SECURITIES TRANSFER AGREEMENT

 

TABLE OF CONTENTS

 

		Page
ARTICLE I	DEFINITIONS	5
Section 1.1.	Definitions	5
ARTICLE II	THE TRANSFERS; CLOSING	11
Section 2.1.	Transfers	11
Section 2.2.	Consideration	12
Section 2.3.	Closing	12
Section 2.4.	Closing Deliveries by Parent	12
Section 2.5.	Closing Deliveries by SLGOP and Manager Corp	13
Section 2.6.	Termination	13
Section 2.7.	Class B Distributions	13
ARTICLE III	REPRESENTATIONS AND WARRANTIES RELATING TO SLGOP, MANAGER CORP AND THE MANAGER	14
Section 3.1.	Organization and Qualification	14
Section 3.2.	Authority; Non-Contravention; Approvals	14
Section 3.3.	The Manager Corp Owned Manager Interests, the SLGOP Owned Manager Interests, the SLGOP Owned Class B Units and the Manager Owned Class B Units	15
Section 3.4.	Capitalization	16
Section 3.5.	Subsidiaries and Equity Investments	16
Section 3.6.	Financial Statements	16
Section 3.7.	Absence of Undisclosed Liabilities	16
Section 3.8.	Intentionally Omitted	16
Section 3.9.	Books and Records	17
Section 3.10.	Tax Matters	17
Section 3.11.	ERISA and Employee Benefits	18
Section 3.12.	Employment Matters	19
Section 3.13.	Labor Relations	19
Section 3.14.	Absence of Litigation	20
Section 3.15.	No Violation of Law	20
Section 3.16.	Title to Assets; Encumbrances	20
Section 3.17.	Sufficiency of Assets	20
Section 3.18.	Insurance	20
Section 3.19.	Contracts and Other Agreements	21
Section 3.20.	Intellectual Property	22
Section 3.21.	Real Property	22
Section 3.22.	Environmental Matters	23

 

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TABLE OF CONTENTS

(continued)

 

		Page
Section 3.23.	Bank Accounts	23
Section 3.24.	Permits	23
Section 3.25.	Powers of Attorney	23
Section 3.26.	No Other Clients	23
Section 3.27.	Transactions and Related Parties	23
Section 3.28.	Brokers	24
ARTICLE IV	REPRESENTATIONS AND WARRANTIES OF PARENT AND THE OPERATING PARTNERSHIP	24
Section 4.1.	Organization and Qualification of Parent and the Operating Partnership	24
Section 4.2.	Authority; Non-Contravention; Approvals	24
Section 4.3.	Brokers	25
ARTICLE V	COVENANTS	25
Section 5.1.	Commercially Reasonable Efforts	25
Section 5.2.	Use of Name	25
Section 5.3.	Transfer Taxes	26
Section 5.4.	Officers and Employees	26
Section 5.5.	Public Statements	26
Section 5.6.	Confidentiality	27
Section 5.7.	Management Agreement Acknowledgement	27
Section 5.8.	Parent Equity Awards	27
Section 5.9.	Certain Amendments	28
Section 5.10.	D&O Insurance	28
Section 5.11.	Obligations of American Financial Realty Trust	28
ARTICLE VI	POST-CLOSING TAX MATTERS	28
Section 6.1.	Covenants	28
Section 6.2.	Cooperation on Tax Matters	28
Section 6.3.	Tax Indemnity	29
Section 6.4.	Disputes	30
Section 6.5.	Tax Returns	30
ARTICLE VII	SURVIVAL; INDEMNIFICATION	31
Section 7.1.	Survival of Representations, Warranties, Covenants and Agreements	31
Section 7.2.	Indemnification of Parent	31
Section 7.3.	Indemnification of SLG, SLGOP and Manager Corp	32
Section 7.4.	Limitations	32

 

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TABLE OF CONTENTS

(continued)

 

		Page
Section 7.5.	Method of Asserting Claims	33
Section 7.6.	Subrogation; Insurance	34
Section 7.7.	Exclusive Remedy	35
ARTICLE VIII	MISCELLANEOUS	35
Section 8.1.	Notices	35
Section 8.2.	Entire Agreement	36
Section 8.3.	Expenses	36
Section 8.4.	Waiver	36
Section 8.5.	Amendment	36
Section 8.6.	No Third-Party Beneficiary	36
Section 8.7.	Assignment; Binding Effect	36
Section 8.8.	CONSENT TO JURISDICTION; SERVICE OF PROCESS; WAIVER OF TRIAL BY JURY	36
Section 8.9.	Specific Performance	37
Section 8.10.	Invalid Provisions	37
Section 8.11.	GOVERNING LAW	37
Section 8.12.	Manager Disclosure Schedule	37
Section 8.13.	Counterparts; Effectiveness	37
Section 8.14.	Interpretation	38
Section 8.15.	Parent Board Actions	38
EXHIBITS:
A                 Form of Special Rights Agreement
B                 Form of Special Servicing Agreement
C                 Joint Press Release

 

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SECURITIES TRANSFER AGREEMENT

 

THIS SECURITIES TRANSFER AGREEMENT, dated as of April 24, 2009 (this “ Agreement ” ), is made by and among Gramercy Capital Corp., a Maryland corporation (“ Parent ”), GKK Capital LP, a Delaware limited partnership (the “ Operating Partnership ”), SL Green Operating Partnership, L.P., a Delaware limited partnership (“ SLGOP ”), GKK Manager Member Corp., a Delaware corporation (“ Manager Corp ”), and, solely for the purpose of Sections 2.6 , 5.4 , 5.5 , 5.6 , 6.3 , 6.4 , 6.5 , 7.1 , 7.2 , 7.3 , 7.4(a) , 7.4(b) , 7.4(d) , 7.4(e) , 7.5 , 7.6 and 7.7 and Article VIII of this Agreement, SL Green Realty Corp., a Maryland corporation (“ SLG ”). Capitalized terms used herein but not otherwise defined (including in the Recitals to this Agreement) shall have the meanings ascribed to such terms in Article I of this Agreement.

 

RECITALS

 

WHEREAS, (i) SLGOP owns 34.02% of the issued and outstanding membership interests (the “ SLGOP Owned Manager Interests ”) in GKK Manager LLC, a Delaware limited liability company (the “ Manager ”) and (ii) Manager Corp owns 65.98% of the issued and outstanding membership interests (the “ Manager Corp Owned Manager Interests ”) in the Manager;

 

WHEREAS, (i) SLGOP is a limited partner of the Operating Partnership and owns 70.00 Class B Units (the “ SLGOP Owned Class B Units ”), representing 70.00% of the issued and outstanding Class B Units and (ii) the Manager is a limited partner of the Operating Partnership and owns 30.00 Class B Units (the “ Manager Owned Class B Units ”), representing 30.00% of the issued and outstanding Class B Units;

 

WHEREAS, Parent, the Operating Partnership and the Manager are parties to the Second Amended and Restated Management Agreement, dated as of October 27, 2008 (the “ Management Agreement ”), pursuant to which the Manager provides management, advisory and various other services to Parent and the Operating Partnership;

 

WHEREAS, Parent and SLGOP are parties to and wish to terminate the Amended and Restated Origination Agreement, dated as of April 19, 2006 (the “ Origination Agreement ” ), and Parent and SLGOP wish to enter into a Special Rights Agreement in the form attached hereto as Exhibit A (the “ Special Rights Agreement ”);

 

WHEREAS, Parent, Gramercy Loan Services LLC and Green Loan Services, LLC wish to enter into an Special Servicing Agreement in the form attached hereto as Exhibit B   (the “ Special Servicing Agreement ”);

 

WHEREAS, the Operating Partnership, Parent, SLGOP and SLG are parties to and wish to terminate the Services Agreement, dated as of October 27, 2008 (the “ Services Agreement ” ), pursuant to which SLGOP and SLG provide certain consulting and other services to Parent and the Operating Partnership;

 

WHEREAS, the Operating Partnership, Parent, SLGOP and the Manager are parties to an Agreement, dated as of December 30, 2008, pursuant to which, among other things, (i) the Manager paid to the Operating Partnership $2.75 million in cash simultaneously with the execution of such agreement and (ii) SLGOP transferred to Parent 1.9 million shares of Parent’s common stock, in full satisfaction of all potential obligations that the holders of Class B Units may have had to the Operating Partnership, and that the Operating Partnership may have had to the holders of Class B Units; and

 

 

WHEREAS, the parties to this Agreement wish to provide for a transaction in which SLGOP and Manager Corp will assign, transfer, convey and deliver to the Operating Partnership all of the Manager Corp Owned Manager Interests, SLGOP Owned Manager Interests and the SLGOP Owned Class B Units, and in consideration therefor, Parent and the Operating Partnership will take the actions and pay the amounts set forth in this Agreement;

 

NOW, THEREFORE, the parties agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.1.             Definitions.

 

(a)            As used in this Agreement, the following terms have the respective meanings indicated:

 

“ Affiliate ” means, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the Person specified.  The term “control” (including the terms “controlling,” “controlled by” and “under common control with”) means possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

“ Business Day ” means any day other than a Saturday, Sunday or any day on which banks located in the State of New York are authorized or required to be closed for the conduct of regular banking business.

 

“ Class B Units ” means the Class B units of the Operating Partnership.

 

“ Closing ” means the closing of the transactions contemplated by this Agreement.

 

“ Closing Date ” means the date on which the Closing occurs.

 

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

 

“ Company Plan ” means a Plan that the Manager or any ERISA Affiliate sponsors, maintains, has any obligation to contribute to, has or may have Liability under or is otherwise a party to, or which otherwise provides benefits for employees, former employees, independent contractors or former independent contractors (or their dependents and beneficiaries) who provide or provided services primarily to the Manager; provided, that Company Plan shall not include any Plan sponsored or maintained by Parent or the Operating Partnership, or any Plan to which Parent or the Operating Partnership is a party.

 

“ Encumbrances ” means any and all liens, charges, security interests, mortgages, pledges, options, preemptive rights, rights of first refusal or first offer, proxies, levies, voting trusts or agreements, or other adverse claims or restrictions on title or transfer of any nature whatsoever, but excluding non-exclusive licenses of Intellectual Property.

 

“ Environmental Law ” means any Law relating to the protection, investigation or restoration of the environment (including natural resources) or the health or safety of human or other

 

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living organisms, including the manufacture, introduction into commerce, export, import, processing, distribution, use, generation, treatment, storage, handling, presence, disposal, transportation, release or management of, or other activities with respect to, Hazardous Substances, in each case as presently in effect.

 

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.

 

“ ERISA Affiliate ” means a person required at any particular time to be aggregated with the Manager under Sections 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA.

 

“ GAAP ” means United States generally accepted accounting principles.

 

“ Governmental Authority ” means any U.S. or foreign federal, state, municipal or local government, any instrumentality, subdivision, court, administrative or regulatory agency or commission or other authority thereof, or any quasi-governmental or private body exercising any regulatory, taxing, importing or other governmental or quasi-governmental authority or self-regulatory agency or authority.

 

“ Governmental Consent ” means any material declaration, filing or registration with, or notice to, or authorization, consent, order or approval of, any Governmental Authority.

 

“ Hazardous Substance ” means (i) any petroleum or petroleum products, flammable explosives, radioactive materials, medical waste, radon, asbestos or asbestos-containing products or materials, chloroflourocarbon, hydroflourocarbon, urea formaldehyde foam insulation, polychlorinated biphenyls (PCBs) or lead-containing paint or plumbing, and (ii) any element, compound, substance, waste or other material that is regulated under any Environmental Law or is defined as, or included in the definition of, or deemed by or pursuant to any Environmental Law or by any Governmental Authority to be “hazardous,” “toxic,” a “contaminant,” “waste,” a “pollutant,” “hazardous substance,” “hazardous waste,” “restricted hazardous waste,” “hazardous material,” “extremely hazardous waste,” a “toxic substance,” a “toxic pollutant” or words with similar meaning.

 

“ Indebtedness ” means, as to any Person, (i) all obligations of such Person for borrowed money (including reimbursement and all other obligations with respect to surety bonds, letters of credit and bankers’ acceptances, whether or not matured), (ii) all obligations of such Person evidenced by notes, bonds, debentures or similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable and accrued commercial or trade payables arising in the ordinary course of business, (iv) all interest rate and currency swaps, caps, collars and similar agreements or hedging devices under which payments are obligated to be made by such Person, whether periodically or upon the happening of a contingency, (v) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person, (vi) all obligations of such Person under leases which have been or should be, in accordance with GAAP, recorded as capital leases, (vii) all indebtedness secured by any lien on any property or asset owned or held by such Person regardless of whether the indebtedness secured thereby shall have been assumed by such Person or is non-recourse to the credit of such Person, and (viii) all guarantees by such Person of any of the indebtedness specified in clauses (i) through (vii) of this definition of any other Person.

 

“ Indemnified Party ” means any Person claiming indemnification under any provision of Article VII .

 

“ Indemnifying Party ” means any Person against whom a claim for indemnification is being asserted under any provision of Article VII .

 

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“ Intellectual Property ” means all of the following intellectual property and intellectual property rights:  (i) all names and marks, brands and slogans, all registered and unregistered trademarks, trade names, service marks and applications therefor and all goodwill associated therewith; (ii) all patents, patent applications and inventions conceived or reduced to practice prior to the Closing, including any provisional, utility, continuation, continuation-in-part or divisional applications filed in the United States or other jurisdiction prior to the Closing, and all reissues thereof and all reexamination certificates issuing therefrom; (iii) all copyrights, including all related copyright registrations; (iv) all know-how or other trade secrets, whether or not reduced to practice; (v) the right to sue for and recover damages, assert, settle and/or release any claims or demands and obtain all other remedies and relief at law or equity for any past, present or future infringement or misappropriation of any of the foregoing; (vi) all licenses, options to license and other contractual rights to use such intellectual property or intellectual property rights; and (vii) all computer and electronic data processing programs and software programs and related documentation.

 

“ Knowledge of the Manager ” means the actual knowledge (after reasonable inquiry) of the persons listed on Section 1.1(a)(i) of the Manager Disclosure Schedule .

 

“ Laws ” means all laws, statutes, regulations, ordinances, orders, judgments, decrees or other legally binding requirements issued, promulgated, adopted or imposed by any Governmental Authority.

 

“ Liabilities ” means all indebtedness, liabilities, obligations, responsibilities, commitments and expenses of every kind, whether or not accrued or fixed, known or unknown, absolute or contingent, matured or unmatured, determined or determinable.

 

“ Losses ” means any and all damages, fines, fees, penalties, Liabilities, settlements and judgments, losses and costs and expenses (including loss of value, interest, court costs and fees, and reasonable costs of attorneys, accountants and other experts, expenses of investigation or other reasonable expenses of litigation or other proceedings or of any claim, default or assessment); provided , that Losses shall not include any indirect, special, punitive, incidental or consequential damages of any kind (except to the extent such damages are awarded against any Indemnified Party in a claim by a third party).

 

“ Manager Material Adverse Effect ” means, with respect to the Manager, any development, occurrence, effect, event or change that, individually or taken together with all other developments, occurrences, effects, events or changes occurring prior thereto, has or is reasonably likely to have (i) a material adverse effect on the business, operations, properties, condition (financial or otherwise) or assets of the Manager and the Manager Subsidiary, taken as a whole ( provided , however , that Manager Material Adverse Effect shall not be deemed to include any developments, occurrences, effects, events or changes to the extent resulting from (A) changes in general political, economic or business conditions (including the commencement, continuation or escalation of a war, material armed hostilities or other material international or national calamity or acts of terrorism or earthquakes, hurricanes, other natural disasters or acts of God) affecting the business or industry in which the Manager and the Manager Subsidiary, as applicable, operates, except to the extent that such changes in general political, economic or business conditions have a materially disproportionate adverse effect on the Manager and the Manager Subsidiary, as applicable, relative to other similarly situated participants, (B) changes in general financial and capital market conditions, except to the extent that such changes in general financial and capital market conditions have a materially disproportionate adverse effect on the Manager and the Manager Subsidiary, as applicable, relative to other similarly situated participants, (C) changes, after the date hereof, in Laws of general applicability or interpretations thereof by courts or Governmental Authorities, (D) changes, after the date hereof, in GAAP, applicable to the business or industry in which the Manager and the Manager Subsidiary, as applicable, operates generally, (E) the

 

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announcement or performance of the transactions contemplated by this Agreement or the Special Rights Agreement or (F) matters expressly requested by Parent or consented to by Parent); or (ii)  a material adverse effect on the enforceability of SLG’s, SLGOP’s or Manager Corp’s obligations under this Agreement or the Special Rights Agreement, as the case may be, or SLG’s, SLGOP’s or Manager Corp’s ability to perform its obligations under this Agreement or the Special Rights Agreement in a timely manner or to consummate the transactions contemplated by this Agreement or the Special Rights Agreement, as the case may be, without material delay.

 

“ OP Agreement ” means the Third Amended and Restated Agreement of Limited Partnership of the Operating Partnership, as amended.

 

“ OP Units ” means, collectively, the Class A Units, the Class B Units, the Class C Units and units of limited partnership of the Operating Partnership classified as LTIP Units.

 

“ Parent Material Adverse Effect ” means, with respect to Parent and the Operating Partnership, any development, occurrence, effect, event or change that, individually or taken together with all other developments, occurrences, effects, events or changes occurring prior thereto, has or is reasonably likely to have a material adverse effect on the enforceability of such party’s obligations under this Agreement or the Special Rights Agreement or on such party’s ability to perform its obligations under this Agreement or the Special Rights Agreement in a timely manner or to consummate the transactions contemplated by this Agreement or the Special Rights Agreement without material delay.

 

“ Permit ” means any permit, license, franchise, approval, consent, registration, clearance, variance, exemption, order, certificate or authorization by or of any Governmental Authority.

 

“ Permitted Encumbrances ” means (a) liens for Taxes not yet due and payable or, if due and payable, are being contested in good faith in appropriate proceedings, (b) mechanics’, workmen’s, repairmen’s, warehousemen’s, carriers’ and other statutory liens arising or incurred in the ordinary course of business in respect of Liabilities that will have been paid prior to the Closing or that are not yet due and payable or, if due and payable, are being contested in good faith in appropriate proceedings, (c) Encumbrances consisting of pledges or deposits made in connection with obligations under workers’ compensation laws, unemployment insurance or similar legislation, including liens of judgments thereunder which are not currently dischargeable, (d) Encumbrances over goods or equipment arising under the supplier’s standard retention of title arrangements or (e) Encumbrances constituted by existing credit facilities, finance or capital leases.

 

“ Person ” means any natural person, corporation, general partnership, limited partnership, limited or unlimited liability company, proprietorship, joint venture, other business organization, trust, union, association or Governmental Authority.

 

“ Plan ” means any employment, consulting, bonus, incentive compensation, deferred compensation, pension, profit sharing, retirement, stock purchase, stock option, stock ownership, stock appreciation rights, phantom stock, equity (or equity-based), leave of absence, layoff, vacation, day or dependent care, legal services, cafeteria, life, health, medical, dental, vision, welfare, accident, disability, workmen’s compensation or other insurance, severance, separation, termination, change of control, collective bargaining or other benefit plan, agreement, practice, policy or arrangement, whether written or oral, and whether or not subject to ERISA, including any “employee benefit plan” within the meaning of Section 3(3) of ERISA.

 

“ Pre-Closing Tax Period ” means any Tax period ending on or before the Closing Date.

 

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“ SEC ” means the U.S. Securities and Exchange Commission.

 

“ Securities Act ” means the Securities Act of 1933, as amended.

 

“ Securities Exchange Act ” means the Securities Exchange Act of 1934, as amended.

 

“ SLG Material Adverse Effect ” means, with respect to SLG, SLGOP and Manager Corp, any development, occurrence, effect, event or change that, individually or taken together with all other developments, occurrences, effects, events or changes occurring prior thereto, has or is reasonably likely to have a material adverse effect on the enforceability of such party’s obligations under this Agreement or the Special Rights Agreement or on such party’s ability to perform its obligations under this Agreement or the Special Rights Agreement in a timely manner or to consummate the transactions contemplated by this Agreement or the Special Rights Agreement without material delay.

 

“ Straddle Period ” means any Tax period beginning, but not ending, on or before the Closing Date.

 

“ Subsidiary ” means, with respect to any Person, any other Person (i) of which the first Person owns directly or indirectly 50% or more of the equity interest in the other Person, (ii) of which the first Person or any other Subsidiary of the first Person is a general partner or (iii) of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions with respect to the other Person are at the time owned by the first Person and/or one or more of the first Person’s Subsidiaries.

 

“ Tax ” means any tax, governmental fee or other like assessment or charge of any kind whatsoever (including withholding on amounts paid to or by any Person), whether federal, state, local, foreign or other, together with any interest, penalty, addition to tax or additional amount imposed by any Tax Authority and any Liability for any of the foregoing as transferee or successor.

 

“ Tax Authority ” means any Governmental Authority responsible for the imposition of any Tax.

 

“ Tax Return ” means any return, declaration, report, claim for refund or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

 

“ Tax Sharing Agreements ” means all existing or effective agreements or arrangements (whether or not written) binding on the Manager that provide for the allocation, apportionment, sharing or assignment of any Tax Liability or benefit, or the transfer or assignment of income, revenues, receipts, or gains for the purpose of determining any person’s Tax Liability (other than any indemnification agreement or arrangement pertaining to the sale or lease of assets or subsidiaries).

 

 

(b)            In addition, the following terms are defined on the pages of this Agreement indicated below:

 

401(k) Plan Transfer Amount		Section 5.4(a)
Agreement		Preamble
Balance Sheet		Section 3.6
Confidential Information		Section 5.6
Employee		Section 3.12(a)
Financial Statements		Section 3.6

 

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Fundamental Representations		Section 7.1(a)
Indemnity Amount		Section 7.4(a)
Individuals		Section 3.10(b)
Leased Real Property		Section 3.21(a)
Leases		Section 3.21(a)
Management Agreement		Recitals
Manager		Recitals
Manager Corp		Preamble
Manager Corp Consideration		Section 2.2(b)
Manager Corp Owned Manager Interests		Recitals
Manager Corp Transfer		Section 2.1(b)
Manager Disclosure Schedule		ARTICLE III
Manager Indemnified Parties		Section 7.3
Manager Owned Class B Units		Recitals
Manager Permits		Section 3.24
Manager Subsidiary		Section 3.1(c)
Operating Partnership		Preamble
Origination Agreement		Recitals
Parent		Preamble
Parent 401(k) Plan		Section 5.4(a)
Parent Deductible		Section 7.4(b)
Parent Indemnified Parties		Section 7.2
Post Closing Amount		Section 2.7
Qualifying Losses		Section 7.4(a)
Representatives		Section 5.6
Services Agreement		Recitals
SLG		Preamble
SLGOP		Preamble
SLGOP Consideration		Section 2.2(a)
SLGOP Deductible		Section 7.4(a)
SLGOP Owned Class B Units		Recitals
SLGOP Owned Manager Interests		Recitals
SLGOP Transfer		Section 2.1(a)
Special Rights Agreement		Recitals
Special Servicing Agreement		Recitals
Tax Loss		Section 6.3(a)
Tax Referee		Section 6.4
Transfers		Section 2.1(b)

 

(c)            For the purposes of this Agreement, except to the extent the context otherwise requires:

 

(i)             when a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference is to an Article or Section of, or an Exhibit or Schedule to, this Agreement;

 

(ii)            the table of contents and headings in this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement;

 

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(iii)           whenever the words “include,” “includes” or “including” (or similar terms) are used in this Agreement, they are deemed to be followed by the words “without limitation”;

 

(iv)           the words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement;

 

(v)            all terms defined in this Agreement have their defined meanings when used in any certificate or other document made or delivered pursuant hereto, unless otherwise defined therein;

 

(vi)           the definitions contained in this Agreement are applicable to the singular as well as the plural forms of those terms;

 

(vii)          if any action is to be taken by any party hereto pursuant to this Agreement on a day that is not a Business Day, such action shall be taken on the next Business Day following such day;

 

(viii)         references to a party are also to its permitted successors and assigns;

 

(ix)            the use of “or” is not intended to be exclusive unless expressly indicated otherwise;

 

(x)             “contract” includes any note, bond, mortgage, indenture, deed of trust, loan, credit agreement, franchise concession, contract, agreement, Permit, license, lease, purchase order, sales order, arrangement or other commitment, obligation or understanding, whether written or oral;

 

(xi)            “ordinary course of business” (or similar terms) shall be deemed followed by “consistent with past practice;”

 

(xii)           “assets” shall include “rights,” including rights under contracts;

 

(xiii)          “reasonable efforts” or similar terms shall not require the waiver of any rights under this Agreement; and

 

(xiv)         “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if.”

 

ARTICLE II

THE TRANSFERS; CLOSING

 

Section 2.1.             Transfers .  At the Closing, upon the terms and subject to the conditions of this Agreement:

 

(a)            SLGOP hereby transfers, assigns, conveys and delivers to the Operating Partnership, and the Operating Partnership hereby accepts from SLGOP, good and valid title, free and clear of all Encumbrances (other than Encumbrances arising under applicable federal and state securities

 

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Laws), to all of (i) the SLGOP Owned Manager Interests and (ii) the SLGOP Owned Class B Units (collectively, the “ SLGOP Transfer ”); and

 

(b)            Manager Corp hereby transfers, assigns, conveys and delivers to the Operating Partnership, and the Operating Partnership hereby accepts from Manager Corp, good and valid title, free and clear of all Encumbrances (other then Encumbrances arising under applicable federal and state securities Laws), to all of the Manager Corp Owned Manager Interests (the “ Manager Corp Transfer ” and, together with the SLGOP Transfer, the “ Transfers ”).

 

Section 2.2.             Consideration .

 

(a)            In consideration of the SLGOP Transfer, SLGOP’s entry into this Agreement and the Special Rights Agreement and other value and benefit to be provided by SLGOP hereunder and thereunder, Parent and the Operating Partnership shall at the Closing pay SLGOP an amount in cash equal to $10.00 (the “ SLGOP Consideration ” ) and shall take the other actions and enter into the other agreements required by this Agreement.

 

(b)            In consideration of the Manager Corp Transfer, Manager Corp’s entry into this Agreement and other value and benefit to be provided by Manager Corp hereunder, Parent and the Operating Partnership shall at the Closing pay Manager Corp an amount in cash equal to $10.00 (the “ Manager Corp Consideration ” ) and shall take the other actions and enter into the other agreements required by this Agreement.

 

(c)            Each of SLGOP and Manager Corp acknowledges and agrees that, notwithstanding any provision to the contrary in the OP Agreement or any other agreement or understanding among SLGOP or Manager Corp or any of their respective Subsidiaries or Affiliates, on the one hand, and Parent or the Operating Partnership or any of their respective Subsidiaries or Affiliates, on the other hand, the payment of the cash consideration set forth in Section 2.2(a)  and Section 2.2(b) , the entry by each of Parent and the Operating Partnership into this Agreement and, in the case of Parent, the Special Rights Agreement and other value and benefit to be provided by Parent and the Operating Partnership hereunder and thereunder constitute the only consideration payable in exchange for the SLGOP Transfer and the Manager Corp Transfer and that no other consideration is payable to SLGOP or Manager Corp in exchange for the SLGOP Transfer and the Manager Corp Transfer and in respect of any other actual, potential or perceived ownership interest in the Manager, the Operating Partnership or any of their respective Subsidiaries or Affiliates.

 

Section 2.3.             Closing .  The Closing shall be held at the offices of Clifford Chance US LLP, 31 West 52nd Street, New York, New York 10019, at 10:00 a.m. local time, on the date hereof.

 

Section 2.4.             Closing Deliveries by Parent .  At the Closing, Parent and/or the Operating Partnership, as applicable, will deliver or cause to be delivered to SLGOP and Manager Corp, as applicable:

 

(a)            to SLGOP, cash in an aggregate amount equal to the sum of (i) $1,737,158, which amount represents the netting of (x) certain accrued and unpaid bonuses of the Manager due to Parent and (y) certain consulting fees, management fees, special servicing fees and other expenses due to SLGOP or its Affiliate and (ii) the SLGOP Consideration;

 

(b)            to Manager Corp, cash in an aggregate amount equal to the Manager Corp Consideration;

 

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(c)            a duly executed counterpart of the Special Rights Agreement;

 

(d)            duly executed counterparts of the Special Servicing Agreement; and

 

(e)            such further instruments and documents as may be required to be delivered by Parent or the Operating Partnership pursuant to the terms of this Agreement or as may be reasonably requested by SLGOP in connection with the Closing.

 

Section 2.5.             Closing Deliveries by SLGOP and Manager Corp .  At the Closing, SLGOP and Manager Corp, as applicable, will deliver to Parent:

 

(a)            a duly executed assignment of each of the SLGOP Owned Manager Interests, the Manager Corp Owned Manager Interests and the SLGOP Owned Class B Units, as applicable, in each case in form and substance reasonably satisfactory to Parent;

 

(b)            duly executed counterparts of the Special Rights Agreement;

 

(c)            a duly executed counterpart of the Special Servicing Agreement; and

 

(d)            such further instruments and documents as may be required to be delivered by SLGOP and Manager Corp pursuant to the terms of this Agreement or as may be reasonably requested by Parent or the Operating Partnership in connection with the Closing.

 

Section 2.6.             Termination .  Immediately upon the Closing, each of the Origination Agreement and the Services Agreement shall automatically terminate and be of no further force and effect without any further action by any party thereto.  For the avoidance of doubt, it is acknowledged that no provisions set forth in these agreements shall have any further force of effect even if the terms of any of these agreements may be interpreted otherwise.

 

Section 2.7.             Class B Distributions .  The Operating Partnership shall have an obligation to pay to SLGOP an amount equal to the amount that would have been payable, if any, to SLGOP and the Manager in their capacities as holders of the SLGOP Owned Class B Units and the Manager Owned Class B Units under the terms of Section 5.01(C) of the OP Agreement (the “ Post Closing Amount ”) in respect of the quarter ended March 31, 2009 had this Agreement not been entered into.  Such Post Closing Amount shall be paid in the same manner and timing as distributions on Class B Units would normally be paid under the OP Agreement; provided , however , that if the Operating Partnership is, at the time a Post Closing Amount is due as set forth above, restricted from making distributions on Class B Units pursuant to an agreement existing as of the date hereof, the obligation to make a payment in respect of the Post Closing Amount, if any, will be deferred until such time that all such restrictions no longer exist.  No interest shall accrue with respect to such deferred payment.  SLGOP agrees that it, as the sole holder of Class B Units as of the date hereof (other than the Manager), waives any rights to receive any distributions in respect of the Class B Units in respect of any prior or future periods.  The holders of the SLGOP Owned Class B Units and the Manager Owned Class B Units and the Operating Partnership agree that they have no obligations to each other under the terms of Section 5.01(C) of the OP Agreement.

 

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ARTICLE III

 

REPRESENTATIONS AND WARRANTIES RELATING TO
SLGOP, MANAGER CORP AND THE MANAGER

 

Each of SLGOP and Manager Corp, jointly and severally, represents and warrants to Parent and the Operating Partnership that, except as set forth in the disclosure schedule delivered by SLGOP and Manager Corp to Parent and the Operating Partnership prior to the execution and delivery of this Agreement (the “ Manager Disclosure Schedule ”), as of the date hereof (except that with respect to the representations and warranties related to the Manager Subsidiary, all such representations and warranties are made only for the period from April 1, 2008 to and including the date hereof):

 

Section 3.1.             Organization and Qualification .

 

(a)            SLGOP is a limited partnership duly organized, validly existing and in good standing under the Laws of the State of Delaware and has all requisite power and authority to own, license, use, lease and operate its assets and properties (including the SLGOP Owned Manager Interests and the SLGOP Owned Class B Units) and to carry on its business as it is now being conducted.  SLGOP is not in default under any provision of its certificate of limited partnership or its limited partnership agreement.

 

(b)            Manager Corp is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware and has all requisite power and authority to own, license, use, lease and operate its assets and properties (including the Manager Corp Owned Manager Interests) and to carry on its business as it is now being conducted.  Manager Corp is not in default under any provision of its certificate of incorporation or bylaws.

 

(c)            The Manager is a limited liability company duly organized, validly existing and in good standing under the Laws of the State of Delaware and has all requisite power and authority to own, license, use, lease and operate its assets and properties (including the Manager Owned Class B Units) and to carry on its business as it is now being conducted.  First States Services Management LLC (the “ Manager Subsidiary ”) is a limited liability company duly organized, validly existing and in good standing under the Laws of the Commonwealth of Pennsylvania.  Each of the Manager and the Manager Subsidiary is duly qualified, licensed or admitted to do business and is in good standing in every jurisdiction in which such qualification, licensing or admission is necessary because of the nature of the property owned, leased or operated by it or the nature of the business conducted by it (each of which jurisdictions is listed in Section 3.1(c) of the Manager Disclosure Schedule ), except where the failure to be so qualified, licensed or admitted or in good standing would not reasonably be expected to have a Manager Material Adverse Effect.  Neither the Manager nor the Manager Subsidiary is in default under any provision of its certificate of formation or operating agreement.  SLGOP has delivered to Parent true, complete and correct copies of the certificate of formation, operating agreement, minute books and member ledgers of each of the Manager and the Manager Subsidiary as are in effect on the date hereof.

 

Section 3.2.             Authority; Non-Contravention; Approvals .

 

(a)            Each of SLGOP and Manager Corp has all requisite power and authority to execute and deliver this Agreement and, in the case of SLGOP, the Special Rights Agreement and to perform the transactions contemplated by this Agreement and, in the case of SLGOP, the Special Rights Agreement.  The execution and delivery of this Agreement and, in the case of SLGOP, the Special Rights Agreement and the performance by each of SLGOP and Manager Corp of the transactions contemplated by this Agreement and, in the case of SLGOP, the Special Rights Agreement has been approved by the

 

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general partner of SLGOP or the members and the board of managers of Manager Corp, as applicable, and no partnership or limited liability company, as applicable, or other proceedings on the part of SLGOP or Manager Corp are necessary to authorize the execution and delivery of this Agreement or, in the case of SLGOP, the Special Rights Agreement and the performance by SLGOP and Manager Corp of the transactions contemplated by this Agreement and, in the case of SLGOP, the Special Rights Agreement.

 

(b)            This Agreement has been, and upon its execution by SLGOP the Special Rights Agreement will be, duly and validly executed and delivered by SLGOP or Manager Corp, as applicable, and, assuming the due authorization, execution and delivery of this Agreement and, in the case of SLGOP, the Special Rights Agreement by each other party thereto, constitute, and upon their execution, this Agreement and, in the case of SLGOP, the Special Rights Agreement will constitute, legal, valid and binding obligations of SLGOP or Manager Corp, as applicable, enforceable against SLGOP or Manager Corp, as applicable, in accordance with their respective terms.

 

(c)            The execution and delivery of this Agreement and, in the case of SLGOP, the Special Rights Agreement by SLGOP and Manager Corp and the performance of the transactions contemplated by this Agreement and, in the case of SLGOP, the Special Rights Agreement by SLGOP and Manager Corp do not and will not (i) conflict with or result in a breach of any provision of the organizational documents of SLGOP, Manager Corp, the Manager or the Manager Subsidiary, (ii) result in a violation or breach of or constitute a default (or an event which, with or without notice or lapse of time or both, would constitute a default) under, or result in the termination, modification or cancellation of, or the loss of a benefit under or accelerate the performance required by, or result in a right of termination, modification, cancellation or acceleration under, the terms, conditions or provisions of any contract or other instrument of any kind to which SLGOP, Manager Corp, the Manager or the Manager Subsidiary is a party or by which any of their respective properties or assets may be bound or affected, or (iii) violate any order, writ, judgment, injunction, decree, statute, treaty, rule or regulation applicable to SLGOP, Manager Corp, the Manager or the Manager Subsidiary or any of their respective properties or assets, excluding from the foregoing clauses (ii) and (iii) such violations, breaches, defaults, terminations, modifications, cancellations, losses or accelerations that would not reasonably be expected to have a Manager Material Adverse Effect or SLG Material Adverse Effect, as the case may be.

 

(d)            No Governmental Consent is required to be obtained or made in connection with or as a result of the execution and delivery of this Agreement and, in the case of SLGOP, the Special Rights Agreement by SLGOP or Manager Corp, as applicable, or the performance by SLGOP or Manager Corp, as applicable, of the transactions contemplated by this Agreement and, in the case of SLGOP, the Special Rights Agreement or the consummation of the transactions contemplated by this Agreement and, in the case of SLGOP, the Special Rights Agreement.

 

Section 3.3.             The Manager Corp Owned Manager Interests, the SLGOP Owned Manager Interests, the SLGOP Owned Class B Units and the Manager Owned Class B Units .

 

(a)            As of the date hereof, (i) SLGOP is the lawful record and beneficial owner of the SLGOP Owned Manager Interests and the SLGOP Owned Class B Units, (ii) Manager Corp is the lawful record and beneficial owner of the Manager Corp Owned Manager Interests and (iii) the Manager is the lawful record and beneficial owner of the Manager Owned Class B Units, in each case free and clear of all Encumbrances whatsoever, other than Encumbrances arising under this Agreement or the Special Rights Agreement or restrictions on transfer imposed under applicable federal and state securities Laws or, with respect to the Class B Units only, the OP Agreement.  The Manager Corp Owned Manager Interests, the SLGOP Owned Manager Interests, the SLGOP Owned Class B Units and the Manager Owned Class B Units have been duly authorized and are validly issued, fully-paid and non-assessable and have been issued in accordance with all applicable federal and state securities Laws.

 

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(b)            Upon the conveyance of the SLGOP Owned Manager Interests and the SLGOP Owned Class B Units by SLGOP, in each case in the manner contemplated under Article II , SLGOP will transfer, assign, convey and deliver beneficial and legal title to the Operating Partnership of all of the SLGOP Owned Manager Interests and the SLGOP Owned Class B Units free and clear of all Encumbrances, except for Encumbrances created by the Operating Partnership, the OP Agreement or restrictions on transfer imposed under federal and state securities Laws.

 

(c)            Upon the conveyance of the Manager Corp Owned Manager Interests by Manager Corp in the manner contemplated under Article II , Manager Corp will transfer, assign, convey and deliver beneficial and legal title to the Operating Partnership of all of the Manager Corp Owned Manager Interests free and clear of all Encumbrances, except for Encumbrances created by the Operating Partnership, the OP Agreement or restrictions on transfer imposed under federal and state securities Laws.

 

(d)            There are no outstanding options, warrants or other rights of any kind to acquire any membership or other interest in the Manager or the Manager Subsidiary or securities convertible into or exchangeable for, or which otherwise confer on the holder thereof any right to acquire any such interests, nor is the Manager or the Manager Subsidiary committed to issue any such option, warrant, right or security.

 

Section 3.4.             Capitalization .  The SLGOP Owned Manager Interests and the Manager Corp Owned Manager Interests constitute all of the issued and outstanding membership interests in the Manager.  The Manager has no other outstanding membership or other equity interests.  No Person other than SLGOP and Manager Corp has any right to participate in the revenues, profits, control or administration of the Manager.

 

Section 3.5.             Subsidiaries and Equity Investments .  The Manager has no Subsidiaries other than the Manager Subsidiary and does not have, directly or indirectly, any equity interest in any other Person.  The Manager owns all the outstanding limited liability company interests in the Manager Subsidiary free and clear of all Encumbrances.

 

Section 3.6.             Financial Statements .  Section 3.6 of the Manager Disclosure Schedule sets forth the (i) unaudited balance sheet of the Manager as of each of March 31, 2009 (the “ Balance Sheet ”) and  December 31, 2008  and (ii) unaudited statement of income for each of the years ended December 31, 2008, 2007, 2006 and 2005 (collectively, the “ Financial Statements ”).  The Financial Statements were prepared in accordance with GAAP on a basis consistent with prior periods and fairly present in all material respects the financial position and results of operations of Manager as of the dates and for the respective periods presented (subject to the absence of  footnote disclosures otherwise required by GAAP).

 

Section 3.7.             Absence of Undisclosed Liabilities .  There are no Liabilities of the Manager or the Manager Subsidiary of any nature, whether accrued, contingent or otherwise, except for Liabilities (a) reflected in the Financial Statements, (b) that were incurred since the date of the Balance Sheet and were normal and recurring expenses incurred in the ordinary course of business that would not reasonably be expected to have a Manager Material Adverse Effect, (c) that have been discharged or paid in full prior to the date hereof or (d) that derive from actions, inactions or omissions that any of the Manager Indemnified Parties (as defined in Section 7.3) would be entitled to indemnification for under Section 7.3(c).

 

Section 3.8.             Intentionally Omitted .

 

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Section 3.9.             Books and Records .  The minute books and other similar records of the Manager and the Manager Subsidiary as made available to Parent prior to the execution of this Agreement contain a true and complete record, in all material respects, of all actions taken at all meetings and by written consents in lieu of meetings of the members, board of managers, and committees of the board of managers of the Manager and the Manager Subsidiary.

 

Section 3.10.           Tax Matters .

 

(a)            All Tax Returns required to be filed with any Tax Authority or delivered to any Person by the Manager or the Manager Subsidiary have been timely filed or delivered in accordance with applicable Law, and all such Tax Returns were true, correct and complete.  No claim has been made by a Tax Authority in a jurisdiction where Tax Returns are not filed by the Manager or the Manager Subsidiary that the Manager or the Manager Subsidiary is or may be subject to taxation by that jurisdiction.

 

(b)            At all times since the organization of the Manager (i) all of the issued and outstanding membership interests of the Manager have been owned by SLGOP and/or Manager Corp or were owned by the individuals listed on Section 3.10(b) of the Manager Disclosure Schedule (the “ Individuals ”), (ii) the Manager has been treated as a partnership for U.S. federal income Tax and all state and local income and franchise Tax purposes and (iii) no election has been made by the Manager or any other Person to treat the Manager as other than a partnership for such purposes.  At all times since the organization of the Manager Subsidiary (i) the Manager Subsidiary has been treated as a “disregarded entity” within the meaning of U.S. Treasury Regulation Section 301.7701-3 for U.S. federal income Tax and all state and local income or franchise Tax purposes, and (ii) no election has been made by the Manager Subsidiary or any other person to treat the Manager Subsidiary as other than a “disregarded entity” for such purposes.  Except for the interests in the Manager Subsidiary owned by the Manager, none of the Manager or the Manager Subsidiary owns securities (A) possessing more than 10% of the total voting power of the outstanding securities of any one issuer or (B) having a value of more than 10% of the total value of the outstanding securities of any issuer.

 

(c)            No audit or other examination by any Tax Authority that relates to any Taxes of the Manager or the Manager Subsidiary is currently in progress (and to the Knowledge of the Manager, no such audit or examination is pending or has been threatened), and neither the Manager nor the Manager Subsidiary has received any notification from any Tax Authority relating to any issue that could affect any Liability for Taxes of the Manager or the Manager Subsidiary.

 

(d)            No agreement or waiver extending the statue of limitations relating to the payment, assessment or collection of any Taxes of the Manager or the Manager Subsidiary has been entered into or requested, and no contest that relates to any Taxes of the Manager or the Manager Subsidiary exists.

 

(e)            There are no agreements in effect between the Manager or the Manager Subsidiary and any Person (including, but not limited to, any Tax Sharing Agreements) or any other statutory, judicial or contractual agreements or provisions under which the Manager or the Manager Subsidiary could be liable for any Taxes of any Person or claims related to any Taxes of any Person (including, but not limited to SLGOP and Manager Corp).  None of the Manager or the Manager Subsidiary has (i) requested, received or been the subject of any written ruling of any Tax Authority relating to Taxes of the Manager or the Manager Subsidiary and has entered into any written agreement with a Tax Authority relating to Taxes of the Manager or the Manager Subsidiary, (ii) engaged in any transaction of which it has made (or intends to make or was required to make) any disclosure to any Tax Authority to avoid the imposition of any penalties, interest or addition to Taxes of the Manager or the

 

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Manager Subsidiary, or (iii) filed any Tax Return of the Manager or the Manager Subsidiary containing any position that is, or would be, subject to penalties under Code Section 6662 (or any similar provision of state, local or foreign Law).

 

(f)             None of the Manager or the Manager Subsidiary has changed any method of accounting (or requested any change in any method of accounting) that related to any Taxes of the Manager or the Manager Subsidiary as a separate entity, and is not required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) “closing agreement” as described in Code Section 7121 (or any similar provision of state, local or foreign Law) executed on or before the Closing Date, (ii) installment sale or open transaction made on or prior to the Closing Date, or (iii) prepaid amount on or prior to the Closing Date.

 

(g)            None of SLGOP or Manager Corp expects any Governmental Authority to assess any additional Taxes of the Manager or the Manager Subsidiary for any period for which Tax Returns have been or should have been filed.  There is no dispute or claim concerning any Tax Liability of the Manager or the