| Item 1.01. | Entry into a Material Definitive Agreement. |
Debt Agreements
2031 and 2032 Senior Notes
On the Closing Date, the Company, Portfolio Holdings, as issuer, and
U.S. Bank Trust Company, National Association (as successor in interest to U.S. Bank National Association), as trustee (the “Trustee”),
executed a third supplemental indenture (the “Supplemental Indenture”) to the Base Indenture (as defined below) pursuant to
which (a) the Company assumed the obligations of Old SAFE as the guarantor under Portfolio Holdings’ outstanding (i) $400,000,000
in aggregate principal amount of 2.800% Senior Notes due June 2031 (the “2031 Notes”) and (ii) $350,000,000 in aggregate principal
amount of 2.850% Senior Notes due January 2032 (the “2032 Notes” and, together with the 2031 Notes, the “Notes”),
and (b) the Base Indenture was amended to make an immaterial change resulting from the Conversion and the merger of Safehold OP GenPar
LLC into New SAFE. The Notes were previously issued pursuant to an indenture, dated as of May 7, 2021 (the “Base Indenture”),
by and among Portfolio Holdings (then known as Safehold Operating Partnership LP), Old SAFE and the Trustee, and, with respect to the
2031 Notes, a first supplemental indenture, dated as of May 7, 2021, and, with respect to the 2032 Notes, a second supplemental indenture,
dated as of November 18, 2021.
The Base Indenture contains various restrictive covenants, including
the requirements to maintain a certain percentage of total unencumbered assets by Portfolio Holdings.
The foregoing summary of the Supplemental Indenture does not purport
to be complete and is qualified in its entirety by reference to the text of the Supplemental Indenture, which is attached hereto as Exhibit
4.5 and is incorporated herein by reference.
Master Note Purchase Agreement
In connection with the Merger, the Company
entered into an assumption agreement whereby the Company assumed the obligations of Old SAFE as the parent guarantor under that certain
Master Note Purchase Agreement, dated as of January 27, 2022 (the “Note Purchase Agreement”), among Portfolio Holdings (then
known as Safehold Operating Partnership LP), as issuer, Old SAFE, as parent guarantor, and the purchasers named therein, providing for
a private placement of $475 million aggregate principal amount of Portfolio Holdings’ 3.98% Series 2022A Senior Notes due February
2052 (the “3.98% 2052 Notes”).
Portfolio Holdings may prepay at any time
all, or from time to time any part of, the 3.98% 2052 Notes, in an amount not less than 5% of the aggregate principal amount of the 3.98%
2052 Notes then outstanding in the case of a partial prepayment, at 100% of the principal amount so prepaid plus a Make-Whole Amount (as
defined in the Note Purchase Agreement) together with accrued interest to the prepayment date.
The Note Purchase Agreement contains various
restrictive covenants, including requirements to maintain a certain percentage of total unencumbered assets by Portfolio Holdings. The
Note Purchase Agreement also contains a “most favored lender” provision whereby it will be deemed to automatically incorporate
by reference additional financial covenants and negative covenants to the extent such covenants are incorporated into Portfolio Holdings’
and/or the Company’s existing or future material credit facilities and to the extent such covenants are more favorable to the lenders
under such material credit facilities than the covenants contained in the Note Purchase Agreement. Subject to the terms of the Note Purchase
Agreement and the 3.98% 2052 Notes, upon certain events of default, including, but not limited to, (i) a default in the payment of any
principal, Make-Whole Amount or interest under the 3.98% 2052 Notes, and (ii) a default in the payment of certain other indebtedness of
Portfolio Holdings, the Company or their subsidiaries, all the 3.98% 2052 Notes then outstanding will become due and payable, either automatically
or at the option of the Purchasers, depending on the event of default.
Portfolio Holdings’ obligations under
the 3.98% 2052 Notes are fully and unconditionally guaranteed by the Company.
The foregoing summary of the Note Purchase
Agreement does not purport to be complete and is qualified in its entirety by reference to the text of the Note Purchase Agreement, a
copy of which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
Credit Agreement, dated as of March 31, 2021, as amended
In connection with the Merger, the Company
assumed the obligations of Old SAFE as guarantor under that certain credit agreement, dated as of March 31, 2021 (the “Original
2021 Credit Agreement”), among Portfolio Holdings (then known as Safehold Operating Partnership LP), as borrower, Old SAFE, as guarantor,
JPMorgan Chase Bank, N.A., as administrative agent, the lenders, agents and arrangers party thereto and JPMorgan Chase Bank, N.A., Bank
of America, N.A., and Goldman Sachs Bank USA, as letter of credit issuers, as amended by that certain first amendment to the Original
2021 Credit Agreement, dated December 15, 2021 (the “First Amendment to 2021 Credit Agreement”), that certain second amendment
to the Original 2021 Credit Agreement, dated January 9, 2023 (the “Second Amendment to 2021 Credit Agreement,” and, together
with the Original 2021 Credit Agreement, the First Amendment to 2021 Credit Agreement and as further amended, supplemented or otherwise
modified from time to time, the “2021 Credit Agreement”).
The 2021 Credit Agreement provides for $1.35
billion of revolving loan commitments with a maturity date of March 31, 2024, with two one-year extension options. The 2021 Credit Agreement
provides that the revolving loans will bear interest, at Portfolio Holdings’ option, at the rate of (x) the term SOFR rate plus
a spread adjustment of 0.10% per annum plus an applicable margin ranging from 0.900% to 1.450% per annum depending on Portfolio Holdings’
credit rating, (y) the daily simple SOFR rate plus a spread adjustment of 0.10% per annum plus an applicable margin ranging from 0.900%
to 1.450% per annum depending on the Portfolio Holdings’ credit rating or (z) the base rate plus an applicable margin ranging from
0.000% to 0.450% per annum depending on Portfolio Holdings’ credit rating.
The Company is required to comply with the
following financial covenants under the 2021 Credit Agreement:
| · | Ratio of Consolidated EBITDA to annualized fixed charges not less than 1.15:1.00; and |
| · | Ratio of total unencumbered assets to total unsecured debt not less than 1.33:1.00. |
The 2021 Credit Agreement contains customary
affirmative and negative covenants that, among other things, limit Portfolio Holdings’ ability to (or permit certain subsidiaries
to), subject to various exceptions and limitations, incur indebtedness and liens, make investments, pay dividends and enter into certain
transactions. A breach of such covenants or any other event of default would entitle the administrative agent to accelerate Portfolio
Holdings’ debt obligations.
Pursuant to the 2021 Credit Agreement, the
Company gave a guaranty pursuant to which it has absolutely and unconditionally guaranteed the payment and performance of the obligations
of Portfolio Holdings under the 2021 Credit Agreement as and when due and payable.
The foregoing summary of the 2021 Credit Agreement
does not purport to be complete and is qualified in its entirety by reference to (i) the text of the Original 2021 Credit Agreement, a
copy of which is attached hereto as Exhibit 10.3, (ii) the text of the First Amendment to 2021 Credit Agreement, a copy of which is attached
hereto as Exhibit 10.4, and (iii) the text of the Second Amendment to 2021 Credit Agreement, a copy of which is attached hereto as Exhibit
10.5, each of which are incorporated herein by reference.
Credit Agreement, dated as of January 9, 2023
In connection with the Merger, the Company
assumed the obligations of Old SAFE as guarantor under that certain credit agreement, dated as of January 9, 2023 (as amended, supplemented
or otherwise modified from time to time, the “2023 Credit Agreement”), among Portfolio Holdings (then known as Safehold Operating
Partnership LP), as borrower, Old SAFE, as guarantor, JPMorgan Chase Bank, N.A., as administrative agent, and certain other financial
institutions party thereto as lenders, agents, arrangers and bookrunners providing for $500 million of revolving loan commitments available
for working capital and general corporate purposes with a maturity date of July 31, 2025.
The 2023 Credit Agreement provides for $500
million of revolving loan commitments with a maturity date of July 31, 2025. The 2023 Credit Agreement also include an accordion feature
to increase the revolving loan commitments or add one or more tranches of term loans up to an aggregate amount of $200 million, subject
to obtaining lender commitments and the satisfaction of certain customary conditions. The 2023 Credit Agreement provides that the revolving
loans will bear interest, at Portfolio Holdings’ option, at the rate of (x) the term SOFR rate plus a spread adjustment of 0.10%
per annum plus an applicable margin ranging from 0.900% to 1.450% per annum depending on Portfolio Holdings’ credit rating, (y)
the daily simple SOFR rate plus a spread adjustment of 0.10% per annum plus an applicable margin ranging from 0.900% to 1.450% per annum
depending on the Portfolio Holdings’ credit rating or (z) the base rate plus an applicable margin ranging from 0.000% to 0.450%
per annum depending on Portfolio Holdings’ credit rating.
The Company is required to comply with the
following financial covenants under the 2023 Credit Agreement:
| · | Ratio of Consolidated EBITDA to annualized fixed charges not less than 1.15:1.00; and |
| · | Ratio of total unencumbered assets to total unsecured debt not less than 1.33:1.00. |
The 2023 Credit Agreement contains customary
affirmative and negative covenants that, among other things, limit Portfolio Holdings’ ability to (or permit certain subsidiaries
to), subject to various exceptions and limitations, incur indebtedness and liens, make investments, pay dividends and enter into certain
transactions. A breach of such covenants or any other event of default would entitle the administrative agent to accelerate Portfolio
Holdings’ debt obligations.
Pursuant to the 2023 Credit Agreement, the
Company gave a guaranty pursuant to which it has absolutely and unconditionally guaranteed the payment and performance of the obligations
of Portfolio Holdings under the 2023 Credit Agreement as and when due and payable.
The foregoing summary of the 2023 Credit Agreement
does not purport to be complete and is qualified in its entirety by reference to the text of the 2023 Credit Agreement, a copy of which
is attached hereto as Exhibit 10.6 and is incorporated herein by reference.
Loan Agreement, dated as of March 30, 2017
The Company is a guarantor under that certain
loan agreement, dated March 30, 2017 (the “Loan Agreement”), among Barclays Bank PLC, JPMorgan Chase Bank, National Association
and Bank of America, N.A., Old SAFE and the Old SAFE subsidiaries, which became subsidiaries of the Company in connection with the Merger,
named therein as borrower, under which the borrowers borrowed $227 million, secured by first mortgage of analogous liens on certain properties.
The loan is generally non-recourse to the borrowers except as described herein. The loan bears interest at an effective annual rate of
3.795% and requires interest-only payments until October 2025, at which time all revenue available from the collateral will be applied
in accordance with an order of priorities as set forth in the Loan Agreement unless the borrowers deposit $12.0 million of cash collateral
with the lenders or obtain a letter of credit in such amount.
If the borrowers have not repaid the loan on or before
April 6, 2027 (the “anticipated repayment date”), the interest rate will be increased to the greater of (i) 6.795%, (ii) the
then current one year treasury note rate plus 3.00% and (iii) the then current one year treasury swap rate plus 3.00% (the “Adjusted
Interest Rate”). In addition, if the borrowers have not repaid the loan on or before the anticipated repayment date, all revenue
available from the collateral after the anticipated repayment date will be applied in accordance with an order of priorities set forth
in the Loan Agreement, including to fund certain reserves, to the extent required under the Loan Agreement, for the benefit of the lenders
under the loan, payment of interest at an annual rate of 3.795% and other amounts due to the lenders with any remaining excess funds being
used to pay down the loan. Interest not paid at the Adjusted Interest Rate shall itself accrue at the Adjusted Interest Rate. The final
maturity date of the initial portfolio financing is April 6, 2028. The Loan Agreement is collateralized by seven ground leases and one
master lease (covering the accounts of five properties).
The loan will become fully recourse to the
Company to the extent of certain losses incurred by the lenders under the loan. In addition, the loan is fully recourse to the Company
if (i) any single purpose entity representation, warranty or covenant contained in the Loan Agreement is violated or breached which results
in the substantive consolidation of a borrower with any other person, (ii) in certain circumstances, a borrower fails to obtain the lenders’
prior written consent to any voluntary transfer of a material portion of a property or voluntary act that results in a change in the ownership
of a borrower, (iii) the occurrence of a voluntary or certain involuntary bankruptcy proceedings, or (iv) a certain ground lease is terminated,
cancelled or ceases to exist (however, the Company’s full recourse liability with respect to this clause (iv) is limited to 120%
of the loan amount allocated to such property together with lenders’ fees, costs and expenses in connection therewith). Under the
Loan Agreement, the Company has provided a limited recourse guaranty and environmental indemnity in favor of the lenders.
The Loan Agreement contains customary events
of default, certain of which are subject to notice and cure periods, the occurrence of which would entitle the lenders thereunder to accelerate
the borrower’s debt obligations.
The foregoing summary of the Loan Agreement
does not purport to be complete and is qualified in its entirety by reference to the text of the Loan Agreement, a copy of which is attached
hereto as Exhibit 10.7 and is incorporated herein by reference.
MSD Stockholder’s Agreement
As previously disclosed, on August 10, 2022,
the Company (then known as iStar Inc.), Old SAFE and MSD Partners, L.P. (“MSD Partners”) entered into a stock purchase agreement
pursuant to which MSD Partners agreed to purchase 5,405,406 shares of Old SAFE Common Stock from the Company for an aggregate purchase
price of $200,000,022.00, or $37.00 per share, payable in cash (the “MSD Stock Purchase”). MSD Partners’ rights and
obligations under the stock purchase agreement were subsequently assigned to certain of its affiliates. In connection with the closing
of the MSD Stock Purchase, the Company and the affiliates of MSD Partners entered into a stockholder’s agreement (the “MSD
Stockholder’s Agreement”), which became effective at the Merger Effective Time (as defined below).
The MSD Stockholder’s Agreement provides
the affiliates of MSD Partners with a top-up right to purchase common stock of the Company following certain new issuances of common stock
by the Company. In respect of a new issuance, the affiliates of MSD Partners will have the right to purchase a number of shares of the
Company’s common stock equal to its proportionate share of the new issuance, based on the MSD Partners affiliates’ then current
percentage ownership of the Company’s common stock. The MSD Partners affiliates will pay the same price to the Company as third
parties paid in the new issuance. New issuances pursuant to the Company’s equity compensation plans are excluded from the MSD Partners
affiliates’ top-up right.
The MSD Stockholder’s Agreement prohibits
the MSD Partners affiliates from transferring any of the Company’s common stock it acquires in the MSD Stock Purchase on or before
September 30, 2023 without the Company’s prior consent, not to be unreasonably withheld. Certain transfers to affiliates and bona
fide pledges are excluded.
The MSD Stockholder’s Agreement also
provides that (i) the affiliates of MSD Partners will be subject to certain standstill restrictions and (ii) the affiliates of MSD Partners
will have the right to designate an observer to the Company’s board of directors (the “Board”), in each case, until
such time as MSD Partners and its affiliates own less than 5.0% of the Company’s outstanding common stock, as calculated in accordance
with the MSD Stockholder’s Agreement.
The foregoing description of the MSD Stockholder’s
Agreement does not purport to be complete and is qualified in its entirety by the full text of the MSD Stockholder’s Agreement,
which is attached hereto as Exhibit 10.8 and is incorporated herein by reference.
MSD Registration Rights Agreement
In connection with the closing of the MSD Stock Purchase, on March
31, 2023, the Company and affiliates of MSD Partners entered into a registration rights agreement (the “MSD Registration Rights
Agreement”), which became effective at the Merger Effective Time.
The MSD Registration Rights Agreement obligates the Company to file
a shelf registration statement to register the MSD Partners affiliates’ shares of New SAFE Common Stock (as defined below) and other
“registrable shares”, as defined in the agreement, for resale in accordance with distribution methods selected by the affiliates
of MSD Partners which may include underwritten public offerings. SAFE will be required to reasonably cooperate with the affiliates of
MSD Partners in connection with any underwritten offerings, block trades and bought deals. The affiliates of MSD Partners will also have
piggyback registration rights.
The MSD Registration Rights Agreement contains customary suspension
provisions and restrictions on sales at certain times. The Company also agreed to provide customary indemnification and contribution to
the affiliates of MSD Partners.
The foregoing description of the MSD Registration Rights Agreement
does not purport to be complete and is qualified in its entirety by the full text of the MSD Registration Rights Agreement, which is attached
hereto as Exhibit 10.9 and is incorporated herein by reference.
Separation and Distribution Agreement
On March 31, 2023, immediately prior to the
closing of the Merger, the Company (then known as iStar Inc.) completed a series of reorganization and separation transactions (collectively,
the “Spin-Off”), resulting in the spin-off of its remaining legacy assets and certain other assets through a separation and
distribution agreement (the “Separation and Distribution Agreement”), dated as of March 31, 2023, by and between the Company
and Star Holdings, a Maryland statutory trust (“SpinCo”).
The Separation and Distribution Agreement
sets forth, among other things, SpinCo’s agreements with the Company regarding the principal transactions necessary to separate
SpinCo from the Company. It also sets forth other agreements that govern certain aspects of SpinCo’s relationship with the Company
after the Spin-Off date.
Transfer of Assets and Assumption of Liabilities
The Separation and Distribution Agreement identifies the assets to
be transferred, the liabilities to be assumed and the contracts to be assigned to each of SpinCo and the Company as part of the separation
of the two companies, and it provides for when and how these transfers, assumptions and assignments will occur. In particular, the Separation
and Distribution Agreement provides, among other things, that subject to the terms and conditions contained therein certain assets related
to SpinCo’s business will be retained by SpinCo or one of SpinCo’s subsidiaries or transferred to SpinCo or one of SpinCo’s
subsidiaries, including 13,522,651 shares of Old SAFE Common Stock, which represents 13,522,651 shares of New SAFE Common Stock following
the closing of the Merger, and certain liabilities related to SpinCo’s businesses or the SpinCo assets will be retained by or transferred
to SpinCo or one of SpinCo’s subsidiaries.
Cash Assets
The Separation and Distribution Agreement provides that, at or prior
to the Spin-Off, the Company will contribute at least $50.0 million in cash to SpinCo, and, after the Spin-Off, will promptly pay to SpinCo
any cash proceeds in respect of asset sales occurring prior to the Spin-Off date that generate proceeds in excess of amounts needed for
the Company to retire its unsecured senior notes and cash out its preferred stock in connection with the Merger and pay other liabilities.
Release
of Claims
SpinCo agreed to release and discharge the Company, its subsidiaries
and all persons who at any time prior to the distribution were stockholders, directors, officers, agents or employees thereof or of any
transferred entity from the SpinCo liabilities, all liabilities arising from or in connection with the transactions and activities to
implement the Spin-Off and all liabilities arising from or in connection with actions, inactions, events, omissions, conditions, facts
or circumstances occurring or existing prior to the distribution, in each case, relating to, arising out of or resulting from the transferred
business, the SpinCo assets and SpinCo liabilities. The Company agreed to release and discharge SpinCo, SpinCo’s subsidiaries, and
all persons who at any time prior to the distribution were stockholders, directors, officers, agents or employees thereof from all Company
liabilities and all liabilities arising from or in connection with actions, inactions, events, omissions, conditions, facts or circumstances
occurring or existing prior to the distribution, in each case, relating to, arising out of or resulting from the Company’s business,
Company assets and Company liabilities. The release described above will not include certain specified liabilities, including without
limitation liabilities arising out of the agreements among the parties with respect to the Spin-Off, liabilities allocated pursuant to
such agreements and liabilities in connection with any untrue or alleged untrue statement of material fact from disclosure documents,
among others.
Insurance
The Separation and Distribution Agreement provides that, at or after
the effective time of the Spin-Off, the Company will be entitled to terminate coverage under its existing insurance policies with respect
to the SpinCo assets that it previously owned and the SpinCo liabilities to which it previously was subject. The Separation and Distribution
Agreement further provides that SpinCo will cause the SpinCo assets and SpinCo liabilities to be covered by existing or new insurance
policies of SpinCo. The Separation and Distribution Agreement also contains procedures for asserting claims for losses arising prior to
the separation and the Spin-Off under the policies that covered the property in question at the applicable time.
Non-Solicitation
Pursuant to the Separation and Distribution Agreement, for a period
of two years after the closing of the Spin-Off, neither SpinCo nor any of SpinCo’s subsidiaries may, directly or indirectly, solicit
for employment or employ or cause to leave the employ of the Company or any of its subsidiaries any employee of the Company or any of
its subsidiaries with a title of Vice President or higher, subject to customary exceptions.
Segregation
of Accounts
The Separation and Distribution Agreement provides that SpinCo and
the Company will use commercially reasonable efforts to separate and de-link any common bank or brokerage accounts between them, and any
outstanding checks issued or payments initiated prior to the effective time of the Spin-Off will be honored after the effective time of
the Spin-Off by the party then owning the account on which the check is drawn or the payment was initiated.
The foregoing description of the Separation and Distribution Agreement
does not purport to be complete and is qualified in its entirety by the full text of the Separation and Distribution Agreement, which
is attached hereto as Exhibit 10.10 and is incorporated herein by reference.
SpinCo Registration Rights Agreement
In connection with the Spin-Off, on March 31, 2023, the Company and
SpinCo entered into a Registration Rights Agreement (the “Registration Rights Agreement”). Pursuant to the Registration Rights
Agreement, the Company is required to file within seven months following the consummation of the Merger a shelf registration statement
covering the Registrable Shares (as defined in the registration rights agreement) owned by SpinCo (and its permitted assigns) and keep
such shelf registration statement effective so long as SpinCo (and its permitted assigns) own Registrable Shares. In addition, SpinCo
(and its permitted assigns) will be able to cause the Company to undertake one demand registration (including pursuant to an underwritten
take down). The registration rights agreement will also grant SpinCo certain customary piggyback registration rights.
The foregoing description of the Registration Rights Agreement does
not purport to be complete and is qualified in its entirety by the full text of the Registration Rights Agreement, which is attached hereto
as Exhibit 10.11 and is incorporated herein by reference.
SpinCo Management Agreement
In connection with the Spin-Off, on March 31, 2023, Safehold Management
Services Inc., a Delaware corporation (“SpinCo manager”) (a subsidiary of the Company) and SpinCo entered into a management
agreement (the “SpinCo Management Agreement”) pursuant to which SpinCo will be externally managed by SpinCo manager.
Pursuant to the SpinCo Management Agreement SpinCo manager will provide
SpinCo with a management team and support personnel.
The SpinCo Management Agreement requires the SpinCo manager to manage
SpinCo’s assets and its subsidiaries’ day-to-day operations in accordance with the SpinCo Management Agreement and subject
to the supervision of SpinCo’s board of trustees. The SpinCo manager will have only such functions and authority as SpinCo may delegate
to it. The SpinCo Management Agreement delineates a non-exclusive list of such functions and authorities. Unless otherwise agreed by SpinCo’s
board of trustees and the SpinCo manager or as otherwise in connection with the ordinary course management and operation of SpinCo’s
assets, the SpinCo manager will not be responsible for assisting SpinCo in the acquisition, purchase or origination of additional assets.
SpinCo will pay the SpinCo manager an annual management fee fixed at
$25.0 million, $15.0 million, $10.0 million and $5.0 million in each of the first four annual terms of the agreement, and 2.0% of the
gross book value of SpinCo’s assets thereafter, excluding the shares of New SAFE Common Stock owned by SpinCo. The management fee
is payable in cash quarterly, in arrears. If SpinCo does not have sufficient net cash proceeds on hand from sales of its assets or other
available sources to pay the management fee in full when due, SpinCo may defer payment of the shortfall amount until it has sufficient
net proceeds to cover such shortfall in full; provided that in no event may such shortfall in respect of any fiscal quarter remain
unpaid by the 12 month anniversary of the original due date.
In general, SpinCo will pay its own operating expenses, including the
costs of asset-level consultants. SpinCo will not reimburse the SpinCo manager or its affiliates for the compensation paid to its personnel
except for the compensation costs paid to up to two accounting personnel who will be dedicated to performing services for SpinCo, whose
compensation will be subject to the reasonable approval of our independent trustees. In addition, the SpinCo manager will be solely responsible
for any portion of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses
attributable to the personnel of the SpinCo manager and its affiliates required for SpinCo’s operations.
Pursuant to the terms of the SpinCo Management Agreement, the SpinCo
manager is required to provide SpinCo with a management team, including a chief executive officer, a chief financial officer and a chief
compliance officer, along with support personnel, to provide the management services to be provided by the SpinCo manager to SpinCo. None
of the SpinCo manager or its affiliates will be obligated to dedicate any of its officers or employees exclusively to SpinCo.
The SpinCo Management Agreement has an initial one-year term and will
be automatically renewed for successive one-year terms each anniversary date thereafter unless previously terminated as described below.
The SpinCo management agreement may be terminated by SpinCo without cause by not less than one hundred eighty days’ written notice
to the SpinCo manager upon the affirmative vote of at least two-thirds of SpinCo’s independent directors, provided, however, that
if the date of termination occurs prior to the fourth anniversary of the Spin-Off, the termination will be subject to payment of the applicable
termination fee to the SpinCo manager. SpinCo may also terminate the SpinCo management agreement at any time, including during the initial
term, with 30 days’ prior written notice from SpinCo’s board of trustees for “cause,” as defined in the SpinCo
Management Agreement.
In the event of a termination without cause by SpinCo prior to the
fourth anniversary of the Spin-Off, SpinCo will pay the SpinCo manager a termination fee of $50.0 million minus the aggregate amount of
management fees actually paid to the SpinCo manager prior to the termination date. However, if SpinCo has completed the liquidation of
its assets on or before the termination date, the termination fee will consist of any portion of the annual management fee that remained
unpaid for the remainder of the then current annual term plus, if the termination date occurs on or before the third anniversary of the
Spin-Off, the amount of the management fee that would have been payable for the next succeeding annual term, or if the termination date
occurs after the third anniversary of the Spin-Off, zero.
In the event of a termination by the Company based on a reduction in
the amount of SpinCo’s consolidated assets below designated thresholds, SpinCo will pay the SpinCo manager a termination fee of
$30.0 million if the termination occurs in the first year, $15.0 million if the termination occurs in the second year and $5.0 million
if the termination occurs in the third year, in each case, plus the balance of any unpaid portion of the annual management fee for the
applicable year.
The foregoing description of the SpinCo Management Agreement does not
purport to be complete and is qualified in its entirety by the full text of the SpinCo Management Agreement, which is attached hereto
as Exhibit 10.12 and is incorporated herein by reference.
SpinCo Governance Agreement
In connection
with the Spin-Off, on March 31, 2023, the Company and SpinCo entered into a governance agreement (the “Governance Agreement”)
in order to establish various arrangements and restrictions with respect to the governance of SpinCo, and certain rights and restrictions
with respect to shares of New SAFE Common Stock owned by SpinCo.
Pursuant to the terms of the Governance Agreement, SpinCo and its subsidiaries
are subject to customary restrictions on the transfer of any New SAFE Common Stock held by SpinCo for nine months following the closing
date. Furthermore, SpinCo and its subsidiaries are prohibited from transferring at any time any shares of New SAFE Common Stock held by
SpinCo or its subsidiaries to any person who is known by SpinCo or its subsidiaries to be an “Activist” or “Company
Competitor” (as such terms are defined in the Governance Agreement), or to any group that, to the knowledge of SpinCo or its subsidiaries,
includes as “Activist” or “Company Competitor,” without first obtaining the Company’s prior written consent.
In addition,
pursuant to the Governance Agreement, SpinCo and its affiliates will be subject to customary standstill restrictions until the earliest
to occur of (a) the termination of the SpinCo Management Agreement; (b) the date on which both (i) SpinCo ceases to beneficially
own at least 7.5% of the outstanding shares of New SAFE Common Stock and (ii) SpinCo is no longer managed by the Company or affiliates
of the Company; or (c) a “change of control” of the Company (as such term is defined in the Governance Agreement) (together,
the “restrictive period”).
The standstill restrictions will limit SpinCo’s and its affiliates’
purchases of additional New SAFE Common Stock in excess of the ownership threshold then applicable to SpinCo. The standstill restrictions
will also restrict SpinCo’s and its affiliates’ ability to, among other things, propose a merger or other acquisition transaction
relating to all or part of the Company, call a special meeting of the stockholders, submit any stockholder proposal, participate in a
group for such actions, enter into any voting trust or other agreement with respect to the voting of New SAFE Common Stock, or seek a
change in the composition of the Board (including seeking representation on the Board).
In addition, during the restrictive period, SpinCo and its subsidiaries
will vote all shares of New SAFE Common Stock owned by them (a) in favor of all persons nominated to serve as directors of the Company
by the Board or its nominating and corporate governance committee, (b) against any stockholder proposal that is not recommended by the
Board and (c) in accordance with the recommendations of the Board on all other proposals brought before the Company’s stockholders.
The foregoing description of the Governance Agreement does not purport
to be complete and is qualified in its entirety by the full text of the Governance Agreement, which is attached hereto as Exhibit 10.13
and is incorporated herein by reference.
SpinCo Secured Term Loan
On March 31, 2023, the Company, as lender and as administrative agent,
and SpinCo, as borrower, entered into a senior secured term loan facility in an aggregate principal amount of $115.0 million (the “Secured
Term Loan Facility”) and an additional commitment amount of up to $25.0 million at SpinCo’s election (the “Incremental
Term Loan Facility”, together with the Secured Term Loan Facility, the “SpinCo Term Loan Facility”).
The Secured Term Loan Facility is a secured credit facility. Borrowings
under the SpinCo Term Loan Facility will bear interest at a fixed rate of 8.00% per annum, which may increase to 10.00% per annum if either
(i) any loans remain outstanding under the Incremental Term Loan Facility or (ii) SpinCo elects for interest due for any two fiscal quarters
to be paid in kind. The interest rate will increase to 12.00% per annum if both (i) and (ii) in the previous sentence occur. The term
loan facility will have a maturity of four years from the initial funding date. The SpinCo Term Loan Facility will be secured by a first-priority
perfected security pledge of all the equity interests in SpinCo’s primary real estate subsidiary. Starting the quarter that is six
months after closing, within five business days after SpinCo has delivered its unaudited quarterly financial statements, SpinCo will apply
any unrestricted cash on its balance sheet in excess of the aggregate of (i) an operating reserve; and (ii) $50 million, to prepay
its SpinCo Term Loan Facility or alternatively, with the consent of Company, SpinCo may apply such cash to prepay the margin loan facility
in lieu of any prepayment of the SpinCo Term Loan Facility. The operating reserve will be calculated quarterly and is equal to the aggregate
of projected operating expenses (including payments to the Borrower’s local property consultants but excluding management fees and
public company costs), projected land carry costs, projected capital expenditure and projected interest expense on the margin loan facility
and SpinCo Term Loan Facility for the next twelve months; less the projected operating revenues for the next twelve months consistent
with the operating budget approved by the Company.
The SpinCo Term Loan Facility contains certain customary covenants,
including affirmative covenants on reporting, maintenance of property, continued ownership of interests in the Company as well as negative
covenants relating to investments, indebtedness and liens, fundamental changes, asset dispositions, repayments, distributions and affiliate
transactions. Furthermore, the SpinCo Term Loan Facility contains customary events of default, including payment defaults, failure to
perform covenants, cross-default and cross acceleration to other indebtedness, including the margin loan facility, impairment of security
interests and change of control.
The foregoing description of the SpinCo Term Loan Facility does not
purport to be complete and is qualified in its entirety by the full text of the SpinCo Term Loan Facility, which is attached hereto as
Exhibit 10.14 and is incorporated herein by reference.
Old SAFE Stockholder and Registration Rights Agreements
In connection with the Merger, the Company assumed the obligations
of Old SAFE under (i) that certain post-IPO stockholder’s agreement, dated as of April 14, 2017, by and between Old SAFE (then known
as Safety, Income and Growth, Inc.) and SFTY Venture LLC (the “Old SAFE Stockholder’s Agreement”) and (ii) that certain
registration rights agreement, dated April 14, 2017, by and among Old SAFE (then known as Safety, Income and Growth, Inc.) and SFTY Venture
LLC and SFTY VII-B, LLC (the “Old SAFE Registration Rights Agreement”).
The Old SAFE Stockholder’s Agreement
provides SFTY Venture LLC, an affiliate of GIC Real Estate Private Limited, the right to purchase additional shares of the Company’s
common stock up to an amount equal to 10% of future issuances of common stock by the Company in single issuances of at least $1 million,
and on a quarterly basis in respect of other issuances. Based solely on a Schedule 13D filed with the SEC on December 27, 2021, GIC Real
Estate, Inc., the investment manager for SFTY Venture LLC, has the power to vote and dispose of the 2,125,000 shares held directly by
SFTY Venture LLC. GIC Real Estate, Inc. shares such powers with GIC Real Estate Private Limited and GIC Private Limited. In addition to
the shares held by SFTY Ventures LLC, GIC Private Limited holds 2,123,435 shares of the Company’s common stock. Jesse Hom, our director,
is an employee of GIC Real Estate Private Limited, and affiliate of SFTY Venture LLC.
The purchase price paid by SFTY Venture LLC
will generally be the same price as the price per share implied by the transaction that resulted in the relevant issuance. SFTY Venture
LLC also has the right to designate a non-voting board observer and participate as a co-investor in real estate investments for which
the Company is seeking co-investment partners. The foregoing rights are conditioned on SFTY Venture LLC owning at least the lesser of
(i) 5.0% of the Company’s outstanding common stock and (ii) common stock with a value of $50 million.
The foregoing summary of the Old SAFE Stockholder’s
Agreement does not purport to be complete and is qualified in its entirety by reference to the text of the Old SAFE Stockholder’s
Agreement, a copy of which is attached hereto as Exhibit 10.15 and is incorporated herein by reference.
The
Old SAFE Registration Rights Agreement requires the Company to, among other things, file with the U.S. Securities and Exchange
Commission (the “SEC”), a shelf registration statement providing for the resale of SFTY Venture LLC’s shares of the
Company’s common stock acquired in connection with certain transactions related to Old SAFE’s IPO and any additional shares
of common stock acquired by SFTY Venture LLC thereafter. Pursuant to the terms of the Old SAFE Registration Rights Agreement, SFTY Venture
LLC may sell its shares in underwritten offerings and the Company must use its reasonable best efforts to cause a resale shelf registration
statement to become effective as soon as practicable after its filing. The Company has agreed to indemnify SFTY Venture LLC against specified
liabilities, including certain potential liabilities arising under the Securities Act, or to contribute to the payments SFTY Venture LLC
may be required to make in respect thereof. The Company has agreed to pay all of the expenses relating to the registration of such securities,
including, without limitation, all registration, listing, filing and stock exchange or the Financial Industry Regulatory Authority, or
FINRA, fees, all fees and expenses of complying with securities or “blue sky” laws, all printing expenses and all fees and
disbursements of counsel and independent public accountants retained by the Company, but excluding underwriting discounts and commissions,
any out-of-pocket expenses of SFTY Venture LLC and any transfer taxes.
The foregoing summary of the Old SAFE Registration
Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the text of the Old SAFE Registration
Rights Agreement, a copy of which is attached hereto as Exhibit 10.16 and is incorporated herein by reference.