Unassociated Document


    EXHIBIT
10.28

     

    NET PROFITS
AGREEMENT

     

    THIS NET
PROFITS AGREEMENT (the “Agreement”) is
executed and entered into as of the 4th day of January, 2007 (the “Execution
Date”), by
and among LEHMAN BROTHERS HOLDINGS INC., a Delaware corporation, its successors
and/or assigns (“Lehman”), whose
address is 399 Park Avenue, 8th Floor, New York, New York 10022, and 1407
BROADWAY REAL ESTATE LLC, a Delaware limited liability company (“Borrower”), whose
address is c/o The Lightstone Group, 326 Third Street, Lakewood, New Jersey
08701, and, solely with respect to the provisions of Article 6 and Sections 7.15
and 7.13, each of the other parties hereto (each, an “Owning
Entity”)


     

    W I T N E S S E TH:

     

    WHEREAS,
Lehman is making a loan in the amount of $127,250,000 (the “Loan”) to
Borrower pursuant to that certain Loan Agreement dated of even date herewith
between Borrower and Lehman (the “Loan
Agreement”).

     

    WHEREAS,
as a condition to making the Loan, Lehman has required that Borrower and each
Owning Entity enter into this Agreement. 

     

    NOW,
THEREFORE, KNOW ALL MEN BY THESE PRESENTS, that for and in consideration of the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged and confessed, Borrower
and Lehman hereby agree as follows:

     

    ARTICLE 1

     

    DEFINITIONS

     

    A. DEFINED
TERMS. For purposes of this Agreement, unless the context otherwise requires,
the following terms shall have the respective meanings assigned to them in this
Article I or in the sections and subsections referred to below:

     

    1.1   “Allowed
Rate” shall
mean a rate of interest equal to six percent (6%) per annum, compounded
annually. 

     

    1.2   “Approved
Budget” shall
have the meaning assigned to it in Section
3.5 hereof.


     

    1.3   “Borrower’s Allowed
Return” as of
any date shall mean a cumulative return on the Borrower’s cash equity investment
in the Property at the Allowed Rate. 

     

    1.4   “Borrower’s Cash Flow
Amount” shall
mean an amount equal to the amount of any distributions to members of Borrower
at any time other than as a result of clause (i) of the definition of Net
Profits plus the amount of any fees or other compensation paid by or on behalf
of Borrower to Affiliates of Borrower and not either (x) disclosed on the
closing statement delivered to and approved by Lehman or (y) permitted by the
Approved Budget or otherwise approved by Lehman. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    1.5   “Borrower’s Maximum Permitted
Return” as of
any date shall mean a cumulative return on the Borrower’s cash equity investment
in the Property at a rate of interest equal to nine percent (9%) per annum,
compounded annually.

     

    1.6   “Business
Plan” shall
have the meaning assigned to it in Section
3.5
hereof.

     

    1.7   “Capital
Proceeds” shall
mean the gross cash receipts of Borrower from any Capital
Transaction.

     

    1.8   “Capital
Transaction” shall
mean any transaction involving the sale, assignment, transfer, liquidation,
condemnation or settlement in lieu thereof, disposition, financing, refinancing
or any other conversion to cash of all or any portion of the Property or the
equity or membership interests in Borrower, directly or indirectly (including,
without limitation, through merger, consolidation, an initial public offering or
otherwise), other than the leasing of space for occupancy and/or any other
transaction with respect to the Property or the direct or indirect ownership
interests in Borrower outside the ordinary course of business.

     

    1.9   “Event of
Default” shall
have the meaning assigned to it in Section 5.1 hereof.

     

    1.10   “Major
Decision” shall
mean any of the following:

     

    (i) Approving
the merger, consolidation, dissolution, transfer or winding up of the
Borrower;

     

    (ii) Approving
any changes in the purposes of the Borrower or engaging in any other business
not related to the purpose of the Borrower.

     

    (iii) Approving
any financing or refinancing of the Property or any material modification of
amendment thereof,

     

    (iv) Admitting
an additional member or selling or issuing any additional ownership interests in
the Borrower;

     

    (v) Entering
into, amending, terminating or enforcing the rights of the Borrower under any
(x) Affiliate Agreement or (y) transaction with any Affiliate; provided,
however, that Lehman shall not unreasonably withhold its consent if the terms of
such Affiliate Agreement or transaction are on fair market terms and
conditions;

     

    (vi) (a)
Responding to a petition filed against the Borrower for a proceeding under any
bankruptcy, insolvency, reorganization, or similar act; (b) filing of any
consent to any such proceeding against the Borrower; (c) making any decision to
contest or not to contest such proceeding against the Borrower; (d) commencing a
voluntary case or proceeding under any bankruptcy, insolvency, reorganization,
or similar act (e) making a general assignment of the property of the Borrower
for the benefit of creditors; (f) appointing, or acquiescing in the appointment
of; a custodian or receiver; and (g) taking any actions with respect to any of
the foregoing proceedings other than those which are routine and
non-substantive;

     

    
      
        
        

      

      
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    (vii) Approving
the terms and conditions of any direct or indirect sale, transfer, assignment,
exchange, mortgage, pledge, security interest, ground lease, master lease or
other disposition of any kind of all or any part of any Property or the other
material assets of the Borrower, except for (a) any lease or installment sales
contract for personal property and equipment in the ordinary course of business,
(b) any sale or disposition and/or replacement of personal property in the
ordinary course of business or (c) a Permitted Transfer (as defined in the Loan
Agreement);

     

    (viii) Acquiring,
directly or indirectly through one or more other entities, of (A) any material
assets, other than in the ordinary course of business or (B) any equity interest
in any person on behalf of or by the Borrower;

     

    (ix) Entering
into any partnership, joint venture or similar relationship with, or acquiring
any interest in, any corporation, limited liability company, partnership,
association or other business organization by the Borrower;

     

    (x) Doing any
act in contravention of this Agreement or any applicable law, or receive (or
cause any of its affiliates to receive) any rebate or give-up or participate in
any reciprocal business arrangements or receive any benefit separate from the
Borrower based on the business or activities of the Borrower which circumvent
the provisions of this Agreement;

     

    (xi) Approving
any material amendment to the Operating Agreement;

     

    (xii) Any
decision to undertake any expansion, or addition to, the Property or any new
development of the Property;

     

    (xiii) Initiating
or settling any litigation on behalf of the Borrower other than: (a) tenant
dispossessory and/or collection actions with tenants or other occupants
involving defaults of such tenants; (b) actions with service providers in the
ordinary course of business; and (c) matters covered by insurance, excluding
deductibles, and (d) matters where the claim is less than
$5,000,000;

     

    (xiv) Any
decision to undertake any development, alteration, modification, improvement or
renovation of any portion of the Property costing individually or, if in a
series of related transactions, in the aggregate, in excess of
$2,500,000;

     

    (xv) Approving
all material matters relating to: (a) uninsured casualties affecting any portion
of any Property where the damage arising from any single casualty event or
series of related casualty events is in excess of $5,000,000 in the aggregate;
and (b) any condemnation or eminent domain proceeding affecting the
Property;

     

    (xvi) Approving
changes to the insurance coverage to be maintained for the Property or the
Borrower that are inconsistent with the standard insurance requirements of
institutional lenders;

     

    (xvii) Creating
or modifying any mortgage, lien, security interest, charge or encumbrance in any
portion of the Property or any other Borrower assets, provided, however, that
incurring any personal property lease obligation or similar lien in the ordinary
course of business shall not be deemed to constitute the creation of a mortgage,
lien or other security interest in Borrower assets; 

     

    
      
        
        

      

      
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    (xviii) Distributing
of cash, other than in strict accordance with the terms of the distribution
provisions of the Operating Agreement and this Agreement;

     

    (xix) Redeeming,
purchasing or otherwise acquiring all or any portion of any interest in
Borrower;

     

    (xx) Entering
into, terminating (except following a default by the tenant thereunder) or
modifying the Sublease, the Ground Lease or any Major Lease, or any renewal of a
Major Lease or entering into any other lease not in accordance with the then
current leasing guidelines approved by Lehman; 

     

    (xxi) Making
any loan or other extension of credit by the Borrower (except in connection with
tenant work under a Lease or any other lease of space at the Property approved
by Lehman or not requiring Lehman’s approval);

     

    (xxii) Other
than pursuant to the Loan Documents, entering into any swap, hedge, collar or
other interest rate protection agreement other than as may be required in
connection with any financing or refinancing approved by Lehman;

     

    (xxiii) Doing any
act in contravention of any documents binding upon or otherwise affecting the
Borrower; 

     

    (xxiv) Except as
permitted hereby and strictly in accordance herewith, amending or modifying, or
deviating from, the Business Plan or the then-effective Approved Budget; and


     

    (xxv) Entering
into, or permitting any Affiliate to enter into, any agreement with the
sublessor under the Sublease, including without limitation, any purchase
agreement with respect to sublessor’s interest under the Sublease.

     

    1.11   “Net
Profits” shall
mean (i) the Capital Proceeds less the costs and expenses actually paid in cash,
associated and incurred in connection with such Capital Transaction and which
have been approved by Lehman in its reasonable discretion less (ii) the
amount of any principal payment on the Loan and the Mezzanine Loan as a result
of such Capital Transaction, less (iii)
Borrower’s cash equity investment in the Property less (iv) the
difference, if positive, between (A) Borrower’s Allowed Return and (B)
Borrower’s Cash Flow Amount as of the date of determination of Net Profits plus
interest on Borrower’s Cash Flow Amount from the date of receipt until such date
of determination at six percent (6%) per annum, plus (v) the
difference, if positive, between (A) Borrower’s Cash Flow Amount as of the date
of determination of Net Profits plus interest on Borrower’s Cash Flow Amount
from the date of receipt until such date of determination at nine percent (9%)
per annum and (B) Borrower’s Maximum Permitted Return.

     

    1.12   “Net Profits
Amount” shall
mean thirty-five percent (35%) of all Net Profits.

     

    1.13   “Operating
Agreement” shall
mean the Limited Liability Company Agreement of Borrower as in existence from
time to time.

     

    
      
        
        

      

      
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    1.14   “Organizational
Documents” shall
have the meaning assigned to in Section
4.2 hereof.


     

    1.15   “Person” shall
mean any individual, corporation, partnership, limited liability company, joint
venture, estate, trust, unincorporated association, any federal, state, county
or municipal government or any bureau, department or agency thereof and any
fiduciary acting in such capacity on behalf of any of the foregoing.


     

    1.16   “Proposed
Budget” shall
have the meaning assigned to it in Section
3.5
hereof.

     

    1.17   “Uncontrollable
Expenses” means:
(a) insurance premiums, (b) utility costs, (c) labor costs
controlled by union or collective bargaining agreements or other
industry-wide cost increases which are beyond the reasonable control of
Borrower,
(d) those costs required by applicable legal requirements, including
property taxes, (e) leasing fees, brokerage commissions and other costs which
vary based on the amount of space leased during the relevant period, including
legal fees, (f) unanticipated elevator repair costs, (g) costs associated with
an emergency or other circumstance where prompt action is necessary to alleviate
conditions that require an immediate expenditure of funds in order to avoid, or
lessen or reduce the likelihood of, personal injury or material damage to any
real or personal property and (h) snow removal and other
costs which vary based on weather or other factors beyond Borrower’s
control.

     

    1.18   Further Definitional
Provisions.

     

    (a) Defined
terms used herein and not otherwise defined herein shall have the meaning set
forth in the Loan Agreement.

     

    (b) Defined
terms used in the singular shall include the plural and vice versa.

     

    (c) The words
“hereof”, “herein”, “hereunder” and similar terms when used in this Agreement,
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement. “Including” means “including without limitation”.

     

    (d) All
computations of Net Profits shall be determined in accordance with cash basis
accounting principles reasonably acceptable to Lehman. If a promissory note or
notes are delivered as all or a portion of the consideration for any Capital
Transaction, then the cash proceeds, if and when received as a result of
payments on such notes, shall be treated as Capital Proceeds only when actually
received, and the receipt of any such notes shall not be deemed the receipt of
cash for purposes hereof.

     

    ARTICLE 2

     

    NET PROFITS
AMOUNT

     

    2.1   Net Profits
Amount.

     

    (a) Borrower
shall pay to Lehman the Net Profits Amount in accordance with the terms of this
Agreement simultaneously with receipt of any cash pursuant to any Capital
Transactions; provided, however, that Borrower may establish a reasonable
reserve or holdback for anticipated costs or expenses associated and incurred in
connection with such Capital Transaction and which have not yet been determined;
provided, however, that any amounts remaining in such reserve or holdback after
payment of such costs or expenses shall be deemed Net Profits and shall be paid
in accordance with the provisions of this Agreement. After the Net Profits
Amount with respect to any Capital Transactions is paid to Lehman any remaining
Net Profits with respect to such Capital Transaction may be distributed to
Borrower’s members in accordance with the Operating Agreement. In all cases,
Lehman must receive the Net Profits Amount with respect to any Capital
Transactions prior to the distribution of any Net Profits with respect to any
Capital Transactions to the members of Borrower. Lehman’s rights pursuant to
this Agreement are independent of the Loan and shall survive the repayment of
the Loan. Borrower’s obligation to pay the Net Profit Amount to Lehman shall be
secured by a pledge of all the membership interests in Borrower as well as by
pledges of all of
the interests in the sole member of Borrower, subject to any pledges granted in
connection with the Mezzanine Loan. The Borrower Parties acknowledge that Lehman
may, subject to the terms hereof, transfer and assign Lehman’s rights pursuant
to this Agreement separately from any of Lehman’s rights with respect to the
Loan. Lehman’s rights with respect to the Net Profits Amount are fully earned
upon execution and delivery of the Loan Agreement and are not conditioned on any
act or occurrence whatsoever. In no event shall Lehman have any obligation to
make any contributions to Borrower in exchange for Lehman’s rights with respect
to the Net Profits Amount. If any portion of the Net Profits Amount is not
timely paid to Lehman, any such amounts shall bear interest at the Default
Rate.

     

    
      
        
        

      

      
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    (b) Lehman
may not assign or encumber all or any part of its rights with respect to this
Agreement without the consent or approval of Borrower, which shall not be
unreasonably withheld, conditioned or delayed. If Borrower fails to respond to
any request for any such approval within ten Business Days (which request for
approval shall state in boldface type that if Borrower fails to respond, its
approval shall be conclusively presumed to have been granted), such
approval shall be conclusively presumed to have been granted. Any assignment
(but not an encumbrance by Lehman) shall be subject to Section 7.6 as to
Lehman. Lehman shall give Borrower written notice of any such assignment or
encumbrance and in the absence of such notice, Borrower shall fulfill its
obligations hereunder with respect to the payment of the Net Profits Amount by
paying or causing any such amounts to be paid to Lehman. Upon any default by any
Borrower Party with respect to this Agreement, in addition to any other remedies
which Lehman may have at law or in equity, Lehman shall have the right to bring
a suit for specific performance against any of the Borrower
Parties.

     

    (c) The
Borrower Parties and Lehman stipulate and agree that none of the terms and
provisions contained in this Agreement shall ever be construed to create a
contract to pay for the use, forbearance or detention of money in an amount in
excess of the maximum amount permitted to be charged by applicable law, if any.
None of Borrower Parties or other Person now or hereafter becoming liable for
payment of the Loan shall ever be required to pay interest on the Loan in an
amount in excess of the maximum amount which lawfully may be charged under Legal
Requirements and the provisions of this paragraph shall control over all other
provisions of this Agreement. If this Agreement, taken together with the
interest otherwise contracted for, charged or received with respect to the Loan,
shall exceed the maximum amount of interest allowed under applicable law, Lehman
shall, at the option of Lehman, either refund to Borrower the amount of such
excess or shall reduce the amount of this Agreement to the extent of such excess
or shall credit the amount of such excess against the principal balance of the
Loan then outstanding in such order and manner as Lehman may elect. The terms
and provisions of this paragraph shall control every other provision of this
Agreement, the Note, the Loan Agreement and all other agreements in connection
with the Loan. All amounts not payable to Lehman under this Agreement on account
of the foregoing limitation shall be retained by Borrower, provided that, if at
a later date Lehman determines that a greater amount of the Net Profits could
lawfully be paid to Lehman, all Net Profits thereafter received shall be paid to
Lehman until Lehman shall have received, on a cumulative basis, the Net Profits
Amount to which Lehman is entitled pursuant to this Agreement, subject to the
limitations of this paragraph.

     

    
      
        
        

      

      
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    2.2   Relationship. It is
not the intention of the parties that Lehman be or become a member, partner,
joint venturer or other owner of or with Borrower unless and until Lehman
exercises the Conversion Option . By entering into this Agreement and/or by
accepting the Net Profits Amount, Lehman does not become a member, partner,
joint venturer or owner of or with Borrower, and in no event shall Lehman become
a member, a partner, joint venturer or owner of or with Borrower or be or become
liable for any of the debts, obligations, or liabilities of Borrower as a result
of the acceptance of the Net Profits Amount.

     

    2.3   Adjustment.
Borrower shall not directly or indirectly, pay, distribute or cause to be paid
or distributed to the holders of any of the interests in Borrower, prior to the
exercise of the Conversion Option, any (i) cash (except for (a) cash flow (other
than Capital Proceeds) distributed pursuant to Borrower’s Organizational
Documents and (b) Capital Proceeds after payment of the Net Profits Amount); or
(ii) any evidence of indebtedness, any further or additional interests in
Borrower or any property of any nature whatsoever; or (iii) warrants, options or
other rights to subscribe for or purchase any evidences of Borrower’s
indebtedness or any interest in Borrower or in any other property of any nature
whatsoever unless such warrants, options or other rights allow the holder to
acquire only a portion of the existing rights of the existing owners of Borrower
and are subject in all respects to the rights of Lehman hereunder; or (iv) any
right to acquire any of the foregoing. Borrower shall not, directly or
indirectly, prior to the exercise of the Conversion Option, reorganize its
capital, reclassify its ownership interests, or consolidate or merge with any
other Person, or take any similar action without the prior written consent of
Lehman not to be unreasonably withheld. Additionally, Borrower shall not,
directly or indirectly, prior to exercise of the Conversion Option, by any
action, including without limitation, amend its Organizational Documents or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of ownership interests or any other action, avoid or
seek to avoid the observance or performance of the rights of Lehman pursuant to
this Agreement (or pursuant to the Organizational Documents, after exercise of
the Conversion Option), but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Lehman set forth in this
Agreement (or pursuant to the Organizational Documents, after exercise of the
Conversion Option). In the event of the taking of any action to dilute or
otherwise adversely affect Lehman’s rights pursuant to this Agreement (and
pursuant to the Organizational Documents after exercise of the Conversion
Option), Lehman’s rights with respect to the Net Profits Amount shall be
increased (but not decreased) automatically and without further action in order
to maintain Lehman’s rights with respect to the Net Profits Amount as
contemplated by this Agreement (and Lehman’s rights pursuant to the
Organizational Documents after exercise of the Conversion Option) and Borrower
agrees to take all actions necessary to evidence any such adjustment (although
no such action shall be necessary). In no event may any of Borrower Parties
amend or modify or take other action pursuant to the Organizational Documents of
Borrower that would adversely affect Lehman’s rights to the Net Profits Amount
or Lehman’s rights after the exercise of the Conversion Option and Borrower
shall cause the Organizational Documents to provide (i) that such Organizational
Documents are subject to this Agreement, (ii) that such Organizational Documents
cannot be amended without Lehman’s prior written consent, and (iii) that the
taking of any action to dilute or otherwise adversely affect Lehman’s rights
pursuant to this Agreement or pursuant to the Organizational Documents of
Borrower is prohibited. Notwithstanding the foregoing, after the Net Profits
Amount with respect to any Capital Transaction then due to Lehman has been paid,
Borrower may distribute any remaining Net Profits with respect to such Capital
Transaction to its members, subject to the terms and conditions of the Loan
Documents. In all events, however, the Net Profits Amount must be paid to Lehman
prior to or simultaneously with the payment or distribution of any Net Profits
to the members of Borrower.

     

    
      
        
        

      

      
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    2.4   Survival.
Lehman’s rights pursuant to this Agreement shall survive the repayment of the
Loan, until all of the Property is sold to a Person that is not an Affiliate of
Borrower and payment in full is made to Lehman of the full Net Profits Amount or
Borrower purchases Lehman’s interest pursuant to Section 7.6, at which time this
Agreement will terminate and be of no further force or effect. 

     

    ARTICLE 3

     

    AFFIRMATIVE
COVENANTS

     

    Unless
and until all of the Property is sold to a Person that is not an Affiliate of
Borrower and Lehman is paid the Net Profits Amount in full (and notwithstanding
any repayment of the Loan) Borrower covenants and agrees that unless Lehman
otherwise consents in writing:

     

    3.1   Notifications from
Borrower.
Borrower shall promptly notify Lehman in writing of each of the
following:

     

    (a) Any
change in any material fact or circumstance represented or warranted in this
Agreement; and

     

    (b) Any
proposed Major Decision.

     

    3.2   Maintenance and Granting of
Liens and Security Interests.
Borrower shall execute and deliver to Lehman all security agreements, financing
statements, documents and instruments, and do such other things as are required
by this Agreement, or as Lehman shall reasonably request or deem reasonably
necessary in order to maintain the validity, enforceability and perfection of
Lehman’s rights pursuant to this Agreement.

     

    3.3   No Encumbrances or
Liens. Except
for the Loan Documents, Borrower shall not permit any other liens, encumbrances,
mortgages, deeds of trust or unbonded mechanic’s or materialman’s liens to
affect any portion of the Property without Lehman’s written consent. Lehman
shall have no obligation to consent to any such lien. Notwithstanding the
foregoing, after prior written notice to Lender, Borrower, at its own expense,
shall have the right to contest the existence of any liens, encumbrances,
mortgages, deeds of trust or unbonded mechanic’s or materialman’s liens
affecting any portion of the Property, subject to the terms and conditions set
forth in Section 5.4 of the Loan Agreement.

     

    
      
        
        

      

      
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    3.4   Major
Decisions.
Notwithstanding anything to the contrary contained in this Agreement, no act
shall be taken, sum expended, decision made or obligation incurred by Borrower
or any Affiliate with respect to a Major Decision without the prior written
consent of Lehman; provided, however, that Lehman will not unreasonably withhold
its consent with respect to the matters listed in clauses (xiii), (xiv), (xv),
(xvi) or (xxi) of the definition of Major Decision.

     

    3.5   Budget.
Borrower shall prepare and deliver to Lehman, within sixty (60) days prior to
the beginning of each calendar year, an annual expenditure budget for Borrower
and the Property, if any, including all planned capital expenditures and all
anticipated costs and expenses for such ensuing calendar year (“Proposed
Budget”). The
Proposed Budget shall also include a business plan for the Borrower’s proposed
operations during the forthcoming calendar year, including Borrower’s proposed
leasing guidelines. The Proposed Budget shall be prepared and submitted in a
form reasonably acceptable to Lehman and shall set forth in reasonable detail
budgeted capital and other expenses. Lehman shall have the right to approve each
Proposed Budget in Lehman’s reasonable discretion. In the event that Lehman
objects to the Proposed Budget submitted by the Borrower, Lehman shall advise
the Borrower of such objections within fifteen (15) Business Days after receipt
thereof (and deliver to the Borrower a reasonably detailed description of such
objection) and the Borrower shall promptly revise such Proposed Budget and
resubmit the same to Lehman. Lehman shall advise the Borrower of any objections
to such revised Proposed Budget, in Lehman’s reasonable discretion, within ten
(10) Business Days after receipt thereof (and deliver to the Borrower a
reasonably detailed description of such objection) and the Borrower shall
promptly revise the same in accordance with the process described in this
Section
3.5 until
Lehman approves a Proposed Budget, in Lehman’s reasonable discretion; provided
that, if Lehman fails to approve such a Proposed Budget, the operating budget
and the capital expenditure budget for such calendar year shall be the budget
attached hereto as Exhibit A (the
“Business
Plan”). Each
such Proposed Budget approved by Lehman in accordance with terms hereof (or, if
applicable, the Proposed Budget for such year included in the Business Plan
referred to in the proviso to the immediately preceding sentence) shall
hereinafter be referred to as an “Approved
Budget.”
Notwithstanding the foregoing, Borrower may exceed the Approved Budget for all
line items by up to five percent (5%) of the total amount of the Budget for all
line items in any calendar year and may incur Uncontrollable Expenses without
Lehman’s consent. 

     

    ARTICLE 4

     

    REPRESENTATIONS AND
WARRANTIES

     

    To induce
Lehman to enter into this Agreement, Borrower hereby represents and warrants to
Lehman as follows:

     

    
      
        
        

      

      
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    4.1   Authorization.
Borrower is duly authorized to execute and deliver this Agreement and all other
documents to be executed in connection herewith, and is and will continue to be
authorized to perform its obligations under this Agreement and such other
agreements.

     

    4.2   Organizational
Documents.
Attached hereto as Exhibit B is a
true and correct copy of the Operating Agreement and all other Organizational
Documents of Borrower together with all amendments thereto, if any (the
“Organizational
Documents”).
Borrower shall not amend, modify, or supplement the Operating Agreement or any
of the Organizational Documents of Borrower and shall not admit any additional
members in Borrower, without the prior written consent of Lehman in each
instance, which consent may be withheld in Lehman’s sole and absolute
discretion. Any attempt to do so shall be null and void and of no force or
effect.

     

    4.3   Consents. No
consent, approval, authorization or order of any court or governmental
authority, or third party is required in connection with the execution and
delivery by Borrower of this Agreement and the other documents to be executed in
connection herewith, or to consummate the transactions contemplated
hereby.

     

    4.4   Enforceable
Obligations. This
Agreement and the other documents to be executed in connection herewith, when
duly executed and delivered in accordance with this Agreement, will be the legal
and binding obligations of Borrower and enforceable in accordance with their
respective terms, except as limited by bankruptcy, insolvency or other laws of
general application relating to the enforcement of creditors’
rights.

     

    4.5   Restatement and
Representations.
Borrower hereby restates all of the representations and warranties made by each
of the Borrower Parties in the Loan Agreement for the benefit of Lehman as if
such representations were fully set forth herein.

     

    ARTICLE 5

     

    DEFAULTS

     

    5.1   Events of
Default. An
Event of Default shall exist if any one or more of the following events (herein
called “Events of
Default”) shall
occur:

     

    (a) The
failure by Borrower to make any payment (other than the failure to pay the Net
Profits Amount) on or before the fifth (5th) Business Day after the same are due
to Lehman as required by this Agreement or the failure by Borrower to pay the
Net Profits Amount on the date when due;

     

    (b) The
failure or refusal of Borrower to keep or perform any covenant or other term or
condition specified herein for a period of thirty (30) days after written notice
from Lehman;

     

    (c) The
incorrectness in any material respect, as of the date hereof, of any
representation or warranty made by Borrower to Lehman herein;

     

    (d) The
application for or the appointment of a receiver, trustee, intervenor, custodian
or liquidator of Borrower;

     

    
      
        
        

      

      
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    (e) The act
of Borrower in taking or permitting to be taken any action seeking relief or an
order for relief under, or any other action taking advantage of, any bankruptcy,
debtor relief or similar laws;

     

    (f) The
filing of an involuntary petition against Borrower under any bankruptcy,
insolvency or reorganization provision of any debtor relief or similar laws if
such petition (1) results in the entry of an order for relief or any such
adjudication or appointment or (2) remains undismissed, undischarged or
unbonded for a period of ninety (90) days; or 

     

    (g) any
“Event of Default” as defined in the Loan Agreement if the Loan Agreement is
still in effect.

     

    5.2 Rights of
Lehman. Upon
the occurrence of an Event of Default, Lehman shall have the right, at its sole
option and without further notice to Borrower, to pursue all available rights or
remedies, at law or in equity or under this Agreement and any documents securing
this Agreement, including any pledge agreements. In this regard, in addition to
any other remedies which Lehman may have at law or in equity, Borrower
acknowledges that an action for damages is inadequate to protect Lehman’s rights
and thus Lehman shall have the right to bring a suit for specific performance or
injunctive or other equitable relief. 

     

    ARTICLE 6

     

    RIGHT OF FIRST
OFFER

     

    6.1   Right of First Offer on
Property or Interests in Borrower. If at
any time Borrower wishes to transfer the Property or any portion thereof, or any
Owning Entity wishes to Transfer its direct or indirect interest (or any portion
thereof) in Borrower (the “Equity
Interest”; and/or
the Property shall be referred to as the “Subject
Interests”) such
Person (“a Transferring
Party”) shall
provide not less than fifteen (15) days’ prior written notice (the “ROFO
Notice”) to
Lehman. The ROFO Notice shall set forth all of the material terms of the
proposed transfer (including the identification of the Subject Interest to be
transferred and the price payable in cash, at which the Transferring Party would
be willing to sell the Subject Interest (the “ROFO
Price”) and
specifying any liens or encumbrances that will not be discharged in connection
with any such sale). Upon receipt of a ROFO Notice, Lehman will have the right
to purchase the Subject Interest of the Transferring Party on the terms set
forth in such ROFO Notice by Lehman delivering written notice thereof to the
Transferring Party (the “Election
Notice”) within
fifteen (15) days after receipt of the applicable ROFO Notice together with a
deposit in an amount equal to ten percent (10%) of the ROFO Price (“Deposit”). The
Deposit shall be delivered to an escrow agent acceptable to Lehman and the
Transferring Party and will be held in an interest-bearing, segregated account
at a federally insured financial institution. If Lehman fails to timely deliver
an Election Notice and/or the Deposit, Lehman shall be deemed to have
irrevocably waived its rights under this Section
6.1 with
respect to the applicable ROFO Notice, except as provided below. Notwithstanding
anything to the contrary herein, any Owning Entity may Transfer its direct or
indirect interest (or any portion thereof) in Borrower in connection with a
Permitted Transfer (as defined in the Loan Agreement), so long as such
transferee executes and delivers to Lehman a Joinder and Consent in
substantially the same form as the Joinder and Consent attached hereto whereby
it agrees to be bound by the terms of this Agreement.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    6.2   If Lehman
validly and timely delivers an Election Notice and the Deposit, the closing of
the purchase shall be on a date (the “ROFO Closing
Date”)
designated by Lehman which is not more than forty-five (45) days after the
delivery of the Election Notice and at a place designated in the ROFO Notice (or
if the ROFO Notice does not designate a closing place, at such place as may be
mutually agreed upon between the Transferring Party and Lehman, and otherwise
such closing shall be in escrow). At the closing:

     

    (i) The
Transferring Party shall deliver to Lehman (or a nominee thereof) a duly
executed and acknowledged instrument of assignment or conveyance transferring
the Subject Interest to Lehman (or its nominee) free and clear of all liens and
encumbrances (other than the liens and encumbrances which the ROFO Notice
specified would not be discharged at closing), which instrument shall contain
surviving representations concerning due organization and authority of the
Transferring Party and the absence of liens and encumbrances (other than the
liens and encumbrances which the ROFO Notice specified would not be discharged
at closing) and shall contain a provision indemnifying and holding Lehman (or
its nominee) harmless from any loss, liability, cost or expense (including
reasonable attorneys’ fees) it may incur by reason of any breach of such
representation;

     

    (ii) Lehman
shall pay or cause to be paid the ROFO Price to the Transferring Party in
immediately available funds;

     

    (iii) all
prorations shall be apportioned between the Transferring Party and Lehman for
the current calendar period, as of 11:59 p.m. of the day preceding the ROFO
Closing Date; and

     

    (iv) the
Transferring Party shall discharge of record all liens and encumbrances
affecting its Subject Interest (other than the liens and encumbrances which the
ROFO Notice specified would not be discharged at closing), and if the
Transferring Party fails to do so, Lehman (or its nominee) may use any portion
of the ROFO Price to pay and discharge any such liens and/or encumbrances and
any related expenses and adjourn the closing for such period as may be necessary
for such purpose.

     

    6.3   If Lehman
waives (or is deemed to have waived) its right to acquire the Subject Interest
offered by the Transferring Party in a given ROFO Notice, the Subject Interest
offered by the Transferring Party may be sold by the Transferring Party, for not
less than ninety-five percent (95%) of the ROFO Price offered to Lehman, at any
time during the next one hundred eighty (180) day period subsequent to the
earlier of receipt of the written waiver by all of Lehman of its right to
purchase the interests being offered by the Transferring Party under
Section
6.1 and the
expiration of the thirty (30) day period for Lehman to respond to the ROFO
Notice with no such written waiver being delivered. 

     

    6.4   In the
event the Transferring Party fails to consummate any sale or transfer of the
Subject Interest for the ROFO Price or within the time period provided in
Section
6.3, then
the Subject Interest shall be re-offered to Lehman in connection with any
further proposed transfer. 

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    6.5   Lehman shall be deemed to
have waived its right of first offer with respect to a Subject Interest that is
part of a settlement arrangement entered into with respect to the Kamber
Litigation if and to the extent the terms of the settlement arrangement are
approved by Lehman. 

     

    ARTICLE 7

     

    GENERAL TERMS AND
CONDITIONS

     

    7.1   Notices. All
notices, demands, requests and other communications shall be given and become
effective as provided in the Loan Agreement, the provisions of which are
incorporated hereby by reference as if fully set forth herein.

     

    7.2   Modifications. No
provisions of this Agreement or any other documents executed in connection
herewith may be modified, waived or terminated, except by an instrument in
writing executed by the party against whom a modification, waiver or termination
is sought to be enforced.

     

    7.3   Severability. In case
any of the provisions of this Agreement shall for any reason be held to be
invalid, illegal or unenforceable, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, and the Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.

     

    7.4   Binding
Effect. This
Agreement shall be binding upon, and inure to the benefit of Lehman and Borrower
and their respective permitted successors and/or assigns.

     

    7.5   Governing
Laws. THIS
AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. THIS CHOICE
OF LAW IS MADE PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401. THE
BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE OR
FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER DOCUMENT DELIVERED IN
CONNECTION HEREWITH OR THEREWITH, AND THE BORROWER HEREBY IRREVOCABLY AGREES
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MUST BE HEARD AND
DETERMINED IN SUCH NEW YORK STATE COURT, OR TO THE EXTENT PERMITTED BY LAW, IN
SUCH FEDERAL COURT. THE BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH ACTION OR PROCEEDING. TO THE EXTENT PERMITTED BY LAW, THE
BORROWER ALSO IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY
SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES (CERTIFIED MAIL, RETURN
RECEIPT REQUESTED AND POSTAGE PREPAID) OF SUCH PROCESS TO THE BORROWER AT ITS
ADDRESS SET FORTH ABOVE. THE BORROWER AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
THIS CONSENT TO JURISDICTION IS MADE PURSUANT TO NEW YORK GENERAL OBLIGATIONS
LAW SECTION 5-1402.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    7.6   Assignment by Lehman; Right
of First Offer in Agreement. Lehman
may not assign or transfer its rights pursuant to this Agreement without
Borrower’s prior written consent, which consent shall not be unreasonably
withheld, conditioned or delayed. In addition, if at any time Lehman wishes to
transfer its interest in this Agreement (the “NPA
Interest”),
Lehman shall provide not less than thirty (30) days’ prior written notice (the
“NPA ROFO
Notice”) to
Borrower. The NPA ROFO Notice shall set forth all of the material terms of the
proposed transfer (including the identification of the NPA Interest to be
transferred and the price payable in cash, at which Lehman would be willing to
sell the NPA Interest (the “NPA ROFO
Price”) and
specifying any liens or encumbrances that will not be discharged in connection
with any such sale). Upon receipt of a NPA ROFO Notice, Borrower will have the
right to purchase the NPA Interest of Lehman on the terms set forth in such NPA
ROFO Notice by Borrower delivering written notice thereof to Lehman (the
“NPA Election
Notice”) within
thirty (30) days after receipt of the applicable NPA ROFO Notice together with a
deposit in an amount equal to ten percent (10%) of the NPA ROFO Price
(“NPA
Deposit”). The
NPA Deposit shall be delivered to an escrow agent acceptable to Borrower and
Lehman and will be held in an interest-bearing, segregated account at a
federally insured financial institution. If Borrower fails to timely deliver an
NPA Election Notice and/or the NPA Deposit, Borrower shall be deemed to have
irrevocably waived its rights under this Section
7.6 with
respect to the applicable NPA ROFO Notice, except as provided below.


     

    7.7   If
Borrower validly and timely delivers an NPA Election Notice, the closing of the
purchase shall be on a date (the “NPA ROFO Closing
Date”)
designated by Borrower which is not more than forty-five (45) days after the
delivery of the NPA Election Notice and at a place designated in the NPA ROFO
Notice (or if the NPA ROFO Notice does not designate a closing place, at such
place as may be mutually agreed upon between Lehman and Borrower, and otherwise
such closing shall be in escrow). At the closing:

     

    (i) Lehman
shall deliver to Borrower (or a nominee thereof) a duly executed and
acknowledged instrument of assignment or conveyance transferring the NPA
Interest to Borrower (or its nominee) free and clear of all liens and
encumbrances (other than the liens and encumbrances which the NPA ROFO Notice
specified would not be discharged at closing), which instrument shall contain
surviving representations concerning due organization and authority of Lehman
and the absence of liens and encumbrances (other than the liens and encumbrances
which the NPA ROFO Notice specified would not be discharged at closing) and
shall contain a provision indemnifying and holding Borrower (or its nominee)
harmless from any loss, liability, cost or expense (including reasonable
attorneys’ fees) it may incur by reason of any breach of such
representation;

     

    (ii) Borrower
shall pay or cause to be paid the NPA ROFO Price to Lehman in immediately
available funds; and

     

    (iii) Lehman
shall discharge of record all liens and encumbrances affecting its NPA Interest
(other than the liens and encumbrances which the NPA ROFO Notice specified would
not be discharged at closing), and if Lehman fails to do so, Borrower (or its
nominee) may use any portion of the NPA ROFO Price to pay and discharge any such
liens and/or encumbrances and any related expenses and adjourn the closing for
such period as may be necessary for such purpose.

     

    
      
        
        

      

      
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    7.8   If
Borrower waives (or is deemed to have waived) its right to acquire the NPA
Interest offered by Lehman in a given NPA ROFO Notice, the NPA Interest offered
by Lehman may be sold by Lehman, for not less than ninety-five percent (95%) of
the NPA ROFO Price offered to Borrower, at any time during the next one hundred
eighty (180) day period subsequent to the earlier of receipt of the written
waiver by all of Borrower of its right to purchase the interests being offered
by Lehman under Section
7.6 and the
expiration of the thirty (30) day period for Borrower to respond to the NPA ROFO
Notice with no such written waiver being delivered. 

     

    7.9   In the
event Lehman fails to consummate any sale or transfer of the NPA Interest for
the NPA ROFO Price or within the time period provided in Section
7.8, then
the NPA Interest shall be re-offered to Borrower in connection with any further
proposed transfer. 

     

    7.10   Assignment by
Borrower.
Borrower may not transfer or assign, directly or indirectly, any of its
obligations pursuant to this Agreement.

     

    7.11   Counterparts. This
Agreement may be executed in any number of separate counterparts, each of which
shall, collectively and separately, constitute one agreement.

     

    7.12   Sole Discretion; Reasonable
Discretion. Except
as specifically provided, whenever in this Agreement, Lehman may or must consent
to or approve any action or inaction or any fact or condition must be
satisfactory to Lehman, such consent or approval must be satisfactory to Lehman,
in Lehman’s sole and absolute discretion, without any express or implied
obligation of reasonableness or good faith unless otherwise provided to the
contrary provided herein. In the event Lehman has agreed not to unreasonably
withhold its consent, Borrower’s sole remedy in the event Lehman refuses to
grant such consent shall be to seek specific performance or other equitable
relief, and in no event shall Borrower have the right to seek monetary damages
as a result of Lehman withholding its consent pursuant to any provision of this
Agreement.

     

    7.13 Waiver of Jury
Trial. THE
BORROWER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF
RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT
ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS AGREEMENT, OR
ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS
WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY THE
BORROWER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE
AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. LEHMAN IS
HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY THE BORROWER.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    7.14   Certain Provisions Relating
to Lehman and its Affiliates. The
Borrower and each of the Owning Entities expressly acknowledge that (y) Lehman
or one of its Affiliates (in such capacity, “Lender”) has
provided the Loan and Mezzanine Loan, and (z) in the future Lender may purchase
or acquire indebtedness of the Borrower or any Owning Entity from time to time
without notice to or approval by the Borrower or any Owning Entity and whether
or not any such financing or indebtedness is in default. Notwithstanding any
common ownership between the Lehman and the Lender: (a) Lehman, on the one
hand, and the Lender, on the other hand, may or may not be separate and distinct
legal entities but in all events have different investment goals and objectives;
(b) the Lender may exercise all the rights, privileges and benefits of the
holder of any such financing or indebtedness and enforce all remedies and other
provisions under the applicable documents evidencing or describing such
financing or indebtedness without regard to the fact that Lehman is the
beneficiary of this Agreement; and (c) to the maximum extent permitted by
applicable law, (I) the Borrower and the Owning Entities waive any claims
that the Borrower and the Owning Entity may have against Lehman arising by
reason of the fact that Lehman is the Lender and (ii) the Borrower and the
Owning Entities waive any claims that the Borrower and such Owning Entities may
have against Lehman arising by reason of the fact that Lender is making, or that
the Lender is holding, the Loan or any other financing or indebtedness of the
Borrower.

     

    7.15   Proposal for New Debt
Financing.


     

    (i) In
addition to Lehman’s rights set forth in Article 9, Lehman shall have the right
to propose to Borrower New Debt Financing (as hereinafter defined) at any time
and from time to time provided that such New Debt Financing (a) shall be
prepayable without premium after 1 year following the closing date of such New
Debt Financing, (b) results in Net Profits of at least five percent (5%) of the
total debt and equity invested in the Property by Borrower and its Affiliates at
the time in question, (c) is on terms and conditions no worse than then market
terms and conditions, and (d) is non-recourse except for customary carve-outs,
and (e) is for an amount no less than the Loan (including any unfunded
amount).

     

    (ii) In the
event that Lehman makes any such proposal to Borrower, Borrower shall have
thirty (30) days to evaluate the proposal and advise Lehman as to whether
Borrower will enter into such New Debt Financing. 

     

    (iii) In the
event Borrower fails to agree to enter into such New Debt Financing within such
30-day period, Lehman may at any time within the following thirty (30) days
advise Borrower of the terms and conditions of a proposed New Debt Financing
that satisfies the criteria set forth in clause (i) above. In such event,
Borrower shall effectuate such New Debt Financing within ninety (90) days
following Lehman’s proposal. 

     

    (iv) In all
events, the provisions of Article 9 shall apply to any financing or refinancing
described in this Section
7.15.

     

    7.16   Lehman’s
Approval. If
Lehman fails to grant or withhold its consent or approval in writing
(i) within a period of ten (10) Business Days after it has received a
request for consent or approval under this Agreement and (ii) within an
additional period of five (5) Business Days after it has received a second
request for consent and which second notice shall advise Lehman (in 14-point
type or larger) that if Lehman fails to respond to Borrower’s second request for
consent within such five (5) Business Day period Lehman shall be deemed to have
approved or consented to the matter in question, then Lehman shall be deemed to
have approved or consented to such matter.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    ARTICLE 8

     

    CONVERSION OPTION


     

    8.1   Conversion
Option. Lehman
shall have the option (the “Conversion
Option”), at
any time in Lehman’s sole discretion, by delivering written notice to Borrower
and its constituent member(s), to elect to convert Lehman’s rights pursuant to
this Agreement into a membership interest in Borrower (the “Conversion”) as
more fully set forth in this Article. Upon exercise of the Conversion Option,
Lehman and Borrower and the members of Borrower shall execute and deliver such
documentation as either party may reasonably request in order to evidence the
exercise of the Conversion Option and the admission of Lehman to Borrower. In
the event Lehman exercises such option, Lehman shall thereafter have no further
right to any Net Profits Amount thereafter received pursuant to this Agreement
(Lehman’s rights with respect thereto being governed by the Operating Agreement
of Borrower after Lehman so elects to convert). In no event may any of the
Borrower Parties amend or modify or take other action pursuant to the
Organizational Documents of any of the Borrower Parties that would adversely
affect Lehman’s rights to the Net Profits Amount and the Organizational
Documents of the Borrower Parties shall prohibit the taking of any such action
and the Borrower Parties shall comply with such provisions of the Organizational
Documents. 

     

    8.2   Amendment of Operating
Agreement. Upon
Lehman’s exercise of the Conversion Option, the Operating Agreement of the
Borrower shall be amended to grant to Lehman a special membership interest
whereby Lehman will receive 35% of all distributions resulting from a Capital
Transaction after the return to the members of Borrower of their cash equity
investment in Borrower plus the Borrower’s Allowed Return. All members of the
Borrower hereby irrevocably consent and agree to (a) the issuance of such
special membership interest to Lehman upon the date of the Conversion (the
“Conversion
Date”) and
(b) the admission of Lehman as a Special Member (the “Special
Member”)
effective on the Conversion Date. On the Conversion Date, the members of
Borrower shall execute an amendment to the Operating Agreement of Borrower
effectuating the transactions contemplated by this Article in form and substance
acceptable to Borrower and Lehman (the “Amendment”) and
acknowledging the admission of Lehman as the Special Member subject to the
terms, rights and obligations of this Agreement and the Amendment. The failure
to execute the Amendment shall be an Event of Default under this Agreement.
Simultaneously with any distributions to the members of Borrower, the Special
Member shall receive the Net Profits Amount in full in cash as the result of a
Capital Transaction.

     

    8.3   Rights of Special
Member. Without
limiting the foregoing, upon and after admission to the Borrower: (i) the
Special Member shall have the rights afforded to Lehman under this Agreement,
including, without limitation, rights to approve the Major Decisions, and (ii)
the Special Member shall not have any obligation to contribute money or property
for any reason or any circumstance, and shall have no obligation or liability in
respect of debts, liabilities or other obligations of the Borrower, or to make
loans to the Borrower. 

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    ARTICLE 9

     

    NEW DEBT FINANCING


     

    If
Borrower or its constituent member(s) or the direct or indirect members of such
constituent member(s) desires to obtain additional or replacement debt
financing, which is in any way related to the Property, whether in the form of
refinancing or restructuring of all or part of any existing debt financing or by
obtaining additional debt financing (whether secured or unsecured) for any
purpose (collectively, “New Debt
Financing”),
Borrower shall notify Lehman of its intent to seek such New Debt Financing.
Within ten (10) days of receiving such notification from Borrower, Lehman (or
its Affiliates) shall have the right (but without any obligation to do so) to
submit to Borrower a term sheet, which shall contain all of the material terms
for the proposed New Debt Financing (the “Lehman
Offer”).
Borrower shall not obtain New Debt Financing offered by a third party lender
unless such New Debt Financing proposed by such third party lender (the
“Third Party
Offer”) taken
as a whole is materially better in terms of proceeds, rate and structure than
the Lehman Offer, in which case Borrower shall notify Lehman of such Third Party
Offer and Lehman (or its Affiliates) shall have the right (but without any
obligation to do so), within five (5) Business Days of receipt of such notice
from Borrower, to propose New Debt Financing which, taken as a whole, is on
terms at least as favorable as those contained in the Third Party Offer. In such
event, Borrower shall consummate such transaction with Lehman and not with the
third party lender. Notwithstanding anything to the contrary, Lehman shall not
be required to approve any New Debt Financing that would result in no Net
Profits or that would result in New Debt Financing less than 75% loan to value
(based on the Property’s stabilized value) in Lehman’s reasonable determination.
In the event the parties dispute the stabilized value of the Property, each
party will obtain an appraisal from a third party appraiser. In the event the
appraisers cannot agree, the appraisers will select a third appraiser whose
valuation of the Property (assuming stabilization) shall be deemed the value of
the Property for purposes of determining the loan to value ratio.

     

    [SIGNATURES
APPEAR ON THE FOLLOWING PAGE]

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

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

     

    
      	 	 	 
	 	1407 BROADWAY REAL ESTATE
      LLC
	 
 	 
 	 
 
	 	By:  	/s/
      David Lichtenstein
	 	
              
      Name: David Lichtenstein
	 	Title:
      President  


    

     

     

    
      	 	/s/ LEHMAN
      BROTHERS HOLDINGS INC.
	 	 
	 	 	 
	 	 	 
	 	THE FOLLOWING PARTIES ARE
      EXECUTING THIS AGREEMENT SOLELY FOR THE PURPOSE OF ARTICLE 6 AND SECTIONS
      7.15 AND 7.13:
	 	 
	 	1407 BROADWAY MEZZ LLC
	 
 	 
 	 
 
	 	By:  	/s/ David Lichtenstein
	 	
              
      Name: David Lichtenstein
	 	Title:
      President  




    
      	 	 	 
	 	1407 BROADWAY MEZZ II
      LLC
	 
 	 
 	 
 
	 	By:  	/s/ David Lichtenstein
	 	
              
      Name: David Lichtenstein
	 	Title:
      President 


    

    


    
      	 	 	 
	 	LIGHTSTONE 1407 MANAGER
      LLC
	 
 	 
 	 
 
	 	By:  	/s/ David Lichtenstein
	 	
              
      Name: David Lichtenstein
	 	Title:
      President  


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	 	 
	 	LVP 1407 BROADWAY
      LLC,
      
	 	a Delaware limited liability
  company
	 
 	 
 	 
 
	 	By:  	Lightstone
      Value Plus REIT LP, 
	 	 	a Delaware limited partnership, 
	 	 	its sole member


    

     

    
      	 	 	 
	 	By:  	Lightstone Value
      Plus Real Estate   
	 	Investment Trust, Inc., a
      Maryland 
	 	corporation, its
      general partner


    

     

    
      	 	 	 
	 	By:  	 
	 	
              
      Name: David Lichtenstein
	 	Title:
      President  


    

    


    
      	 	 	 
	 	LIGHTSTONE HOLDINGS,
      LLC
	 
 	 
 	 
 
	 	By:  	 
	 	
              
      Name: David Lichtenstein
	 	Title:
      President  
	 	 
	 	
              
      SHIFRA
      LICHTENSTEIN


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    JOINDER AND
CONSENT

     

    The
undersigned (“Joinder Party”) has
reviewed the Net Profits Agreement (“Agreement”) dated
as of January 4, 2007 between Lehman Brothers Holdings Inc. (“Lehman”), and
1407 Broadway LLC, a Delaware limited liability company (“Borrower”), to
which this Joinder and Consent has been attached, and hereby covenants,
represents, warrants, acknowledges and agrees that:

     

    (a) Joinder
Party has read and reviewed the Agreement, and is familiar with the terms and
provisions thereof.

     

    (b) Joinder
Party consents to the Borrower’s execution of the Agreement without reservation
or qualification.

     

    (c) Joinder
Party covenants and agrees to cooperate with Borrower and each other Borrower
Party in the performance and observance of all covenants and agreements
contained in the Agreement on the part of Borrower or any other Borrower Party
as necessary to comply or facilitate Borrower’s or such other Borrower Party’s
compliance therewith.

     

    (d) Joinder
Party hereby agrees to be primarily liable, on a joint and several basis with
Borrower, for the amount of any Net Profits Amount due and payable to Lehman
pursuant to this Agreement.

     

    (e) WHENEVER
ANY PROVISION OF THE AGREEMENT PROVIDES FOR OR REFERS TO (i) THE ACKNOWLEDGMENT
OR AGREEMENT OF A JOINDER PARTY, (ii) THE WAIVER OR RELEASE OF RIGHTS BY ANY
JOINDER PARTY, (iii) THE GRANT BY SUCH JOINDER PARTY OF A POWER OF ATTORNEY IN
FAVOR OF LEHMAN OR (iv) THE APPOINTMENT BY A JOINDER PARTY OF AN AGENT FOR THE
SERVICE OF PROCESS, EACH JOINDER PARTY HEREBY CONSENTS TO AND CONFIRMS SUCH
ACKNOWLEDGMENT, AGREEMENT, WAIVER, GRANT OR APPOINTMENT (AS THE CASE MAY BE) AS
BEING ITS ACKNOWLEDGMENT, AGREEMENT, WAIVER, GRANT AND APPOINTMENT AS FULLY AS
IF SUCH ACKNOWLEDGMENT, AGREEMENT, WAIVER, GRANT OR APPOINTMENT (AS THE CASE MAY
BE) WERE FULLY SET FORTH HEREIN.

     

    (f) JOINDER
PARTY HEREBY WAIVES ANY AND ALL RIGHTS OR CLAIMS JOINDER PARTY NOW HAS OR MAY
HEREAFTER HAVE AGAINST BORROWER OR ANY BORROWER PARTY OR ANY OTHER PARTY TO THE
AGREEMENT, WHETHER BY WAY OF SUBROGATION, CONTRIBUTION, REIMBURSEMENT OR
OTHERWISE, ARISING BECAUSE OF JOINDER PARTY’S PAYMENT OR PERFORMANCE OF ANY OF
THE OBLIGATIONS. JOINDER PARTY WAIVES ALL SURETYSHIP DEFENSES OF EVERY KIND AND
NATURE. 

     

    (g) JOINDER
PARTY ACKNOWLEDGES AND AGREES THAT ANY INDEBTEDNESS (AS SUCH TERM IS DEFINED IN
THE LOAN AGREEMENT) OF BORROWER TO JOINDER PARTY OR TO ANY AFFILIATE OF JOINDER
PARTY (“AFFILIATE
INDEBTEDNESS”),
WHETHER EXISTING PRIOR TO, ON OR AFTER SUCH MATURITY DATE, IS AND SHALL AT ALL
TIMES BE SUBJECT AND SUBORDINATE TO ALL OF THE OBLIGATIONS OF BORROWER TO
LEHMAN. JOINDER PARTY, ON BEHALF OF ITSELF AND ITS AFFILIATES, HEREBY
IRREVOCABLY WAIVES ANY RIGHT, CLAIM OR CAUSE OF ACTION TO COLLECT OR OBTAIN ANY
REIMBURSEMENT, RETURN OR REPAYMENT OF SUCH INDEBTEDNESS. UNLESS AND UNTIL THE
NET PROFITS HAVE BEEN PAID IN FULL TO LEHMAN AND ALL OTHER OBLIGATIONS HAVE BEEN
FULLY SATISFIED, ANY AMOUNTS RECEIVED BY BORROWER OR ANY BORROWER PARTY WITH
RESPECT TO ANY SUCH AFFILIATE INDEBTEDNESS BEFORE ALL OBLIGATIONS HAVE BEEN PAID
IN FULL SHALL BE HELD IN TRUST BY BORROWER AND EACH BORROWER PARTY AND APPLIED
IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT. 

    


    


    [SIGNATURES ON FOLLOWING
PAGE]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    IN
WITNESS WHEREOF, the undersigned have duly executed this Joinder and Consent the
day and year first above written.

     

    
      	 	 	 
	 	LIGHTSTONE HOLDINGS,
      LLC
	 
 	 
 	 
 
	 	By:  	/s/ David
      Lichtenstein
	 	
              
      David Lichtenstein
	 	Title:
      President  


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    EXHIBIT
A

     

    Budget
and Business Plan

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
B

    


    Organizational
Documents of Borrower