
the Properties immediately prior to the Closing.

     

    (e) For
federal, state, and local income tax purposes, LVP shall report (i) ANCJ’s
contribution of the Contributed Interest to LVP as a tax-free contribution
pursuant to Section 721 of the Code (or the corresponding provision of state or
local law, as applicable) and (ii) ANCJ as a partner in LVP with respect to all
of the Units received by LVP; provided that,
upon a reasonable request from LVP’s accountant, ANCJ shall provide (at LVP’s
expense) to the accountant, at ANCJ ’s election, either (i) a letter from Cooley
Godward Kronish LLP to the accountant, (ii) an opinion letter from Cooley
Godward Kronish LLP which shall provide that the accountant is entitled to rely
on it, or (iii) an opinion letter from an Approved Firm to the accountant, in
each case providing the required level of comfort to the accountant to sign the
return or returns. Notwithstanding
the foregoing, LVP shall not be deemed to have breached its obligations under
this Section 2(e) solely because a governmental taxing authority determines that
LVP would be required to file an amended tax return or amended information
statement that reports the
Contribution other
than as a contribution pursuant to Section 721 of the Code.

     

    (f) LVP may
elect to apply this Section 2(f) by treating any taxable direct or indirect
disposition of the Orlando Design Center as not subject to indemnification under
the first sentence of Section 2(a); provided,
however, that
LVP shall not be entitled to elect the application of this Section 2(f) if LVP
shall have previously elected the application of Section 2(g). If LVP elects the
application of this Section 2(f), then the first sentence of Section 2(a) shall
not apply to a transfer of the Orlando Design Center.

     

    (g) LVP may
elect to apply this Section 2(g) by treating all or part of one or more taxable
direct or indirect Dispositions of Properties (other than the Orlando Design
Center), occurring at any time after the one year anniversary of the Closing
Date, as an Excluded Transfer or Excluded Transfers (as defined below) not
subject to indemnification under the first sentence of Section 2(a), within the
limits set forth in the following sentence; provided,
however, that
LVP shall not be entitled to elect the application of this Section 2(g) if LVP
shall have previously or concurrently elected the application of Section 2(f).
If LVP elects or has elected the application of this Section 2(g) and in any
calendar year, taking into account all direct or indirect Dispositions by LVP of
one or more Properties or portions thereof that (i) are taxable in whole or in
part and (ii) occur during such calendar year and after the one year anniversary
of the Closing Date, LVP transfers Properties or portions thereof having an
aggregate value as of the date hereof as set forth on Schedule A hereto that is
less than or equal to ten percent (10%) of the total value of the Properties as
of the date hereof as set forth on Schedule A hereto, then the first sentence of
Section 2(a) shall not apply to such Dispositions (each such Disposition, an
“Excluded Transfer”); moreover, if the aggregate value (as of the date hereof as
set forth on Schedule A hereto) of the Properties transferred in such
Dispositions is less than ten percent (10%) of the total value of the Properties
as of the date hereof as set forth on Schedule A hereto, then such deficit shall
carry over to the following calendar year and increase the amount of Properties
the transfers of which may qualify as Excluded Transfers for such year, and if
such amounts are not transferred, all such amounts shall carry over to the next
successive year, and so on, until the term of this Agreement shall expire. If
the preceding sentence does not apply to Dispositions by LVP in any calendar
year because the aggregate value (as of the date hereof as set forth on Schedule
A hereto) of the Properties (or portions thereof) disposed of exceeds ten
percent (10%) of the total value of the Properties as of the date hereof as set
forth on Schedule A hereto, then only a ratable portion of each such Disposition
shall qualify as an Excluded Transfer not subject to Section 2(a). With respect
to the first calendar year that begins after the date hereof, the preceding two
sentences shall be applied by substituting for each occurrence of “ten percent
(10%)” the product of (i) ten percent (10%) and (ii) a fraction, the numerator
of which is the number of days from the one year anniversary of the date hereof
to December 31 of such calendar year, and the denominator of which is 365.
Notwithstanding anything to the contrary herein, a direct or indirect
Disposition or other transfer of a Property or a portion thereof shall not
constitute an Excluded Transfer if such transfer is effectuated with a party
“related” to LVP (applying the principles of Code Sections 267(b) and 707(b)) in
a transaction that lacks a bona fide commercially motivated business purpose.


     

    
      
        
        

      

      
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    (h) No later
than the earlier of (i) the date that is 30 days after LVP consummates a direct
or indirect Disposition, taxable in whole or in part, of one or more Properties
or portions thereof and (ii) December 31 of the calendar year in which such
Disposition occurs, LVP shall provide ANCJ with written notification of such
disposition, including (I) the Property, Properties, or portions thereof
disposed of (II) the amount and nature of the consideration received, and (III)
the amount of gain (including Built-in Gain) allocable to ANCJ as a result of
such Disposition; provided,
however, that
LVP shall not be required to provide such notification if it shall have
previously provided the identical information to ANCJ pursuant to the
notification provisions of Section 3(a). 

     

    3. Indemnity by LVP for Breach
of Obligations set forth in Section 2.

     

    (a) In the
event that LVP engages in a Prohibited Transaction in breach of its obligations
set forth in Section 2(a), LVP shall pay to ANCJ an amount equal to (i) the
aggregate federal, state and local income taxes deemed incurred by ANCJ with
respect to any portion of its Built-in Gain that it recognizes as a result of
such Prohibited Transaction plus (ii) a “gross-up” amount so that, after the
hypothetical payment by ANCJ of all federal, state and local income taxes on
amounts received pursuant to this Section 3(a), ANCJ would retain from such
payments hereunder an amount equal to its total deemed income tax liability
incurred as a result of the Prohibited Transaction and its recognition of such
Built-in Gain. If (i) gain is recognized by ANCJ or allocated to ANCJ as a
result of the closing of the transactions contemplated by the Contribution
Agreement and (ii) such gain recognition is attributable to (I) incorrect
information provided by MRL or an affiliate or agent thereof to ANCJ or (II) a
breach of LVP’s or the Lightstone Value Plus Real Estate Investment Trust,
Inc.’s obligations under the Contribution Agreement or this Agreement, then LVP
shall indemnify ANCJ for such Built-in Gain under this Section 3(a) as if such
Built-in Gain had resulted from a Prohibited Transaction. Notwithstanding
anything herein to the contrary, it is the understanding and the intention of
the parties hereto that this Agreement shall in no manner create liability for
LVP as a result of any tax that may be recognized as a result of (i) the
structure and effectuation of the transactions contemplated hereby and by the
Contribution Agreement or (ii) any conversion of Units into stock of the REIT at
ANCJ’s election and that the only liability that may arise as to LVP shall be as
a result of its breach of its obligations imposed by this Agreement or the
Contribution Agreement, if any, or as a result of any provision of incorrect
information. At the
time LVP enters into an agreement to consummate a Prohibited Transaction that,
if consummated, would breach Section 2(a) hereof and result in the recognition
by ANCJ of all or any portion of its Built-in Gain, and in any case not less
than thirty (30) days prior to consummating such Prohibited Transaction, LVP
shall notify ANCJ in writing of such proposed Prohibited Transaction and of the
approximate sales price or other amount to be realized for income tax purposes
in connection therewith and all other relevant details of the Prohibited
Transaction and shall request from ANCJ such information that is
within ANCJ’s possession or control as is
reasonably necessary for LVP to calculate the amount of the indemnity set forth
herein. Upon receipt of such notice, ANCJ shall provide LVP with any information
reasonably requested by LVP of ANCJ that is within ANCJ’s possession or control
and is relevant to calculation of the indemnity set forth herein within ten (10)
days of such request. Within ten (10) days after receipt of such information
from ANCJ (or, if
no such information is requested, at the same time that LVP notifies ANCJ of the
Prohibited Transaction as provided above), LVP
shall provide to ANCJ (i) a computation of the indemnity payment, if any, owing
to ANCJ under this Section 3(a). LVP shall make any required indemnity payment
owing to ANCJ pursuant to this Section 3(a) no later than five (5) days prior to
the due date of the quarterly estimated tax payment for individuals which next
follows the date that the Prohibited Transaction is consummated or, if later,
ten (10) days after the date required for LVP’s delivery of the computation of
the indemnity payment to ANCJ. For purposes of determining the amount of the
deemed income taxes incurred by ANCJ and the amount of the indemnity for
Built-in Gain under this Section 3(a), (i) all income arising from a transaction
or event that is taxable at ordinary income rates (including, without
limitation, “recapture” under Code Sections 1245 or 1250 and net short-term
capital gain) under the applicable provisions of the Code and allocable to ANCJ
shall be treated as subject to federal, state and local income tax at the then
applicable effective tax rate imposed on ordinary income of individuals residing
in the city of New York, New York, determined using the maximum federal rate of
tax on ordinary income and the maximum state and local rates of tax on ordinary
income then in effect in New York City and New York State, (ii) all long-term
capital gain arising from the transaction or event allocable to ANCJ shall be
treated as subject to federal, state, and local income tax at the then
applicable effective tax rate imposed on long-term capital gains of individuals
residing in the city of New York, New York, determined using the maximum
federal, state and local rates on long-term capital gains then in effect (taking
into account any special capital gains rate attributable to recapture of prior
depreciation deductions), and (iii) any amounts payable with respect to state
and local income taxes shall be assumed to be fully deductible (without
limitation or phaseout) for federal income tax purposes. 

     

    
      
        
        

      

      
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    (b) Notwithstanding
any provision of this Agreement to the contrary, other than the last sentence of
Section 2(a), Section 3(c), and Section 3(d), the sole and exclusive rights and
remedies of ANCJ for a breach or violation of the covenants set forth in
Sections 2(a) and 3(a) shall be a claim for payment against LVP, computed
as set forth in Section 3(a), and for interest and enforcement costs as
provided in Section 9(e). Except as provided in Sections 2(a), 3(c), and 3(d),
ANCJ shall not be entitled to pursue a claim for specific performance of the
covenant set forth in Section 2(a) or bring a claim against any person that
acquires the Contributed Interest or any of the Properties in violation of
Section 2(a).

     

    
      
        
        

      

      
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    (c) Notwithstanding
anything to the contrary herein, LVP may not enter into a Prohibited Transaction
unless, at least fourteen (14) days prior to entering into such transaction, LVP
will have provided ANCJ with evidence reasonably satisfactory to ANCJ that,
following such transaction, and including any proceeds from such transaction,
LVP will have the requisite liquidity to make any necessary indemnification
payments required pursuant to this Agreement. ANCJ shall have the right to seek
and obtain specific performance or injunctive relief as a remedy with respect to
any breach or threatened breach of this covenant.

     

    (d) Prior to
the time that LVP enters into an agreement to consummate a transaction that (i)
may result in the realization of Built-in Gain but (ii) which LVP may report,
for federal, state, or local income tax purposes, as not resulting (in whole or
in part) in the recognition of such realized Built-in Gain, and in any case not
less than thirty (30) days prior to consummating such transaction, LVP shall
provide ANCJ with a written description of the transaction containing all
relevant details and shall thereafter, as promptly as possible upon ANCJ’s
reasonable request, and in any case not less than twenty (20) days prior to
consummating such transaction, provide ANCJ with an opinion from any Approved
Firm that (i) meets all the requirements for “covered opinions” set forth in
Section 10.35(c) of IRS Circular 230, including the requirement that a covered
opinion consider all significant federal tax issues, (ii) is based on a
statement of facts that is not inaccurate or unreasonable in any material
respect, and (iii) concludes, at at least a “more likely than not” level of
comfort, that all or part of the Built-in Gain realized in such transaction will
not be recognized for tax purposes (such an opinion, a “Qualifying Opinion”). If
LVP does not provide ANCJ with a
description of the transaction and, if reasonably requested by ANCJ,
a
Qualifying Opinion in a timely manner pursuant to the first sentence of this
paragraph, then LVP shall not consummate such transaction. Furthermore, LVP
shall not report any transaction as resulting (in whole or in part) in the
realization, but not the nonrecognition, of Built-in Gain unless either (i) LVP
previously provided ANCJ with a Qualifying Opinion in a timely manner pursuant
to the first sentence of this paragraph or (ii) LVP obtains the consent of ANCJ
prior to taking such reporting position. ANCJ shall have the right to seek and
obtain specific performance or injunctive relief as a remedy with respect to any
breach or threatened breach of the covenants set forth in this
paragraph.

     

    4. Section 704(c)
Method. LVP
shall use, and shall cause any other entity in which LVP has a direct or
indirect interest to use, the “traditional method” under Treasury Regulation
Section 1.704-3(b) without curative allocations for purposes of making
allocations under Section 704(c) of the Code or reverse Section 704(c)
allocations with respect to the Contributed Interest and the Properties to take
into account the book-tax disparities as of the effective time of the
Contribution with respect to the Contributed Interest and the Properties.


     

    5. Obligation of LVP to
Maintain Certain Debt.

     

    (a) At all
times through the Protected Period, LVP agrees to maintain, directly or
indirectly, an amount of indebtedness allocable to ANCJ under Section 752 of the
Code (and specifically as one or more nonrecourse liabilities under Treasury
Regulation Section 1.752-3) at least equal to the Protected Amount. ANCJ shall
have the right to seek and obtain specific performance or injunctive relief as a
remedy with respect to any breach or threatened breach of this covenant. For the
avoidance of doubt, the purpose of this Section 5(a) is not to require LVP to
increase the amount of liabilities to which the Properties or any other
properties are subject, provided that LVP
maintains in place the liabilities of MRL and its subsidiary entities existing
as of the date hereof and does not take any actions (or cause or permit any
actions to be taken) that would decrease the amounts of such liabilities that
are allocable to ANCJ under Section 752 and the regulations
thereunder.

     

    
      
        
        

      

      
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    (b) Federal,
state and local income tax returns filed by LVP for all taxable periods
beginning prior to the expiration of the Protected Period shall report
allocations of nonrecourse liabilities to ANCJ in an amount at least equal to
the Protected Amount. 

     

    6. Indemnity by LVP for Breach
of Obligations set forth in Section 5. In the
event that (i) LVP breaches its obligations set forth in Section 5 and as a
result ANCJ recognizes Nonrecourse Built-in Gain and (ii)
such breach has not occurred in connection with a Permitted Transfer,
LVP shall
pay to ANCJ, upon written demand by ANCJ, an amount equal to (i) the aggregate
federal, state and local income taxes deemed incurred by ANCJ as a result of
such Nonrecourse Built-in Gain recognized by ANCJ by reason of such breach plus
(ii) a “gross-up” amount so that, after the hypothetical payment by ANCJ of all
federal, state and local income taxes on amounts received pursuant to this
Section 6, ANCJ would retain from such payments hereunder an amount equal to its
total income tax liability deemed incurred as a result of the breach by LVP of
its obligations set forth in Section 5 and ANCJ’s recognition of such
Nonrecourse Built-in Gain. The principles and tax rates set forth in Section
3(a) shall apply for purposes of determining the timing and amount of payment to
be made to ANCJ pursuant to this Section 6 (including, without limitation, the
calculation of the aggregate federal, state and local income taxes deemed
incurred by ANCJ). In addition, the notification procedures set forth in Section
3(a) shall apply for purposes of this Section 6 with respect to transactions
that would result in a breach of Section 5. 

     

    7. Requests for
Information. Upon
the request of LVP, ANCJ shall provide to LVP copies of such tax returns,
schedules and other information that is within the possession or control of ANCJ
(including, without limitation, copies of state and federal tax returns and
related working papers) reasonably requested by LVP (“Tax Protection
Information”) to enable it to make any necessary calculations with respect to
payments required to be made by LVP hereunder, including, without limitation,
calculations of Built-in Gain and Nonrecourse Built-in Gain claimed to be
recognized by ANCJ. No Tax Protection Information acquired by LVP or any of its
representatives may be disclosed to any individual or entity other than (i)
those representatives of LVP who need to know the Tax Protection Information for
the purpose of assisting LVP in evaluating and performing its obligations under
this Agreement (it being understood that prior to such disclosure LVP’s
representatives will be informed of the confidential nature of the Tax
Protection Information and shall agree in writing to be bound by the
requirements of this Section 7 of this Agreement), (ii) as required by
applicable law, or (iii) if necessary, upon the advice of counsel, in order to
comply with any judicial order, civil or criminal subpoena or any discovery
demand in pending litigation, whether or not LVP or any of its representatives
is a party thereto. LVP agrees to be responsible for any breach of this
Agreement by its representatives.

     

    8. Term. This
Agreement shall terminate upon the expiration of the Protected Period. In
addition, Section 5 of this Agreement shall terminate in the event that the
Protected Amount is reduced to zero. Notwithstanding the foregoing, LVP's
payment obligations under Sections 3, 6 and 9(e) shall survive the termination
of this Agreement or the termination of Section 5, as the case may be, to the
extent such obligations relate to a breach of LVP’s obligations under Section 2
or 5 occurring before such termination of this Agreement (or in the case of
liability under Section 6, the termination of Section 5). 

     

    
      
        
        

      

      
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    9. General
Provisions.

     

    (a) Notices. All
notices, requests, claims, demands and other communications under this Agreement
shall be in writing and shall be deemed given if delivered personally, sent by
overnight courier (providing proof of delivery) or sent by telecopy (providing
confirmation of transmission) to the parties at the following addresses or
telecopy numbers (or at such other address or telecopy number for a party as
shall be specified by like notice):

     

    (i) if to
LVP, to:

     

    c/o The
Lightstone Group

    326 Third
Street

    Lakewood,
NJ 08701

    Attn:
Joseph E. Teichman 

    Fax
No.: 732-612-1444

    


    with a
copy to:

     

    Herrick,
Feinstein LLP

    2 Park
Avenue

    New York,
NY 10016

    Attn:
Sheldon Chanales, Esq. 

    Fax No.:
(212) 545-3313 

    


    (ii) if to
ANCJ, to:

     

    c/o Arbor
Commercial Mortgage LLC

    333 Earle
Ovington Boulevard

    Uniondale,
NY 11553

    Attention:
Guy R. Milone, Jr. 

    Fax No.:
(516) 506-4045

    


    with a
copy to:

     

    Cooley
Godward Kronish LLP

    1114
Avenue of the Americas

    New York,
NY 10036

    Fax No.:
(212) 479-6275

    Attn:
Thomas D. O’Connor, Esq. 

     

    
      
        
        

      

      
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    (b) Counterparts. This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other party.

     

    (c) Governing
Law. THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER
APPLICABLE PRINCIPLES OF CONFLICT OF LAWS THEREOF.

     

    (d) Severability. If any
term, covenant or condition of this Agreement shall be held to be invalid,
illegal or unenforceable in any respect, this Agreement shall be construed
without such provision.

     

    (e) Interest and Enforcement
Costs. In the
event that LVP fails to pay ANCJ any amount due pursuant to this Agreement on
the date such amount is due, then such past due amount shall bear interest until
the date paid at a rate equal to 15% per annum. In the event of any breach by
LVP of any of its covenants in this Agreement, LVP shall pay all of ANCJ’s costs
of enforcement of its rights under this Agreement, including but not limited to
reasonable attorneys’ fees, disbursements, expenses and court
costs.

     

    (f) Subsidiary Entities of
LVP. All
references herein to the consummation, engaging in, entering into, or reporting
of a Disposition or other transaction, or entering into an agreement to do any
of the foregoing, by LVP shall
also apply to and include the consummation, engaging in, entering into, or
reporting of a Disposition or other transaction, or entering into an agreement
to do any of the foregoing, by any entity in which LVP owns, directly or
indirectly, an equity interest. 

     

    (g) List of Properties Correct
and Complete. LVP
represents to ANCJ that MRL owns, indirectly through entities that are treated
as disregarded entities for U.S. federal tax purposes, the Orlando Design Center
and Orlando Outlet World, and that LVP does not own, directly or indirectly, any
properties other than the Orlando Design Center and Orlando Outlet World and
holding entities for the Orlando Design Center and Orlando Outlet
World.

     

    
      
        
        

      

      
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    IN
WITNESS WHEREOF, LVP and ANCJ have caused this Agreement to be signed by their
respective authorized signatories all as of the date first written
above.

     

    
      	 	 	 
	 	
              LIGHTSTONE
      VALUE PLUS REIT, L.P. 

              By
      Lightstone Value Plus Real Estate Investment Trust, Inc., its general
      partner

            
	 
 	 
 	 
 
	
            	      	
              By:

            
	 	
              
                
      Name:

            
	 	
              Title:

            



      	 	 	 
	 	
              ARBOR
      NATIONAL CJ, LLC

              By
      Arbor Commercial Mortgage, LLC, its sole member 

            
	 
 	 
 	 
 
	
            	By  	
            
	 	
              
      Name: 
	 	Title:


    

    


    
      
        
        

      

      
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