Document:

Exhibit
10.41

 

September 15, 2006

 

Mr. Scott Rechler

625 Reckson Plaza

Uniondale, New York 11556

 

 

Re:                               Loan of between $175,000,000 and
$200,000,000 secured by first mortgage liens encumbering the Properties (as
defined below)

 

Gentlemen:

The following is a
summary of terms pursuant to which SL Green Funding LLC (together with its
assignees, “SL Green” or “Lender”) will provide a first
mortgage loan (“Mortgage Loan”)
to one or more newly formed bankruptcy remote special purpose entities or
“recycled” special purpose entities satisfying rating agency guidelines
(collectively, “Borrower”)
controlled directly or indirectly by Scott Rechler, Michael Maturo and Jason
Barnett (“RMB”) and Marathon Real Estate
(collectively “Sponsor”).  The Mortgage Loan will be secured by a first
mortgage lien on all of the Properties.

Properties:                                                          The thirteen (13) commercial office
properties commonly known as the EastRidge Portfolio listed on Exhibit A
attached hereto and made a part hereof. 
The Properties shall be cross-collateralized and cross-defaulted.

Mortgage Loan

Amount:                                                                          Between $175,000,000 and $200,000,000. Borrower will provide irrevocable written notice delivered
to Lender on or prior to December 1st, 2006 stating the exact amount
Borrower desires to borrow. If Borrower fails to deliver such notice, Borrower
shall be deemed to have elected to borrower $200,000,000.

 

Future Funding:                               100% of all capital requirements, including tenant
leasing costs (inclusive of commissions and overrides to affiliated leasing
agents provided such payments are at market rates), subject to an approved
budget, which approval shall not be unreasonably withheld, and in no event to
exceed $30,000,000 (the “Maximum Future Funding Amount”). No more than
$20,000,000 of the Future Funding shall be used for base building capital
improvements. For all purposes hereunder, the Mortgage Loan
Amount shall increase, and shall include, the Maximum Future Funding Amount
(i.e. $230,000,000).

Term:                                                                                       The maturity date (“Maturity
Date”) shall be five (5) years after the initial funding date of the
Mortgage Loan (the “Scheduled Maturity Date”).

Interest Rate:                                              The Mortgage Loan will bear interest at a
floating rate (the “Interest Rate”)
per annum equal to the yield on the 30-day LIBOR Index plus the Spread. After
an event of default, the Interest Rate will increase by 500 basis points.

 

A-1

Borrower shall
purchase and maintain an interest rate protection agreement for the entire
Mortgage Loan Amount and term of the Mortgage Loan, providing for a Maximum
LIBOR of 5.75%, issued by a counterparty having an S&P rating of not less
than “AA-”.

Spread:                                                                               125 basis points (1.25%).

Amortization:                                             The Mortgage Loan shall be interest only
for the Term of the Mortgage Loan.

Prepayment:                                                    The Mortgage Loan may, from time to time,
be prepaid in whole or in part without penalty or premium.

Release Prices:                                  Borrower shall be permitted to repay a
portion of the Mortgage Loan upon the sale of individual Properties subject to
the payment of the respective Release Price listed on Exhibit A (115% of
Allocated Loan Amounts, which Allocated Loan Amounts shall increase with Future
Funding as described herein), provided, however, that (A) the debt service
coverage ratio (based on the greater of (i) actual debt service and (ii) a
9.00% constant, and the actual net operating income of the Properties, on a
trailing 12-month basis) after taking into account any release will not be less
than the lesser of (a) the debt service coverage ratio immediately prior to
such release and (b) 1.25:1.00 and (B) the loan-to-value ratio shall not be
greater than the lesser of (i) the loan-to-value ratio on the closing date and
(ii) the loan-to-value ratio calculated as of the date immediately prior to the
release. The release of individual properties shall also be subject to the
satisfaction of other customary conditions as specified in the Mortgage Loan
documents.  The Allocated Loan Amounts
and Release Prices will increase on a property by property basis based on
future funds advanced under the Mortgage Loan.

Mezzanine

Financing:                                                              Lender shall permit mezzanine financing,
from an institutional mezzanine lender, such that the total amount of financing
encumbering the Properties, inclusive of the Mortgage Loan, and the Mezzanine
Financing, shall not exceed $225,000,000 (not accounting for any Future
Funding). The Mezzanine Financing shall be subject to an intercreditor
agreement acceptable to Lender in its reasonable approval.

Origination Fee:                              None.

 Exit Fee:                                                                       None.

Cash

Management:                                               Borrower shall cause all rents, income
and other payments (“Rents”) to
be transmitted directly by all tenants into an account in which Lender shall
have a first priority perfected security interest (the “Clearing
Account”) maintained by Borrower at a local bank selected by
Borrower (the “Clearing Bank”)
and reasonably approved by Lender.

 

A-2

 

Except during a “Cash Management Period”, funds
deposited into the Clearing Account shall be swept by the Clearing Bank on a
daily basis into Borrower’s operating account at the Clearing Bank. During a
Cash Management Period, funds deposited into the Clearing Account shall be
swept by the Clearing Bank on a daily basis into an account in which Lender
shall have a first priority perfected security interest at a deposit bank
controlled by Lender (a “Deposit Account”)
and on each Payment Date applied and disbursed in accordance with Lender’s
standard waterfall set forth in the Loan Documents; provided, however, that
upon the occurrence of an event of default, Lender shall be entitled to apply
the Rents in the Deposit Account in such manner as Lender shall elect in its
sole discretion.  A “Cash
Management Period” shall commence on the occurrence of (a) the
Scheduled Maturity Date (as the same may be extended or accelerated) and (b) an
Event of Default.

Reserves:                                                                   Upfront escrows will be required for real
estate taxes and insurance at Closing. In addition, the Loan shall require
monthly escrows for real estate taxes and insurance.  There shall be no other reserves. For any
unpaid tenant improvements and leasing commissions (“Unpaid
Leasing Capital”) on account of leases executed prior to
Closing, at Borrower’s option, Borrower may either (a) require Lender to
allocate a portion of the Future Funding in the amount of the Unpaid Leasing
Capital, which allocated portion shall only be used by Borrower to pay the
Unpaid Leasing Capital (the Future Funding available to pay other capital
costs  shall be equal to the $30,000,000
less any amounts allocated to the Unpaid Leasing Capital) and (b) escrow the
Unpaid Leasing Capital at Closing thereby not reducing the availability of the
Future Funding at Closing.

Lease
Approval

Threshold:                                                             All new leases are to be entered into
with third-party tenants unaffiliated with Borrower or Sponsor and shall be on
market terms and conditions. All leases in excess of 20,000 square feet shall
be subject to Lender approval, which approval shall not be reasonably withheld.
Notwithstanding the foregoing, Borrower shall be entitled to lease up to 10,000
rentable square feet in aggregate across the Properties to an affiliate of
Borrower or Sponsor; however, Borrower shall not be entitled to use the Future
Funding to fund any capital costs associated with such affiliate lease. Any
leases to affiliates in excess of 10,000 rentable square feet in aggregate
across the Properties shall require Lender approval, which approval shall not
be unreasonably withheld.  Lender will
execute SNDA’s with tenants leasing 20,000 square feet or more, which leases
have been approved by Lender.

 

Estoppel

Requirement:                                             While Lender acknowledges that delivery
of tenant estoppels is not a condition to the closing of the Mortgage Loan,
Borrower shall, by November 1st, 2006, send estoppels, on a form
reasonably acceptable to Lender, to all

 

A-3

 

tenants in the
Properties.  Borrower shall continuously
use commercially reasonable best efforts to deliver executed estoppels to
Lender until Closing.

Secondary Market

Transactions:                                             Lender shall have the right at any time
(a) to participate, syndicate or securitize all or any portion of its interest
in the Mortgage Loan (any such transaction, a “Securitization”)
and/or, (b) to split the Mortgage Loan into senior and junior components
(and/or mortgage and mezzanine components), provided that at all times
including after any prepayments (i) the weighted average of the spread is equal
to the spread for all such components and (ii) the restructuring of the Mortgage
Loan does not increase the obligations of Borrower or increase the rights of
Lender thereunder.  Borrower shall agree
to cooperate with Lender to facilitate any secondary market transaction and the
rating of the Mortgage Loan or mezzanine loan and any structuring or
restructuring to create separate loan components as described above.  Such cooperation of Borrower shall be at
Lender’s sole cost and expense.

Collateral:                                                              The collateral for the Mortgage Loan
shall include, without limitation, (a) a first priority perfected mortgage
encumbering the Properties, (b) a first priority perfected assignment of leases
and rents encumbering the Properties, (c) a first priority perfected assignment
of all contracts, agreements, trademarks, licenses, goods, equipment, accounts,
fixtures and all other tangible and intangible personal property located on or
used in connection with the Property, (d) a first priority perfected security
interest in all monies deposited into the Clearing Account and Deposit Account,
including all subaccounts, escrow accounts and reserve accounts, (e) a first
priority perfected assignment of the Interest Rate Protection Agreement, (f)
the Guaranty of Recourse Obligations, (g) UCC-1 financing statements (personal
property, fixture filing and accounts and reserves) and (h) all other
agreements and assurances customary in similar financings.  The liens and priority of Lender’s security
interests shall be insured in favor of Lender and its successors and assigns,
which insurance shall be issued and underwritten 75% by a title insurance
carrier insuring Borrower’s acquisition and 25% by a title insurance carrier
selected by Lender.

Recourse:                                                                 The Mortgage Loan will be non-recourse to
Borrower, with exceptions for prohibited transfers, indebtedness and voluntary
or involuntary, collusive or non-collusive bankruptcy (“Recourse
Items”).  Borrower shall
indemnify Lender for losses on account of certain ‘bad acts’ to be defined in
the Mortgage Loan documents. Scott Rechler, Michael Maturo, and Jason Barnett
(collectively, the “Guarantors”)
shall execute Lender’s standard Guaranty of Recourse Obligations (the “Guaranty”) with respect to such
Recourse Items.  The Guarantors shall
have joint and several liability under such Guaranty.

Management:                                               The Properties will be managed by RMB or
an affiliate thereof, pursuant to a management agreement approved by Lender in
its reasonable discretion. Lender will have the right to replace the manager if
(a) an Event of Default

A-4

occurs or (b) the
manager files bankruptcy.  The management
agreement and all fees thereunder shall be made subordinate to the Mortgage
Loan.

Assumability:                                             Neither the Properties, nor any interest;
whether direct or indirect legal or beneficial ownership interests in the
Borrower or any of its constituent members, at any level or tier of ownership,
may be transferred other than pursuant to a bona fide sale of an individual
property to a third party that satisfies the release provisions and conditions.
The Mortgage Loan shall not be assumable without the prior approval of Lender
in its sole and absolute discretion, which approval, if given, may be
conditioned upon, among other things, (i) the payment to Lender of assumption
fee in an amount determined by Lender in its sole discretion (ii) a substitute
guarantor that is acceptable to Lender in its sole discretion and (iii) if the
Mortgage Loan or any portion thereof has been securitized, written confirmation
from the rating agencies that the proposed transfer will not result in a
downgrade, qualification or withdrawal of the rating of such securitization.

                                                                                                                        Notwithstanding the foregoing, Lender
acknowledges that Sponsor is raising a real estate investment fund (the
“Fund”), which Fund shall own 100% of  the
equity interests in Borrower, and which Fund shall be managed and controlled by
Sponsor.  Lender shall permit the
transfer of interests in the Borrower, or its upper tier entities, provided
that (a) after any transfer the Fund retains ownership of not less than 25% of
the Borrower, (b) Scott Rechler, Jason Barnett, Michael Maturo and Marathon
Real Estate retain management and control of the Fund and the Borrower, and no
major decisions shall be made without Sponsor’s consent.

No Additional

Financing:                                                              There shall be no subordinate financing,
pledge, hypothecation or encumbrance, secured or unsecured, on any of the
Properties or on any direct or indirect legal or beneficial ownership interests
in Borrower or any of its constituent members, at any level or tier of
ownership. Notwithstanding the above, Lender will permit pledges in upper tier
entites, whose business is broader than ownership of the Properties.

Insurance:                                                              The Properties shall be covered by
standard “all risk” perils insurance, including, but not limited to, fire and
casualty, machine and boiler, business interruption and liability insurance
(general, employer and workers’ compensation insurance), together with flood,
hurricane or earthquake insurance if the Properties are located in a flood, hurricane
or earthquake zone, as applicable, and terrorism insurance, in amounts and
underwritten by companies reasonably acceptable to Lender.  Ratings of insurance carriers to equal or
exceed the ratings of current carriers.

Patriot Act;

OFAC                                                                                     Borrower represents, warrants and
covenants that, to its knowledge and at all times throughout the term of the
Mortgage Loan, including after giving effect

 

A-5

to any
transfers,  (a) none of the funds or
other assets of Borrower constitute property of, or are beneficially owned,
directly or indirectly, by any person, entity or government subject to trade
restrictions under U.S. law, including but not limited to, the Patriot Act, the
International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The
Trading with the Enemy Act, 50 U.S.C. App. 1 et seq. and any Executive Orders
or regulations promulgated thereunder including, without limitation all
applicable orders, rules, regulations and recommendations of The Office of
Foreign Assets Control of the U.S. Department of the Treasury (collectively, “OFAC Laws and Regulations”) with
the result that the investment in Borrower is prohibited by OFAC Laws or
Regulations or that the investment made by the Sponsor is in violation of OFAC
Laws or Regulations; (b) other than with respect to transfers by reason of
Stock Market Transactions, no person has any interest of any nature whatsoever
in a Sponsor, with the result that the investment in Borrower is prohibited by
OFAC Laws and Regulations; and (c) none of the funds of Borrower have been
derived from any unlawful activity with the result that the investment in
Borrower is prohibited by law or the investment is in violation of law.
Borrower agrees to provide Lender with information regarding Borrower and
Sponsor, which Lender may reasonably request in order to be in compliance with
the OFAC Laws and Regulations.

Mortgage Loan

Expenses:              Sponsor
shall cover all of Lender’s reasonable out-of-pocket costs and expenses.

 

 

This letter shall confirm the agreement of SL Green or
its affiliates, successors or assigns to provide the Mortgage Loan on the terms
and conditions set forth above, conditioned solely upon (a) closing of the
Merger Transaction and (b) RIDER I. 
Please sign and return an original counterpart of this letter in order
to evidence and confirm the foregoing. 
We look forward to working with you on this transaction.

 

	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
  SL GREEN FUNDING
  LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David
  Schonbraun

  
	
   

  	
   

  	
  Name:

  	
  David Schonbraun

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  

 

ACCEPTED AND AGREED

AS OF September 15, 2006:

 

 

 

By: /s/ Scott
Rechler______

Scott Rechler

 

A-6Exhibit 10.42

SL Green Funding LLC

c/o SL Green Realty Corp

420 Lexington Avenue

New York, NY 10170

 

August 3, 2006

Mr. Scott Rechler

225 Broadhollow Road

Melville, NY
11747-4883

Re:     Loan secured by 50% of the equity interest
in Reckson Strategic Venture Partners, LLC (“RSVP”), direct or indirect, and
inclusive of any loans, owned by Reckson Associates Realty Corp., Reckson
Operating Partnership, L.P., Reckson Asset Partners, LLC and any affiliate
thereof, made to a bankruptcy remote single purpose entity 100% owned and
controlled by Scott Rechler and Marathon Asset Management (“Borrower”) by SL
Green Funding LLC or an affiliate thereof (“Lender” or “SLG”) (the “RSVP Loan”).

Dear Scott:

Below are the
terms and conditions upon which we are prepared to make the RSVP Loan:

	
  Lender

  	
   

  	
  SL Green Funding LLC or
  an affiliate thereof (“SLG” or “Lender”).

  
	
   

  	
   

  	
   

  
	
  Borrower

  	
   

  	
  A newly formed bankruptcy
  remote special purpose entity or “recycled” special purpose entity satisfying
  rating agency guidelines (collectively, “Borrower”) controlled directly or
  indirectly by Scott Rechler, Michael Maturo and Jason Barnett (“RMB”) and
  Marathon Real Estate (collectively “Sponsor”).

  
	
   

  	
   

  	
   

  
	
  Guarantor

  	
   

  	
  Scott Rechler and a
  Marathon entity acceptable to Lender, joint and several, for standard carve
  outs.

  
	
   

  	
   

  	
   

  
	
  Loan Amount

  	
   

  	
  $30,000,000.00.

  
	
   

  	
   

  	
   

  
	
  Origination Fee

  	
   

  	
  1.00% of the Loan
  Amount. 50% of the Origination Fee shall be payable upon issuance of this
  letter and 50% shall be payable at Closing.

  
	
   

  	
   

  	
   

  
	
  Exit Fee

  	
   

  	
  1.00% of the Loan
  Amount.

  
	
   

  	
   

  	
   

  
	
  Term

  	
   

  	
  36 months

  
	
   

  	
   

  	
   

  
	
  Amortization

  	
   

  	
  None

  
	
   

  	
   

  	
   

  
	
  Interest Rate

  	
   

  	
  9.00%, calculated on
  the basis of a 360 day year and the actual days elapsed.

  

 

 

	
  Interest Reserve

  	
   

  	
  Lender shall hold back
  from funding to Borrower, an amount to be funded into a reserve account (the
  “Interest Reserve”) equal to six months of debt service payable under the
  RSVP Loan. Borrower shall be required to maintain a balance in the Interest
  Reserve equal to six (6) months of debt service at all times during the Term.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notwithstanding the above,
  Borrower shall pay interest current under the RSVP Loan at all times during
  the Term.

  
	
   

  	
   

  	
   

  
	
  Extension Option

  	
   

  	
  None.

  
	
   

  	
   

  	
   

  
	
  Collateral

  	
   

  	
  The RSVP Loan will be
  secured by 100% of Borrower’s equity interest in RSVP, direct or indirect,
  and inclusive of any loans, owned by Reckson Associates Realty Corp., Reckson
  Operating Partnership, L.P., Reckson Asset Partners, LLC and any affiliate
  thereof. Borrower is prohibited from selling or transferring its direct or
  indirect equity interests in RSVP at all times, unless otherwise consented to
  by Lender in its sole and absolute discretion, or unless such sale or
  transfer is accompanied by a repayment of the RSVP Loan in full. Lender
  acknowledges that Sponsor is raising a real estate investment fund (the “Fund”),
  which Fund shall own 100% of the equity interests in Borrower, and which Fund
  shall be managed and controlled by Sponsor. Lender shall permit the transfer
  of interests in the Borrower, provided that (a) after any transfer the
  Fund retains ownership of not less than 25% of the Borrower, (b) Scott
  Rechler, Jason Barnett, Michael Maturo and Marathon Real Estate retain
  management and control of the Fund and the Borrower and no major decisions
  can be made without Sponsor's consent and (c) such transfer is approved
  by Lender, which consent will not be unreasonably withheld.

  
	
   

  	
   

  	
   

  
	
  Closing Fees and Costs

  	
   

  	
  Borrower will pay all
  reasonable out-of-pocket due diligence and closing fees incurred by Lender in
  connection with the RSVP Loan including legal fees, regardless of whether or
  not the RSVP Loan closes.

  
	
   

  	
   

  	
   

  
	
  Prepayment

  	
   

  	
  The RSVP Loan may not
  be prepaid in whole or in part during the first twelve (12) months of the
  term. Thereafter, the Loan may be prepaid in whole without any prepayment
  premium.

  
	
   

  	
   

  	
   

  
	
  Closing

  	
   

  	
  Simultaneous with the
  merger between SL Green Realty Corp and Reckson Associates Realty Corp (the
  “Merger Transaction”).

  
	
   

  	
   

  	
   

  
	
  Additional Financing

  	
   

  	
  None permitted.

  
	
   

  	
   

  	
   

  
	
  Loan Documentation

  	
   

  	
  All Loan Documentation
  shall be in form and content acceptable to Lender and its counsel, and shall
  be supported by acceptable representations and warranties of Borrower,
  opinions of counsel and proof of related matters that Lender’s counsel shall
  deem necessary.

  
	
   

  	
   

  	
   

  
	
  Exclusivity

  	
   

  	
  Upon acceptance of this
  letter, Borrower, Scott Rechler and Marathon agree to work exclusively with
  Lender to negotiate and execute the Loan Documentation.

  

 

2

 

This letter shall confirm
the agreement of SLG or its affiliates, successors or assigns to provide the
RSVP Loan on the terms and conditions set forth above, conditioned solely upon
(a) closing of the Merger Transaction and (b) execution of definitive
Loan Documentation between the parties upon the economic terms contained herein
and otherwise in form and content acceptable to Lender in its sole
discretion.  In the event that Borrower
asserts within 5 days of Closing that the terms and conditions of the Loan
Documentation differ from the terms and conditions which are generally
prevailing in loans of similar size, with similar security and sponsorship and
made by institutional lenders, the Borrower may, within 5 days of such
assertion, submit the Loan Documentation to an Expedited Arbitration Proceeding
as defined below.  If the arbitrator
pursuant to such Expedited Arbitration Proceeding determines that the terms and
conditions of the Loan Documentation differ from the terms and conditions which
are generally prevailing in loans of similar size, with similar security and
sponsorship and made by institutional lenders, then the parties shall amend the
Loan Documentation as determined pursuant to the Expedited Arbitration
Proceeding.

“Expedited Arbitration
Proceeding” means a binding arbitration proceeding conducted in The City of New
York under the Commercial Arbitration Rules of the American Arbitration
Association (or its successor) and administered pursuant to the Expedited
Procedures provisions (the “Expedited Procedures”) thereof; provided, however,
that with respect to any such arbitration (a) the list of arbitrators
referred to in Section E-4(b) of the Expedited Procedures shall be
returned within five (5) Business Days from the date of mailing, (b) the
parties shall notify the American Arbitration Association (or its successor) by
telephone, within four (4) Business Days, of any objections to the arbitrator
appointed and, subject to clause (g) below, shall have no right to object
if the arbitrator so appointed was on the list submitted by the American
Arbitration Association (or its successor) and was not objected to in
accordance with Section E-4(b) of the Expedited Procedures as modified by
clause (a) above, (c) the notification of the hearing referred to in
Section E-8 of the Expedited Procedures shall be four (4) Business Days in
advance of the hearing, (d) the hearing shall be held within seven (7)
Business Days after the appointment of the arbitrator, (e) the arbitrator
shall have no right to award damages or vary, modify or waive any provision of
this Restated Agreement, (f) the decision of the arbitrator shall be final
and binding on the parties and (g) the arbitrator shall not have been
employed by either party (or their respective affiliates) during the period of
three (3) years prior to the date of the Expedited Arbitration Proceeding.  The arbitrator shall determine the extent to
which each party is successful in such Expedited Arbitration Proceeding in
addition to rendering a decision on the dispute submitted.  If the arbitrator determines that one (1) party
is entirely unsuccessful, then such party shall pay all of the fees of such
arbitrator plus the costs and expenses incurred by the prevailing party in
connection therewith.  If the arbitrator
determines that both parties are partially successful, then each party shall be
responsible for such arbitrator’s fees and such party’s own third-party costs
and expenses only to the extent such party is unsuccessful.

 

3

 

Please sign and return an
original counterpart of this term sheet and we will begin to document the
transaction.  We look forward to working
with you to complete this transaction.

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  SL GREEN FUNDING LLC

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ DAVID SCHONBRAUN

  
	
   

  	
   

  	
   

  	
  Name: David Schonbraun

  
	
   

  	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Agreed and Accepted by:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  /s/ SCOTT RECHLER

  
	
   

  	
  SCOTT RECHLER

  

 

 

 

4

 

RSVP

 

100% of the interests in
RSVP, direct or indirect, and inclusive of any loans, owned by Reckson
Associates Realty Corp., Reckson Operating Partnership, L.P., Reckson Asset
Partners, LLC and any affiliate thereof

 

5

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00110-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00110-of-00352.parquet"}]]