10-K405 1 ALEXANDERS INC. - FORM 10-K405 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1994 Commission file number: 1-6064 ALEXANDER'S, INC. ----------------------- (Exact name of registrant as specified in its charter) Delaware 51-01-00517 ------------------------------- ----------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 31 West 34th Street, New York, New York 10001 ----------------------------------------- ------------ (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 760-9500 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- Common Stock, $1 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ------ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the common stock held by non-affiliates of the Registrant (based upon the closing price of the stock on the New York Stock Exchange on March 16, 1995 was approximately $112,038,000. Exhibit Index is located on Page 37. 2 APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X No ------ ------ 5,000,850 shares of the Registrant's common stock, par value $1 per share, were outstanding as of March 16, 1995. DOCUMENTS INCORPORATED BY REFERENCE: The portions of Proxy Statement for Annual Meeting of Shareholders to be held May 25, 1995 are incorporated by reference in Part III hereof. 2 3 Table of Contents
Item PAGE ---- ---- PART I. 1. Business 4 2. Properties 18 3. Legal Proceedings 19 4. Submission of Matters to a Vote of Security Holders 19 Executive Officers of the Company (2) 20 PART II. 5. Market for Registrant's Common Equity and Related Stockholder Matters 21 6. Selected Financial Data 22 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 23 8. Financial Statements and Supplementary Data 27 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 27 PART III. 10. Directors and Executive Officers of the Registrant (1) 11. Executive Compensation (1) 12. Security Ownership of Certain (1) Beneficial Owners and Management 13. Certain Relationships and Related Transactions (1) PART IV. 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 30
SIGNATURES (1) These items are omitted because the Company will file a definitive Proxy Statement pursuant to Regulation 14A involving the election of directors with the Securities and Exchange Commission not later than 120 days after December 31, 1994. (2) Information relating to Executive Officers of the Registrant appears on page 20 of this Annual Report on Form 10-K. 3 4 PART I Item 1. Business GENERAL Alexander's, Inc. ("Alexander's") is a Delaware corporation whose earliest predecessor corporation was organized in 1928. Unless otherwise required by the context, Alexander's and its consolidated subsidiaries are referred to herein as the "Company". On May 15, 1992 (the "Petition Date"), Alexander's and sixteen of its subsidiaries filed petitions for relief (the "Bankruptcy Cases") under chapter 11 of the United States Bankruptcy Code, 11 U.S.C. Sections 101 et seq. (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"). On May 14, 1993, the Company filed a Joint Plan of Reorganization (as amended and restated on July 21, 1993, and modified thereafter, the "Plan"), which allowed the Company to emerge from bankruptcy and continue operating as a real estate company. On September 21, 1993 (the "Confirmation Date"), the Bankruptcy Court confirmed the Plan, which provided for general unsecured creditors of the Company to receive cash in full for their allowed claims, together with interest on such claims, upon the successful effectuation of the Plan. On March 1, 1995, the Bankruptcy Court approved a $75 million secured financing, a portion of the proceeds from which were to pay the balance due and owing to the holders of allowed general unsecured claims. On March 15, 1995, the Company paid holders of allowed general unsecured claims in full, together with accrued interest in respect of their claims. Such payments aggregated $24 million. The Official Committee of Unsecured Creditors has been dissolved and all secured and unsecured creditors having allowed claims in the Bankruptcy Court cases have received the cash payments or debt instruments contemplated to be delivered to them under the Plan. The Bankruptcy Court has retained jurisdiction to resolve the remaining disputed claims and for other limited purposes. Prior to the Petition Date, the Company engaged in the retail department store business in the New York metropolitan area. The Company has terminated its retail business activities and is now exclusively engaged in the real estate business, which includes leasing, managing, developing and redeveloping real estate properties, focusing primarily on the properties where its department stores were formerly located. The Company intends to focus on maximizing the value of its seven properties located in New York City and New Jersey, all of which are former Alexander's store locations and its interests in the Kings Plaza Shopping Center (as defined below). The Company believes that its properties offer advantageous retail opportunities, principally because of their size and location in the densely populated New York City metropolitan area where comparable store sites are not readily available. 4 5 The Company seeks to increase its income and property values by strategically renovating, expanding and developing its properties. In general, the Company's strategy is to lease each of its properties, under long-term (generally 20 years or longer) leases which provide the Company with fixed rents and also with periodic rent step-ups (generally every five years), to large-space users, typically national or large regional retailers. These leases generally require the tenant to pay for or reimburse the Company for common area charges (including roof and structure), real estate taxes, insurance costs and certain capital expenditures. The Company anticipates that it will take several years to develop and lease certain of its existing Redevelopment Properties (as defined below) and does not currently intend to acquire additional properties. The Company's ability to operate as a viable real estate company will depend on the successful completion of the development and leasing of a substantial portion of its existing properties, which is a material factor in the Company's ability to meet its debt service requirements. Three of the Company's properties are 100% leased and the Kings Plaza Mall (as defined below) is 90% occupied (the "Completed Properties") and four properties are in the process of development (the "Redevelopment Properties"). Two of the Redevelopment Properties have been substantially pre-leased pending completion of certain improvements prior to occupancy by the tenants and the Company is in discussions with prospective tenants for the remaining two Redevelopment Properties. The Company's Kings Plaza property consists of the Company's 50% interest in the Kings Plaza Mall, a Completed Property, as well as the Company's former anchor store, a Redevelopment Property. Upon completion of the development of the Redevelopment Properties as currently contemplated, the Company estimates that its properties (other than the Lexington Avenue property) will have approximately 2.1 million square feet of leasable space. The Company's major retail tenants include The Caldor Corporation ("Caldor") and a subsidiary of Conway Stores Inc. ("Conway"). The major retail tenants with whom the Company currently has signed leases that will commence upon completion of development of the Redevelopment Properties include Sears, Roebuck & Company ("Sears"), Waban, Inc., which owns and operates B.J.'s Wholesale Clubs ("B.J.'s Wholesale Clubs"), Home Depot U.S.A., Inc. ("Home Depot"), Marshalls ("Marshalls") and Caldor. See "Business -- Properties -- Paramus." The Company intends to elect to be taxed as a real estate investment trust ("REIT") under sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"), effective for the taxable year ended December 31, 1995. To qualify for taxation as a REIT, the Company must meet various federal income tax law requirements. In general, a REIT that distributes to its stockholders at least 95% of its taxable income for a taxable year and that meets certain other conditions will not be taxed on income distributed that year. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate rates, and distributions to its stockholders in any year in which the Company fails to so qualify 5 6 will not be deductible by the Company in computing its taxable income, nor generally will they be required to be made under the Code. See "Business--Reconstitution as a REIT." Effective March 2, 1995, the Company engaged Vornado Realty Trust ("Vornado") to act for it in the management and direction of virtually all of its business affairs pursuant to the Management and Development Agreement between the Company and Vornado dated February 6, 1995 (the "Management and Development Agreement"). Under the Management and Development Agreement, the term of which is three years, Vornado will provide the Company with strategic and day-to-day management services, including operation, maintenance, management, design, planning, construction and development of the Redevelopment Properties. In addition, pursuant to a Real Estate Retention Agreement dated July 20, 1992 (the "Retention Agreement"), Vornado will continue to act as the Company's exclusive leasing agent. See "Business--Management." Pursuant to the Management and Development Agreement, Steven Roth, a director of the Company and the Chairman and Chief Executive Officer of Vornado, a New York Stock Exchange listed real estate investment trust and an affiliate of the Company, became the Chief Executive Officer of the Company on March 2, 1995. Vornado is a fully integrated real estate company with significant experience in the ownership, development, redevelopment, leasing, operation and management of retail and industrial properties. As of December 31, 1994, Vornado owned fifty-six shopping centers, eight warehouse/industrial properties and one office building, containing 11.6 million square feet, in the aggregate, primarily located in the Midatlantic and Northeast regions of the United States. In the early 1980's, Mr. Roth and the present management of Vornado converted its Two Guys discount department store chain into a full service real estate company. The Company seeks to capitalize on Vornado's extensive real estate expertise and relationships with numerous retail tenants to successfully develop or redevelop the Company's Redevelopment Properties and lease all of its properties. As of March 2, 1995, Mr. Roth, Interstate Properties ("Interstate"), a New Jersey general partnership of which Mr. Roth is the managing general partner, and Vornado owned in the aggregate 56.4% of the outstanding shares of common stock of the Company (the "Common Shares"). Mr. Roth owns 4.1% of Vornado and Vornado owns 29.3% of the Company's Common Shares. Mr. Roth, Interstate and the other two general partners of Interstate own, in the aggregate, 36.6% of the outstanding common shares of beneficial interest of Vornado. See "Security Ownership of Certain Beneficial Owners and Management" for a description of the beneficial ownership of the Company's Common Shares. The Company's principal executive and administrative office facilities are located at 31 West 34th Street, New York, New York. 6 7 PROPERTIES The Company's properties are all located in mature, densely populated areas in New York City and Paramus, New Jersey. These properties are former Alexander's department store locations, ranging in size from approximately 170,000 to 590,000 square feet of retail space. The Company believes that its properties offer advantageous retail opportunities, principally because of their size and location in the densely populated New York metropolitan area where comparable store sites are not readily available. The following table shows the location, approximate size and leasing status as of March 31, 1995 of each of the Company's properties.
APPROXIMATE BUILDING PROPERTY OWNERSHIP SQUARE FOOTAGE(1) LEASING STATUS -------- --------- -------------- -------------- COMPLETED PROPERTIES Fordham Road Owned 303,000 100% leased to Caldor. Bronx, NY Flushing Leased(2) 177,000 100% subleased to Caldor. Queens, NY Third Avenue Owned 173,000 100% leased to a subsidiary of Conway. Bronx, NY Kings Plaza Mall 50% Owned 427,000(3) 90% occupied by approximately 120 Brooklyn, NY tenants. REDEVELOPMENT PROPERTIES Rego Park Owned (a) 359,000 (a) One square block 100% leased to Queens, NY Sears, Caldor and Marshalls. Rents expected to commence by March 1, 1996.(4) (b) Not (b) One and one-half square blocks of applicable vacant land currently zoned residential including one-half square block having a retail zoning overlay. Paramus Owned(5) -- Ground leases executed with Home Depot Paramus, NJ and B.J.'s Wholesale Clubs subject to certain conditions which are not likely to be met if the proposed condemnation discussed in Note 5 occurs.(4) Kings Plaza Owned 320,000 Discussions with potential tenants. Store Brooklyn, NY Lexington Avenue 92.36% Owned(6) 591,000(7) Discussions with potential tenants. New York, NY
------------------ (1) Excludes parking garages. (2) Leased to the Company through January 2027. (3) Excludes approximately 150,000 square feet of enclosed, common area space. 7 8 (4) The commencement of the leases is subject to certain conditions, including the construction of certain improvements. See "Business--Properties." (5) The Company has entered into ground leases pursuant to which Home Depot and B.J.'s Wholesale Clubs would each construct a building containing approximately 150,000 and 116,000 square feet, respectively. The commencement of the ground leases with respect to the Paramus property is subject to certain conditions, including the receipt of certain government approvals, the demolition of the existing building and the completion of site work. In addition, the Company intends to construct a third building containing approximately 87,000 square feet on the property which will require the receipt of certain government approvals. The State of New Jersey has notified the Company of its intention to condemn a portion of the Paramus property and has conducted an appraisal, the results of which have not yet been communicated to the Company. If the condemnation occurs, the Company will be required to change its development plans and Home Depot and B.J.'s Wholesale Clubs will not be obligated under their current leases. The Company is considering alternative development plans and the time and cost to develop the Paramus property may materially increase. (6) The Lexington Avenue property is owned by Seven Thirty One Limited Partnership (the "Partnership"), of which a wholly owned subsidiary of the Company (the "General Partner") is both the sole general partner and a limited partner. The Company, which is also a limited partner, together with the subsidiary own a 92.36% interest in the Partnership. The remaining 7.64% partnership interests are owned by the 731 Limited Partners as limited partners (as defined below). See "Business--Properties--Lexington Avenue" and "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources--1995 Financings--731 Limited Partnership". (7) The Lexington Avenue property is comprised of the Main Building containing approximately 418,000 square feet and several smaller buildings containing approximately 173,000 square feet. Fordham Road The Company owns the Fordham Road property which is located at the intersection of Fordham Road and the Grand Concourse in the Bronx, New York. The property includes a six-floor building containing approximately 303,000 square feet is located in the center of a shopping complex in one of the busiest shopping areas of the Bronx. The Company net leased the Fordham Road property to Caldor. The lease commenced in April 1993 and expires in March 2013. It currently provides for annual base rent per square foot of $11.67 and for percentage rent. Caldor has invested a substantial amount in refurbishing the Fordham Road store, including the installation of new heating and lighting systems, escalators and elevators. Flushing The Flushing property is located on Roosevelt Avenue and Main Street in the downtown, commercial section of Flushing, Queens. Roosevelt Avenue and Main Street are active shopping districts with many national retailers located in the area. A subway entrance is located directly in front of the property with bus service across the street. It comprises a four-floor building containing 177,000 square feet and a parking garage. The Company leases the Flushing property from its owner under a long-term lease. Under the lease, the Company is obligated to pay rent to the owner of the Flushing property in the amount of $496,000 per year through January 1997, $331,000 per year from January 1997 through 2007, $220,000 per year from January 2007 through 2017 and $147,000 per year from January 2017 through January 2027. The Company net subleased the Flushing property (other than the portion currently being used as a parking garage) to Caldor. The lease commenced in April 1993 and expires in 8 9 January 2027. It currently provides for annual base rent per square foot of $14.97 and for percentage rent. The parking garage, which was not subleased to Caldor, provides parking for approximately 343 cars and currently generates approximately $135,000 of annual revenues (before expenses of approximately $100,000). Third Avenue The Company owns the Third Avenue property, a four-floor building and a small surface parking lot located at the intersection of Third Avenue and 152nd Street in the Bronx, New York. The store is located in a densely populated neighborhood. The Third Avenue property is net leased to a subsidiary of Conway, a New York area discount retailer. The lease commenced in May 1993 and expires in April 2023. It currently provides for annual base rent per square foot of $6.65. Kings Plaza Shopping Center The Kings Plaza Shopping Center and Marina (the "Kings Plaza Shopping Center") comprises a two-level mall (the "Kings Plaza Mall" or the "Mall") and two anchor stores. It contains approximately 1.1 million square feet and occupies a 24.3-acre site at the intersection of Flatbush Avenue and Avenue U located in Brooklyn, New York. Among its features are a marina, a five-level parking structure and an energy plant that generates the shopping center's electrical power. The Company owns one anchor store in the shopping center of approximately 320,000 square feet, and an undivided one-half interest in the Mall. The other anchor is a Macy's store. Kings Plaza Mall. The Mall contains approximately 427,000 leasable square feet. As of December 31, 1994, 90% of the leasable area was leased to approximately 120 tenants. The Mall is managed by Centercorp, Inc. and Interstate Properties, through Vornado, is the leasing agent. Kings Plaza Store. The Company's anchor store in the Kings Plaza Shopping Center (the "Kings Plaza Store" or the "Store") is a four-floor building containing approximately 320,000 square feet. Access to the store is available from entrances on Flatbush Avenue and the parking lot and from entrances on both levels of the Mall. The Company is currently in discussions with several major retailers to lease a large portion of the store. The Company is also currently in discussions with retailers who lease large spaces with respect to the remaining portion of the store. The Company may need to subdivide it, divide the utilities and install elevators and escalators. The Company estimates that the cost of these improvements will be as much as 9 10 $10 million and that it will take from four to six months to complete the improvements once development begins, depending on the number of tenants. However, no assurance can be given that these improvements will be completed at such cost or within such time frame. Rego Park The developed Rego Park property, which encompasses the entire block fronting on Queens Boulevard and bounded by 63rd Road, 62nd Drive, 97th Street and Junction Boulevard, is currently occupied by the Company's former three-floor store and a surface parking lot. The Company has leased to Sears the entire first floor and approximately two-thirds of the second floor and has leased the entire third floor to Caldor. The Company recently entered into a lease with Marshalls for the remaining approximately one-third of the second floor. The leases with Sears, Caldor and Marshalls are contingent upon the Company completing certain improvements, including subdividing the building, refacing it and constructing a multi-level parking structure (the "Rego Park Project"). When completed, the parking structure will be operated for the benefit of the Company and will provide pay parking spaces for approximately 1,100 vehicles and direct access to each store. Construction commenced in December 1994. The Company estimates that its construction costs for the Rego Park Project will be approximately $33 million to $35 million including approximately $3 million to transport and dispose of soil containing lead which is being removed to complete the Project. There can be no assurance that the Company's actual costs will not exceed its estimates. The leases with Sears, Caldor and Marshalls are expected to commence in March 1996. The leases with Sears and Caldor expire in December 2020 and the lease with Marshalls expires in April 2009. There are two additional land parcels adjacent to the developed Rego Park property. They are the entire square block bounded by the Long Island Expressway, 97th Street, 62nd Drive and Junction Boulevard (the "Back Lot"), and a smaller parcel of approximately one-half square block at the intersection of 97th Street and the Long Island Expressway (the "Z Parcel"). Both parcels are currently zoned for residential use with the Z parcel having a retail zoning overlay. Both parcels are being used for public pay parking. The Company intends to continue to use these properties for paid parking while it evaluates the feasibility of having these properties re-zoned for commercial use. Paramus The Company owns 39.3 acres of land, including its former store, located at the intersection of Routes 4 and 17 in Paramus, New Jersey. Paramus is a retail destination for shoppers coming from northern New Jersey as well as New York City. The Company's 10 11 property is located directly across from the Garden State Plaza regional shopping mall within two miles of three other regional shopping malls and within 10 miles of New York City. The Company intends to raze its former store building on the Paramus property to allow for the possible construction of three new buildings. Two of the buildings would be built by lessees under "pad" leases and the third would be built by the Company. The Company has entered into "pad" leases with Waban, Inc., pursuant to which B.J.'s Wholesale Clubs will construct a building containing approximately 116,000 square feet of floor space and Home Depot, which will construct a building containing approximately 150,000 square feet of floor space. Under a "pad" lease, the lessee rents only the land (as opposed to the land and building) and constructs its building at its own expense. Each of these leases is conditioned upon the Company's receiving the government approvals required for development, including demolishing the former Alexander's store and completing site work at the property. The lease with Home Depot will terminate if (i) the Company does not commence and prosecute the demolition and site work required by the lease within six months after obtaining the governmental approvals as set forth in the lease or (ii) if Delivery of Possession (as defined in the lease) has not occurred by January 1996. The B.J.'s Wholesale Clubs lease will terminate if Delivery of Possession (as defined in the lease) has not occurred within 545 days (plus up to an additional 180 days upon certain contingencies) of obtaining government approvals as set forth in the lease. The Company estimates that it will cost approximately $15 million to $17 million to remove asbestos, demolish the building and make certain other improvements to permit the development described above (the "Site Work") and to construct a third building on the Paramus property containing approximately 87,000 square feet. The Company intends to lease the 87,000 square foot building to retailers interested in leasing large spaces. Home Depot will pay the Company $4 million of such Site Work costs and B.J.'s Wholesale Clubs will pay its proportionate share (based on square footage) of such Site Work costs which share is currently expected to be $3.5 million. The Company has begun the process of obtaining the necessary governmental approvals to develop the Paramus property and has submitted a site plan application to the Planning Board of the Borough of Paramus (the "Borough") for the development of such property. There can be no assurance, however, that such governmental approvals will be obtained. The New Jersey Department of Transportation (the "DOT") is pursuing a plan to redesign the intersection of Routes 4 and 17 that would utilize a portion of the Company's Paramus property which falls within the right-of-way area identified for "preservation" on a map filed in accordance with the New Jersey Alignment Preservation Statute. The Company believes that the State is interested in acquiring, under its powers of eminent domain, approximately 10 of the Company's 39 acres for such purpose. On October 12, 1994, the DOT formally notified the Borough that it was considering an improvement in the alignment preservation area in which 11 12 the Company's Paramus property is located and that the Borough could not issue permits for work in such area pending DOT action. On December 1, 1994, the DOT formally notified the Company that the DOT anticipates acquiring, agreeing to acquire or commencing an action to condemn the Company's property within 120 days from the date of such notification (such period expiring on March 31, 1995). The DOT has conducted an appraisal of the Paramus property, the results of which have not yet been communicated to the Company. Once appraisals are made available to the Company, the Company and the DOT will commence negotiations to attempt to reach agreement on the fair market value of that portion of the Company's Paramus property which is subject to taking or condemnation. In the event that the Company and the DOT do not reach agreement on the fair market value, a formal process will be initiated by the DOT, pursuant to which, among other things, a group of independent commissioners will be appointed by a court to determine fair market value. On January 9, 1995, the Company requested that the Borough reschedule the Company's site plan application hearings currently before the Borough to April 1995, following the expiration of the 120-day period. Provided that no condemnation proceeding has commenced before April 1995, the Company will be free to complete its site plan application and recommence such hearings. If condemnation proceedings are commenced and the State of New Jersey acquires a portion of the Paramus property, the Company will be required to change its redevelopment plans, neither Home Depot nor B.J.'s Wholesale Clubs will be obligated under their respective leases and the time and cost required to develop the Paramus property may materially increase. The Company would, however, be entitled to compensation from the State of New Jersey for its loss of property and for damages, if any, in connection with that portion of the property that has not been condemned. Based on the information currently available, the Company cannot determine the ultimate effect that a taking or condemnation, or any uncertainty with respect thereto, would have on the use or development of the Paramus property or whether such effect will be adverse to the Company. Lexington Avenue The Lexington Avenue property is situated in the heart of one of Manhattan's busiest business and shopping districts with convenient access to several subway and bus lines. The property is located across the street from Bloomingdale's flagship store and only a few blocks away from both Fifth Avenue and 57th Street, Manhattan's two major shopping thoroughfares. The Company is currently planning to redevelop the property for retail, residential, office or other commercial use, or a combination thereof, however, no development decisions have been made. As of December 31, 1994, the Company owned approximately an 82% interest in the Seven Thirty One Limited Partnership (the "Partnership"), a limited partnership which 12 13 Owns the Lexington Avenue property. This property comprises the entire square block bounded by Lexington Avenue, East 59th Street, Third Avenue and East 58th Street. As of January 4, 1995, after the exercise of a $21.8 million put to the Company (the payment for which was an interest bearing note), the Company owns a 92.36% interest in the Partnership. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources -- 1995 Financings -- 731 Limited Partnership". The Company believes that, along with a number of other locations, a portion of the Lexington Avenue property is being considered by the Port Authority of New York and New Jersey ("Port Authority") for the site of the terminus for a rail link from midtown Manhattan to La Guardia and Kennedy Airports. In June 1994, the Federal Aviation Administration ("FAA") and the New York State Department of Transportation ("NYDOT") released a draft environmental impact statement ("DEIS") and Section 4(f) Evaluation (the "DEIS and Section 4(f) Evaluation") of the Port Authority's proposed rail link. On December 15, 1994, the Company submitted a letter of comment and a report to the U.S. Department of Transportation, FAA and the NYDOT on the DEIS and Section 4(f) Evaluation pursuant to the period of public comment which terminated on December 15, 1994. The Company expressed its opposition to the consideration of a portion of the Lexington Avenue property for the site of the terminus. Approval of numerous Federal, New York State and New York City agencies are required before construction could begin. The Company does not know whether the rail link terminus project will be undertaken or, if undertaken, the timing of the project and whether the Lexington Avenue property will be chosen as the site of the terminus. If the project proceeds and the Port Authority selects a portion of the Lexington Avenue property for such use and can establish that it is needed to serve a public use, benefit or purpose, the Port Authority, after conducting the requisite public hearings, may acquire such portion of the Lexington Avenue property pursuant to its powers of eminent domain. The Company has the right to appeal any such action by the Port Authority. If the Port Authority prevails, the Company would be entitled to compensation for its loss. Since the nature and scope of any plans being considered by the Port Authority, and whether any such plans would ultimately affect the Lexington Avenue property, cannot be fully assessed by the Company at this time, it is impossible to determine the ultimate effect that a taking, or any uncertainty with respect thereto, would have on the Company's use or development of the Lexington Avenue property. 13 14 Base Rental Table The table below presents the initial base rentals for the Fordham Road, Flushing and Third Avenue properties.
Year Ending TOTAL December 31, AMOUNTS ------------ ------- 1995 $ 7,287,000 1996 7,435,000 1997 7,467,000 1998 7,831,000 1999 7,876,000 Thereafter 185,430,000
As of March 30, 1995, the Company had not paid real estate taxes that were due on its Rego Park, Lexington Avenue, Third Avenue and Kings Plaza Store properties in the aggregate principal amount of approximately $5.9 million plus interest. During the first quarter of 1995, the Company entered into separate In Rem Installment Agreements with the City of New York on its Rego Park and Lexington Avenue properties which required the Company to make an initial installment payment of 15% of all delinquent taxes plus interest on each property calculated to the date of the respective installment agreements. Thereafter, the Company is required to make equal quarterly installment payments until all delinquent taxes and interest on each of these properties are paid in full. On March 15, 1995, the Company entered into a 60-day escrow agreement with a title company in the amount of approximately $7 million representing both principal and interest owed on the unpaid real estate taxes including the amounts owing under the In Rem Installment Agreements. The escrow agreement established an interest bearing cash collateral account and was funded from the proceeds of certain financings consummated in 1995. The Company is pursuing real estate tax certiorari proceedings that are pending before The City of New York on several of its properties, some of which are properties where the real estate taxes remain unpaid. Alexander's Department Stores of Valley Stream, Inc. ("ADS of Valley Stream") is a party to a tax certiorari proceeding against The Board of Assessors and The Board of Assessment Review of the County of Nassau (the "Board") for overpayment of taxes on its former Valley Stream store property during the assessment rolls for May 1, 1986 through May 1, 1992. On January 12, 1995, the Supreme Court of Nassau County, New York ruled that ADS of Valley Stream is entitled to an assessment reduction which would result in a refund of approximately $8.2 million, plus interest (currently, $1.3 million). The Company has been informed by the Board that it intends to appeal the court's decision. 14 15 MAJOR TENANTS Revenues from the Caldor leases (Flushing and Fordham Road) represent approximately 63% of the Company's consolidated revenues as of December 31, 1994. Revenues from the Conway lease (Third Avenue) represent approximately 13% of the Company's consolidated revenues as of December 31, 1994. The Company believes that the loss of either of these lessees would have a material adverse effect on the Company. MANAGEMENT Pursuant to a Management and Development Agreement with Vornado entered into on March 2, 1995 and approved by the Bankruptcy Court, Mr. Roth, a director of the Company and the Chairman of the Board and Chief Executive Officer of Vornado, became the Chief Executive Officer of the Company, and Vornado agreed to provide the Company with strategic and day-to-day management services and asset management services, including operation, maintenance, management, design, planning, construction and development of the Company's properties. Vornado has also agreed to continue to act as the Company's exclusive leasing agent pursuant to the Retention Agreement entered into in July l992, the term of which has been extended to be coterminous with the Management and Development Agreement. Accordingly, the Company will depend upon Vornado to manage and direct virtually all of its business affairs. The fee payable by the Company to Vornado for services under the Management and Development Agreement is $3 million per year, subject to certain adjustments and includes the services of Mr. Roth as Chief Executive Officer, for which he receives no other compensation from the Company. Although Mr. Roth will provide all services normally associated with his position as Chief Executive Officer of the Company to the extent not inconsistent with his position at Vornado, he has or may have other business interests or opportunities in connection with his interest in Vornado which may conflict or compete with the business of the Company. The Company has also agreed to pay Vornado a fee for the development work pursuant to the Management and Development Agreement of 6% of development costs with a minimum guaranteed fee of $1.65 million in the first year and $750,000 in each of the second and third years. The Management and Development Agreement may be terminated if such Agreement adversely affects either the Company's or Vornado's REIT status or, under certain circumstances, in the event of a change of control of Vornado. RECONSTITUTION AS A REIT The Company intends to elect to be taxed as a real estate investment trust ("REIT") under section 856 through 860 of the Internal Revenue Code of 1986, as amended, effective for the taxable year ended December 31, 1995. In general, a REIT that distributes to its shareholders at least 95% of its taxable income for a taxable year and that meets certain other 15 16 conditions will not be taxed on income distributed for that year. If the Company fails to qualify as a REIT in any taxable year, it will be subject to Federal income tax at regular corporate rates. As of December 31, 1994, the Company had reported net operating loss carryovers ("NOLs") of approximately $110 million of which approximately $5 million, $52 million, $22 million, $15 million and $16 million expire in 2005, 2006, 2007, 2008 and 2009, respectively. The Company's NOLs generally would be available to offset the amount of the Company's REIT taxable income that otherwise would be required to be distributed to its stockholders. The Company currently does not anticipate making any distributions during 1995. To help maintain its eligibility to be taxed as a REIT and reduce the risk of triggering limitations on the use of its existing NOLs, the Company has included certain restrictions relating to the transfer and ownership of its securities in its Amended and Restated Certificate of Incorporation. Such restrictions are applicable even if a REIT election is not made. ENVIRONMENTAL MATTERS Compliance with applicable provisions of federal, state and local laws regulating the discharge of materials into the environment or otherwise relating to the protection of the environment have not had, and, although there can be no assurance, are not expected to have, a material effect on the Company's operations, earnings, competitive position or capital expenditures. From July 1992 through December 31, 1994, the Company spent approximately $3 million to comply with such laws, substantially all of which relate to the removal of asbestos-containing material. The Company is aware of the presence of asbestos-containing materials at several of its properties and believes that it manages such asbestos in accordance with applicable laws. The Company plans to abate or remove such asbestos as appropriate. In September 1993, the Company had Phase I environmental assessments (which generally involve site and records inspection without soil or groundwater sampling) performed by an environmental engineering firm on each of its properties. The results of the assessment at the Kings Plaza property show that certain adjacent properties owned by third parties have experienced petroleum hydrocarbon contamination. Based on this assessment and additional investigation of the Kings Plaza property and historical operations at the site, the Company believes there is a potential for hydrocarbon contamination on the Kings Plaza property. However, no contamination has been found on the property to date. The Company is currently building a parking structure and certain additional improvements at the Rego Park property, and is currently in the process of removing soil containing lead as part of this project. It is anticipated that approximately $3 million will be spent for the transportation and disposal of the soil, which is included in the estimate for the construction costs for this property. See "Business -- Properties -- Rego Park." 16 17 The Company believes that known and potential environmental liabilities will not have a material adverse effect on the Company's business, assets or results of operations. However, there can be no assurance that the confirmation of the existence of contamination or the identification of potential new areas of contamination would not be material to the Company. COMPETITION The Company conducts its real estate operations in the New York metropolitan area, a highly competitive market. The Company's success depends upon, among other factors, the trends of the national and local economies, the financial condition and operating results of current and prospective tenants, the availability and cost of capital, interest rates, construction and renovation costs, income tax laws, governmental regulations and legislation, population trends, the market for real estate properties in the New York metropolitan area, zoning laws and the ability of the Company to lease, sublease or sell its properties at profitable levels. The Company competes with a large number of real estate property owners. In addition, although the Company believes that it will realize significant value from its properties over time, the Company anticipates that it may take a number of years before all of its properties generate cash flow at or near anticipated levels. Its success is also subject to its ability to finance its developments and to refinance its debts as they come due. EMPLOYEES As of December 31, 1994, the Company had 13 employees. The Company is analyzing its personnel requirements in connection with its recently consummated management arrangement with Vornado. 17 18 Item 2. Properties General The table below shows the location and approximate size of each of the Company's properties as of December 31, 1994. For additional information regarding such properties see "Business--Properties".
APPROXIMATE APPROXIMATE BUILDING SQUARE OWNED OR LAND SQUARE FOOTAGE/ DATE OF LOCATION LEASED FOOTAGE/ACREAGE NUMBER OF FLOORS CONSTRUCTION -------- ------ --------------- ---------------- ------------ Square block at East 92.36% Owned (1) 84,420 591,000/6 1965 59th Street & (1.9 acres) Lexington Avenue New York, New York Kings Plaza Shopping Center & Marina Flatbush Avenue Brooklyn, New York Store: Owned(1) 1,056,645 320,000/4 1970 Mall: 50% Owned(1) (24.3 acres) 427,000/2 1970 63rd Road & Queens Owned(1) 496,016 359,000/3 1959 Blvd. (11.4 acres) Rego Park, New York Routes 4 & 17 Owned(1) 1,711,908 340,000/3 1962 Paramus, New Jersey (39.3 acres) Fordham Road & Owned 67,590 303,000/5 1933 Grand Concourse (1.6 acres) Bronx, New York Third Ave. & 152nd Owned 60,451 173,000/4 1928 St. (1.4 acres) Bronx, New York Roosevelt Ave. & Leased 44,975 177,000/4 1975 Main St. (1.0 acres) Flushing, New York
18 19 ________________________ Footnotes: (1) As of December 31, 1994, the properties located at the Kings Plaza Shopping Center, Paramus, Lexington Avenue and Rego Park were held subject to mortgages in the approximate outstanding amounts of $13.5 million ($8.3 million representing the mortgage on the Kings Plaza Store and $5.2 million representing the Company's share of the mortgage on the Kings Plaza Mall), $13.2 million, $3.7 million and $16.3 million, respectively. Since the Kings Plaza Mall is an unconsolidated joint venture, the mortgage on the Kings Plaza Mall is not reflected on the Company's books and records. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - 1995 Financings" for a discussion of additional financings in connection with certain of the Company's properties. Item 3. Legal Proceedings In 1991, the Company settled a zoning-related litigation with, among others, the Borough of Paramus and the owners of a shopping center proximate to the Company's Paramus, New Jersey property (the "Westland Parties"). On November 14, 1994, the Company commenced a proceeding in the Bankruptcy Court against the Westland Parties to compel payment pursuant to such settlement. On December 30, 1994, the Company and the Westland Parties reached a settlement with respect to such proceeding and the Company received a promissory note from the Westland Parties in the principal amount of $4,550,000 which amount was paid in January 1995 in exchange for a full release by the Company from any and all claims relating to such matters. See "Business -- Properties" for a discussion of the tax certiorari proceedings involving Alexander's Department Stores of Valley Stream, Inc. Except for the matters referred to herein, and the matters referred to in footnote 5 of the financial statements relating to the final resolution of all claims filed or continuing to be filed against the Company in the Company's bankruptcy proceedings, neither the Company nor any of its subsidiaries is a party to, nor is their property the subject of, any material pending legal proceeding other than routine litigation incidental to their businesses. The Company believes that these legal actions will not be material to the Company's business or operations. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the fiscal year ended December 31, 1994. 19 20 Executive Officers of the Company The following is a list of the names, ages, principal occupations and positions with the Company of the executive officers of the Company and the positions held by such officers during the past five years.
PRINCIPAL OCCUPATION, POSITION AND OFFICE (CURRENT AND DURING THE PAST FIVE YEARS WITH THE COMPANY NAME AGE UNLESS OTHERWISE STATED) ---- --- -------------------------------------------------- Stephen Mann(1) 57 Chairman of the Board of Directors since March 2, 1995; Interim Chairman of the Board of Directors from August, 1994 to March 1, 1995; Chairman of the Clifford Companies since 1990; and, prior thereto, counsel to Mudge Rose Guthrie Alexander & Ferdon, attorneys. Brian M. Kurtz 46 Executive Vice President and Chief Administrative Officer from July, 1994 to the present; Senior Vice President and Chief Administrative Officer from March 1993 to July 1994; Senior Vice President and Controller from January 1989 to March, 1993; and Vice President-Controller from December 1985 to January 1989.
____________________ 1 Stephen Mann became Chairman of the Board of Directors on March 2, 1995. On March 2, 1995, Steven Roth, a director of the Company, became the Chief Executive Officer of the Company pursuant to the Management and Development Agreement. Steven Roth has been the Chairman of the Board and Chief Executive Officer of Vornado since May 1989; Chairman of the Vornado's Executive Committee since April 1988; and the Managing General Partner of Interstate, a developer and operator of shopping centers and an investor in securities and partnerships. Steven Roth is 53 years of age. 20 21 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters The common stock, par value $1.00 per share, of the Company is traded on the New York Stock Exchange under the symbol "ALX". Set forth below are the high and low sales prices for the Company's common stock for each full quarterly period within the two most recent years:
HIGH LOW ---- --- 1st Quarter 1994 $60 1/2 $52 1/4 2nd Quarter 1994 $55 3/4 $51 5/8 3rd Quarter 1994 $58 $51 1/2 4th Quarter 1994 $54 1/4 $48 7/8
HIGH LOW ---- --- 1st Quarter 1993 $32 $16 2nd Quarter 1993 $50 $29 3rd Quarter 1993 $59 1/4 $42 1/4 4th Quarter 1993 $59 3/4 $50 1/2
As of March 16, 1995, there were approximately 2,108 holders of record of the Company's common stock. No dividends were paid in 1994 and 1993. The Company currently does not anticipate paying any dividends during 1995. 21 22 Item 6. Selected Financial Data Summary of Selected Financial Data (Dollars in thousands, except per share data)
FIVE MONTHS YEAR ENDED ENDED(1) FISCAL YEAR ENDED DEC. 31, DEC. 31, DEC. 31, JULY 31, JULY 25, JULY 27, JULY 28, 1994 1993 1993 1993(2) 1992 1991 1990 -------- -------- -------- -------- -------- -------- -------- (unaudited) Operating results: Real estate operating revenue 11,572 9,320 5,133 5,580 2,207 1,504 1,736 Gains on sales of real estate 161 7,686 -- 28,779 -- -- -- leases Income/(loss) from continuing operations 4,033 9,644 946 27,151 (14,630) (300) 1,503 Loss from discontinued operations -- (280) -- (477) (118,198) (3,882) (5,452) Cumulative effect of change in accounting -- -- -- (21,449) -- -- Net income/(loss) 4,033 9,364 946 5,225 (132,828) (4,182) (3,949) Income/(loss) per common share: Continuing operations 0.81 1.93 0.19 5.45 (2.94) (0.06) 0.30 Discontinued operations -- (0.05) -- (0.09) (23.75) (0.78) (1.09) Cumulative effect of change in accounting -- -- -- (4.31) -- -- -- Income/(loss) per common share 0.81 1.88 0.19 1.05 (26.69) (0.84) (0.79) Financial position at year end: Total assets 109,419 92,917 92,917 113,572 113,384 188,057 198,993 Real estate 84,658 70,882 70,882 71,325 84,906 56,174 53,876 Debt 53,573 43,520 43,520 44,359 53,187 46,473 50,619
1. In November 1993, the Company changed to a calendar year from a fiscal year ending on the last Saturday in July. 2. Includes 53 weeks. 22 23 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Continuing Operations - Years Ended December 31, 1994 and December 31, 1993 (unaudited) The Company's real estate operating revenue was $11,572,000 in 1994, compared to $9,320,000 in 1993, an increase of $2,252,000, or 24.2%. The increase in real estate operating revenue this year as compared to last year was due primarily to the commencement of rents under new long-term leases during the second quarter of 1993. The Company recorded a pre-tax gain of approximately $161,000 in 1994 from the sale of an approximately 20,000 square foot warehouse located in the Bronx, New York. In 1993, the Company recorded a pre-tax gain of approximately $7,686,000, of which approximately $7,313,000 resulted from the assignment back to the Port Authority of the real property lease for its former store located in the World Trade Center, New York and approximately $373,000 resulted from the Company's sale of its leasehold interest in real property located in the Bronx, New York. Reorganization costs were $3,721,000 in 1994. These costs included $1,121,000 for costs incurred in connection with various financing alternatives and $518,000 for costs incurred in connection with the Company's proposed reconstitution as a REIT. Excluding these costs, reorganization costs were $2,082,000 in 1994, compared to $4,400,000 in 1993, a decrease of $2,318,000 or 52.7%. The decrease was primarily attributable to the winding down of the Company's bankruptcy proceedings. Depreciation and amortization in 1994 did not change significantly from 1993. Operating, general and administrative expenses were $3,595,000 in 1994, compared to $1,501,000 in 1993, an increase of $2,094,000. This increase was primarily a result of certain expenses being charged against the accrual for losses from discontinued operations during the first nine months of 1993. Interest and debt expense was $3,331,000 in 1994, compared to $855,000 in 1993, an increase of $2,476,000. Of this increase (i) approximately $637,000 was attributable to a short-term secured loan obtained by the Company in September, 1994, (ii) $376,000 resulted from the non-payment of real estate taxes in 1994, and (iii) approximately $1,463,000 resulted from a substantial portion of interest and debt expense for 1993 being charged against the accrual for losses from discontinued operations during the first nine months of 1993. 23 24 Other income and interest was $4,768,000 in 1994, compared to $1,270,000 in 1993, an increase of $3,498,000. This increase resulted from the net of (i) $4,550,000 from the Company's receipt of a promissory note for a zoning-related matter in 1994, (2) the receipt in 1993, of approximately $421,000, representing the Company's pro rata receipt, net of expenses, from its unsecured allowed claim in an unrelated bankruptcy proceeding and (3) a refund in 1993 of approximately $489,000 for real estate taxes previously paid. As a result of the above, the Company had income from continuing operations of $4,033,000 in 1994 as compared to $9,644,000 in 1993. Continuing Operations - 53 Weeks Ended July 31, 1993 and 52 Weeks Ended July 25, 1992 Real estate operating revenue increased in fiscal 1993 by $3,373,000 over the prior fiscal year as a result of the commencement of rents under new long-term leases of $2,799,000 and an increase of $525,000 from the Company's share of the revenue derived from the operation of the Kings Plaza Mall and the Company's parking lots. The Company recorded in the fiscal year ended July 31, 1993 a pretax gain of $28,779,000 from the sales of its real property leases at the Bruckner Boulevard, Bronx, New York, Valley Stream, Long Island, New York, Yonkers, New York and the World Trade Center, Manhattan, New York properties and its interest in a real property lease located on Third Avenue in the Bronx, New York. The Company responded to changes in the real estate market by changing its strategies with respect to its properties at Rego Park, Queens, New York, Paramus, New Jersey and Lexington Avenue, Manhattan, New York from development sites to current use sites. As a result, the Company wrote off $11,972,000 of prior predevelopment costs in fiscal 1992. During this period, real estate operating expenses previously charged to discontinued operations were included as operating, general and administrative expenses. Reorganization costs of $5,030,000 and $4,318,000 consisting of legal, accounting and other professional fees were charged to earnings during fiscal years 1993 and 1992, respectively. 24 25 LIQUIDITY AND CAPITAL RESOURCES The Company's cash position, including short-term investments, was $2,363,000 at December 31, 1994, as compared to $7,053,000 at December 31, 1993, a decrease of $4,690,000. The Company estimates that its capital expenditure requirements for 1995 will include: (1) the building of a parking structure and certain additional improvements at the Rego Park property which are expected to be approximately $33,000,000 to $35,000,000, (2) the asbestos removal, building demolition and other improvements at the Paramus property which are expected to cost between $15,000,000 and $17,000,000, and (3) an estimated $10,000,000 expenditure that will be needed to subdivide the existing space and other improvements at the Kings Plaza Store property. Other than the Rego Park project, there is no assurance that the other projects will commence in 1995. The Company may seek to obtain additional short- or long-term financings to develop these properties. However, there can be no assurance that any such financing can be obtained or, if obtained, that such financing will be on terms that are favorable or acceptable to the Company. In addition, in the event a portion of the Paramus property is condemned, see "Business -- Properties -- Paramus," the Company's plan for development of this property would be affected and the cost and time required to develop the property may materially increase. The Company's properties do not generate sufficient cash flow to pay all of its expenses. However, the Company estimates that the net proceeds from financings consummated during the first quarter of 1995 (see below) will be adequate to fund its business operations, debt service obligations and construction costs of the projects referred to above. 1995 Financings At December 31, 1994, the Company had outstanding funded debt of $53,600,000. Of this amount $39,500,000 was repaid with the proceeds of the financings described below (the "1995 Financings"). As of March 30, 1995, the Company borrowed approximately $121,000,000. After giving effect to these transactions and the repayment of other obligations of the Company existing at the end of 1994 (such as general unsecured creditors claims, the funding of an escrow account for unpaid real estate taxes, and the funding of cash collateral accounts for the purposes of funding the remaining disputed claims in the Bankruptcy Court cases as they become allowed), the Company's cash position was approximately $30,000,000. Substantially all of the assets of the Company and its subsidiaries have been pledged and/or mortgaged to secure the indebtedness incurred in connection with the 1995 Financings. The 1995 Financings consist of: (1) A $25 million loan secured by, among other things, a mortgage on the Fordham Road property. The loan matures on February 24, 2000 and bears interest at a rate per annum equal to the 30-Day LIBOR Rate plus 4.25%. 25 26 (2) A term loan from Vornado and a major bank aggregating approximately $75,000,000 secured by, among other things, (i) mortgages on the Lexington Avenue, Rego Park, Fordham Road, Kings Plaza Store, Third Avenue and Paramus properties, (ii) a pledge of the stock of the Company and its wholly owned subsidiaries and (iii) a pledge by the Company and one of its wholly owned subsidiaries of their respective partnership interests in the 731 Partnership. The loan with Vornado in the principal amount of $45,000,000 is subordinated to that of the bank. The loans mature on March 15, 1998 and bear interest at a blended rate per annum of 13.8%. As a result of the subordination, the Vornado loan bears interest at a rate per annum equal to 16.43% during the first two years, and 9.92% plus the One-Year Treasury Rate during the third year and the bank loan bears interest at a rate per annum equal to 9.86% during the first two years, and 3.25% plus the One-Year Treasury Rate during the third year. The Company paid a fee to the bank and to Vornado of $375,000 and $1,500,000, respectively. In addition, the loans, among other things, require the Company to grant to Vornado and the bank mortgage liens on all after-acquired properties and prohibit the Company from developing undeveloped property without approved leases for more than 50% of such property's projected leasable space. (3) A $60,000,000 construction loan and a $25,000,000 bridge loan from a bank, each secured by, among other things, a mortgage on the Rego Park property. As of March 30, 1995, approximately $21,000,000 in the aggregate was funded under such loans. The loans mature on April 1, 1997 (but may be extended under certain circumstances for one year) and bear interest at a variable rate per annum equal to, at the option of the Company, (i) LIBOR rate plus 1.625% or (ii) the greater of (a) the Federal Funds Rate plus 1.125% or (b) the prime commercial lending rate plus 0.625%. The ability of the Company to borrow the $25,000,000 under the bridge loan is based on conditions that cannot be met today and may not be met during the term of this loan. The Company has not relied on this amount in its determination of its ability to fund its cash needs. 731 Limited Partnership The Partnership Agreement, as amended and restated in August 1987, gave the outside 731 Limited Partners the right to require the 731 Partnership to redeem their partnership interest for $35,000,000. Pursuant to the Bankruptcy Plan, the redemption option was restructured, to require the Partnership, under certain conditions, to redeem the outside 731 Limited Partners' interest in two separate stages for an aggregate amount of $35,000,000 plus capitalized interest from the effective date of the Bankruptcy Plan to the date of the first redemption of approximately $1,800,000. In January 1995, the Partnership redeemed the first portion of the outside 731 Limited Partners' interest by giving such limited partner a promissory note due in August 1998 in the amount of approximately $2,800,000 (the "Note"). The Note bears interest at the rate equal to the Prime Rate plus 1% and is secured by a second mortgage on the Lexington Avenue property. The outside 731 Limited Partners have the right to put their remaining 7.64% interest to the Partnership for a five-year period in exchange for a five-year secured note in the principal amount of $15,000,000, bearing interest at a rate equal to the Prime Rate plus 1%. 26 27 Item 8. Financial Statements and Supplementary Data Information called for by this Item is set forth in the Company's financial statements and supplementary data contained in this report and is incorporated herein by reference. Specific financial statements and supplementary data can be found at the pages listed in the following index. Index
PAGE NUMBER ------ Independent Auditors' Report F-1 Consolidated Balance Sheets (at December 31, 1994 and December 31, 1993) F-2 Consolidated Statements of Operations for the Year Ended December 31, 1994, the Five Months Ended December 31, 1993, the 53 Weeks Ended July 31, 1993 and the 52 Weeks Ended July 25, 1992 F-3 Consolidated Statements of Deficiency in Net Assets for the Year Ended December 31, 1994, the Five Months Ended December 31, 1993, the 53 Weeks Ended July 31, 1993 and the 52 Weeks Ended July 25, 1992 F-4 Consolidated Statements of Cash Flows for the Year Ended December 31, 1994 the Five Months Ended December 31, 1993, the 53 Weeks Ended July 31, 1993 and the 52 Weeks Ended July 25, 1992 F-5 Notes to Consolidated Financial Statements F-6 - F-20
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. 27 28 PART III Item 10. Directors and Executive Officers of the Registrant Information relating to directors and executive officers of the Company will be contained in a definitive Proxy Statement involving the election of directors which the Company will file with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, not later than 120 days after December 31, 1994, and such information is incorporated herein by reference. Information relating to Executive Officers of the Company appears on page 20 of this Annual Report on Form 10-K. Item 11. Executive Compensation Information relating to executive compensation will be contained in the Proxy Statement referred to above in Item 10, "Directors and Executive Officers of the Company", and such information is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management Information relating to security ownership of certain beneficial owners and management will be contained in the Proxy Statement referred to in Item 10, "Directors and Executive Officers of the Company", and such information is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions Steven Roth, Interstate, in which Mr. Roth is the managing general partner, and the two other general partners, own, in the aggregate, 36.6% of the outstanding common shares of beneficial interest of Vornado and 27.1% of the Company's Common Shares. As a result of Vornado's acquisition on March 2, 1995 of 27.1% of the Company's Common Shares from Citibank, N.A., Vornado currently owns 29.3% of the Company's Common Shares. Accordingly, Vornado and its affiliates currently own 56.4% of the Company's Common Shares. In connection with Vornado's increased ownership of the Company's Common Shares, Vornado, the Company and Interstate entered into the Standstill Agreement which became effective March 2, 1995. The Standstill Agreement restricts self-dealing principal transactions between the Company and Vornado and its affiliates. Pursuant to the Standstill Agreement, the Company and Vornado agreed to use their best efforts to cause the Board of Directors of the Company to include up to three, but not less than two, independent directors until March 2, 1998. In addition, Vornado, Interstate and their respective affiliates (the "Vornado Group") are restricted for three years from owning, in the aggregate, Common Shares of the Company in excess of 66.65% of the Common Shares outstanding without the consent of such independent directors. 28 29 The Standstill Agreement also restricts for three years the disposition by the Vornado Group of the Company's Common Shares (other than pursuant to an underwritten public offering) in an amount in excess of the greater of (i) 30% of the outstanding Common Shares of the Company or (ii) a majority of the Common Shares of the Company held by Interstate and Vornado and their affiliates, at a price greater than 115% of the then current market price, unless the transferee of such shares irrevocably offers to purchase the same pro rata percentage of Common Shares held by all other beneficial owners of the outstanding Common Shares. At December 31, 1994, the Company owed Vornado approximately $12,400,000 for transactions completed to date in connection with the leasing of, or the sale of leases on, approximately two-thirds of the Company's store properties. This amount will be payable over a seven year period in an amount not to exceed $2,500,000 in any calendar year until the present value of such installments (calculated at a discount rate of 9% per annum) paid to Vornado equals the amount that would have been paid had it been paid on September 21, 1993 or at the time of the transaction giving rise to the commission, if later. This amount is included in "taxes payable and accrued liabilities" in the Consolidated Balance Sheets as of December 31, 1994. Additional information relating to certain relationships and related transactions will be contained in the Proxy Statement referred to in Item 10, "Directors and Executive Officers of the Company", and such information is incorporated herein by reference. 29 30 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports On Form 8-K (a) Documents filed as part of this Report (1) Financial Statements The Consolidated Financial Statements of Alexander's, Inc. and its subsidiaries, which appear on pages F-1 through F-20, are incorporated herein by reference.
PAGE REFERENCE --------- Independent Auditors' Report F-1 - F-2 Consolidated Balance Sheets (at December 31, 1994 and December 31, 1993) F-2 Consolidated Statements of Operations for the Year Ended December 31, 1994, the Five Months Ended December 31, 1993, the 53 Weeks Ended July 31, 1993 and the 52 Weeks Ended July 25, 1992 F-3 Consolidated Statements of Deficiency in Net Assets for the Year Ended December 31, 1994, the Five Months Ended December 31, 1993, the 53 Weeks Ended July 31, 1993 and the 52 Weeks Ended July 25, 1992 F-4 Consolidated Statements of Cash Flows for the Year Ended December 31, 1994 the Five Months Ended December 31, 1993, the 53 Weeks Ended July 31, 1993 and the 52 Weeks Ended July 25, 1992 F-5 Notes to Consolidated Financial Statements F-6 - F-20
30 31 (2) Financial Statement Schedules Schedule III - Real Estate and Accumulated Depreciation All other consolidated financial schedules are omitted because they are inapplicable, not required, or the information is included elsewhere in the consolidated financial statements or the notes thereto. (3) Exhibits See Exhibit Index on page 37. (b) Reports on Form 8-K The Company has filed Current Reports on Form 8-K, dated January 4, 1995 and February 6, 1995. In the fourth quarter of fiscal 1994, the Company did not file a current report on Form 8-K. 31 32 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ALEXANDER'S, INC. By: /s/ Brian M. Kurtz --------------------------------------- Brian M. Kurtz Chief Administrative Officer, Executive Vice President and Secretary Date: March 31, 1995 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Steven Roth Chief Executive Officer March 31, 1995 --------------------- and Director Steven Roth (Principal Executive Officer) /s/ Steven Santora Vice President March 31, 1995 --------------------- and Controller Steven Santora (Principal Accounting Officer)
32 33
/s/ Thomas R. DiBenedetto Director March 31, 1995 --------------------------- Thomas R. DiBenedetto /s/ David Mandelbaum Director March 31, 1995 --------------------------- David Mandelbaum /s/ Stephen Mann Director March 31, 1995 --------------------------- Stephen Mann /s/ Arthur I. Sonnenblick Director March 31, 1995 --------------------------- Arthur I. Sonnenblick /s/ Neil Underberg Director March 31, 1995 --------------------------- Neil Underberg /s/ Richard West Director March 31, 1995 --------------------------- Richard West /s/ Russell Wight, Jr. Director March 31, 1995 --------------------------- Russell Wight, Jr.
33 34 ALEXANDER'S, INC. AND SUBSIDIARIES SCHEDULE III SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1994 (Amounts in thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F GROSS AMOUNT AT WHICH INITIAL CARRIED AT COST TO CLOSE OF COMPANY (2) PERIOD- BUILDING, COST BUILDINGS, ACCUMULATED LEASEHOLDS CAPITALIZED LEASEHOLD DEPRECIATION AND LEASEHOLD SUBSEQUENT TO AND LEASEHOLD AND DESCRIPTION ENCUMBRANCES(1) LAND IMPROVEMENTS ACQUISITION(3) LAND IMPROVEMENTS TOTAL(4) AMORTIZATION Commercial Property: New York State: New York City: Fordham Rd $10,000 $ 2,301 $ 9,258 $ - $ 2,301 $ 9,258 $11,559 $ 6,299 Third Avenue - 1,201 4,437 - 1,201 4,437 5,638 2,933 Rego Park 16,325 5,553 10,420 48 5,553 10,468 16,021 8,834 Flushing - - 1,660 - - 1,660 1,660 1,203 Lexington Ave. 3,721 14,432 12,355 - 14,432 12,355 26,787 3,360 Flatbush Ave. and Avenue U 8,318 497 9,542 3,036 497 12,578 13,075 5,808 ------- ------- ------- ------- ------- ------- ------- ------- Total NY City 38,364 23,984 47,672 3,084 23,984 50,756 74,740 28,437 ------- ------- ------- ------- ------- ------- ------- ------- Total NY State 38,364 23,984 47,672 3,084 23,984 50,756 74,740 28,437 ------- ------- ------- ------- ------- ------- ------- ------- New Jersey: Paramus 13,290 1,742 7,185 13 1,742 7,198 8,940 6,101 ------- ------- ------- ------- ------- ------- ------- ------- Total NJ 13,290 1,742 7,185 13 1,742 7,198 8,940 6,101 ------- ------- ------- ------- ------- ------- ------- ------- Total Commercial Property 51,654 25,726 54,857 3,097 25,726 57,954 83,680 34,538 Miscellaneous Properties -- 734 1,897 -- 734 1,897 2,631 1,827 TOTAL $51,654 $26,460 $56,754 $ 3,097 $26,460 $59,851 $86,311 $36,365 ======= ======= ======= ======= ======= ======= ======= =======
Column A Column G Column H Column I LIFE ON WHICH DEPRECIATION IN LATEST INCOME DATE OF DATE STATEMENT IS DESCRIPTION CONSTRUCTION ACQUIRED (6) COMPUTED Commercial Property: New York State: New York City: Fordham Rd 1933 1992 4-40 years Third Avenue 1928 1992 13 years Rego Park 1959 1992 6-40 years Flushing 1975(5) 1992 10-22 years Lexington Ave. 1965 1992 29 years Flatbush Ave. and Avenue U 1970 1992 20-40 years Total NY City Total NY State New Jersey: Paramus 1962 1992 5-40 years Total NJ Total Commercial Property Miscellaneous Properties Various 1992 7-25 years
(1) Subsequent to December 31, 1994, the Company entered into several new credit facilities totalling approximately $121,000,000, replacing all existing indebtedness except with respect to the Paramus, New Jersey property. (2) Initial cost is as of May 15, 1992 (the date on which the Company commenced real estate operations) unless acquired subsequent to that date. See Column H. (3) Cost capitalized subsequent to acquisition does not include development costs at December 31, 1994 of $27,213,000. (4) Aggregate cost is approximately the same for Federal income tax purposes. (5) Date represents lease acquisition date. (6) Date acquired represents the date on which the Company commenced its real estate operations. 34 35 SCHEDULE III Cont. ALEXANDER'S, INC. AND SUBSIDIARIES SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Amounts in thousands)
DEC. 31, 1994 DEC. 31, 1993 ------------- ------------- REAL ESTATE: Balance at beginning of period $86,114 $83,373 Additions during the period: Buildings, leaseholds and leasehold improvements 356 2,741 ------- ------- 86,470 86,114 Deductions during the period: Retirements and sales of leases 159 -- ------- ------- Balance at end of period $86,311 $86,114 ======= ======= ACCUMULATED DEPRECIATION: Balance at beginning of period $35,124 $34,513 Additions charged to operating expenses 1,393 611 ------- ------- 36,517 35,124 Retirements and sales of leases 152 -- ------- ------- Balance at end of period $36,365 $35,124 ======= =======
35 36 Commission File No. 1-6064 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________ EXHIBITS to FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1994 _______________ ALEXANDER'S, INC. 36 37 Index to Exhibits The following is a list of all exhibits filed as part of this Report:
EXHIBIT NO. DOCUMENT PAGE ----------- -------- ---- 3(i) Certificate of Incorporation, as amended. Incorporated herein by reference from Exhibit 3.0 to the Registrant's Current Report on Form 8-K dated September 21, 1993. 3(ii) By-Laws, as amended. Incorporated herein by reference from Exhibit 3(B) to the Registrant's Form 10-K for the fiscal year ended July 27, 1991. 10(i)(A)(1)* Agreement, dated as of December 4, 1985, among Seven Thirty One Limited Partnership ("731 Limited Partnership"), Alexander's Department Stores of Lexington Avenue, Inc., the Company, Emanuel Gruss, Riane Gruss and Elizabeth Goldberg (collectively, the "Partners"). Incorporated herein by reference from Exhibit 10(i)(F)(1) to the Registrant's Form 10-K for the fiscal year ended July 26, 1986. 10(i)(A)(2) Amended and Restated Agreement of Limited Partnership in the 731 Limited Partnership, dated as of August 21, 1986, among the Partners. Incorporated herein by reference from Exhibit 1 to the Registrant's Current Report on Form 8-K, dated August 21, 1986. 10(i)(A)(3) Third Amendment to Amended and Restated Agreement of Limited Partnership dated December 30, 1994, among the Partners. Filed herewith. 10(i)(B)(1) Promissory Note Modification Agreement, dated October 4, 1993, between Alexander's Department Stores of New Jersey, Inc. and New York Life Insurance Company ("New York Life"). Incorporated herein by reference from Exhibit 10(i)(3)(a) to the Registrant's Form 10-K for the Transition Period August 1, 1993 to December 31, 1993. 10(i)(B)(2) Mortgage Modification Agreement, dated October 4, 1993, by Alexander's Department Stores of New Jersey, Inc. and New York Life Incorporated herein by reference from Exhibit 10(i)(E)(3)(a) to the Registrant's Form 10-K for the Transition Period August 1, 1993 to December 31, 1993.
37 38
EXHIBIT NO. DOCUMENT PAGE ----------- -------- ---- 10(i)(C)* Credit Agreement, dated March 15, 1995, among the Company and Vornado Lending Corp. Filed herewith. 10(i)(D)* Credit Agreement, dated March 15, 1995, among the Company and First Fidelity Bank, National Association. Filed herewith. 10(i)(E)* Building Loan Agreement, dated as of March 29, 1995, among the Company, Union Bank of Switzerland ("UBS") (New York Branch) as Lender and UBS (New York Branch) as Agent. Filed herewith. 10(i)(F)* Project Loan Agreement, dated as of March 29,1995, among the Company, UBS (New York Branch), as Lender and UBS (New York Branch) as Agent. Filed herewith. 10(i)(G)(1) Real Estate Retention Agreement dated as of July 20, 1992, between Vornado Realty Trust and Keen Realty Consultants, Inc., each as special real estate consultants, and the Company. Incorporated herein by reference from Exhibit 10(i)(O) to the Registrant's Form 10-K for the fiscal year ended July 25, 1992. 10(i)(G)(2) Extension Agreement to the Real Estate Retention Agreement, dated as of February 6, 1995, between the Company and Vornado Realty Trust. Filed herewith. 10(i)(H) Management and Development Agreement, dated as of February 6, 1995, between Vornado Realty Trust and the Company, on behalf of itself and each subsidiary listed therein. Incorporated herein by reference from Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated February 6, 1995. 10(i)(I) Standstill and Corporate Governance Agreement, dated as of February 6, 1995, by and among Vornado Realty Trust, Interstate Properties and the Company. Incorporated herein by reference from Exhibit 10.2 to the Registrant's Current Report on Form 8-K dated February 6, 1995.
38 39
EXHIBIT NO. DOCUMENT PAGE ----------- -------- ---- 10(i)(J) Commitment letter, dated as of February 6, 1995, between Vornado Realty Trust and the Company. Incorporated herein by reference from Exhibit 10.3 to the Registrant's Current Report on Form 8-K dated February 6, 1995. 10(i)(K) Consulting Retention Agreement, dated as of August 26, 1993, between the Company and Versar, Inc. Incorporated herein by reference from Exhibit 10(i)(4) to the Registrant's Form 10-K for the fiscal year ended July 31, 1993. 10(i)(L) Consulting Retention Agreement, dated as of August 19, 1993, between the Company and Certified Engineering and Testing Co., Inc. Incorporated herein by reference from Exhibit 10(i)(J) to the Registrant's Form 10-K for the fiscal year ended July 31, 1993. 10(i)(M) Consulting Retention Agreement, dated as of August 10, 1993, between the Company and Merritt & Harris, Inc. Incorporated herein by reference from Exhibit 10(i)(I) to the Registrant's Form 10-K for the fiscal year ended July 31, 1993. 10(ii)(A)(1)* Agreement of Lease, dated April 22, 1966, between S&E Realty Company and Alexander's Department Stores of Valley Stream, Inc. Incorporated herein by reference from Exhibit 13N to the Registrant's Registration Statement on Form S-1 (Registration No. 2-29780). 10(ii)(A)(2) Guarantee, dated April 22, 1966, of the Lease described as Exhibit 10(ii)(A)(1) above by Alexander's Department Stores, Inc. Incorporated herein by reference from Exhibit 13N(1) to the Registrant's Registration Statement on Form S-1 (Registration No. 2-29780). 10(ii)(A)(3)* Agreement of Lease, between Alexander's, Inc. and Sears Roebuck & Co. Incorporated herein by reference from Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1994. 10(ii)(A)(4)* Amendment to the Lease, between Alexander's, Inc. and Sears Roebuck & Co., dated March 29, 1995. Filed herewith.
39 40
EXHIBIT NO. DOCUMENT PAGE ----------- -------- ---- 10(ii)(A)(5)* Agreement, dated as of December 1, 1992, between Alexander's Department Stores of Yonkers, Inc. and Bradlees, Inc. relating to the sale and assignment of leasehold interest in the property located at 2500 Central Park Avenue, Yonkers, New York. Incorporated herein by reference from Exhibit 10(ii)(E)(3) to the Registrant's Form 10-K for the fiscal year ended July 25, 1992. 10(ii)(A)(6)* Lease for Rego Park, Queens, New York, dated as of December 1, 1992, between the Company, as landlord, and Caldor, as tenant. Incorporated herein by reference from Exhibit 10(ii)(E)(5) to the Registrant's Form 10-K for the fiscal year ended July 25, 1992. 10(ii)(A)(7)(a)* Lease for Fordham Road, Bronx, New York, dated as of December 1, 1992, between the Company, as landlord, and Caldor, as tenant. Incorporated herein by reference from Exhibit 10(ii)(E)(6) to the Registrant's Form 10-K for the fiscal year ended July 25, 1992. 10(ii)(A)(7)(b) First Amendment to the Lease for Fordham Road, Bronx, New York, dated as of February 22, 1995, between the Company, as Landlord, and Caldor, as tenant. Filed herewith. 10(ii)(A)(8)(a)* Lease for Roosevelt Avenue, Flushing, New York, dated as of December 1, 1992, between the Company, as landlord, and Caldor, as tenant. Incorporated herein by reference from Exhibit 10(ii)(E)(7) to the Registrant's Form 10-K for the fiscal year ended July 25, 1992. 10(ii)(A)(8)(b) First Amendment to Sublease for Roosevelt Avenue, Flushing, New York, dated as of February 22, 1995 between the Company as sublandlord, and Caldor, as tenant. Filed herewith. 10(ii)(A)(9)* Lease Agreement, dated March 1, 1993 by and between the Company and Alex Third Avenue Acquisition Associates. Incorporated by reference from Exhibit 10(ii)(F) to the Registrant's Form 10-K for the fiscal year ended July 31, 1993. 10(ii)(A)(10)* Agreement of Lease, between Alexander's Department Stores of New Jersey, Inc. and Waban, Inc. Incorporated herein by reference from Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the twelve weeks ended October 23, 1993, dated December 7, 1993.
40 41
EXHIBIT NO. DOCUMENT PAGE ----------- -------- ---- 10(ii)(A)(11)* Agreement of Lease, between Alexander's Department Store of New Jersey, Inc. and Home Depot U.S.A., Inc. Incorporated herein by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the twelve weeks ended October 23, 1993, dated December 7, 1993. 10(ii)(A)(12)(a)* Agreement of Lease, between the Company and Marshalls of Richfield, MN., Inc., dated as of March 1, 1995. Filed herewith. 10(ii)(A)(12)(b) Guaranty, dated March 1, 1995, of the Lease described in Exhibit 10(ii)(A)(12)(a) above by the Company. Filed herewith. 10(iii)(A) Employment Agreement, dated March 29, 1995, between Brian M. Kurtz and the Company. Filed herewith. 10(iii)(B) Employment Agreement, dated February 9, 1995, between the Company and Stephen Mann. Filed herewith. 21 Subsidiaries of Registrant. Filed herewith. 27 Financial Data Schedule. Filed herewith.
______________ * The basic operating agreements have been filed herewith or incorporated by reference. Certain amendments, supplements and other related agreements which are not material to current operations have not been filed but will be made available upon request. 41 42 INDEPENDENT AUDITORS' REPORT Board of Directors and Stockholders of Alexander's, Inc. New York, New York We have audited the accompanying consolidated balance sheets of Alexander's, Inc. and Subsidiaries (the "Company") as of December 31, 1994, and 1993 and the related statements of operations, deficiency in net assets and cash flows for the year ended December 31, 1994, for the five months ended December 31, 1993 and each of the two years in the period ended July 31, 1993. Our audits also included the financial statement schedules listed in the index at Item 14.(a)(2). These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also included assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 1994, and 1993, and the results of their operations and their cash flows for the year ended December 31, 1994 and for the five months ended December 31, 1993 and each of the two years in the period ended July 31, 1993 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. As discussed in Note 5 to the financial statements, the Company changed in Fiscal 1993 its method of accounting for postretirement healthcare benefits to conform with Statement of Financial Accounting Standards No. 106. As emphasized in Note 1 to the financial statements, the Company's ability to operate as a viable real estate company will depend on the successful completion of the development and leasing of a substantial portion of its existing properties, which is a material factor in the Company's ability to meet its debt service requirements. DELOITTE & TOUCHE LLP New York, New York March 29, 1995 F-1 43 ALEXANDER'S, INC. AND SUBSIDIARIES Consolidated Balance Sheets (amounts in thousands except share amounts)
DECEMBER 31, DECEMBER 31, 1994 1993 ------------ ------------ ASSETS: Real estate, net $ 84,658 $ 70,882 Cash and cash equivalents 2,363 7,053 Restricted cash -- 775 Note receivable 4,550 -- Deferred lease expense 11,561 8,608 Deferred finance and debt expense 2,642 1,184 Other assets 3,645 4,415 ----------- ----------- TOTAL ASSETS $ 109,419 $ 92,917 =========== =========== LIABILITIES AND DEFICIENCY IN NET ASSETS: CONTINUING OPERATIONS: Secured debt $ 51,654 $ 41,566 Taxes payable and accrued liabilities 21,409 13,204 Debt 1,188 1,188 Minority interest 1,574 1,574 ----------- ----------- Total continuing operations 75,825 57,532 ----------- ----------- DISCONTINUED RETAIL OPERATIONS: Accrual for losses from discontinued operations 26,742 32,227 Taxes payable and accrued liabilities 2,613 2,353 Liabilities subject to settlement under reorganization proceedings 25,812 26,411 ----------- ----------- Total discontinued retail operations 55,167 60,991 ----------- ----------- Total liabilities 130,992 118,523 COMMITMENTS AND CONTINGENCIES DEFICIENCY IN NET ASSETS (21,573) (25,606) ----------- ----------- TOTAL LIABILITIES AND DEFICIENCY IN NET ASSETS $ 109,419 $ 92,917 =========== ===========
See notes to consolidated financial statements. F-2 44 ALEXANDER'S, INC. AND SUBSIDIARIES Consolidated Statements of Operations (amounts in thousands except share amounts)
YEAR FIVE MONTHS FIFTY-THREE FIFTY-TWO ENDED ENDED WEEKS ENDED WEEKS ENDED ----------------- ---------------- --------------- --------------- DEC. 31, 1994 DEC. 31, 1993 JULY 31, 1993 JULY 25, 1992 ----------------- ---------------- --------------- --------------- Continuing Operations: Real estate operating revenue $ 11,572 $ 5,133 $ 5,580 $ 2,207 Gains on sales of real estate and real estate leases 161 -- 28,779 -- Write-off of pre-development costs -- -- -- (11,972) Reorganization costs (3,721) (1,808) (5,030) (4,318) Depreciation and amortization (1,821) (833) (2,124) (359) Operating, general and administrative expenses (3,595) (1,391) (842) (296) Interest and debt expense (3,331) (855) -- -- Other income and interest 4,768 700 788 108 -------------- ------------- ------------ ------------ Income/(loss) from continuing operations 4,033 946 27,151 (14,630) Loss from discontinued operations -- -- (477) (118,198) -------------- ------------- ------------ ------------ Income/(loss) before cumulative effect of change in accounting principle 4,033 946 26,674 (132,828) Cumulative effect of change in accounting -- -- (21,449) -- -------------- ------------- ------------ ------------ NET INCOME/(LOSS) $ 4,033 $ 946 $ 5,225 $ (132,828) ============== ============= ============ ============ NET INCOME/(LOSS) PER COMMON SHARE: Continuing operations $ 0.81 $ 0.19 $ 5.45 $ (2.94) Discontinued operations -- -- (0.09) (23.75) Cumulative effect of change in accounting -- -- (4.31) -- -------------- ------------- ------------ ------------ $ 0.81 $ 0.19 $ 1.05 $ (26.69) ============== ============= ============ ============
See notes to consolidated financial statements. F-3 45 ALEXANDER'S, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF DEFICIENCY IN NET ASSETS (amounts in thousands except share amounts)
YEAR FIVE MONTHS FIFTY-THREE FIFTY-TWO ENDED ENDED WEEKS ENDED WEEKS ENDED DEC. 31, 1994 DEC. 31, 1993 JULY 31, 1993 JULY 25, 1992 ------------- ------------- -------------- ------------- PREFERRED STOCK - Authorized, 3,000,000 shares, none issued COMMON STOCK - Authorized, 10,000,000 shares, par value $1.00 per share; outstanding, [5,173,450] shares $ 5,174 $ 5,174 $ 5,174 $ 5,174 ----------- ----------- ----------- ----------- EXCESS STOCK - Authorized, 13,000,000 shares, par value $1.00 per share, none issued ADDITIONAL PAID-IN-CAPITAL Balance, beginning of period 24,843 24,843 23,779 23,651 Exercise of stock options -- -- 1,064 128 ------------ ----------- ----------- ----------- Balance, end of period 24,843 24,843 24,843 23,779 ----------- ----------- ----------- ----------- RETAINED EARNINGS (DEFICIT): Balance, beginning of period (54,663) (55,609) (60,834) 71,994 Net income/(loss) 4,033 946 5,225 (132,828) ------------ ----------- ----------- ----------- Balance, end of period (50,630) (54,663) (55,609) (60,834) ------------- ----------- ----------- ----------- (20,613) (24,646) (25,592) (31,881) TREASURY SHARES - (172,600, 172,600, 197,600 and 197,600 shares at cost) Balance, beginning of period (960) (960) (1,099) (1,099) Issuance of treasury stock -- -- 139 -- ------------ ----------- ----------- ----------- Balance, end of period (960) (960) (960) (1,099) ------------ ----------- ----------- ----------- DEFICIENCY IN NET ASSETS $ (21,573) $ (25,606) $ (26,552) $ (32,980) ============= ============ =========== ===========
See notes to consolidated financial statements. F-4 46 ALEXANDER'S, INC. AND SUBSIDIARIES Consolidated Statements Of Cash Flows (amounts in thousands)
FIVE FIFTY-THREE FIFTY-TWO YEAR MONTHS WEEKS WEEKS ENDED ENDED ENDED ENDED ------------ ------------ ------------- ------------ - - - DEC. 31, DEC. 31, JULY 31, JULY 25, -------- -------- -------- -------- 1994 1993 1993 1992 ---- ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Income from continuing operations $ 4,033 $ 946 $ 27,151 $ (14,630) Adjustments to reconcile net income to net cash provided by (used in) continuing operating activities: Depreciation and amortization 2,251 833 2,124 359 Gains on sales of real estate and real estate leases (161) -- (28,779) -- Write-off of predevelopment costs -- -- -- 11,972 Equity in real estate operations (net of distributions of $(583), $(4,211) and $(1,329) at December 31, 1994, December 31, 1993 and July 31, 1993, respectively). (1,260) 3,116 (326) (947) Change in operating assets and liabilities from continuing operations: Restricted cash 775 371 1,833 (2,979) Note receivable (4,550) -- -- -- Taxes payable and accrued liabilities 1,793 (1,020) 2,331 -- Other 1,602 1,238 (250) -- ------- --------- --------- --------- Net cash (used in)/provided by operating activities of continuing operations 4,483 5,484 4,084 (6,225) ------- --------- --------- --------- Net cash (used in)/provided by discontinued operating activities (5,539) (21,567) (28,475) 9,664 ------- --------- --------- --------- Net cash (used in)/provided by operating activities (1,056) (16,083) (24,391) 3,439 ------- --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to real estate (11,170) (2,549) -- (5,056) Proceeds from sales of real estate and real estate leases 200 -- 33,701 -- Deferred lease expense -- (677) (575) -- ------- --------- --------- --------- Net cash (used in)/provided by investing activities (10,970) (3,226) 33,126 (5,056) ------- --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of secured debt 10,000 -- -- 10,000 Reduction of secured debt (775) (2,314) -- (1,720) Exercise of stock option -- -- 625 -- Reduction of debt from capital lease obligations -- -- (144) (668) Deferred finance and debt expense (1,889) -- -- -- ------- --------- --------- --------- Net cash provided by/(used in) financing activities 7,336 (2,314) 481 7,612 ------- --------- --------- --------- CASH AND CASH EQUIVALENTS: Net cash (used)/provided (4,690) (21,623) 9,216 5,995 Beginning of period 7,053 28,676 19,460 13,465 ------- --------- --------- --------- End of period $ 2,363 $ 7,053 $ 28,676 $ 19,460 ======= ========= ========= ========= SUPPLEMENTAL INFORMATION Cash payments for interest $ 5,133 $ 4,424 $ 2,222 $ 2,231 ======= ========= ========= ========= Cash payments for income taxes $ 131 $ 349 $ 179 $ 584 ======= ========= ========= ========= Tax refunds received $ (200) $ (564) $ -- $ (1,395) ======= ========= ========= ========= Reclassification of obligations subject to settlement under reorganization proceedings $ -- $ -- $ -- $ 77,148 ======= ========= ========= =========
See notes to consolidated financial statements. F-5 47 ALEXANDER'S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. EMERGENCE FROM CHAPTER 11 On May 15, 1992 (the "Petition Date"), Alexander's and sixteen of its subsidiaries filed petitions for relief (the "Bankruptcy Cases") under chapter 11 of the United States Bankruptcy Code, 11 U.S.C. Section Section 101 et seq. (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"). On May 14, 1993, the Company filed a Joint Plan of Reorganization (as amended and restated on July 21, 1993, and modified thereafter, the "Plan"), which allowed the Company to emerge from bankruptcy and continue operating as a real estate company. On September 21, 1993 (the "Confirmation Date"), the Bankruptcy Court confirmed the Plan, which provided for general unsecured creditors of the Company to receive cash in full for their allowed claims, together with interest on such claims, upon the successful effectuation of the Plan. On March 1, 1995, the Bankruptcy Court approved a $75,000,000 secured financing, a portion of the proceeds from which were to pay the balance due and owing to the holders of allowed general unsecured claims. On March 15, 1995, the Company paid holders of allowed general unsecured claims in full, together with accrued interest in respect of their claims. Such payments aggregated $24,005,000. The Official Committee of Unsecured Creditors has been dissolved and all secured and unsecured creditors having allowed claims in the Bankruptcy Court cases have received the cash payments or debt instruments contemplated to be delivered to them under the Plan. The Bankruptcy Court has retained jurisdiction to resolve any remaining disputed claims and for other limited purposes. The Company's ability to operate as a viable real estate company will depend on the successful completion of the development and leasing of a substantial portion of its existing properties, which is a material factor in the Company's ability to meet its debt service requirements. A failure to raise additional cash through additional leasing, asset sales, external financing or otherwise will substantially impede the Company's ability to complete the development of its properties. Liabilities subject to settlement under the Plan are as follows (amounts in thousands):
DEC. 31,1994 DEC. 31,1993 ------------ ------------ Discontinued retail operations: Accounts payable and accrued liabilities $ 22,381 $ 22,945 Unsecured debt 731 766 Other liabilities 2,700 2,700 ---------- ---------- $ 25,812 $ 26,411 ========= =========
F-6 48 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business -- The Company is engaged in the business of leasing, managing, developing and redeveloping real estate properties, focusing on the properties where its department stores were formerly located. Principles of Consolidation -- The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, and the Partnership, a partnership in which the Company held a majority interest at December 31, 1994. Investments in real estate and other property which are 50% owned joint ventures are accounted for under the equity method. All material intercompany accounts and transactions have been eliminated. Cash and Cash Equivalents -- The Company includes in cash and cash equivalents both cash and short-term highly liquid investments which are readily convertible into cash and mature within three months. Real Estate and Other Property -- Real estate and other property is recorded at the lower of cost, less accumulated depreciation, or market. Depreciation is provided on buildings and improvements on a straight-line basis over their estimated useful lives. When real estate and other property is undergoing development activities, all property operating expenses, including interest expense, are capitalized to the cost of the real property to the extent that management believes such costs are recoverable through the value of the property. Deferred Lease Expense -- The Company capitalizes the costs incurred in connection with obtaining long-term leases. Deferred lease expense is amortized on the straight-line method over the initial terms of the leases. Deferred Finance and Debt Expense -- The Company capitalizes the costs incurred in connection with obtaining short-term or long-term debt or refinancing existing debt. These costs are amortized on the straight-line method over the initial terms of the debt. Leases -- All leases are operating leases whereby rents are recorded as real estate operating revenue, and reimbursement of operating expenses are offset against property expenses included in operating, general and administrative expenses. The straight-line basis is used to recognize rents under leases entered into which provide for varying rents over the lease terms. Income Taxes -- The Company recognizes deferred taxes for the temporary differences between the tax bases of its assets and liabilities and the amounts reported in the financial statements at enacted statutory tax rates. Reorganization Costs -- Reorganization costs consist of legal, accounting and other professional fees incurred in connection with consultations on restructuring alternatives of the Company. Amounts Per Share -- Amounts per share are computed based upon the weighted average number of shares outstanding during the period. F-7 49 3. COMPARABLE TRANSITIONAL PERIOD FINANCIAL DATA In November 1993, the Company changed to a calendar year from a fiscal year ending on the last Saturday in July to be consistent with the predominant real estate industry practice. The change of fiscal year resulted in a transition period of five months beginning on August 1, 1993 and ending on December 31, 1993. Presented below is the financial data for the years ended December 31, 1994 and 1993 (amounts in thousands).
YEAR YEAR ENDED ENDED DECEMBER 31, DECEMBER 31, 1994 1993 ------------ ------------ (UNAUDITED) Continuing Operations: Real estate operating revenue $ 11,572 $ 9,320 Gains on sales of real estate and real estate leases 161 7,686 Reorganization costs (3,721) (4,400) Depreciation and amortization (1,821) (1,876) Operating, general and administrative expenses (3,595) (1,501) Interest and debt expense (3,331) (855) Other income and interest 4,768 1,270 -------- ------- Income from continuing operations 4,033 9,644 Loss from discontinued operations -- (280) -------- ------- NET INCOME $ 4,033 $ 9,364 ========= =========
F-8 50 4. REAL ESTATE (amounts in thousands)
DECEMBER 31, DECEMBER 31, 1994 1993 ------------ ------------ Land $ 26,460 $ 26,460 Buildings, leaseholds and leasehold improvements 59,851 59,654 Predevelopment and other deferred costs 27,213 13,653 -------- -------- 113,524 99,767 Less: Accumulated depreciation and amortization 36,365 35,124 -------- -------- 77,159 64,643 Investment in unconsolidated joint venture (Kings Plaza Mall) 7,499 6,239 -------- -------- Real estate, net $ 84,658 $ 70,882 ======== ======== Summary financial information for the Kings Plaza Mall is as follows (amounts in thousands):
SIX MONTHS ENDED FISCAL YEAR ENDED JUNE 30, DEC. 31, ------------------------------- 1994 1994 1993 1992 ---------- ---- ---- ---- (UNAUDITED) Operating revenue $ 12,694 $ 24,635 $ 23,890 $ 21,790 -------- -------- -------- -------- Operating costs 8,590 17,662 17,477 16,486 Depreciation and amortization 649 1,147 1,231 1,253 Interest expense 879 1,945 2,270 1,932 -------- -------- -------- -------- 10,118 20,754 20,978 19,671 -------- -------- -------- -------- Income before taxes $ 2,576 $ 3,881 $ 2,912 $ 2,119 ======== ======== ======== ======== Assets, principally cash (at June 30, 1993 and 1992) and property and equipment $ 28,600 $ 33,800 $ 40,500 $ 32,200 ======== ======== ======== ======== Liabilities $ 17,400 $ 19,500 $ 22,600 $ 17,200 ======== ======== ======== ========
As of March 24, 1995, the Company had not paid real estate taxes that were due on its Rego Park, Lexington Avenue, Third Avenue and Kings Plaza Store properties in the aggregate principal amount of approximately $5,900,000 plus interest. During the first quarter of 1995, the Company entered into separate agreements with The City of New York on its Rego Park and Lexington Avenue properties pursuant to which the Company made an initial installment payment of 15% of all delinquent taxes, plus interest on each property calculated to the date of the respective installment agreements. Thereafter, the Company is required to make equal quarterly installment payments until all delinquent taxes and interest on each of these properties are paid in full. F-9 51 On March 15, 1995, the Company entered into a 60-day escrow agreement with a title company in the amount of approximately $7,000,000 representing both principal and interest owed on the unpaid real estate taxes including the amounts owing under the agreements. The escrow agreement established an interest bearing cash collateral account and was funded from the proceeds of certain of the Company's financings. 5. PROVISION FOR ESTIMATED LOSSES AND EXPENSES ON DISCONTINUED OPERATIONS The results of the retail operations, together with the provisions for estimated future losses, are presented as "discontinued operations" in the consolidated statements of operations. The Company provided significant reserves in the amount of approximately $97,800,000 in the third quarter of the fiscal year ended July 25, 1992 for estimated expenses and losses to be incurred in connection with discontinuing its retail operations. In addition, the Company recorded a one-time transition charge of approximately $21,400,000 resulting from its adoption of Statement of Financial Accounting Standards ("SFAS"), 106, "Employees' Accounting for Postretirement Benefits Other Than Pensions" and increased the loss from discontinued operations by approximately $500,000 for the fiscal year ended July 31, 1993. The amounts utilized and remaining reserves are summarized as follows (amounts in thousands) :
DEC. 31, 1994 DEC. 31, 1993 JULY 31, 1993 JULY 25, 1992 ------------- ------------- ------------- ------------- Balance at beginning of period $ 32,808 $ 44,047 $ 53,402 $ -- Provisions provided during period -- -- 21,926 97,800 Utilized during period (5,485) (11,239) (31,281) (44,398) ----------- ----------- ---------- ---------- Balance at end of period $ 27,323 $ 32,808 $ 44,047 $ 53,402 ========= ========= ========= =========
The balance remaining is reflected in the consolidated balance sheet as of December 31, 1994 as follows (amounts in thousands): Accrual for losses from discontinued operations $ 26,742 Liabilities subject to settlement under reorganization proceedings-discontinued retail operations 581 --------- $ 27,323 =========
It is the opinion of management that these reserves represent a reasonable estimation of the remaining costs associated with discontinuing the retail operations. However, due to the continuing uncertainties with respect to (i) the final resolution of all bankruptcy claims filed or continuing to be filed against the Company in the Bankruptcy Court cases, (ii) the final cost of interest accruing on unpaid unsecured creditors' claims and (iii) the contingent obligations of the Company with respect to its former employees' postretirement health care benefits, the ultimate amount of such costs to be incurred is presently not determinable. Any future additions F-10 52 to these reserves will be provided when known. Any excess in such reserves over actual costs incurred will be recorded as income when they become reasonably certain. 6. DEBT (amounts in thousands)
DEC. 31, 1994 DEC. 31, 1993 ------------- ------------- Items included in secured debt: First mortgage loans, payable to 1998, with interest rates ranging from 8.5% to 10.5% at December 31, 1994 $ 27,012 $ 16,136 Secured note, payable in semiannual installments to 2000, with interest at 7.3% at December 31, 1994 8,318 8,330 Bank loan with average interest rate of 8.0% at December 31, 1994 16,324 17,100 -------- -------- 51,654 41,566 -------- -------- Other debt: Bank loans, 731 Limited Partnership, with average interest rates of 12.1% at December 31, 1994 1,188 1,188 Other (included in liabilities subject to settlement under reorganization proceedings) 731 766 --------- --------- 1,919 1,954 --------- --------- $ 53,573 $ 43,520 ======== =========
A summary of maturities of long-term debt is as follows (amounts in thousands): Year ending December 31, 1995 $ 11,223 1996 20,081 1997 135 1998 13,425 Thereafter 8,709 -------- $ 53,573 ========
Approximately $900,000 in standby letters of credit were issued at December 31, 1994. F-11 53 At December 31, 1994, the Company held an 82% interest in the Seven Thirty One Limited Partnership (the "Partnership"). A third party (the "731 Limited Partners"), as a limited partner, held an 18% interest in the Partnership. The outside 731 Limited Partners have the right to require the Partnership to redeem their partnership interest in two separate stages for an aggregate amount of approximately $35,000,000, plus capitalized interest from the effective date of the Plan to the date of redemption of approximately $1,800,000. In January 1995, the Partnership redeemed the first portion of the outside 731 Limited Partners' interest by giving such limited partner a promissory note due in August 1998 in the amount of approximately $21,800,000 (the "Note"). The Note bears interest at the prime rate and is secured by a second mortgage on the Lexington Avenue property. The outside 731 Limited Partners have the right to put their remaining 7.64% interest to the Partnership for a five-year period in exchange for a five-year secured note in the principal amount of $15,000,000, bearing interest at a rate equal to the Prime Rate plus 1%. The Company currently holds a 92.36% interest in the Partnership. The effect of the $21,800,000 redemption by the Partnership of the first portion of the 731 Limited Partners' partnership interest on the Company's balance sheet will be an increase to real estate a reduction in minority interest for the redeemed shares, and an increase in debt. The Company incurred $5,133,000 of total interest costs during 1994 of which $1,718,000 was capitalized. The net carrying value of real estate collateralizing mortgages amounted to $45,980,000 at December 31, 1994. 7. LEASES Leases and Sales of Leases During the 53 weeks ended July 31, 1993, the Company sold its interests in four real property leases and assigned another real property lease. The Company received proceeds of $33,701,000, and recorded a pre-tax gain of $28,779,000. F-12 54 As Lessor The Company currently (i) net leases to the Caldor Corporation ("Caldor") its Fordham Road property, (ii) net subleases to Caldor its Flushing property and (iii) net leases its Third Avenue property to an affiliate of Conway Stores, Inc. ("Conway"). The rental terms for the properties leased to Caldor and Conway range from 20 years to approximately 34 years. The leases provide for the payment of fixed base rentals payable monthly in advance and for the payment by the lessees of additional rents based on a percentage of the tenants' sales as well as reimbursements of real estate taxes, insurance and maintenance. As of December 31, 1994, future base rental revenue, under noncancellable operating leases is as follows:
YEAR ENDING TOTAL DECEMBER 31, AMOUNTS ------------ ------- 1995 $ 7,287,000 1996 7,435,000 1997 7,467,000 1998 7,831,000 1999 7,876,000 Thereafter 185,430,000
Revenues from the Caldor leases represent approximately 63% of the Company's consolidated revenues for the year ended December 31, 1994. Revenues from the Conway lease represents approximately 13% of the Company's consolidated revenues for the year ended December 31, 1994. The Company believes that the loss of either of these tenants would have a material adverse effect on the Company. In addition, the Company has entered into leases with Sears, Caldor and Marshalls for its Rego Park Redevelopment Property and has entered into "pad" leases with Waban, Inc., which operates B.J.'s Wholesale Clubs and Home Depot at its Paramus Redevelopment Property. The Rego Park leases referred to above require the Company to build a multi-level parking garage annexed to the existing building where these stores will be located, to subdivide and reface the building and to make other improvements. Rentals commence under these leases upon the completion of such projects. Construction commenced in December 1994. In connection with the Waban's and Home Depot leases at Paramus, rentals commence upon the completion of the construction of the buildings which is subject to obtaining various governmental approvals. If the proposed condemnation of a portion of the Paramus property were to occur, the required governmental approvals could not be obtained. F-13 55 As Lessee The Company is a tenant under a long-term lease for the Flushing property which expires on January 31, 2027. Future minimum lease payments under the operating lease at December 31, 1994 are as follows:
Year Ending December 31, Amount ------------ ------ 1995 $ 496,000 1996 496,000 1997 344,000 1998 331,000 1999 331,000 Thereafter 6,017,000
8. INCOME TAXES For the year ended December 31, 1994, the Company had net income of approximately $4,033,000 for financial reporting purposes, for which no federal tax provision is currently provided due to the carryover of net operating losses ("NOLs"). The Company has remaining NOL carryovers for tax purposes of approximately $110,000,000 at December 31, 1994, of which $5,000,000, $52,000,000, $22,000,000, $15,000,000 and $16,000,000 expire in 2005, 2006, 2007, 2008 and 2009, respectively. The Company also had investment tax and targeted jobs tax credits of approximately $3,000,000 expiring in 2002 through 2005. The Company intends to elect to be taxed as a real estate investment trust ("REIT") under sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"), effective for the taxable year ended December 31, 1995. Under the Code, the Company's NOL carryovers generally would be available to offset the amount of the Company's REIT taxable income that otherwise would be required to be distributed to its stockholders. The Company currently does not anticipate making any distributions during 1995. In addition, the Company had a deferred tax liability of approximately $1,254,000 at December 31, 1994, which amount will be reversed in 1995 when the Company elects to be taxed as a REIT. F-14 56 9. RELATED PARTY TRANSACTIONS The Company is a party to a Real Estate Retention Agreement with Vornado Realty Trust ("Vornado"). Interstate Properties ("Interstate"), a partnership of which Steven Roth, a director of the Company, is the managing general partner, owns 27.1% of the outstanding common stock of the Company and owns 30.9% of the outstanding common shares of beneficial interest of Vornado. In addition, Mr. Roth owns 4.1% of the outstanding common shares of beneficial interest of Vornado. Mr. Roth, Interstate and the other two general partners of Interstate own, in the aggregate, 36.6% of the outstanding Common Shares of beneficial interest of Vornado. Vornado owns 29.3% of the outstanding common stock of the Company and, because of the relationship between Interstate, Mr. Roth and Vornado, Interstate and Vornado have filed as a "group" with the Securities and Exchange Commission in connection with their respective holdings in the Company. Pursuant to the Retention Agreement, Vornado agreed to act as the Company's exclusive leasing agent. The Retention Agreement will continue until March 2, 1998 after which it will automatically renew on a year-to-year basis, terminable by either party at the end of each year on not less than 60 days' prior notice. At December 31, 1994, the Company owed Vornado approximately $12,400,000 for transactions completed to date in connection with the leasing of, or the sale of leases on, approximately two-thirds of the Company's store properties. This amount will be payable over a seven-year period in an amount not to exceed $2,500,000 in any calendar year until the present value of such installments (calculated at a discount rate of 9% per annum) paid to Vornado equals the amount that would have been paid had it been paid on September 21, 1993 or at the time of the transaction giving rise to the commission, if later. This amount is included in "taxes payable and accrued liabilities" in the Consolidated Balance Sheets as of December 31, 1994. In September 1994, the Company obtained from Interprop Fordham, Inc., an affiliate of Interstate, and Citibank, N.A. a short-term secured loan of $10,000,000 which enabled the Company to make the $2,600,000 payment to the unsecured creditors and to fund a portion of the Company's working capital and capital expenditure requirements. This loan was repaid during the first quarter of 1995. During the twelve months ended December 31, 1994, the five months ended December 31, 1993 and the fiscal year 1993, Vornado through Interstate was paid $57,000, $2,000 and $445,000, respectively, by the Kings Plaza Shopping Center for performing leasing services. For the fiscal year 1992, Interstate was paid $694,000 by the Kings Plaza Shopping Center for performing leasing services. See Note 14 for a discussion of a recent financing provided by Vornado. F-15 57 10. ISSUANCE OF SHARES As of the Effective Date of the Company's Plan, the Company's Certificate of Incorporation was amended and restated to authorize the issuance of 26,000,000 shares of which 3,000,000 are Preferred Stock, par value $1.00 per share, 10,000,000 shares are Common Stock, par value $1.00 per share, and 13,000,000 are Excess Stock, par value $1.00 per share. At December 31, 1994, December 31, 1993, July 31, 1993, and July 25, 1992, 1,000,000 shares of Preferred Stock were authorized (none issued) and there was no authorized Excess Stock. 11. LEGAL PROCEEDINGS In 1991, the Company settled a zoning-related litigation with, among others, the Borough of Paramus and the owners of a shopping center proximate to the Company's Paramus, New Jersey property (the "Westland Parties"). On November 14, 1994, the Company commenced a proceeding in the Bankruptcy Court against the Westland Parties to compel payment pursuant to such settlement. On December 30, 1994, the Company and the Westland Parties reached a settlement with respect to such proceeding and the Company received a promissory note from the Westland Parties in the principal amount of $4,550,000 which was paid January 10, 1995 in exchange for a full release by the Company from any and all claims relating to such matters. 12. COMMITMENTS AND CONTINGENCIES Paramus Property The State of New Jersey has notified the Company of its intention to condemn a portion of the Paramus property and has conducted an appraisal, the results of which have not yet been communicated to the Company. If the condemnation occurs, the Company will be required to change its development plans and Home Depot and B.J.'s Wholesale Clubs will not be obligated under their current leases, and the time and cost to develop the Paramus property may materially increase. Lexington Avenue Property The Company believes that, along with a number of other locations, a portion of the Lexington Avenue property is being considered by the Port Authority of New York and New Jersey (the "Port Authority") for the site of the terminus for a rail link from midtown Manhattan to LaGuardia and Kennedy Airports. In June 1994, the Federal Aviation Administration ("FAA") and the New York State Department of Transportation ("NYDOT") released a draft environmental impact statement ("DEIS") and Section 4(f) Evaluation (the "DEIS and Section 4(f) Evaluation") of the Port Authority's proposed rail link. On December 15, 1994, the Company submitted a letter of comment and a report to the U.S. Department of Transportation, the FAA and the NYDOT on the DEIS and Section 4(f) Evaluation pursuant to the period of public comment which terminated on December 15, F-16 58 1994. The Company expressed its opposition to the consideration of a portion of the Lexington Avenue property for the site of the terminus. Approval of numerous federal, New York State and New York City agencies are required before construction could begin. The Company does not know whether the rail link terminus project will be undertaken or, if undertaken, the timing of the project and whether the Lexington Avenue property will be chosen as the site of the terminus. If the project proceeds and the Port Authority selects a portion of the Lexington Avenue property for such use and can establish that it is needed to serve a public use, benefit or purpose, the Port Authority, after conducting the requisite public hearings, may acquire such portion of the Lexington Avenue property pursuant to its powers of eminent domain. The Company has the right to appeal any such action by the Port Authority. If the Port Authority prevails, the Company would be entitled to compensation for its loss. Since the nature and scope of any plans being considered by the Port Authority, and whether any such plans would ultimately affect the Lexington Avenue property, cannot be fully assessed by the Company at this time, it is impossible to determine the ultimate effect that a taking, or any uncertainty with respect thereto, would have on the Company's use or development of the Lexington Avenue property. Tax Certiorari Proceedings The Company is currently negotiating with the City of New York a settlement of both these unpaid real estate taxes and certiorari proceedings that are currently pending before the City of New York on several of its properties, some of which are properties where the real estate taxes remain unpaid. Alexander's Department Stores of Valley Stream, Inc. ("ADS of Valley Stream") is a party to a tax certiorari proceeding against The Board of Assessors and The Board of Assessment Review of the County of Nassau (the "Board") for overpayment of taxes on its former Valley Stream store property during the assessment rolls for May 1, 1986 through May 1, 1992. On January 12, 1995, the Supreme Court of Nassau County, New York ruled that ADS of Valley Stream is entitled to an assessment reduction which would result in a refund of approximately $8,200,000, plus $1,300,000 in interest. The Company has been informed by the Board that it intends to appeal the court's decision. Rego Park Property The Company is currently building a parking structure and certain additional improvements at the Rego Park property. The Company estimates that its construction costs to build the parking structure and make certain additional improvements at the Rego Park site will be approximately $33,000,000 to $35,000,000. This amount includes approximately $3,000,000 to transport and dispose of soil containing lead which must be removed to complete the project. F-17 59 13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (amounts in thousands except per share amounts)
Year Ended Five Months Ended Fifty-Three Weeks Ended December 31, 1994 December 31, 1993 July 31, 1993 ----------------- ----------------- ----------------------- 1st 2nd 3rd 4th 3rd 4th 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- (two (three months) months) Real estate operating revenue $ 2,896 $ 2,519 $ 3,062 $ 3,095 $ 2,030 $ 3,103 $ 612 $ 1,205 $ 1,368 $ 2,395 Income/(loss) from continuing operations 650 86 757 2,540 645 301 (1,546) 27,959 (99) 837 Loss from discontinued operations -- -- -- -- -- -- (110) (147) (110) (110) Cumulative effect of change in accounting -- -- -- -- -- -- (21,449) -- -- -- Net income/ (loss) 650 86 757 2,540 645 301 (23,105) 27,812 (209) 727 Income/(loss) per common share: Continuing operations 0.13 0.02 0.15 0.51 0.13 0.06 (0.31) 5.62 (0.02) 0.17 Discontinued operations -- -- -- -- -- -- (0.02) (0.03) (0.02) (0.02) Cumulative effect of change in accounting -- -- -- -- -- -- (4.31) -- -- -- Total $ 0.13 $ 0.02 $ 0.15 $ 0.51 $ 0.13 $ 0.06 $(4.64) $ 5.59 $(0.04) $ 0.15
(a) The total for the year ended July 31, 1993 differs from the sum of the quarters as a result of the weighting of the average number of shares outstanding. F-18 60 14. SUBSEQUENT EVENTS Effective March 2, 1995, following the Bankruptcy Court approval of the financing and management arrangements described below, the Company engaged Vornado Realty Trust ("Vornado") to act for it in the management and direction of virtually all of its business affairs pursuant to the Management and Development Agreement between the Company and Vornado dated February 6, 1995 (the "Management and Development Agreement"). Under the Management and Development Agreement, the term of which is three years, Vornado will provide the Company with strategic and day-to-day management services, including operation, maintenance, management, design, planning, construction and development of the Company's Redevelopment Properties. Pursuant to the Management and Development Agreement, Steven Roth, a director of the Company and the Chairman and Chief Executive Officer of Vornado, a New York Stock Exchange listed real estate investment trust and an affiliate of the Company, became the Chief Executive Officer of the Company on March 2, 1995. On March 2, 1995, Vornado, which previously owned 2.2% of the Company's Common Shares, purchased 27.1% of the Company's Common Shares owned by Citibank, N.A. (the "Vornado Acquisition"). In connection with the Vornado Acquisition, Vornado agreed to provide the Company with certain financing (described below) and to act as manager of the Company pursuant to the Management and Development Agreement. In addition, the Company concluded to elect to be taxed as a REIT effective for the taxable year ended December 31, 1995. On March 15, 1995, the Company borrowed from Vornado and a bank an aggregate amount of approximately $75,000,000, at a blended interest rate per annum of 13.8%, secured by, among other things, mortgages on the Lexington Avenue, Rego Park, Fordham Road, Kings Plaza Store, Third Avenue and Paramus properties, a pledge of the stock of the Company and its wholly owned subsidiaries and a pledge by the Company and one of its wholly owned subsidiaries of their respective partnership interests in the 731 Partnership. The loan with Vornado is in the principal amount of $45,000,000 and is subordinated to that of the bank. The loans, which are guaranteed by substantially all of the Company's wholly owned subsidiaries, mature on March 15, 1998. As a result of the subordination, the Vornado loan bears interest at a rate per annum equal to 16.43% during the first two years of the loan, and 9.92% plus the One-Year Treasury Rate during the third year and the bank loan bears interest at a rate per annum equal to 9.86% during the first two years of the loan, and 3.25% plus the One-Year Treasury Rate during the third year. The Company paid a fee to the bank and to Vornado of $375,000 and $1,500,000, respectively. In addition, the loans, among other things, require the Company to grant to Vornado and the bank mortgage liens on all after-acquired properties and prohibit the Company from developing undeveloped property without approved leases for more than 50% of such property's projected leasable space. F-19 61 The proceeds of the foregoing loans were used to pay the general unsecured creditors of the Company, to repay existing loans on the Lexington Avenue, Rego Park and Kings Plaza Store properties, to fund the cash collateral account established pursuant to an escrow agreement for the payment of certain unpaid real estate taxes, and to establish the cash collateral accounts in the amount of approximately $8,100,000 for purposes of funding the remaining disputed claims in the Bankruptcy Court cases as they become allowed. The remaining proceeds of the such loans will be used for general corporate purposes, including the development of the Redevelopment Properties. On February 24, 1995, the Company obtained a $25,000,000 bank loan secured by, among other things, a mortgage on the Fordham Road property. The proceeds were used to discharge the existing mortgage on the Fordham Road property, and for general corporate purposes. Such loan matures on February 24, 2000 and bears interest at a rate per annum equal to the LIBOR Rate plus 4.25%. In addition, the Company paid a one-time facility fee of $375,000. On March 29, 1995, the Company obtained from a bank a $60,000,000 construction loan and a $25,000,000 bridge loan each secured by, among other things, a mortgage on the Rego Park property. As of March 30, 1995, $21,600,000 in the aggregate was funded under such loans. The proceeds will be used to construct certain improvements at the Rego Park property and for general corporate purposes. Such loans mature on April 1, 1997 (but may be extended under certain circumstances for one year) and bear interest at a variable rate per annum equal to, at the option of the Company, (i) LIBOR Rate plus 1.625% or (ii) the greater of (a) the Federal Funds Rate plus 1.125% or (b) the prime commercial lending rate plus 0.625%. F-20 62 Commission File No. 1-6064 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________ EXHIBITS to FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1994 _______________ ALEXANDER'S, INC. 63 Index to Exhibits The following is a list of all exhibits filed as part of this Report:
EXHIBIT NO. DOCUMENT PAGE ----------- -------- ---- 3(i) Certificate of Incorporation, as amended. Incorporated herein by reference from Exhibit 3.0 to the Registrant's Current Report on Form 8-K dated September 21, 1993. 3(ii) By-Laws, as amended. Incorporated herein by reference from Exhibit 3(B) to the Registrant's Form 10-K for the fiscal year ended July 27, 1991. 10(i)(A)(1)* Agreement, dated as of December 4, 1985, among Seven Thirty One Limited Partnership ("731 Limited Partnership"), Alexander's Department Stores of Lexington Avenue, Inc., the Company, Emanuel Gruss, Riane Gruss and Elizabeth Goldberg (collectively, the "Partners"). Incorporated herein by reference from Exhibit 10(i)(F)(1) to the Registrant's Form 10-K for the fiscal year ended July 26, 1986. 10(i)(A)(2) Amended and Restated Agreement of Limited Partnership in the 731 Limited Partnership, dated as of August 21, 1986, among the Partners. Incorporated herein by reference from Exhibit 1 to the Registrant's Current Report on Form 8-K, dated August 21, 1986. 10(i)(A)(3) Third Amendment to Amended and Restated Agreement of Limited Partnership dated December 30, 1994, among the Partners. Filed herewith. 10(i)(B)(1) Promissory Note Modification Agreement, dated October 4, 1993, between Alexander's Department Stores of New Jersey, Inc. and New York Life Insurance Company ("New York Life"). Incorporated herein by reference from Exhibit 10(i)(3)(a) to the Registrant's Form 10-K for the Transition Period August 1, 1993 to December 31, 1993. 10(i)(B)(2) Mortgage Modification Agreement, dated October 4, 1993, by Alexander's Department Stores of New Jersey, Inc. and New York Life Incorporated herein by reference from Exhibit 10(i)(E)(3)(a) to the Registrant's Form 10-K for the Transition Period August 1, 1993 to December 31, 1993.
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EXHIBIT NO. DOCUMENT PAGE ----------- -------- ---- 10(i)(C)* Credit Agreement, dated March 15, 1995, among the Company and Vornado Lending Corp. Filed herewith. 10(i)(D)* Credit Agreement, dated March 15, 1995, among the Company and First Fidelity Bank, National Association. Filed herewith. 10(i)(E)* Building Loan Agreement, dated as of March 29, 1995, among the Company, Union Bank of Switzerland ("UBS") (New York Branch) as Lender and UBS (New York Branch) as Agent. Filed herewith. 10(i)(F)* Project Loan Agreement, dated as of March 29,1995, among the Company, UBS (New York Branch), as Lender and UBS (New York Branch) as Agent. Filed herewith. 10(i)(G)(1) Real Estate Retention Agreement dated as of July 20, 1992, between Vornado Realty Trust and Keen Realty Consultants, Inc., each as special real estate consultants, and the Company. Incorporated herein by reference from Exhibit 10(i)(O) to the Registrant's Form 10-K for the fiscal year ended July 25, 1992. 10(i)(G)(2) Extension Agreement to the Real Estate Retention Agreement, dated as of February 6, 1995, between the Company and Vornado Realty Trust. Filed herewith. 10(i)(H) Management and Development Agreement, dated as of February 6, 1995, between Vornado Realty Trust and the Company, on behalf of itself and each subsidiary listed therein. Incorporated herein by reference from Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated February 6, 1995. 10(i)(I) Standstill and Corporate Governance Agreement, dated as of February 6, 1995, by and among Vornado Realty Trust, Interstate Properties and the Company. Incorporated herein by reference from Exhibit 10.2 to the Registrant's Current Report on Form 8-K dated February 6, 1995.
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EXHIBIT NO. DOCUMENT PAGE ----------- -------- ---- 10(i)(J) Commitment letter, dated as of February 6, 1995, between Vornado Realty Trust and the Company. Incorporated herein by reference from Exhibit 10.3 to the Registrant's Current Report on Form 8-K dated February 6, 1995. 10(i)(K) Consulting Retention Agreement, dated as of August 26, 1993, between the Company and Versar, Inc. Incorporated herein by reference from Exhibit 10(i)(4) to the Registrant's Form 10-K for the fiscal year ended July 31, 1993. 10(i)(L) Consulting Retention Agreement, dated as of August 19, 1993, between the Company and Certified Engineering and Testing Co., Inc. Incorporated herein by reference from Exhibit 10(i)(J) to the Registrant's Form 10-K for the fiscal year ended July 31, 1993. 10(i)(M) Consulting Retention Agreement, dated as of August 10, 1993, between the Company and Merritt & Harris, Inc. Incorporated herein by reference from Exhibit 10(i)(I) to the Registrant's Form 10-K for the fiscal year ended July 31, 1993. 10(ii)(A)(1)* Agreement of Lease, dated April 22, 1966, between S&E Realty Company and Alexander's Department Stores of Valley Stream, Inc. Incorporated herein by reference from Exhibit 13N to the Registrant's Registration Statement on Form S-1 (Registration No. 2-29780). 10(ii)(A)(2) Guarantee, dated April 22, 1966, of the Lease described as Exhibit 10(ii)(A)(1) above by Alexander's Department Stores, Inc. Incorporated herein by reference from Exhibit 13N(1) to the Registrant's Registration Statement on Form S-1 (Registration No. 2-29780). 10(ii)(A)(3)* Agreement of Lease, between Alexander's, Inc. and Sears Roebuck & Co. Incorporated herein by reference from Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1994. 10(ii)(A)(4)* Amendment to the Lease, between Alexander's, Inc. and Sears Roebuck & Co., dated March 29, 1995. Filed herewith.
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EXHIBIT NO. DOCUMENT PAGE ----------- -------- ---- 10(ii)(A)(5)* Agreement, dated as of December 1, 1992, between Alexander's Department Stores of Yonkers, Inc. and Bradlees, Inc. relating to the sale and assignment of leasehold interest in the property located at 2500 Central Park Avenue, Yonkers, New York. Incorporated herein by reference from Exhibit 10(ii)(E)(3) to the Registrant's Form 10-K for the fiscal year ended July 25, 1992. 10(ii)(A)(6)* Lease for Rego Park, Queens, New York, dated as of December 1, 1992, between the Company, as landlord, and Caldor, as tenant. Incorporated herein by reference from Exhibit 10(ii)(E)(5) to the Registrant's Form 10-K for the fiscal year ended July 25, 1992. 10(ii)(A)(7)(a)* Lease for Fordham Road, Bronx, New York, dated as of December 1, 1992, between the Company, as landlord, and Caldor, as tenant. Incorporated herein by reference from Exhibit 10(ii)(E)(6) to the Registrant's Form 10-K for the fiscal year ended July 25, 1992. 10(ii)(A)(7)(b) First Amendment to the Lease for Fordham Road, Bronx, New York, dated as of February 22, 1995, between the Company, as Landlord, and Caldor, as tenant. Filed herewith. 10(ii)(A)(8)(a)* Lease for Roosevelt Avenue, Flushing, New York, dated as of December 1, 1992, between the Company, as landlord, and Caldor, as tenant. Incorporated herein by reference from Exhibit 10(ii)(E)(7) to the Registrant's Form 10-K for the fiscal year ended July 25, 1992. 10(ii)(A)(8)(b) First Amendment to Sublease for Roosevelt Avenue, Flushing, New York, dated as of February 22, 1995 between the Company as sublandlord, and Caldor, as tenant. Filed herewith. 10(ii)(A)(9)* Lease Agreement, dated March 1, 1993 by and between the Company and Alex Third Avenue Acquisition Associates. Incorporated by reference from Exhibit 10(ii)(F) to the Registrant's Form 10-K for the fiscal year ended July 31, 1993. 10(ii)(A)(10)* Agreement of Lease, between Alexander's Department Stores of New Jersey, Inc. and Waban, Inc. Incorporated herein by reference from Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the twelve weeks ended October 23, 1993, dated December 7, 1993.
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EXHIBIT NO. DOCUMENT PAGE ----------- -------- ---- 10(ii)(A)(11)* Agreement of Lease, between Alexander's Department Store of New Jersey, Inc. and Home Depot U.S.A., Inc. Incorporated herein by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the twelve weeks ended October 23, 1993, dated December 7, 1993. 10(ii)(A)(12)(a)* Agreement of Lease, between the Company and Marshalls of Richfield, MN., Inc., dated as of March 1, 1995. Filed herewith. 10(ii)(A)(12)(b) Guaranty, dated March 1, 1995, of the Lease described in Exhibit 10(ii)(A)(12)(a) above by the Company. Filed herewith. 10(iii)(A) Employment Agreement, dated March 29, 1995, between Brian M. Kurtz and the Company. Filed herewith. 10(iii)(B) Employment Agreement, dated February 9, 1995, between the Company and Stephen Mann. Filed herewith. 21 Subsidiaries of Registrant. Filed herewith. 27 Financial Data Schedule. Filed herewith.
______________ * The basic operating agreements have been filed herewith or incorporated by reference. Certain amendments, supplements and other related agreements which are not material to current operations have not been filed but will be made available upon request. EX-10.IA3 2 THIRD AMEND TO LIMITED PARTNERSHIP 1 Exhibit 10(i)(A)(3) THIRD AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP FOR SEVEN THIRTY ONE LIMITED PARTNERSHIP, A NEW YORK LIMITED PARTNERSHIP -------------------------------------------------- THIS THIRD AMENDMENT TO THE AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP FOR SEVEN THIRTY ONE LIMITED PARTNERSHIP (this "Third Amendment") made as of the 4th day of October, 1993, by and among ALEXANDER'S DEPARTMENT STORES OF LEXINGTON AVENUE, INC., a New York corporation ("ALX 1"), ALEXANDER'S, INC., a Delaware corporation ("ALX 2") (together, the "ALX Partners"), and EMANUEL GRUSS, RIANE GRUSS and ELIZABETH GOLDBERG. R E C I T A L S: A. On or about August 21, 1986, the ALX Partners and the Gruss Partners entered into an Amended and Restated Agreement of Limited Partnership for Seven Thirty One Limited Partnership (as amended by the First Amendment to Amended and Restated Agreement of Limited Partnership for Seven Thirty One Limited Partnership dated as of May 14, 1992 and the Second Amendment to Amended and Restated Agreement of Limited Partnership for Seven Thirty One Limited Partnership dated as of August 20, 1993, the "Partnership Agreement"); B. On May 15, 1992, the ALX Partners each filed a petition for relief as debtors under Chapter 11 of the U. S. 2 Bankruptcy Code and the consolidated case of the debtors is pending; C. By order dated September 21, 1993, the First Amended and Restated Joint Plan of Reorganization of Alexander's, Inc., et al. (the "Plan") was confirmed; and D. This Third Amendment is entered into in order to fully carry out the provisions of Section 4.8 of the Plan relating to the Class 7 Limited Partners' Claims and, in particular, the matters set forth in Exhibit F-1 to the Plan, as modified by the agreement of the Partners reflected herein. NOW, THEREFORE, the parties agree as follows: 1. Except as otherwise specified or as the context may otherwise require, the following terms have the respective meanings set forth below for all purposes of this Third Amendment, and the definitions of such terms are equally applicable both to the singular and the plural forms thereof: "Advance Total" is defined in Paragraph 15 hereof. "ALX 1" is defined in the introductory paragraph of this Third Amendment. "ALX 2" is defined in the introductory paragraph of this Third Amendment. "ALX Cumulative Priority" means, at any time, the excess of (I) the cumulative total of ALX Second Priority Distribution Amounts with respect to the period from the date -2- 3 hereof until the date of calculation of the ALX Cumulative Priority over (II) the cumulative total of Partnership Cash Flow received by the ALX Partners pursuant to Sections 4.4(D)(2) and 4.4(D)(3) (excluding amounts paid under Section 4.4(D)(3) as a reimbursement of Guaranteed Distributions) from the date hereof until the date of calculation of the ALX Cumulative Priority. "ALX Partners" is defined in the introductory paragraph of this Third Amendment. "ALX Residual Percentage" means, at any time, one of the following percentages: (I) from the date hereof until the first to occur of the 4/7 Interest Commencement Date or the 3/7 Interest Commencement Date, 82.17%; (II) if the 4/7 Interest Commencement Date shall occur before the 3/7 Interest Commencement Date, then from the 4/7 Interest Commencement Date until the 3/7 Interest Commencement Date, 92.36%; and (III) if the 3/7 Interest Commencement Date shall occur before the 4/7 Interest Commencement Date, then from the 3/7 Interest Commencement Date until the 4/7 Interest Commencement Date, 89.81%. "ALX Second Priority Distribution Amount" means $5,198,000 in each October Year (prorated for any partial October Year). "Authorization Notice" is defined in Paragraph 10 hereof (Section 5.4(A)). "Authorized Person" is defined in Paragraph 10 hereof (Section 5.4(A)). -3- 4 "Challenge Notice" is defined in Paragraph 10 hereof (Section 5.8(B)). "Collateral" means any collateral (including cash or cash equivalents) encumbered by any mortgage, security agreement or other security instrument or a letter of credit from a New York Clearinghouse Bank or comparable bank given to secure a Redemption Note in accordance with the provisions of this Third Amendment. "Debt Coverage Requirement" means, (I) with respect to Collateral, that the fair market value of the Collateral, minus the aggregate principal amount of any senior liens (other than the Gruss Mortgage, if it is a lien on the Collateral at that time) encumbering the Collateral, is at least 125% of the outstanding amount of the Redemption Note secured thereby, except that if the Collateral is cash, a letter of credit from a New York Clearinghouse Bank or comparable bank or other cash equivalent, "Debt Coverage Requirement" shall mean that the amount of the Collateral, minus the aggregate outstanding amount of any such senior liens encumbering the Collateral, is at least 100% of the outstanding amount of the Redemption Note secured thereby; and (II) with respect to a Third-Party Guaranty, the Third-Party Guarantor has a Market Capitalization of at least 10 times the Redemption Note amount being guaranteed. "Development Mortgages" is defined in Paragraph 2(C) hereof. -4- 5 "Dispute Notice" means any notice delivered by the Gruss Partners in response to a Substitute Notice or by the Partnership in response to a Challenge Notice, which Dispute Notice shall set forth with particularity the respects in which the party delivering the Dispute Notice shall dispute the matters set forth in the Substitute Notice or Challenge Notice, as the case may be. "Distributions Guaranty" is defined in Paragraph 8 hereof (Section 4.4(F)). "Existing ALX Mortgage" is defined in Paragraph 2(A) hereof. "Existing Collateral Package" means the combination of Collateral and Third-Party Guaranties securing a Redemption Note at any time. "4/7 Escrow Agreement" is defined in Paragraph 10 hereof (Section 5.7(I)). "4/7 Interest Commencement Date" shall be the date on which receipt of the 4/7 Redemption Notice by an Authorized Person or the Partnership, as the case may be, is deemed complete; provided, however, that if the 4/7 Redemption Note is delivered to an Authorized Person within five business days after the date on which receipt of the 4/7 Redemption Notice by an Authorized Person or the Partnership, as the case may be, is deemed complete, then the 4/7 Interest Commencement Date will be the date of delivery of the 4/7 Redemption Note. -5- 6 "4/7 Mortgage" is defined in Paragraph 10 hereof (Section 5.7(B)(1)). "4/7 Redemption" is defined in Paragraph 10 hereof (Section 5.4(A)). "4/7 Redemption Amount" is defined in Paragraph 10 hereof (Section 5.6(A)). "4/7 Redemption Note" is defined in Paragraph 10 hereof (Section 5.7(A)). "4/7 Redemption Notice" is defined in Paragraph 10 hereof (Sections 5.4(A) and 5.5(B)). "Gruss Cumulative Priority" means, at any time, the excess of (I) the cumulative total of Gruss First Priority Distribution Amounts with respect to the period from the date hereof until the date of calculation of the Gruss Cumulative Priority over (II) the cumulative total of Partnership Cash Flow received by the Gruss Partners pursuant to Sections 4.4(D)(1) and 4.4(D)(3) and Guaranteed Distributions received by the Gruss Partners pursuant to Section 4.4(F) from the date hereof until the date of calculation of the Gruss Cumulative Priority. "Gruss First Priority Distribution Amount" means $430,000 per annum in each October Year (prorated for any partial October Year); provided that if the percentage of Units being owned (legally and beneficially) by the Gruss Partners at any time is reduced (other than as a result of dilution pursuant to Section 3.2) to less than 7.64% of the total Units in the Partnership, the $430,000 amount used in this definition shall be -6- 7 reduced to an amount equal to $430,000 multiplied by a fraction, the numerator of which is the new percentage of all Units owned (legally and beneficially) by the Gruss Partners and the denominator of which is 7.64%. "Gruss Partners" means only the persons defined as "Gruss Partners" in the Original Agreement and their Permitted Transferees, but shall not include any other transferees or persons. "Gruss Residual Percentage" means, at any time, one of the following percentages: (I) from the date hereof until the first to occur of the 4/7 Interest Commencement Date or the 3/7 Interest Commencement Date, 17.83%; (II) if the 4/7 Interest Commencement Date shall occur before the 3/7 Interest Commencement Date, then from the 4/7 Interest Commencement Date until the 3/7 Interest Commencement Date, 7.64%; and (III) if the 3/7 Interest Commencement Date shall occur before the 4/7 Interest Commencement Date, then from the 3/7 Interest Commencement Date until the 4/7 Interest Commencement Date, 10.19%. "Guarantor" is defined in Paragraph 10 hereof (Section 5.8(B)). "Guaranty Period" means the period from the date hereof until the earlier to occur of the date on which the 3/7 Redemption Note is delivered and October 3, 1998. "Guaranteed Distributions" is defined in Paragraph 8 hereof (Section 4.4(F)). -7- 8 "Market Capitalization" means, with respect to a Third-Party Guarantor, the product of the number of outstanding shares of the Third-Party Guarantor (as set forth in its latest filing with the Securities and Exchange Commission) multiplied by the closing share price of the Third-Party Guarantor published in The Wall Street Journal on the last business day of the week immediately preceding the week in which the Substitute Notice or Challenge Notice, as the case may be, is delivered. "Note Credit" is defined in Paragraph 8 hereof (Section 4.4(G)). "Note Guarantors" means ALX 1 and ALX 2. "Note Guaranty" is defined in Paragraph 10 hereof (Section 5.7(D)). "October Year" means any 12-month period beginning on October 4 and ending on the following October 3, beginning with the 12-month period beginning October 4, 1993 and ending October 3, 1994. "Original Agreement" is defined in Paragraph 13 hereof. "Partnership Agreement" is defined in the Recitals to this Third Amendment. "Partnership Cash Flow" is defined in Paragraph 7 hereof (Section 4.4(C)). "Plan" is defined in the Recitals to this Third Amendment. "Proposed Substitute Collateral Package" is defined in Paragraph 10 hereof (Section 5.8(A)). -8- 9 "Redeemed Partner" is defined in Paragraph 10 hereof (Section 5.6). "Redeemed Units" is defined in Paragraph 10 hereof (Section 5.6). "Redemption Amounts" means, collectively, the 4/7 Redemption Amount and the 3/7 Redemption Amount. "Redemption Instruments" means, collectively, the Redemption Notes, the 4/7 Mortgage, the 3/7 Security Agreement, the Note Guaranty, Third-Party Guaranties and any other mortgages, security agreements, security instruments, letters of credit or guaranties permitted to be given hereunder at any time to secure or guaranty the performance of the Partnership's obligations under a Redemption Note. "Redemption Mortgage" is defined in Paragraph 10 hereof (Section 5.7(E)). "Redemption Note" means either the 4/7 Redemption Note or the 3/7 Redemption Note. "Redemption Notice(s)" is defined in Paragraph 10 hereof (Section 5.4(B)). "Release Price" is defined in Paragraph 2(A)(3) hereof. "Restructuring Loan" is defined in Paragraph 2(A) hereof. "Restructuring Mortgage" is defined in Paragraph 2(A) hereof. "Restructuring Mortgagee" is defined in Paragraph 2(A)(2) hereof. -9- 10 "Satisfaction Notice" is defined in Paragraph 10 hereof (Section 5.7(B)). "Substitute Collateral" is defined in Paragraph 10 hereof (Section 5.8(A)). "Substitute Notice" is defined in Paragraph 10 hereof (Section 5.8(A)). "Third Amendment" is defined in the introductory paragraph of this Third Amendment. "Third-Party Guarantor" means a New York Stock Exchange listed company (other than ALX 1 or ALX 2 but including any entity into which ALX 1 or ALX 2 may be merged hereafter) which, if the company has publicly held unsecured debt, has an investment grade debt rating from both Standard & Poor's Corporation and Moody's Investor Service. "Third-Party Guaranty" means a guarantee (other than the Note Guaranty) given by a Third-Party Guarantor to secure a Redemption Note. "3/7 Interest Commencement Date" shall be the date on which receipt of the 3/7 Redemption Notice by an Authorized Person is deemed complete; provided, however, that if the 3/7 Redemption Note is delivered to any of the Gruss Partners within five business days after the date on which receipt of the 3/7 Redemption Notice by an Authorized Person is deemed complete, then the 3/7 Interest Commencement Date will be the date of delivery of the 3/7 Redemption Note. -10- 11 "3/7 Redemption" is defined in Paragraph 10 hereof (Section 5.4(B)). "3/7 Redemption Amount" is defined in Paragraph 10 hereof (Section 5.6(B)). "3/7 Redemption Note" is defined in Paragraph 10 hereof (Section 5.7(A)). "3/7 Redemption Notice" is defined in Paragraph 10 hereof (Section 5.4(B)). "3/7 Security Agreement" is defined in Paragraph 10 hereof (Section 5.7(C)). Each capitalized term not defined in this Third Amendment shall have the meaning given to it in the Partnership Agreement. 2. (A) Notwithstanding the provisions of Section 2.2, ALX 1 and ALX 2 shall have the right to replace the consolidated mortgages described in Exhibit F attached hereto (collectively, the "Existing ALX Mortgage") with a Partnership mortgage (the "Restructuring Mortgage") encumbering all or any part of the Partnership Real Estate (including the Gruss Real Estate) securing a borrowing by ALX 1 and/or ALX 2 for its or their exclusive benefit from a lender who may be an Affiliate (the "Restructuring Loan"). The requirements set forth in Section 2.2(B) shall not be applicable to the Restructuring Loan and Restructuring Mortgage, but shall be replaced by the following: (1) the Restructuring Loan may be in any amount, but the total amount secured by the Restructuring Mortgage -11- 12 (including principal, interest and any real estate taxes and insurance premiums which may be advanced by the Restructuring Mortgagee) may not exceed $75,000,000; (2) the Restructuring Loan shall be evidenced in whole or in part by one or more notes totalling $30,000,000 executed and delivered by ALX 1 and/or ALX 2, as the case may be, to the holder of the Restructuring Mortgage (the "Restructuring Mortgagee"); (3) the Restructuring Loan and Restructuring Mortgage shall provide that (a) the Restructuring Mortgagee will not have any recourse against the Partnership, its partners (other than the ALX Partners, as borrower) or its assets, except to the extent that the Partnership Real Estate is mortgaged pursuant to the Restructuring Mortgage; (b) the Restructuring Mortgagee shall release the lien of the Restructuring Mortgage from the Partnership Real Estate on 10 days' notice and payment of an amount (the "Release Price") not to exceed the lesser of $30,000,000 or the total amount then owing on the Restructuring Loan; (c) the Gruss Partners shall have the right to pay the Release Price if a court of competent jurisdiction shall have entered an order authorizing the sale at foreclosure of the Partnership Real Estate, unless the foreclosure action is based upon a default or failure of performance under the Gruss Mortgage; (d) upon the payment of the Release Price by the Gruss Partners, the Restructuring Mortgagee will assign to the -12- 13 Gruss Partners the Restructuring Mortgage (which shall then secure a debt in the amount of the Release Price) and one or more notes from the ALX Partners to the Restructuring Mortgagee evidencing the Restructuring Loan in the aggregate principal amount of the Release Price; and (e) the Restructuring Mortgagee will simultaneously deliver to the Gruss Partners copies of all notices delivered to the Partnership or the ALX Partners under the Restructuring Mortgage; (4) ALX 1 and ALX 2 shall have sole responsibility for the payment of all costs and expenses incurred by the Partnership and the ALX Partners in connection with the Restructuring Loan and Restructuring Mortgage; and (5) the Restructuring Mortgage at ALX 1's option shall be a first mortgage lien on the Partnership Real Estate (including the Gruss Real Estate). The Gruss Partners' rights under this Paragraph 2(A) with respect to the Restructuring Loan and Restructuring Mortgage shall not give the Gruss Partners any right of approval with respect to the Restructuring Loan or its documentation, provided that the Restructuring Loan and Restructuring Mortgage comply with the criteria set forth in this Paragraph 2(A). The Restructuring Loan may be secured by pledges of property other than the Partnership Real Estate. Any loan or mortgage entered into as a substitute or replacement for the original Restructuring Loan and -13- 14 Mortgage shall also be considered a "Restructuring Loan" or a "Restructuring Mortgage", as the case may be, provided that it complies with the provisions of this Paragraph 2(A). (B) The ALX Partners shall indemnify the Partnership and hold it harmless from all losses, costs and expenses, including reasonable attorneys' fees and costs, incurred by it in connection with any foreclosure or threatened foreclosure of the Restructuring Mortgage. (C) Pursuant to Section 3.2(B), the General Partner has the right to mortgage the Partnership Real Estate from time to time in order to secure Partnership obligations. All such mortgages on the Partnership Real Estate, whether for development of the Partnership Real Estate or otherwise, are hereinafter collectively referred to as "Development Mortgages". The first Development Mortgage shall replace the Restructuring Mortgage. For so long as the 4/7 Mortgage shall be a lien on the Partnership Real Estate, the total amount secured by Development Mortgages which are senior to the 4/7 Redemption Mortgage (including principal, interest and any real estate taxes or insurance premiums which may be advanced by the holders of the Development Mortgages) shall not exceed the greater of (1) $75,000,000 or (2) the excess of the fair market value of the Partnership Real Estate over 125% of the outstanding principal amount of the 4/7 Redemption Note. Proceeds of the loans secured by the Development Mortgages may be only used for payment of the -14- 15 Redemption Notes, development of the Partnership Real Estate and any other Partnership purpose. (D) The Partnership shall deliver true and correct copies of any Restructuring Mortgages and Development Mortgages and the notes secured thereby and any amendments thereto promptly after execution and delivery thereof. 3. Section 2.5 is hereby amended by adding the following as paragraph (F) thereof: (F) If not sooner specified by the General Partner, the Mortgage Payment Date shall be October 3, 1998 and, on the Mortgage Payment Date, the Existing ALX Mortgage (if not already paid off), the Restructuring Mortgage and the Gruss Mortgage will be paid off and their liens released or, at the request of the General Partner, assigned to the holder(s) of Development Mortgage(s). The Partners responsible therefor under Section 2.5(D) shall cause such payoff and release or assignment. Time shall be of the essence with respect to the payment of the Restructuring Mortgage and Gruss Mortgage and release or assignment of their liens. 4. The following is hereby added after the words "Section 2.2" in the last line of Section 3.2(B)(6): "or Paragraph 2 of the Third Amendment to this Agreement". 5. The number "5.12" in the last line of Section 3.2(D)(1)(iii)(g) is hereby deleted and the number "5.10" inserted in its place. -15- 16 6. 34,654 of the Units held by ALX 1 in its capacity as General Partner shall hereafter be held by ALX 1 as a Limited Partner and the schedule of Units set forth in Section 4.2 is hereby deleted and the following inserted in its place:
NAME UNITS ---- ----- ALX 1 as General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,960.92 ALX 1 as Limited Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,654.00 ALX 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 693.08 Emanuel Gruss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,512.60 Riane Gruss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,512.60 Elizabeth Goldberg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,016.80 -------- TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,350.00
7. The following is hereby added after the words "but not less frequently than annually" at the end of the first sentence of Section 4.4(C): ", except that with respect to each of the October Years from 1993-94 to 1997-98, any distributions on account of the Gruss First Priority Distribution Amount shall be made on or before the next October 31 after such October Year (such excess being hereinafter referred to as the 'Partnership Cash Flow'). At the discretion of the General Partner, the cash disbursements referred to in the immediately preceding sentence may include payment of interest on or principal of the Redemption Notes and repayment of the Advance Total or any amounts hereinafter advanced by the ALX Partners to the Partnership." 8. Section 4.4 is hereby amended by adding the following as paragraphs (D), (E), (F) and (G) thereof: -16- 17 (D) Partnership Cash Flow shall be distributed in accordance with the following priorities: (1) First, there shall be distributed to the Gruss Partners (in proportion to the Units owned by each of the Gruss Partners), for so long as the Gruss Partners shall be Partners, an amount equal to the Gruss Cumulative Priority; (2) Second, there shall be distributed to the ALX Partners (in proportion to the Units owned by each of the ALX Partners) an amount equal to the ALX Cumulative Priority; and (3) Finally, the balance, if any, shall be distributed to the Gruss Partners (in proportion to the Units owned by each of the Gruss Partners) and the ALX Partners (in proportion to the Units owned by each of the ALX Partners) in accordance with the Gruss Residual Percentage and the ALX Residual Percentage, respectively; provided that the amounts distributable to the Gruss Partners under this Section 4.4(D)(3) shall be reduced by the amount of Guaranteed Distributions that have not been previously reimbursed under this Section 4.4(D)(3), and such amount of Guaranteed Distributions shall be paid to the ALX Partners as reimbursement for the amounts paid under the Distributions Guaranty. -17- 18 (E) Notwithstanding the provisions of Section 4.4(B), profits and losses of the Partnership shall be allocated to the Partners as follows: (1) Profits shall be allocated among the Partners as follows: (a) first, to each of the Partners until the cumulative profits allocated to such Partner pursuant to this Section 4.4(E)(1)(a) are equal to the cumulative losses allocated to the Partner pursuant to Section 4.4(E)(2)(a) for any prior period; (b) next, to the Gruss Partners (in proportion to the Units owned by each of the Gruss Partners) until the Gruss Partners have been allocated an amount of profits equal to the Partnership Cash Flow distributed to the Gruss Partners pursuant to Section 4.4(D)(1); (c) next, to the ALX Partners until the ALX Partners (in proportion to the Units owned by each of the ALX Partners) have been allocated an amount of profits equal to the Partnership Cash Flow distributed to the ALX Partners pursuant to Section 4.4(D)(2); and (d) thereafter, to the Gruss Partners (in proportion to the Units owned by each of the Gruss Partners) and the ALX Partners (in proportion to the Units owned by each of the ALX Partners) in accordance with the Gruss Residual Percentage and the ALX Residual Percentage, respectively. -18- 19 (2) Losses shall be allocated among the Partners as follows: (a) first, to offset any profits allocated pursuant to Section 4.4(E)(1)(d), then to offset any profits allocated pursuant to Section 4.4(E)(1)(c) and then to offset any profits allocated pursuant to Section 4.4(E)(1)(b) (in each case pro rata in proportion to the individual Partners' shares of profits being offset); and (b) second, to the Gruss Partners (in proportion to the Units owned by each of the Gruss Partners) and the ALX Partners (in proportion to the Units owned by each of the ALX Partners) in accordance with the Gruss Residual Percentage and the ALX Residual Percentage, respectively. (3) There shall be specially allocated to the ALX Partners the amount of any deductions on account of Guaranteed Distributions. To the extent that the ALX Partners are reimbursed for Guaranteed Distributions pursuant to Section 4.4(D)(3), such reimbursement shall be specially allocated as income to the ALX Partners. (F) To the extent that the Gruss Partners shall not receive the full amount set forth in Section 4.4(D)(1) during the Guaranty Period, ALX 1 and ALX 2 shall make up such deficiency by paying cash to the Gruss Partners under a guaranty in the form of Exhibit E attached hereto (the -19- 20 "Distributions Guaranty"). All payments made under the Distributions Guaranty shall be hereinafter collectively referred to as "Guaranteed Distributions". Guaranteed Distributions made to the Gruss Partners shall be deemed "guaranteed payments" under Section 707(c) of the Internal Revenue Code. (G) Upon the Partnership's delivery of the 3/7 Redemption Note to the Gruss Partners in response to the 3/7 Redemption Notice, the sum of all Partnership Cash Flow distributed to the Gruss Partners prior to the delivery of the 3/7 Redemption Note (collectively, the "Note Credit") shall be credited against the interest and principal payable under the 3/7 Redemption Note as set forth in Section 5.6(C). 9. The words "have the same meaning as set forth in Section 5.4(D) hereof" in Section 5.2(A) are hereby deleted and the following inserted in their place: mean any one or more of the following: (1) the voluntary filing of a petition by the sole remaining General Partner for relief as a debtor under any provisions of the U.S. Bankruptcy Code; (2) the involuntary filing of a petition by any creditor of the sole remaining General Partner under such Code seeking a remedy thereunder against either of them and the failure to discharge or stay such petition for 90 days; -20- 21 (3) the voluntary or involuntary filing by the sole remaining General Partner or by any creditor of the sole remaining General Partner for any relief or remedy under any state act relating to insolvency or insolvent debtors, by whatever name called, and the failure to discharge or stay for 90 days any such involuntary petition, or (4) the making by the sole remaining General Partner of an assignment for the benefit of creditors. 10. The provisions of Sections 5.4 through 5.12 of the Partnership Agreement are hereby deleted and replaced in their entirety by the following Sections 5.4 through 5.10: 5.4 Gruss Partners' Redemption Right. Subject to Section 5.5, (A) If the Gruss Partners shall deliver to the General Partner a notice requesting redemption of 9,309 Units (or, if receipt by the Partnership of the 3/7 Redemption Notice has previously been deemed complete, all remaining Units originally issued to the Gruss Partners) in the aggregate held by the Gruss Partners (the "4/7 Redemption Notice"), the Partnership shall redeem the Units proffered by the Gruss Partners in accordance with the provisions of Sections 5.6 and 5.7. The 4/7 Redemption Notice delivered pursuant to this Section 5.4(A) shall set forth the manner in which the proffered Units shall be allocated among the Gruss Partners. The Partnership shall -21- 22 be entitled to rely upon the first 4/7 Redemption Notice received from any person who has been authorized to deliver the 4/7 Redemption Notice (any such person being hereinafter referred to as an "Authorized Person") by a notice in the form of Exhibit J attached hereto (an "Authorization Notice") delivered to the Partnership prior to or simultaneously with the 4/7 Redemption Notice and purportedly signed by the Gruss Partners owning at least 50% of the total Units then owned by the Gruss Partners. Each Authorization Notice will revoke all previous Authorization Notices. Each Gruss Partner hereby empowers and appoints as its agent and attorney-in-fact each Authorized Person to deliver the 4/7 Redemption Notice and act for and on behalf of all the Gruss Partners in carrying out the 4/7 Redemption, which appointment shall be coupled with an interest and shall be irrevocable until receipt of a subsequent Authorization Notice shall have been deemed complete. (The redemption of the proffered Units from the Gruss Partners pursuant to the 4/7 Redemption Notice shall be sometimes hereinafter referred to as the "4/7 Redemption.") (B) If the Gruss Partners shall deliver to the General Partner a notice requesting redemption of 7,170 Units (or, if receipt by the Partnership or the Authorized Person, as the case may be, of the 4/7 Redemption Notice has previously been deemed complete, all remaining Units -22- 23 originally issued to the Gruss Partners) in the aggregate held by the Gruss Partners (the "3/7 Redemption Notice"), the Partnership shall redeem the Units proffered by the Gruss Partners in accordance with the provisions of Sections 5.6 and 5.7. The 3/7 Redemption Notice shall set forth the manner in which the proffered Units shall be allocated among the Gruss Partners. The Partnership shall be entitled to rely upon the first 3/7 Redemption Notice it receives which is purportedly signed by an Authorized Person. Each Gruss Partner hereby empowers and appoints as its agent and attorney-in-fact each Authorized Person to act for and on behalf of all the Gruss Partners in carrying out the 3/7 Redemption, which appointment shall be coupled with an interest and shall be irrevocable until receipt of a subsequent Authorization Notice shall have been deemed complete. (The redemption of the Units proffered by the Gruss Partners pursuant to the 3/7 Redemption Notice shall be sometimes hereinafter referred to as the "3/7 Redemption"; and the 4/7 Redemption Notice and the 3/7 Redemption Notice shall be sometimes referred to individually as a "Redemption Notice" and collectively as the "Redemption Notices".) (C) The Gruss Partners shall not have any rights with respect to the redemption of Units, nor shall the Partnership have any rights to cause the Gruss Partners to -23- 24 redeem their Units, except in strict accordance with Sections 5.4 through 5.10. (D) The 9,309 Units and the 7,170 Units referred to in this Article V shall be adjusted to reflect any changes in the capitalization of the Partnership which alters the number of Units held by the Gruss Partners so that a redemption pursuant to the first to be exercised of the 4/7 Redemption Notice or the 3/7 Redemption Notice will redeem (without change in the Redemption Amount) the same proportion of the Units then held by the Gruss Partners. In any event, the second redemption shall redeem all remaining Units held by the Gruss Partners (without change in the respective Redemption Amount). Upon the delivery of both Redemption Notices and the redemption of the Units to be redeemed pursuant thereto in accordance with Sections 5.6 and 5.7, the Gruss Partners will hold no Units. 5.5 Delivery of Redemption Notice. (A) In order to be effective, receipt of the 4/7 Redemption Notice by the Partnership must be deemed complete not later than April 3, 1995. In order to be effective, receipt of the 3/7 Redemption Notice by the Partnership must be deemed complete not later than October 3, 1998. Time is of the essence with respect to the Gruss Partners' delivery of any Redemption Notice. (B) If receipt by the Partnership of the 4/7 Redemption Notice delivered by the Gruss Partners in -24- 25 accordance with Sections 5.4 and 5.5 has not been deemed complete on or before April 3, 1995, then from and after April 4, 1995, the General Partner, in its sole discretion on behalf of the Partnership, may deliver to an Authorized Person, for and on behalf of the Gruss Partners, a notice requiring redemption from some or all of the Gruss Partners of 9,309 Units in the aggregate. The notice described in the immediately preceding sentence shall also be a "4/7 Redemption Notice". In order to be effective, receipt of the 4/7 Redemption Notice by an Authorized Person must be deemed complete before the date on which receipt of the Satisfaction Notice by an Authorized Person shall be deemed complete, but in no event later than July 3, 1995. Time is of the essence with respect to the Partnership's delivery of the 4/7 Redemption Notice. If the General Partner delivers the 4/7 Redemption Notice, the Gruss Partners shall be redeemed, pro rata in proportion to the individual Gruss Partners' Units, unless an Authorized Person delivers a notice as to the number of Units of each Gruss Partner which will be redeemed, receipt of which notice must be deemed complete no later than one day prior to the closing of the redemption pursuant to the 4/7 Redemption Notice. Upon delivery of the 4/7 Redemption Notice by the Partnership in accordance with the provisions of this Section 5.5(B), the Partnership shall be entitled to redeem 9,309 Units from the Gruss Partners in the same manner (i.e., using the same -25- 26 process, documentation and consideration) as if the Gruss Partners had delivered the 4/7 Redemption Notice. (C) In the event of the termination of the Partnership pursuant to Section 5.1 or the Withdrawal of either or both of the ALX Partners pursuant to Section 5.2, the provisions of Sections 5.4 and 5.5 shall nevertheless continue in full force and effect and the rights of the Gruss Partners and the Partnership pursuant to Sections 5.4 through 5.10 shall not be affected thereby. (D) The redemption of each Redeemed Partner's Units pursuant to Sections 5.4 through 5.10 shall be deemed to include the capital account and other interests in the Partnership and all rights under the Partnership Agreement attributable to the Redeemed Units. 5.6 Determination of Redemption Amount. If a Redemption Notice is delivered by the Gruss Partners or received by the Gruss Partners pursuant to Sections 5.4 and 5.5, each Gruss Partner, to the extent of the Units redeemed (the "Redeemed Units"), shall thereupon be a "Redeemed Partner" of the Partnership. The Partnership shall pay to the Redeemed Partners, as payment for their Units proffered pursuant to a Redemption Notice, but without any personal liability of any Partner (except as expressly agreed to by the General Partner or pursuant to the Note Guaranty), the Redemption Amount defined in Section 5.6(A) (with respect to the 4/7 Redemption) or Section 5.6(B) (with respect to the -26- 27 3/7 Redemption) in exchange for the transfer by the Redeemed Partners of the Redeemed Units in accordance with Section 5.7. (A) If the 4/7 Redemption Notice is delivered in accordance with Sections 5.4 and 5.5, the Redemption Amount with respect thereto (the "4/7 Redemption Amount") shall be determined by the date that receipt by the Partnership or the Gruss Partners, as the case may be, of the 4/7 Redemption Notice is deemed complete, as follows: (1) If receipt of the 4/7 Redemption Notice is deemed complete on or before January 3, 1995, the 4/7 Redemption Amount will be $21,437,180.63; (2) If receipt of the 4/7 Redemption Notice is deemed complete during the period from January 4, 1995 to April 3, 1995, inclusive, the 4/7 Redemption Amount will be $21,812,331.29; and (3) If receipt of the 4/7 Redemption Notice is deemed complete during the period from April 4, 1995 to July 3, 1995, inclusive, the 4/7 Redemption Amount will be $22,194,047.08. (B) If the 3/7 Redemption Notice is delivered in accordance with Sections 5.4 and 5.5, the Redemption Amount with respect thereto (the "3/7 Redemption Amount") shall be $15,000,000 minus the Loan Amounts, if any. (C) The Note Credit shall be applied as a credit against the obligation to pay interest as it accrues on the -27- 28 3/7 Redemption Note until the earlier to occur of: (1) the entire Note Credit being credited against interest; or (2) the payment of the principal amount of the 3/7 Redemption Note. In the event of a prepayment or upon maturity, any unused Note Credit shall be credited as a payment in satisfaction of the principal amount of the 3/7 Redemption Note. (D) The Redemption Amounts shall be allocated among and paid to the Redeemed Partners in proportion to their Units being redeemed compared to all Units then being redeemed. The obligations to pay the Redemption Amounts shall be evidenced by promissory notes to be delivered as described in Section 5.7. 5.7 Redemption Instruments. Subject to Section 5.7(I), no more than 30 days after receipt of a Redemption Notice by the Partnership or the Gruss Partners, as the case may be, is deemed complete, at a closing in the Borough of Manhattan at a time and a place designated by the General Partner, the Partnership shall deliver or cause to be delivered to the Redeemed Partners a Redemption Note and those Redemption Instruments which have not been previously delivered and the Redeemed Partners shall deliver an assignment of the Redeemed Units in the form of Exhibit G attached hereto. On the following terms and conditions, the Redeemed Partners shall accept the Redemption Instruments in full satisfaction of the obligations of the Partnership to -28- 29 evidence and secure its obligations to pay the Redemption Amounts as provided in the Redemption Instruments: (A) Redemption Notes. The Redemption Note delivered in connection with the 4/7 Redemption shall be in the form of Exhibit D-1A attached hereto (the "4/7 Redemption Note") and the Redemption Note delivered in connection with the 3/7 Redemption shall be in the form of Exhibit D-1B attached hereto (the "3/7 Redemption Note"). The 4/7 Redemption Note and the 3/7 Redemption Note shall be delivered to Redeemed Partners who are to be redeemed pursuant to the 4/7 Redemption Notice or the 3/7 Redemption Notice, respectively. (B) 4/7 Mortgage. (1) The 4/7 Redemption Note and the obligation of the Partnership to execute and deliver the 4/7 Redemption Note will initially be secured by a mortgage substantially in the form of Exhibit D-3 attached hereto encumbering the Partnership Real Estate (the "4/7 Mortgage"). The Partnership shall have the right to provide Substitute Collateral, a Third-Party Guaranty or a combination thereof as security for the 4/7 Redemption Note in lieu of the 4/7 Mortgage, provided that it shall have been determined pursuant to Section 5.8 that the Substitute Collateral and/or Third-Party Guaranty satisfy the Debt Coverage Requirement. Upon the delivery of Redemption -29- 30 Instruments covering Substitute Collateral (which shall be in recordable form if the Redemption Instrument is of a type which is customarily recorded or in perfectible form if the Collateral is of a type in which a security interest is normally perfected by means other than recording) or the delivery of a Third-Party Guaranty as security for the 4/7 Redemption Note in accordance with this Section 5.8 and the delivery of a Satisfaction Notice, the Gruss Partners shall execute and deliver all documents required to satisfy and release the lien of the 4/7 Mortgage. (2) In order to secure the obligations of the Partnership to execute and deliver the 4/7 Redemption Note and to make payments under the 4/7 Redemption Note, the 4/7 Mortgage, together with appropriate UCC-1 Financing Statements, are being executed and delivered simultaneously with the execution and delivery of the Third Amendment to this Agreement and the Partnership will cause the 4/7 Mortgage to be recorded promptly after obtaining all court orders and other documents necessary to allow recording without payment of recording tax; provided that if the Partnership is not able, within 120 days after the execution and delivery of the Third Amendment to this Agreement, to obtain such orders and documents, the Partnership will pay the -30- 31 recording tax and cause the 4/7 Mortgage to be recorded. (3) The Gruss Partners will give the Partnership all cooperation (including, without limitation, the execution and delivery of all necessary affidavits and other documents prepared by the Partnership) reasonably required to obtain all court orders and other documents necessary to allow recording of the 4/7 Mortgage without payment of recording tax. (4) If the Gruss Partners shall not have exercised their right to deliver the 4/7 Redemption Notice on or before April 3, 1995, the Partnership shall have the right, at any time before receipt of the 4/7 Redemption Notice delivered by the Partnership to the Gruss Partners is deemed complete, to cause the Gruss Partners to satisfy, release or assign the 4/7 Mortgage by delivering to an Authorized Person a notice (the "Satisfaction Notice") to that effect. (C) 3/7 Security Agreement. (1) The 3/7 Redemption Note will be secured by a security agreement from ALX 1 and/or ALX 2 in the form of Exhibit D-4 attached hereto encumbering 34,654 Units in the Partnership (the "3/7 Security Agreement"), which Units shall be held by ALX 1 and/or ALX 2 as Limited Partners. In order to secure the obligations of the Partnership to make payments under the 3/7 -31- 32 Redemption Note, simultaneously with the execution and delivery of the Third Amendment to this Agreement, the 3/7 Security Agreement and appropriate UCC-1 Financing Statements are being executed and delivered into escrow pursuant to the terms of an escrow agreement in the form of Exhibit I attached hereto. (2) If 34,654 Units do not have a sufficient value to satisfy the Debt Coverage Requirement at the time the 3/7 Security Agreement is unconditionally delivered out of escrow to the Gruss Partners, or at such earlier time as it shall have been determined pursuant to Section 5.8(B) that the Units covered by the 3/7 Security Agreement are insufficient Collateral for the 3/7 Redemption Note, the Partnership will cause ALX 1 and/or ALX 2, as appropriate, to execute and deliver to the Gruss Partners or into escrow, as the case may be (simultaneously with the delivery of the 3/7 Security Agreement out of escrow or within 15 days after it shall have been determined pursuant to Section 5.8(B) that the Units covered by the 3/7 Security Agreement are insufficient Collateral for the 3/7 Redemption Note, as the case may be) an additional security agreement in the form of the 3/7 Security Agreement and appropriate UCC-3 Financing Statement Change (Amendment) forms encumbering so many more of the Units then owned by ALX 1 and/or ALX 2 in the -32- 33 Partnership as Limited Partners and/or such Substitute Collateral or Third-Party Guaranties as are needed to satisfy the Debt Coverage Requirement and a new or amended escrow agreement related thereto in the form of Exhibit I. Any security agreements given with respect to such Substitute Collateral shall be comparable to the documents attached as Exhibits D-3 and D-4. (3) If the number of Units needed to satisfy the Debt Coverage Requirement is determined after the delivery of a Substitute Notice to be less than the Units held in escrow, the escrowed 3/7 Security Agreement and the UCC-1 Financing Statements shall be amended to release the excess Units, provided that the Partnership shall not have the right to deliver a Substitute Notice with respect to the 3/7 Security Agreement (a) during the first year after the execution and delivery of the Third Amendment to this Agreement, (b) during the first two years of the term of the Restructuring Mortgage (or, if the Restructuring Mortgage has a term shorter than two years, during such term), nor (c) more than once per calendar year thereafter. (4) The Partnership shall have the right to substitute Collateral for the 3/7 Redemption Note, provided that it shall have been determined pursuant to Section 5.8 that the Substitute Collateral and/or the -33- 34 Third-Party Guaranty, as applicable, satisfy the Debt Coverage Requirement. Upon the delivery of Redemption Instruments covering Substitute Collateral (which shall be in recordable form if the Redemption Instrument is of a type which is customarily recorded or in perfectible form if the Collateral is of a type in which a security interest is normally perfected by means other than recording) or the delivery of a Third-Party Guaranty as security for the 3/7 Redemption Note in accordance with this Agreement, the Gruss Partners shall execute and deliver all documents required to release the lien of the 3/7 Security Agreement. (D) Note Guaranty. In order to guarantee the obligations of the Partnership to execute and deliver the 3/7 Redemption Note and to make payments under the 3/7 Redemption Note and the 4/7 Redemption Note, simultaneously with the execution and delivery of the Third Amendment to this Agreement, a guaranty (the "Note Guaranty") in the form of Exhibit D-2 attached hereto is being executed and delivered to the Gruss Partners. (E) Subordination. Upon notice by the Partnership, any Redemption Instrument (any Redemption Instrument which is a mortgage, security agreement or other security instrument being hereinafter referred to as a "Redemption Mortgage") placed upon any Collateral to secure a Redemption Note shall be subordinate, as applicable, to: -34- 35 (1) if the Collateral is the Partnership Real Estate, the Existing ALX Mortgage; (2) if the Collateral is the Partnership Real Estate, the Restructuring Mortgage; (3) if the Collateral is the Partnership Real Estate, the Development Mortgages; (4) any lease to a party which is not an Affiliate of the General Partner of any part of the Collateral, provided that such lease does not contain: (a) any options to purchase any portion of the Collateral; (b) any prepayments by the tenant of rent for a period in excess of 5% of the term; (c) any other similar substantial advance payments other than payment on account of additions, alterations or tenant improvements to the Collateral; or (d) any provision under which a judgment obtained by the tenant creates a security interest in the Collateral or its proceeds senior to the applicable Redemption Instrument; (5) all mortgages, liens or other encumbrances: (a) existing on the Collateral encumbered by the Redemption Instrument at the time the Redemption Instrument is placed on the Collateral, provided the same were not placed on the Partnership Real Estate in violation of this Agreement; or (b) placed on the Collateral encumbered by the lien of the Redemption Instrument with the consent of mortgagor after the -35- 36 Redemption Instrument is placed on such Collateral, provided the Debt Coverage Requirement is then met with respect to the Redemption Note secured by the Redemption Instrument. If the subordination of any Redemption Mortgage to any mortgages, liens or other encumbrances placed on Collateral as described in Sections 5.7(B)(5) and (6) would cause a failure to meet the Debt Coverage Requirement, the Partnership may provide a perfected security interest in or lien on Substitute Collateral and/or a Third-Party Guaranty to meet the Debt Coverage Requirement. The Redeemed Partners holding a Redemption Note from time to time shall execute subordination agreements required to carry out this Section 5.7, which subordination agreements shall be in such form as the title insurer insuring the lender or tenant, as the case may be, requesting the same customarily employs in connection with insuring financings of collateral similar to the Collateral or leases of real estate, as the case may be. If a non-disturbance agreement is requested by an unrelated tenant in lieu of a subordination agreement, the Redeemed Partners holding a Redemption Note from time to time shall execute such a non-disturbance and attornment agreement, which agreement shall be in such form as the tenant requesting the same customarily employs in connection with its leases. Each of the Gruss Partners hereby appoints the General Partner as his or her agent and attorney-in-fact and -36- 37 authorizes the General Partner to execute and deliver such agreements in the name and on behalf of such Redeemed Partner if a Redeemed Partner fails to execute any such subordination agreement (or non-disturbance and attornment agreement) within 30 days after the General Partner's request therefor to the Gruss Partners is deemed complete (or such shorter period, but not less than 10 days, as may be required by the tenant or lender). This appointment shall be coupled with an interest and shall be irrevocable. The ALX Partners on the one hand and the Gruss Partners on the other hand may then pursue such claims, at law or in equity, as each may have against the other. (F) Mortgage Recording Tax. No mortgage, stamp or documentary taxes nor other similar costs of recording any mortgages given to secure the Redemption Notes shall be the obligation of the Gruss Partners. (G) Gains Tax. Notwithstanding the provisions of Section 2.7(D), if any Gains Tax is incurred as a result of any redemption of a Gruss Partner's Units pursuant to this Article V, whether the redemption is taken alone or aggregated with other changes of Partners' interests in the Partnership, it shall be paid by the Gruss Partners when due; except that the Partnership shall pay any Gains Tax that is triggered by a transaction between ALX 2 and any Affiliate of ALX 2 and the Gruss Partner shall have no liability to the Partnership for the payment of such Gains -37- 38 Tax, provided that the Gruss Partners shall use commercially reasonable efforts to cause the taxing authorities to treat the redemption and such transaction as separate transactions. In any transaction between ALX 1 and/or ALX 2 and an entity who is not an Affiliate, the ALX Partners shall use commercially reasonable efforts to cause the taxing authorities to treat the redemption and such transaction as separate transactions. Whether or not Gains Tax is due at the time of a redemption, each Gruss Partner being redeemed shall deliver to the General Partner all appropriate Gains Tax returns. Provided the Gruss Partners have fulfilled their obligations pursuant to this Section 5.7(G), in no event shall the Gruss Partners have any liability for the payment of Gains Tax with respect to the 4/7 Redemption if the Gains Tax claim is asserted by the State of New York after August 21, 1998 or with respect to the 3/7 Redemption if the Gains Tax claim is asserted by the State of New York after the maturity date of the 3/7 Redemption Note. If the Gruss Partners shall fail to pay Gains Tax, if any, when due, the Partnership may pay such Gains Tax and immediately offset the amount of such unpaid tax, together with any interest and penalties assessed, against amounts due under the Redemption Notes as more particularly set forth in the Redemption Notes. The Partnership reserves the right to conduct and control the defense of any claim by taxing authorities for Gains Tax -38- 39 which the Partnership is or may (in the General Partner's sole judgment) be obligated to pay under this Agreement, but shall keep the Gruss Partners informed of the status of, and consult with the Gruss Partners regarding, any such claim. (H) Section 5.8. Nothing contained in this Section 5.7 shall affect the rights and obligations of the Partners under Section 5.8. (I) Recording. If the 4/7 Mortgage has not been recorded prior to the scheduled closing pursuant to the 4/7 Redemption Notice, then all closing Redemption Instruments and other closing documents shall be delivered by the Partnership and the Gruss Partners into escrow to be held on the terms contained in the escrow agreement attached hereto as Exhibit K (the "4/7 Escrow Agreement"). (J) Notices. At the request of the Partnership or the holder of any senior lien on Collateral which is encumbered by a Redemption Mortgage, the Gruss Partners shall simultaneously deliver to the holder of such lien copies of all notices delivered to the Partnership under the Redemption Mortgage. 5.8 Debt Coverage Requirement. (A) Substitution Right. (1) If the Partnership shall desire to secure a Redemption Note with additional or substitute collateral (collectively, "Substitute Collateral") and/or a Third-Party Guaranty, the Partnership shall -39- 40 deliver to the Gruss Partners a notice (the "Substitute Notice"). (2) Substitute Collateral may consist only of: (a) a parcel or parcels of real estate located in the States of New York or New Jersey, each of which parcels has a fair market value (without regard to liens or encumbrances) of at least $5,000,000; (b) securities listed on the New York Stock Exchange; (c) a letter of credit provided by a New York Clearinghouse Bank or comparable bank or other cash equivalent; or (d) any combination of the items described in Section 5.8(A)(2)(a) through (c). (3) The Substitute Notice shall: (a) if the Partnership is proposing a Third-Party Guaranty, describe the Third-Party Guarantor and set forth the Partnership's calculation of the Market Capitalization of, and the debt rating (if any) of, the Third-Party Guarantor; (b) if the Partnership is proposing Substitute Collateral, describe the proposed Substitute Collateral (including the nature and amount of any senior liens thereon and any notices of default theretofore received from the holders thereof which remain uncured) and set forth the Partnership's determination of the fair -40- 41 market value of the proposed Substitute Collateral, minus the outstanding amount of senior liens; (c) describe any present Collateral (including the Partnership's determination of the fair market value of the Collateral, minus the outstanding amount of senior liens, and any notices of default theretofore received from the holders thereof which remain uncured) or Third-Party Guaranty (including the Market Capitalization of, and the publicly held debt rating, if any, of the Third-Party Guarantor) which it proposes continue as security for the Redemption Note; and (d) set forth the manner in which the combination of Third-Party Guaranties, Substitute Collateral and Collateral described in the Substitute Notice (collectively, the "Proposed Substitute Collateral Package") meets the Debt Coverage Requirement applicable to the Redemption Note. (4) The Gruss Partners shall have the right to dispute the Substitute Notice by delivering to the Partnership a Dispute Notice. In order for the Dispute Notice to be effective, receipt thereof by the Partnership must be deemed complete within 30 days after receipt by the Gruss Partners of the Substitute Notice is deemed complete; if receipt of the Dispute Notice by the Partnership is not deemed complete within 30 days after receipt of the Substitute Notice by the -41- 42 Gruss Partners is deemed complete, the Partnership shall thereafter have the right, subject to Section 5.8(E), to replace the Existing Collateral Package with the Proposed Substitute Collateral Package. (5) If a Dispute Notice is timely delivered in response to a Substitute Notice, then: (a) if the Market Capitalization or the publicly held debt rating of a Third-Party Guarantor is in dispute, the Partnership and the Gruss Partners shall use commercially reasonable efforts to resolve such disagreement within 30 days after receipt of the Dispute Notice by the Partnership is deemed complete; and (b) if the valuation of Collateral or Substitute Collateral is in dispute, the Partnership and the Gruss Partners shall, within 15 days after receipt of the Dispute Notice by the Partnership is deemed complete, jointly endeavor to appoint an independent appraiser with at least 10 years' experience in valuing similar collateral to determine whether the Proposed Substitute Collateral Package meets the applicable Debt Coverage Requirement. (c) Except as provided in Section 5.8(B)(1)(y), nothing contained in this Section 5.8(A) shall limit the rights of the Gruss Partners to deliver a Challenge Notice. -42- 43 (B) Challenge Right. (1) The Gruss Partners shall have the right to deliver a notice to the Partnership and the Note Guarantors (the "Challenge Notice") stating that Collateral does not meet the Debt Coverage Requirement for a Redemption Note, but a Challenge Notice may not be given (x) more frequently than once in any calendar year nor (y) within 12 months after an Existing Collateral Package has been measured against the Debt Coverage Requirement pursuant to a Challenge Notice delivered in accordance with Section 5.8(B) or a Dispute Notice delivered in accordance with Section 5.8(A). Notwithstanding the foregoing: (a) the Gruss Partners shall not have the right to deliver a Challenge Notice with respect to the adequacy of the Partnership Real Estate mortgaged pursuant to the 4/7 Mortgage as Collateral for the 4/7 Redemption Note or the adequacy of the Units covered by the 3/7 Security Agreement as Collateral for the 3/7 Redemption Note during (x) the first year after the execution and delivery of the Third Amendment to this Agreement (unless the Partnership shall have failed to take those actions required of it under this Agreement to record the 4/7 Mortgage), (y) the first two years of the term of the Restructuring Mortgage (or, if the Restructuring Mortgage has a term shorter than two -43- 44 years, during such term), or (z) the term of the Development Mortgages, unless: (i) material proceeds from the sale of a fee interest in all or any part of the Partnership Real Estate, or any interest in or rights (including air rights) to the fee interest in all or any part of the Partnership Real Estate, shall have been distributed or lent to any Partner(s); (ii) the Partnership shall enter into a lease for any portion of the Partnership Real Estate providing for prepayments of rent for a period in excess of 5% of the lease term or any other similar substantial advance payment by the tenant (other than payments on account of additions, alterations or tenant improvements to the Collateral) and such prepayments shall have been: (aa) distributed or lent to any Partners; or (bb) invested in Contiguous Real Estate; (iii) during the term of the Development Mortgages, additional mortgage liens are placed on the Partnership Real Estate senior to the 4/7 Mortgage, and, as a result, the total amount secured by senior mortgage liens (including principal, interest and any real estate taxes and insurance premiums which may be advanced by the holder of the mortgage liens) on the Partnership -44- 45 Real Estate exceeds the greater of: (aa) $75,000,000; or (bb) the excess of the fair market value of the Partnership Real Estate over 125% of the outstanding principal amount of the 4/7 Redemption Note; (iv) the holder of a senior mortgage or lien on the Collateral covered by the 4/7 Mortgage or the 3/7 Security Agreement shall have commenced proceedings to foreclose such senior mortgage or lien; or (v) the Partnership shall have provided, partially in lieu of the Partnership Real Estate or the Units, Substitute Collateral for such Redemption Note. If any of the events described in clauses (i) through (v) occur, the Gruss Partners shall have the right to deliver a Challenge Notice with respect to the adequacy of Partnership Real Estate or Units, as the case may be, securing the Redemption Note affected by such occurrence, provided that receipt of such Challenge Notice by the Partnership is deemed complete within 30 days after an Authorized Person is notified of such occurrence. (b) if any of the following shall have occurred: (i) one or more of the Note Guarantors or a Third-Party Guarantor (each being sometimes -45- 46 hereinafter individually referred to as a "Guarantor") shall have become insolvent, made an assignment for the benefit of creditors or applied for the appointment of a receiver; or a receiver, trustee or liquidator shall have been appointed for a Guarantor; or a Guarantor shall have filed any petition under the Federal Bankruptcy Code or any amendment thereto, including, without limitation, a petition for reorganization or arrangement; or a Guarantor shall have filed a petition or seek other relief under any insolvency law or laws providing for the relief of debtors; or a petition under the Federal Bankruptcy Code or any amendment thereto or under any other insolvency law shall have been filed against a Guarantor and not discharged within 30 days; (ii) the General Partner shall be an entity that is not ALX 1, ALX 2, Interstate Properties or Vornado, Inc. or an Affiliate thereof; or (iii) while Units are Collateral for a Redemption Note, new partnership interests shall have been issued by the Partnership in exchange for insubstantial consideration (which consideration may be in the form of cash, notes or services) and, as a result thereof, the percentage -46- 47 interest of ALX 1 and ALX 2 in the Partnership shall have been reduced by more than 50%, then, in any such event, the Gruss Partners shall have the right to deliver a Challenge Notice with respect to the adequacy of Collateral securing the Redemption Note affected by such occurrence, provided that receipt of such Challenge Notice by the Partnership is deemed complete within 30 days after an Authorized Person is notified of such occurrence. (c) The Gruss Partners shall have the right to deliver a Challenge Notice with respect to the adequacy of Collateral for the 3/7 Redemption Note simultaneously with the delivery of the 3/7 Redemption Notice. (2) The Gruss Partners shall have the right to deliver a Challenge Notice with respect to a Third-Party Guaranty at any time. (3) The Challenge Notice shall: (a) if the Gruss Partners are challenging the sufficiency of a Third-Party Guaranty, set forth the Gruss Partners' calculation of the Market Capitalization and the debt rating of the Third-Party Guarantor; (b) if the Gruss Partners are challenging the sufficiency of Collateral, set forth the Gruss Partners' determination of the fair market value of the -47- 48 Collateral, minus the outstanding amount of senior liens (provided that for purposes of the Challenge Notice, the Gruss Partners shall be entitled to assume that the amount of such senior liens is the amount set forth in the last notice that the Gruss Partners shall have received from the Partnership with respect to such senior liens); and (c) set forth the manner in which the Existing Collateral Package fails to meet the Debt Coverage Requirement applicable to the Redemption Note. (4) The Partnership shall have the right to dispute the Challenge Notice by delivering to the Gruss Partners a Dispute Notice. In order for the Dispute Notice to be effective, receipt thereof by the Gruss Partners must be deemed complete within 30 days after receipt of the Challenge Notice by the Partnership is deemed complete; if receipt of the Dispute Notice by the Gruss Partners is not deemed complete within 30 days after receipt of the Challenge Notice by the Partnership is deemed complete, the Partnership shall thereafter replace or supplement, as the case may be, the Existing Collateral Package with Substitute Collateral and Third-Party Guaranties sufficient to meet the Debt Coverage Requirement in accordance with the provisions of this Agreement, including without limitation Section 5.8(E). -48- 49 (5) If a Dispute Notice is timely delivered in response to a Challenge Notice, then: (a) if the Market Capitalization or the publicly held debt rating of a Third-Party Guarantor is in dispute, the Partnership and the Gruss Partners shall use commercially reasonable efforts to resolve such disagreement within 30 days after receipt of the Dispute Notice by the Gruss Partners is deemed complete; and (b) if the issue in dispute is the valuation of Collateral, the Partnership and the Gruss Partners shall, within 15 days after receipt of the Dispute Notice by the Gruss Partners is deemed complete, jointly endeavor to appoint an independent appraiser with at least 10 years' experience in valuing similar collateral to determine whether the Collateral described in the Challenge Notice meets the applicable Debt Coverage Requirement. (C) Arbitration. (1) If the parties shall be unable to agree within 15 days on the appointment of an appraiser under Section 5.8(A) or 5.8(B), either party, on behalf of both, may apply to the local office of the American Arbitration Association for appointment of an arbitrator, and, if the American Arbitration Association, shall not then exist or shall fail, refuse -49- 50 or be unable to act so that an arbitrator is not appointed within 30 days after application therefor, then either party may apply to the presiding Justice of the Appellate Division of the Supreme Court of the State of New York (First Department) for the appointment of the arbitrator. The party applying to the American Arbitration Association or the Appellate Division for the appointment of the arbitrator shall inform the Association or the Court, as the case may be, of the required qualifications for the arbitrator. (2) If any portion of the Substitute Collateral or the Collateral described in the Substitute Notice or Challenge Notice, as the case may be, is real estate, the appraiser appointed pursuant to this Section 5.8 shall be an MAI appraiser. Any appraiser so appointed shall be instructed to make his or her determination within 30 days after his or her appointment. The determination of any appraiser so appointed shall be binding upon all Partners. If the Partnership shall deliver to the Gruss Partners a Substitute Notice, then ALX 1 and/or ALX 2 shall pay all appraisal costs. If the Gruss Partners shall deliver to the Partnership a Challenge Notice, then the Gruss Partners shall pay all appraisal costs. No appraiser appointed hereunder shall have the power to add to, subtract from or -50- 51 otherwise modify the provisions of this Third Amendment or the Partnership Agreement. (D) Form of Mortgage or Security Agreement. Any Substitute Collateral given to secure a Redemption Note shall be encumbered by a mortgage substantially in the form of Exhibit D-3 attached hereto (in the case of fee interests in real property being used as Collateral), a security agreement substantially in the form of Exhibit D-4 attached hereto (in the case of personal property being used as Collateral) or another security instrument affording the Gruss Partners protection reasonably equivalent to that offered by Exhibits D-3 and D-4 (in the case of property other than fee interests in real property or personal property being used as Collateral). Any Third-Party Guaranty given to secure a Redemption Note shall be substantially in the form of Exhibit D-2 attached hereto. (E) Release of Collateral. Upon the provision of a perfected security interest in Substitute Collateral or the execution and delivery of a Third-Party Guaranty, as the case may be, pursuant to this Section 5.8, the Gruss Partners shall execute and deliver all documents required to release the lien of any mortgage or security agreement covering the Collateral which no longer secures the Redemption Note or discharge the obligation of the guarantor under the Third-Party Guaranty which no longer secures the Redemption Note, as applicable; provided that if the -51- 52 Partnership shall have provided Substitute Collateral in lieu of a Third-Party Guaranty, the Third-Party Guaranty shall remain effective for 90 days after the perfection of a security interest in such Substitute Collateral. 5.9 Release from Personal Liability under Section 2.1: Indemnity. Within 120 days after the date of the Redemption Notice, the Partnership shall use its best efforts to deliver to any Redeemed Partner or Partners who no longer hold Units instruments duly executed and delivered by the lenders of any amounts referred to in Section 2.1, releasing such Redeemed Partner or Partners from and against all claims and liabilities assumed pursuant to the provisions of Section 2.1. In lieu of such release, the Partnership shall indemnify the Redeemed Partner or Partners against liability for such loans, which indemnity shall be without personal liability to any Partner. 5.10 Rights Personal. The rights of the Gruss Partners under Sections 4.4(D)(1), 4.4(F) and 5.4 through 5.10 and Paragraph 17(C) of the Third Amendment to Amended and Restated Agreement of Limited Partnership for Seven Thirty One Limited Partnership are not transferable except in connection with transfers of Units to Permitted Transferees. Only Emanuel Gruss, Riane Gruss or Elizabeth Goldberg or a Permitted Transferee (as defined in Section 6.1(D)) may exercise the rights set forth in Sections 5.4 through 5.10, and they may exercise such rights only if -52- 53 they are at the time of such exercise the legal and beneficial owners of the Units to be redeemed and that such Units are at the time of closing unencumbered and free of any liens or security interests. 11. The fourth and fifth sentences in Article VII are hereby deleted and the following inserted in their place: Receipt of any notice or demand made by personal delivery shall be deemed complete when so delivered. All notices shall be addressed, if to the Partnership, ALX Partners or Note Guarantors, at c/o Alexander's, Inc., 31 West 34th Street, New York, New York 10001, with a copy to Neil Underberg, Esq., Whitman Breed Abbott & Morgan, 200 Park Avenue, New York, New York 10166; and if to the Gruss Partners, c/o Emanuel Gruss, Oscar Gruss & Son, Inc., 74 Broad Street, New York, New York 10004 (or, if an Authorization Notice has been delivered to the Partnership, to an Authorized Person, with (in either case) copies to David M. Gerstein, Esq., Gerstein & Churchill, P.C., 300 Park Avenue, 20th Floor, New York, New York 10022 and Laurence J. Kaiser, Esq., Lowenthal, Landau, Fischer & Bring, P.C., 250 Park Avenue, New York, New York 10177. 12. All notices and deliveries required or permitted to be delivered pursuant to this Third Amendment shall be deemed delivered or made when and if delivery thereof shall be deemed to be complete pursuant to the provisions of Article VII, as the same has been modified by this Third Amendment. -53- 54 13. Exhibits D-1A and D-1B attached hereto are hereby substituted for the Exhibit D-1 attached to the Amended and Restated Agreement of Limited Partnership for Seven Thirty One Limited Partnership dated August 21, 1986 (the "Original Agreement"), Exhibit D-2 attached hereto is hereby substituted for the Exhibit D-2 attached to the Original Agreement and Exhibit D-3 attached hereto is hereby substituted for the Exhibit D-3 attached to the Original Agreement. All exhibits to this Third Amendment are hereby incorporated into this Third Amendment as if they were set forth in full herein. 14. The Gruss Partners hereby acknowledge timely receipt of the following: (A) $200,000 for reasonable and necessary legal fees and expenses incurred by the Gruss Partners; and (B) $300,000 as a restructuring fee. The payments described in this Paragraph 14 were made pursuant to the Plan and shall be deemed income to the recipients and an expense of ALX 2. 15. The Gruss Partners acknowledge that they have been advised that since June 26, 1992 (the date on which the ALX Partners ceased to operate a retail store on the ALX Real Estate) ALX 1 and ALX 2 have made a number of advances to the Partnership totalling $6,294,314 (the "Advance Total") (which sum does not include the $500,000 of fees and reimbursements paid to the Gruss Partners pursuant to Paragraph 14 hereof or the $400,000 to be paid to them pursuant to Paragraph 17(C) hereof) and that the -54- 55 [BPartnership owes the ALX Partners the Advance Total, together with interest at the prime rate as established from time to time by Chemical Bank, N.A. plus 1% per annum from the date of each advance until the date of repayment. The Gruss Partners acknowledge that they have been advised that the individual advances constituting the Advance Total were made on the dates and for the purposes more particularly described in Exhibit H attached hereto. If the ALX Partners make any future advances to the Partnership for or make any Guaranteed Distributions, such advances and Guaranteed Distributions shall be considered loans to the Partnership by the ALX Partner(s) advancing the funds and shall be repayable by the Partnership in the manner provided in this Paragraph 15 for repayment of the Advance Total. The Partners agree that as of the date hereof, there are no Loan Amounts outstanding with respect to any of the Partners. 16. As payment of the Gruss First Priority Distribution Amount for the 1993-94 October Year: (A) the Gruss Partners hereby acknowledge receipt of $215,000 simultaneously with the execution and delivery of this Third Amendment, together with interest from October 4, 1994 to the date of payment at the rate of 1% per annum in excess of the rate from time to time announced by Chemical Bank, N.A. as its "prime" or "base" rate; and (B) the ALX Partners agree to pay $215,000 simultaneously with the payment of substantially all unsecured creditors to be paid under the Plan but in all events by June 30, 1995, together -55- 56 with interest (1) from October 4, 1994 to the date of execution and delivery of this Third Amendment at the rate of 1% per annum in excess of the rate from time to time announced by Chemical Bank, N.A. as its "prime" or "base" rate and (2) from the date of the execution and delivery of this Third Amendment to the date of payment at the rate of 14% per annum. Such amounts are being paid by the ALX Partners under the Distributions Guaranty and are Guaranteed Distributions. 17. (A) At the request of the Partnership, the Gruss Mortgage shall be subordinated to: (1) the Restructuring Mortgage; and (2) all leases to unrelated third parties of any part of the Partnership Real Estate, provided such leases satisfy the provisions of Section 5.7(E)(4). The Gruss Partners will cause the holder of the Gruss Mortgage to execute subordination agreements required to carry out the intent of this Paragraph 17, which subordination agreement shall be in such form as the lender or tenant, as the case may be, requesting the same customarily employs in connection with financings of collateral similar to the Partnership Real Estate. If a non- disturbance agreement is requested by a third-party tenant of any part of the Partnership Real Estate in lieu of a subordination agreement, the holder of the Gruss Mortgage from time to time shall execute such a non-disturbance and attornment agreement, which agreement shall be in such form as the tenant requesting the same customarily employs in connection with leases of real estate. The fact that any third-party tenant requesting a non-disturbance agreement from -56- 57 the holder of the Gruss Mortgage shall have an option to purchase any portion of the Partnership Real Estate shall not affect the obligation of the Gruss Partners to cause the holder of the Gruss Mortgage to execute and deliver a non-disturbance and attornment agreement. Emanuel Gruss, as the holder of the Gruss Mortgage, hereby appoints the General Partner as the agent and attorney-in-fact of the holder of the Gruss Mortgage and authorizes the General Partner to execute and deliver such agreements in the name and on behalf of such holder if a such holder fails to execute any such subordination agreement (or non-disturbance and attornment agreement) within 30 days after the General Partner's request therefor to the Gruss Partners is deemed complete (or such shorter period, but not less than 10 days, as may be required by the tenant or lender) and pursue such claims as the General Partner may have, at law or in equity, against said holder and the Gruss Partners. This appointment shall be coupled with an interest and shall be irrevocable. The ALX Partners on the one hand and the Gruss Partners on the other hand may then pursue such claims, at law or in equity, as each may have against the other. (B) For so long as the Gruss Mortgage is subordinated to the Restructuring Mortgage at the request of the Partnership, the Partnership shall pay to the Gruss Partners $8,333 per month (prorated for any partial month) in arrears no later than the 10th day of the month. In any event, Emanuel Gruss, as the holder of the Gruss Mortgage, and his successors and assigns as -57- 58 holders of the Gruss Mortgage, shall not call a default under the loan secured by the Gruss Mortgage, accelerate such loan or commence foreclosure proceedings unless a default has been called and foreclosure proceedings have commenced under the Restructuring Loan. Simultaneously with the execution and delivery of this Third Amendment, the mortgagor under the Gruss Mortgage and Emanuel Gruss, as the holder of the Gruss Mortgage, are executing and delivering an amendment to the Gruss Mortgage implementing the provisions of the immediately preceding sentence. Emanuel Gruss, as the holder of the Gruss Mortgage, shall cause such amendment to be recorded promptly after the execution and delivery of this Third Amendment. All payments described in this Paragraph 17(B) shall be treated as income to the Gruss Partners. (C) Simultaneously with the payment of substantially all unsecured creditors to be paid under the Plan, but in all events by June 30, 1995, ALX 2 shall pay to the Gruss Partners $400,000 for and on account of their additional and necessary legal expenses and as a restructuring fee, together with interest from the date of the execution and delivery of this Third Amendment to the date of payment at the rate of 14% per annum, which payment shall be income to the Gruss Partners and an expense of ALX 2. (D) At the request of the Partnership or the holder of any senior lien on the Partnership Real Estate, the Gruss Partners shall simultaneously deliver to the holder of such lien -58- 59 copies of all notices delivered to the Partnership under the Gruss Mortgage. 18. Wherever any of the terms appearing in the following left column appear in the Partnership Agreement (other than in Sections 5.4 to 5.10), the term shall be replaced with the term appearing opposite such term in the following right column: Liquidation Notice is Redemption Notice Liquidating Partners is Redeemed Partners Liquidation Amount is Redemption Amounts 19. The Partners acknowledge and agree that all disputes arising, directly or indirectly, out of or relating to the Partnership Agreement, as modified by this Third Amendment, may be dealt with and adjudicated in the state courts of New York sitting in New York County or the federal courts sitting in New York County, and each Partner hereby expressly and irrevocably submits itself to the jurisdiction of such courts in any suit, action or proceeding arising, directly or indirectly, out of or relating to the Partnership Agreement, as modified by this Third Amendment, or in any action to enforce the Partnership Agreement, as modified by this Third Amendment. 20. The provisions of the Plan shall not be used to construe the provisions of this Third Amendment and, from and after the date hereof, the provisions of the Plan contained in Section 4.8 thereof and Exhibits F-1 and F-2 thereof shall be of no further force or effect as between the Partners. In the event -59- 60 of any conflict between the provisions of the Plan and the provisions of this Third Amendment, the provisions of this Third Amendment shall control. 21. The Partners shall from time to time execute one or more documents as may be necessary to effect the provisions of this Third Amendment. 22. Except for the changes made by this Third Amendment, all of the provisions of the Partnership Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have executed this Third Amendment as of the date first above written. ALEXANDER'S DEPARTMENT STORES OF LEXINGTON AVENUE, INC. By: /s/ BRIAN KURTZ ------------------- Name: Brian Kurtz Title: Vice President ALEXANDER'S, INC. By: /s/ BRIAN KURTZ ------------------- Name: Brian Kurtz Title: Executive Vice President /s/ EMANUEL GRUSS ----------------------- EMANUEL GRUSS /s/ RIANE GRUSS ----------------------- RIANE GRUSS /s/ ELIZABETH GOLDBERG ----------------------- ELIZABETH GOLDBERG -60- 61 EMANUEL GRUSS hereby: (a) certifies that he is the sole holder of the Gruss Mortgage and that he has the lawful right to subordinate the Gruss Mortgage as required by Paragraph 17 of this Third Amendment without the consent of any other person or entity; (b) agrees to be bound by all provisions of said Paragraph 17; and (c) agrees that he will at any time and from time to time, at the request of the Partnership, execute and deliver to the Partnership such instruments as the Partnership may reasonably request for the purpose of effecting the provisions of said Paragraph 17. /s/ EMANUEL GRUSS ----------------------- EMANUEL GRUSS -61- 62 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the 30th day of December, 1994, before me personally came Emanuel Gruss to me known to be the individual described in and who executed the foregoing instrument, and acknowledged that he executed the same. /s/ TRACY MALONEY -------------------- Notary Public STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the 30th day of December, 1994, before me personally came Riane Gruss to me known to be the individual described in and who executed the foregoing instrument, and acknowledged that she executed the same. /s/ TRACY MALONEY -------------------- Notary Public STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the 30th day of December, 1994, before me personally came Elizabeth Goldberg to me known to be the individual described in and who executed the foregoing instrument, and acknowledged that she executed the same. /s/ TRACY MALONEY -------------------- Notary Public -62- 63 EXHIBIT D-1A 4/7 REDEMPTION NOTE $ 21,812,331.29 New York, New York [As of] _________, 199_(1) FOR GOOD AND VALUABLE CONSIDERATION, SEVEN THIRTY ONE LIMITED PARTNERSHIP, a limited partnership duly organized and existing under the laws of the State of New York (the "Partnership"), does hereby promise to pay to the order of EMANUEL GRUSS, RIANE GRUSS and ELIZABETH GOLDBERG [or their Permitted Transferees](2) (collectively, the "Payee"), whose address is c/o Emanuel Gruss, Oscar Gruss & Son, Inc., 74 Broad Street, New York, New York 10004, the principal amount of ________________ ($___________) DOLLARS, together with interest on the outstanding principal balance from the date of this 4/7 Redemption Note until August 21, 1998 (the "Maturity Date") at the rate of 1% percent per annum in excess of the rate from time to time announced by Chemical Bank, N.A., as its "prime" or "base" rate (the "Prime Rate"; provided that (I) if Chemical Bank, N.A. shall cease to announce such a rate, then the Prime Rate shall be the rate from time to time reported in The Wall Street Journal, New York edition, from time to time as the base rate on corporate loans posted by at least 75% of the nation's thirty (30) largest banks as the "prime rate"; (II) if The Wall Street Journal shall cease to report a "prime rate," a substitute and comparable "prime rate" shall be selected by the Partnership; and (III) if The Wall Street Journal reports more than one "prime rate," then the Prime Rate shall mean the average of such reported rates), as follows: A. interest only, in arrears, on April(3)4, 1995 and on the fourth day of each July, October, January and April thereafter until this 4/7 Redemption Note is fully paid; and B. on the Maturity Date, the entire unpaid principal amount and any interest accrued but remaining unpaid. -------------------- (1) The date of the note will be the 4/7 Interest Commencement Date. (2) Bracketed language here and elsewhere throughout these exhibits is for the purpose of explaining matters which depend on future circumstances. (3) This will read "July" if the Note is delivered on or after April 4, 1995 but before July 4, 1995 and "October" if the Note is delivered on or after July 4, 1995. -1- 64 Payment of this 4/7 Redemption Note shall be made c/o Emanuel Gruss, Oscar Gruss & Son, Inc., 74 Broad Street, New York, New York 10004 in such coin or currency of the United States of America as at the time of payment shall constitute legal tender for the payment of public and private debts. This 4/7 Redemption Note will be initially secured by a mortgage, dated December __, 1994 and executed and delivered to the Payee covering premises in the City and County of New York, which are more particularly described in said mortgage. As provided in, and subject to all the terms and condition of, the Amended and Restated Agreement of Limited Partnership for the Partnership dated August 21, 1986 (as amended by the First Amendment to Amended and Restated Agreement of Limited Partnership for the Partnership dated as of May 14, 1992, the Second Amendment to Amended and Restated Agreement of Limited Partnership for the Partnership dated as of August 20, 1993 and the Third Amendment to Amended and Restated Agreement of Limited Partnership for the Partnership dated as of October 4, 1993 [the "Partnership Agreement"], the Partnership has the right to secure this note with another mortgage, security agreement, security instrument and/or Third-Party Guaranty (as defined in the Partnership Agreement). Any mortgage, security agreement, security instrument, letter of credit or Third-Party Guaranty given heretofore, simultaneously or hereafter to secure or guarantee this 4/7 Redemption Note shall be hereinafter referred to as a "Collateral Instrument". Unless otherwise indicated, capitalized terms not defined herein shall have the meaning ascribed to them in the Partnership Agreement. If an "Event of Default" should occur under this 4/7 Redemption Note, as such term is hereinafter defined, then and in that event: (1) interest shall accrue on the entire amount then due and owing from the date of the Event of Default under this 4/7 Redemption Note until such amount is paid, at the rate of 3% per annum in excess of the Prime Rate, unless such rate of interest is not then permitted by law, in which event such rate shall be the highest rate then permitted by law (the "Default Rate"); (2) the entire unpaid principal balance under this 4/7 Redemption Note plus all accrued interest shall become due and payable immediately, five days after written demand for payment, together with interest at the Default Rate, unless the amount due pursuant to (1) above is paid within said five-day period; and (3) the Partnership agrees to pay all costs and expenses, including all reasonable legal fees, which may be incurred by the Payee or any other holder of this 4/7 Redemption Note, if any action is brought to collect the indebtedness evidenced hereby or to foreclose or enforce the terms of a Collateral Instrument. -2- 65 The term "Event of Default" as used in this 4/7 Redemption Note means any one or more of the following occurrences: (a) any default by the Partnership in making any payment required to be made hereunder, which continues for more than five days after notice in writing; (b) an Event of Default shall have occurred under the 3/7 Redemption Note; (c) the Payee shall have delivered to the Partnership and the Note Guarantors a Challenge Notice and, within 30 days after it shall have been determined pursuant to Section 5.8 of the Partnership Agreement that the Collateral does not meet the Debt Coverage Requirement, the Partnership shall have failed to make payments, provide Substitute Collateral and/or a Third-Party Guaranty or take such other actions as are necessary to satisfy the Debt Coverage Requirement; (d) in the event that the Partnership should become insolvent, make an assignment for the benefit of creditors or apply for the appointment of a receiver; or in the event of the appointment of a receiver, trustee or liquidator for the Partnership; or in the event that the Partnership should file any petition under the Federal Bankruptcy Code or any amendment thereto, including, without limitation, a petition for reorganization; or in the event that the Partnership should file a petition or seek other relief under any insolvency law or laws providing for the relief of debtors; or in the event that a petition under the Federal Bankruptcy Code or any amendment thereto or under any other insolvency law is filed against the Partnership (by parties other than the Gruss Partners) and not discharged within thirty (30) days; (e) in the event that one or more of ALX 1 or ALX 2 should become insolvent, make an assignment for the benefit of creditors or apply for the appointment of a receiver; or in the event of the appointment of a receiver, trustee or liquidator for ALX 1 or ALX 2; or in the event that ALX 1 or ALX 2 should file any petition under the Federal Bankruptcy Code or any amendment thereto, including, without limitation, a petition for reorganization; or in the event that ALX 1 or ALX 2 should file a petition or seek other relief under any insolvency law or laws providing for the relief of debtors; or in the event that a petition under the Federal Bankruptcy Code or any amendment thereto or under any other insolvency law is filed against ALX 1 or ALX 2 and not discharged within thirty (30) days; (f) the occurrence of an Event of Default under a Collateral Instrument; or -3- 66 (g) the failure of the Partnership to execute and deliver the 3/7 Redemption Note as and when required under the Partnership Agreement. The Partnership shall have the right to prepay the principal indebtedness evidenced by this 4/7 Redemption Note in full or in part, together with interest accrued on the amount prepaid, without premium or penalty upon five days' prior written notice to the Payee; provided, however, that no prepayment may be made in the last calendar quarter of any year without the consent of the Payee. In addition, the Maker may offset against accrued interest or the principal amount of this 4/7 Redemption Note at any time any amounts that are due from the Gruss Partners to the Partnership, Alexander's, Inc., or any of their Affiliates for payments pursuant to Section 2.7 or 5.7(G) of the Partnership Agreement and, after December 31, 1995, principal of and interest on any Gains Tax Loan. The obligations of this 4/7 Redemption Note shall continue until the entire debt evidenced hereby is paid, notwithstanding any action or actions, whether by foreclosure or otherwise, which may be brought to recover any sum or sums of money payable under the provisions of this 4/7 Redemption Note. The Partnership does hereby waive presentment for payment, demand for payment, notice of dishonor, protest, notice of protest and all other notices or demands in connection with the payment of or enforcement of the Partnership's obligations under this 4/7 Redemption Note, except as expressly provided in this 4/7 Redemption Note. No act, delay, extension, omission or indulgence on the part of the Payee or any other holder of this 4/7 Redemption Note shall be deemed a waiver of any of the rights of the Payee or such holder hereunder, nor shall the failure to exercise any such right or remedy when available on any occasion bar or waive any of such rights on any future occasion. This 4/7 Redemption Note shall be governed by and construed in accordance with the law of the State of New York. In the event that the Payee or any other holder of this 4/7 Redemption Note shall seek to enforce her or his rights under this 4/7 Redemption Note, the Partnership does hereby designate the firm of Whitman Breed Abbott & Morgan, with offices at 200 Park Avenue, New York, New York 10166, Attention: Neil Underberg, Esq., as the agent of the Partnership for purposes of service of process. The Partnership further agrees that service of process may be effected by the mailing of process to such firm on behalf of the Partnership by certified or registered mail, return receipt requested, or by hand delivery to said firm at the above- -4- 67 specified address or at any other address at which such firm shall be located, if its address should change. Except as provided in Section 5.8(C) of the Partnership Agreement, the Partnership and the Payee acknowledge and agree that all disputes arising, directly or indirectly, out of or relating to this 4/7 Redemption Note may be dealt with and adjudicated in the state courts of New York sitting in New York County or the federal courts sitting in New York County, and each of the Partnership and the Payee hereby expressly and irrevocably submits itself to the jurisdiction of such courts in any suit, action or proceeding arising, directly or indirectly, out of or relating to this 4/7 Redemption Note, or in any action to enforce this 4/7 Redemption Note. Any notice, demand, consent or other communication required or permitted by this 4/7 Redemption Note will be in writing, addressed to the appropriate party and sent by either registered or certified U.S. Mail, return receipt requested, postage prepaid or by reputable overnight courier, shipping charges prepaid. Notice is effective upon deposit in the U.S. Mail or delivery to the courier in accordance with the foregoing. For purposes of notice, the addresses of the parties shall be as follows: If to the Partnership: c/o Alexander's, Inc 31 West 34th Street New York, New York 10001 Attention: Chairman of the Board, and c/o Whitman Breed Abbott & Morgan 200 Park Avenue New York, New York 10166 Attention: Neil Underberg, Esq.; If to the Payee: c/o Oscar Gruss & Son, Inc. 74 Broad Street New York, New York 10004, and c/o Gerstein & Churchill, P.C. 300 Park Avenue, 20th Floor New York, New York 10022 Attention: David M. Gerstein, Esq., and c/o Lowenthal, Landau, Fischer & Bring, P.C. 250 Park Avenue New York, New York 10177 Attention: Laurence J. Kaiser, Esq. -5- 68 Each party has the right at any time to change the address to which notice must be sent or the person to whom notice must be directed. Such change is not effective until the party changing its address or addressee has given notice in accordance with the requirements of this paragraph to each of the other parties and provided further that the address for notice must at all times be within the United States of America. IN WITNESS WHEREOF, the undersigned has caused this 4/7 Redemption Note to be executed in its name by its general partner on the date first set forth above. SEVEN THIRTY ONE LIMITED PARTNERSHIP By: Alexander's Department Stores of Lexington Avenue, Inc., General Partner By: /s/ BRIAN KURTZ ---------------------- Name: Brian Kurtz Title: Vice President -6- 69 EXHIBIT D-2 NOTE GUARANTY Pursuant to Section 5.7 of that certain Amended and Restated Agreement of Limited Partnership for Seven Thirty One Limited Partnership (the "Partnership") dated as of August 21, 1986 (as amended by the First Amendment to Amended and Restated Agreement of Limited Partnership for the Partnership dated as of May 14, 1992, the Second Amendment to Amended and Restated Agreement of Limited Partnership for the Partnership dated as of August 20, 1993 and the Third Amendment to Amended and Restated Agreement of Limited Partnership for the Partnership dated as of October 4, 1993 [the "Partnership Agreement"]), among ALEXANDER'S DEPARTMENT STORES OF LEXINGTON AVENUE, INC. ("ALX 1"), a New York corporation, ALEXANDER'S, INC. ("ALX 2"), a Delaware corporation, EMANUEL GRUSS, RIANE GRUSS and ELIZABETH GOLDBERG (the latter three persons referred to herein as the "Gruss Partners" and also sometimes collectively as the "Payees" and singly as a "Payee"), and in consideration of the Third Amendment and for other good and valuable consideration: 1. The undersigned, ALX 1 and ALX 2 (hereinafter called the "Note Guarantors"), do hereby, jointly and severally, unconditionally guarantee (a) the obligation of the Partnership to execute and deliver the 3/7 Redemption Note (as defined in and to be issued pursuant to the Partnership Agreement) when and if such execution and delivery is required under the Partnership Agreement and (b) when and if either or both of the 3/7 Redemption Note and the 4/7 Redemption Note are issued, payment of all amounts required to be paid by the Partnership to the Gruss Partners under the terms of either or both of the 3/7 Redemption Note and the 4/7 Redemption Note (collectively, the "Redemption Notes"), when the same become due and payable under the terms of the respective Redemption Notes, together with all amounts of interest (if and when any interest is required to be paid under the respective Redemption Notes) when such interest is due and payable thereunder. Unless otherwise indicated, capitalized terms not defined herein shall have the meaning ascribed to them in the Partnership Agreement. 2. The Note Guarantors do hereby waive presentment for payment, demand for payment, notice of dishonor, notice of protest and protest and all other notices or demands in connection with the payment of or enforcement of the obligations of the Partnership under each of the Redemption Notes or the obligations of the Note Guarantors under this Note Guaranty. 3. If an Event of Default should occur under either of the Redemption Notes, as the term "Event of Default" is defined thereunder, the Note Guarantors do hereby consent that an action or suit may be brought against them or either of them by the -1- 70 Payee or by the holder or holders of the Redemption Note(s) under which the Event of Default has occurred (the "Holder") regardless of whether an action or suit has been brought against the Partnership or any Note Guarantor or whether any action has been taken to foreclose upon any assets securing the obligations of the Partnership. In any such action or suit, any Note Guarantor, Third-Party Guarantor and the Partnership, at the option of the Payee or any Holder, may be joined as parties defendant. 4. If an Event of Default should occur under either one or both of the Redemption Notes, the Note Guarantors do hereby, jointly and severally, agree to be fully liable for the payment of, and to pay, all costs and expenses which may be incurred by the Payee or any other Holder, including all reasonable legal fees, for the purpose of enforcing their or her or his rights against the Partnership under the Redemption Note(s) under which the Event of Default has occurred, or under Section 5.4(B) of the Partnership Agreement for failure to deliver the 3/7 Note when required, and/or against the Note Guarantors hereunder. 5. In the event that the Payee or any Holder shall seek to enforce her or his rights under this Note Guaranty, the Note Guarantors do hereby designate the firm of Whitman Breed Abbott & Morgan, with offices at 200 Park Avenue, New York, New York 10166, Attention: Neil Underberg, Esq., as the agent of the Note Guarantors for purposes of service of process. The Note Guarantors further agree that service of process may be effected by the mailing of process to such firm on behalf of the Note Guarantors by certified or registered mail, return receipt requested, or by hand delivery to said firm at the above-specified address or at any other address at which such firm shall be located, if its address should change. Payee and the Note Guarantors acknowledge and agree that, except as provided in Section 5.8(C) of the Partnership Agreement, all disputes arising, directly or indirectly, out of or relating to this Note Guaranty may be dealt with and adjudicated in the state courts of New York sitting in New York County or the federal courts sitting in New York County, and the Note Guarantors hereby expressly and irrevocably submit the persons of the Note Guarantors to the jurisdiction of such courts in any suit, action or proceeding arising, directly or indirectly, out of or relating to this Note Guaranty or in any action to enforce this Note Guaranty. 6. Each of the Note Guarantors represents and warrants that it is a corporation duly organized and existing and in good standing under the laws of its respective state of incorporation; that neither its certificate of incorporation nor its by-laws nor any agreement, understanding or instrument to which it is a party or by which it is bound, nor any law, order, judgment, decree, regulation, ruling or governmental requirement of any kind prevents it from executing and delivering this Note Guaranty; that the execution of this Note Guaranty and the performance of -2- 71 its obligations hereunder have been duly authorized by its board of directors; and that it has the right to execute this Note Guaranty and carry out all of its obligations contained herein. 7. Any indebtedness or liabilities of the Partnership to either of the Note Guarantors, of any kind or nature, whether now existing or hereafter created, due or to become due, direct or contingent, other than reimbursement of the Advance Total as provided for in the Partnership Agreement, are hereby subordinated to the payment to the Payee and any Holder of all amounts guaranteed in this Note Guaranty. 8. The Note Guarantors hereby consent that at any time or from time to time, with or without consideration, the Payee or any Holder, may, without notice to or further consent of the Note Guarantors and without in any manner affecting, lessening, impairing or releasing the liability and obligations of the Note Guarantors under this Note Guaranty (a) renew, extend or change the time and terms of payment and/or maturity of either or both of the Redemption Notes, and (b) assign, release, surrender, exchange, settle, compromise, substitute, subordinate, hypothecate, change, waive rights under or modify either or both of the Redemption Notes, or the provisions of Section 5.4(B) of the Partnership Agreement. 9. Whether expressly stated herein or otherwise, all obligations of the Note Guarantors under this Note Guaranty are joint and several. 10. The guaranty obligation contained in this Note Guaranty is a guaranty of payment and performance and not of collection. It is not in any way conditioned or contingent upon any attempt to collect from the Partnership and neither the Payee nor any other Holder shall be under any obligation to seek or prosecute collection from the Partnership or enforce any remedy it may have under any Collateral Instrument (as defined in the Redemption Notes) before proceeding against the Note Guarantors under this Note Guaranty. The obligations and liabilities of the Note Guarantors hereunder shall not be impaired, released, lessened or affected by any failure, delay or omission of the Payee or any other Holder to enforce any right or utilize any remedy or by any waiver of any such right or remedy in the event of any default under either of the Redemption Notes. 11. Each right, power and remedy of the Payee or any Holder, as provided for in this Note Guaranty or now or hereafter existing at law or in equity or by statute or otherwise, shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in this Note Guaranty or now or hereafter existing at law or in equity or by statute or otherwise and the exercise or beginning of the exercise by the Payee or any Holder of any one or more of such rights, powers or -3- 72 remedies shall not preclude the simultaneous or later exercise by them of any or all such other rights, powers or remedies. 12. This Note Guaranty and all covenants and agreements of the Note Guarantors herein shall continue in full force and effect and shall not be discharged or released until such time as all of the obligations of the Partnership to deliver the 3/7 Redemption Note pursuant to Section 5.4(B) of the Partnership Agreement and under both Redemption Notes and of the Note Guarantors under this Note Guaranty shall be performed and discharged in full. 13. Any Payee may assign or transfer to any person or persons all or any part of the indebtedness of the Partnership to him represented by either or both of the Redemption Notes and such person or persons shall have the right to enforce this Note Guaranty in the same manner and with the same rights as such Payee, provided that such Payee shall continue to have the unimpaired right to enforce this Note Guaranty as to so much of such indebtedness as he has not assigned or transferred. 14. All notices and communications required or permitted to be given hereunder shall be given by registered or certified mail as follows: if to the Note Guarantors, at 31 West 34th Street New York, New York 10001 Attention: Chairman of the Board, and c/o Whitman Breed Abbott & Morgan 200 Park Avenue New York, New York 10166 Attention: Neil Underberg, Esq.; and if to the Payee, c/o Oscar Gruss & Son, Inc. 74 Broad Street New York, New York 10004, and c/o Gerstein & Churchill, P.C. 300 Park Avenue, 20th Floor New York, New York 10022 Attention: David M. Gerstein, Esq., and c/o Lowenthal, Landau, Fischer & Bring, P.C. 250 Park Avenue New York, New York 10177 Attention: Laurence J. Kaiser, Esq. -4- 73 or to such other address or addresses as any party or Holder may, from time to time, designate in writing in the manner above described. 15. This Note Guaranty shall be governed by and construed in accordance with the law of the State of New York. It contains the entire understanding among the parties hereto with respect to the guaranty described herein. No waiver, amendment or modification of any of the provisions of this Note Guaranty shall be binding unless in writing and signed by the parties hereto. 16. This Note Guaranty shall inure to the benefit of the Payees and their respective heirs, legal representatives and assigns. It shall be binding upon the Note Guarantors and their respective successors and assigns. IN WITNESS WHEREOF, the undersigned have hereunto set their hands and seals this ____ day of December, 1994. ALEXANDER'S DEPARTMENT STORES OF LEXINGTON AVENUE, INC. By: /s/ BRIAN KURTZ ----------------------- Title: Vice President ----------------------- ALEXANDER'S, INC. By: /s/ BRIAN KURTZ ----------------------- Title: Executive Vice President ------------------------ -5- 74 EXHIBIT D-4 3/7 SECURITY AGREEMENT SECURITY AGREEMENT (this "Security Agreement") dated as of December 30, 1994 between ALEXANDER'S DEPARTMENT STORES OF LEXINGTON AVENUE, INC. ("ALX 1"), a New York corporation ("Debtor"), and EMANUEL GRUSS, RIANE GRUSS and ELIZABETH GOLDBERG (collectively, "Secured Party"). Preliminary Statement Pursuant to Section 5.7 of that certain Amended and Restated Agreement of Limited Partnership for Seven Thirty One Limited Partnership (the "Partnership") dated as of August 21, 1986 (as amended by the First Amendment to Amended and Restated Agreement of Limited Partnership for the Partnership dated as of May 14, 1992, the Second Amendment to Amended and Restated Agreement of Limited Partnership for the Partnership dated as of August 20, 1993 and the Third Amendment to Amended and Restated Agreement of Limited Partnership for the Partnership dated as of October 4, 1993 [(the "Partnership Agreement")], the Partnership is obligated to execute and deliver to Secured Party a note in the principal amount of up to $15,000,000, if the Secured Party timely exercises its right to the 3/7 Redemption. (Such note, together with any amendments thereto or substitutes therefor, is herein referred to as the "3/7 Redemption Note"). Unless otherwise indicated, capitalized terms not defined herein shall have the meaning ascribed to them in the Partnership Agreement. The parties desire to provide for the securing of the 3/7 Redemption Note by the granting to Secured Party of a security interest in all of Debtor's right, title and interest, whether now owned or hereafter acquired, in 34,654 Units (as such term is defined in the Partnership Agreement) as a limited partner in the Partnership (the "Partnership Interest"). The Partnership Interest, together with all proceeds thereof, is hereinafter called the "Collateral". 1. Security Interest. To secure the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of the principal of and interest on the 3/7 Redemption Note and all other monies that may become due under the 3/7 Redemption Note, the payment of all other monies that may become due under this Security Agreement and the faithful performance and observance of all the terms, covenants, conditions and warranties contained in this Security Agreement (the "Obligations"), Debtor grants to Secured Party a security interest in the Collateral. 2. Representations and Warranties of Debtor. Debtor represents, warrants and covenants to Secured Party as follows: -1- 75 (a) Debtor is the legal and beneficial owner of, and has good title to, the Partnership Interest, subject to no security interest or other encumbrance superior to the lien granted hereby. (b) Debtor shall defend the Collateral against all claims and demands of all persons at any time claiming the same or any interest therein. (c) Debtor's chief executive office and the records concerning the Collateral are located at 31 West 34th Street, New York, New York 10001. (d) Debtor shall notify Secured Party promptly of any change in its principal place of business or the location of the records concerning the Collateral. (e) Debtor is a corporation duly organized and existing and in good standing under the laws of its state of incorporation. (f) Neither Debtor's certificate of incorporation nor its by-laws nor any agreement, understanding or instrument to which it is a party or by which it is bound, nor any law, order, judgment, decree, regulation, ruling or governmental requirement of any kind prevents it from executing and delivering this Security Agreement. (g) The execution of this Security Agreement and the performance of the Debtor's obligations hereunder have been duly authorized by its board of directors. (h) Debtor has the right to execute this Security Agreement and carry out all of its obligations contained herein. 2. Voting, Etc.. Until the occurrence and continuation of an Event of Default, Debtor shall be entitled to exercise all rights to vote, approve or consent under the Partnership Agreement or applicable law, and to give waivers or ratifications in respect thereto. 3. Distributions. Until the occurrence and continuation of an Event of Default, Debtor shall be entitled to receive and retain all distributions and other payments in respect of the Partnership Interest. 4. Further Assurances. (a) Debtor shall from time to time execute one or more financing statements and such other instruments as may be requested by Secured Party to perfect the security interest created by this Security Agreement, including any continuations or amendments of such financing statements, and -2- 76 Debtor shall pay the cost of filing or recording the same in the public offices deemed necessary or desirable by Secured Party. Debtor shall do such other acts as Secured Party may request to establish, maintain and perfect the security interest in the Collateral created by this Security Agreement. (b) Debtor authorizes Secured Party to file one or more financing statements and continuation statements signed only by Secured Party in any jurisdiction in which such filing shall be necessary, in the opinion of Secured Party's counsel, to perfect the security interest created by this Security Agreement. The expense of such filing and reasonable fees and expenses of attorneys in connection with such filing and recording shall be borne by Debtor. 5. Events of Default. The occurrence of any Event of Default (as defined in the 3/7 Redemption Note) shall be an Event of Default hereunder [(other than an Event of Default described in paragraph (e) of "Events of Default" in the 3/7 Redemption Note)](1). 6. Remedies. If any Event of Default shall have occurred and be continuing, Secured Party shall be entitled to exercise all rights and remedies of a secured party under the Uniform Commercial Code. 7. Termination. After all Obligations have been paid or discharged in full, this Security Agreement shall terminate, and Secured Party, at the request and expense of Debtor, will execute and deliver to Debtor a proper instrument or instruments acknowledging the satisfaction and termination of this Security Agreement, and will duly assign, transfer and deliver to Debtor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of Secured Party and has not theretofore been sold or otherwise applied or released pursuant to this Security Agreement, together with any moneys at the time held by Secured Party hereunder. 8. Amendment and Waivers. This Security Agreement may not be terminated, amended or waived orally, but only by an instrument in writing signed by the party against which enforcement of the termination, amendment or waiver is sought. 9. Notices. Any notice, demand, consent or other communication required or permitted by this Security Agreement will be in writing, addressed to the appropriate party and sent by either registered or certified U.S. Mail, return receipt requested, postage prepaid or by reputable overnight courier, shipping charges prepaid. Notice is effective upon deposit in -------------------- (1) The bracketed language is to be used if this Security Agreement covers property of parties other than ALX 1 and ALX 2. -3- 77 the U.S. Mail or delivery to the courier in accordance with the foregoing. For purposes of notice, the addresses of the parties shall be as follows: If to Debtor: 31 West 34th Street New York, New York 10001 Attention: Chairman of the Board, and c/o Whitman Breed Abbott & Morgan 200 Park Avenue New York, New York 10166 Attention: Neil Underberg, Esq.; If to Secured Party: c/o Oscar Gruss & Son, Inc. 74 Broad Street New York, New York 10004, and c/o Gerstein & Churchill, P.C. 300 Park Avenue, 20th Floor New York, New York 10022 Attention: David M. Gerstein, Esq., and c/o Lowenthal, Landau, Fischer & Bring, P.C. 250 Park Avenue New York, New York 10177 Attention: Laurence J. Kaiser, Esq. Each party has the right at any time to change the address to which notice must be sent or the person to whom notice must be directed. Such change is not effective until the party changing its address or addressee has given notice in accordance with the requirements of this Section 9 to each of the other parties and provided further that the address for notice must at all times be within the United States of America. 10. Governing Law. This Security Agreement and the rights and obligations of Debtor hereunder shall be construed and enforced in accordance with the laws of the State of New York. 11. Miscellaneous. This Security Agreement contains the entire understanding among the parties hereto with respect to the matters described herein. No waiver, amendment or modification of any of the provisions of this Security Agreement shall be binding unless in writing and signed by the parties hereto. This Security Agreement shall inure to the benefit of and shall bind the successors and assigns of the parties. The headings in this Security Agreement are for purposes of reference only and shall not limit or define the meaning hereof. This -4- 78 Security Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument. If any provision of this Security Agreement or the application of any such provision shall be invalid, illegal or unenforceable, the remainder of this Security Agreement and any other application of such provision shall remain effective. 12. Jurisdiction. The Partners acknowledge and agree that, except as provided in Section 5.8(C) of the Partnership Agreement, all disputes arising, directly or indirectly, out of or relating to this 3/7 Security Agreement may be dealt with and adjudicated in the state courts of New York sitting in New York County or the federal courts sitting in New York County, and each Partner hereby expressly and irrevocably submits itself to the jurisdiction of such courts in any suit, action or proceeding arising, directly or indirectly, out of or relating to this 3/7 Security Agreement or in any action to enforce this 3/7 Security Agreement. [13. Non-Recourse. Secured Party agrees that Secured Party will look solely to the Collateral for the payment and performance of the provisions of the 3/7 Redemption Note and of this Security Agreement, and that Secured Party will not seek or take any personal or deficiency judgment against the Debtor or any partner, shareholder, officer or principal of Debtor, disclosed or undisclosed, with respect to such indebtedness or performance; provided, however, that nothing herein shall be deemed to affect otherwise the rights of the Secured Party to proceed against the Collateral or to proceed against the 3/7 Redemption Note Guarantors under their Guaranty (as defined in the Partnership Agreement); and further provided that Secured Party's recourse against Debtor shall not be so limited in connection with any fraud or material and intentional misrepresentation by the Debtor in connection with this Security Agreement.](2) 14. Except to the extent specifically set forth in this Security Agreement, the rights granted to Secured Party under this Security Agreement shall not be construed to limit the rights granted to the General Partner under the Partnership Agreement. 15. Upon notice by the Debtor, this Security Agreement is and shall be subject and subordinate to all security interests or liens placed on the Collateral with the consent of the Debtor after the date hereof, including any security interest securing the 4/7 Redemption Note (as such term is defined in the -------------------- (2) This non-recourse language will be used only in security agreements, mortgages or other security instruments given by parties other than the Partnership, ALX 1 or ALX 2. -5- 79 Partnership Agreement), provided the Debt Coverage Requirement (as defined in the Partnership Agreement) is then met with respect to the 3/7 Redemption Note (the security interests or liens being herein referred to as the "Superior Liens"). The Secured Party shall execute all agreements subordinating the lien of this Security Agreement required to carry out the intent of this Paragraph No. 15, which subordination agreements shall be in such form as the lender requesting same customarily employs in connection with its financings of collateral similar to the Collateral, provided that nothing in the terms of such agreement renders Secured Party's interest in the Collateral unperfected. If the Secured Party fails to execute any such subordination agreement within 30 days (or such shorter time, but not less than 10 days, as the lessee or mortgagee requires) after the Debtor's request therefor, the Debtor may execute and deliver such agreements in the name and on behalf of the Secured Party. Debtor and Secured Party may then pursue such claims, at law or in equity, as each may have against the other. 16. The Secured Party will comply with the obligations imposed on it by Superior Liens to the extent such obligations do not violate the provisions of Paragraph No. 15. IN WITNESS WHEREOF, Debtor and Secured Party have executed this Security Agreement as of the day and year first above written. Debtor: ALEXANDER'S DEPARTMENT STORES OF LEXINGTON AVENUE, INC. By: /s/ BRIAN KURTZ ---------------------- Name: Brian Kurtz Title: Vice President Secured Party: /s/ EMANUEL GRUSS ------------------------- EMANUEL GRUSS /s/ RIANE GRUSS ------------------------- RIANE GRUSS /s/ ELIZABETH GOLDBERG ------------------------- ELIZABETH GOLDBERG -6- 80 EXHIBIT E DISTRIBUTIONS GUARANTY Pursuant to Section 4.4(F) of that certain Amended and Restated Agreement of Limited Partnership for Seven Thirty One Limited Partnership dated as of August 21, 1986 (as amended by the First Amendment to Amended and Restated Agreement of Limited Partnership for Seven Thirty One Limited Partnership dated as of May 14, 1992, the Second Amendment to Amended and Restated Agreement of Limited Partnership for Seven Thirty One Limited Partnership dated as of August 20, 1993 and the Third Amendment to Amended and Restated Agreement of Limited Partnership for Seven Thirty One Limited Partnership dated as of October 4, 1993 [the "Partnership Agreement"]) for Seven Thirty One Limited Partnership, a New York limited partnership (the "Partnership"), among ALEXANDER'S DEPARTMENT STORES OF LEXINGTON AVENUE, INC. ("ALX 1"), a New York corporation, ALEXANDER'S, INC. ("ALX 2"), a Delaware corporation, EMANUEL GRUSS, RIANE GRUSS and ELIZABETH GOLDBERG (the latter three persons referred to herein as the "Gruss Partners" and also sometimes collectively as the "Payees" and singly as a "Payee"), and for good and valuable consideration: 1. The undersigned, ALX 1 and ALX 2 (hereinafter called the "Distributions Guarantors"), do hereby, jointly and severally, unconditionally guarantee payment by the Partnership of the Gruss Cumulative Priority annually for each October Year (as defined in the Partnership Agreement) from October 4, 1993 to October 3, 1998 to the Gruss Partners when due under the Partnership Agreement. The Distributions Guarantors shall make any and all payments required under this Paragraph 1 with respect to any October Year within 10 days after demand from Payees indicating their good faith determination of (a) the amount received during the October Year, (b) the amount received in any prior October Years in excess of the Gruss First Priority Distribution Amount and (c) the amount due hereunder for the October Year just ended. Such demand may be given at any time on or after the October 4 (or the next succeeding business day, if October 4 is not a business day) immediately following the October Year. If the Distributions Guarantors shall disagree with the amounts set forth in such notice, the Partnership and the parties hereto shall use commercially reasonable efforts to resolve such disagreement within 30 days after receipt of the notice by the Payees, during which period no payment shall be required. No mistake in any Payees' notice under this Section 1 shall affect the rights and obligations of the parties hereunder. 2. The Distributions Guarantors do hereby waive presentment for payment, demand for payment, notice of dishonor, notice of protest and protest and all other notices or demands in connection with the payment of or enforcement of the obligations -1- 81 of the Distributions Guarantors under this Distributions Guaranty. 3. If the Distributions Guarantors shall fail to timely make any payment due hereunder, the Distributions Guarantors do hereby, jointly and severally, agree to be fully liable for the payment of, and to pay, all costs and expenses which may be incurred by the Payee including all reasonable legal fees, for the purpose of enforcing their or her or his rights against the Distributions Guarantors hereunder. 4. In the event that the Payee shall seek to enforce her or his rights under this Distributions Guaranty, the Distributions Guarantors do hereby designate the firm of Whitman Breed Abbott & Morgan, with offices at 200 Park Avenue, New York, New York 10166, Attention: Neil Underberg, as the agent of the Distributions Guarantors for purposes of service of process. The Distributions Guarantors further agree that service of process may be effected by the mailing of process to such firm on behalf of the Distributions Guarantors by certified or registered mail, return receipt requested, or by hand delivery to said firm at the above-specified address or at any other address at which such firm shall be located, if its address should change. Payee and the Distributions Guarantors acknowledge and agree that all disputes arising, directly or indirectly, out of or relating to this Distributions Guaranty may be dealt with and adjudicated in the state courts of New York sitting in New York County or the federal courts sitting in New York County, and the Distributions Guarantors hereby expressly and irrevocably submit the persons of the Distributions Guarantors to the jurisdiction of such courts in any suit, action or proceeding arising, directly or indirectly, out of or relating to this Distributions Guaranty or in any action to enforce this Distributions Guaranty. 5. Each of the Distributions Guarantors represents and warrants that it is a corporation duly organized and existing and in good standing under the laws of its respective state of incorporation; that neither its certificate of incorporation nor its by-laws nor any agreement, understanding or instrument to which it is a party or by which it is bound, nor any law, order, judgment, decree, regulation, ruling or governmental requirement of any kind prevents it from executing and delivering this Distributions Guaranty; that the execution of this Distributions Guaranty and the performance of its obligations hereunder have been duly authorized by its board of directors; and that it has the right to execute this Distributions Guaranty and carry out all of its obligations contained herein. 6. Any indebtedness or liabilities of the Partnership to either of the Distributions Guarantors, of any kind or nature, whether now existing or hereafter created, due or to become due, direct or contingent, other than reimbursement of the Advance -2- 82 Total as provided for in the Partnership Agreement, are hereby subordinated to the payment to the Payee of all amounts guaranteed in this Distributions Guaranty. 7. The Distributions Guarantors hereby consent that at any time or from time to time, with or without consideration, the Payee may, without notice to or further consent of the Distributions Guarantors and without in any manner affecting, lessening, impairing or releasing the liability and obligations of the Distributions Guarantors under this Distributions Guaranty extend or change in any respect the payment of the Gruss Cumulative Priority or the amount thereof. 8. Whether expressly stated herein or otherwise, all obligations of the Distributions Guarantors under this Distributions Guaranty are joint and several. 9. The guaranty obligation contained in this Distributions Guaranty is a guaranty of payment and not of collection. It is not in any way conditioned or contingent upon any attempt to collect from the Partnership and the Payees shall not be under any obligation to seek or prosecute collection from the Partnership before proceeding against the Distributions Guarantors under this Distributions Guaranty. The obligations and liabilities of the Distributions Guarantors hereunder shall not be impaired, released, lessened or affected by any failure, delay or omission of the Payees to enforce any right or utilize any remedy or by any waiver of any such right or remedy in the event of any default under the Partnership Agreement. 10. Each right, power and remedy of the Payee, as provided for in this Distributions Guaranty or now or hereafter existing at law or in equity or by statute or otherwise, shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in this Distributions Guaranty or now or hereafter existing at law or in equity or by statute or otherwise and the exercise or beginning of the exercise by the Payee of any one or more of such rights, powers or remedies shall not preclude the simultaneous or later exercise by them of any or all such other rights, powers or remedies. 11. This Distributions Guaranty and all covenants and agreements of the Distributions Guarantors herein shall continue in full force and effect and shall not be discharged or released until such time as all of the obligations of the Partnership under the Partnership Agreement and of the Distributions Guarantors under this Distributions Guaranty shall be performed and discharged in full. 12. All notices and communications required or permitted to be given hereunder shall be given by registered or certified mail as follows: -3- 83 if to the Distributions Guarantors, at 31 West 34th Street New York, New York 10001 Attention: Chairman of the Board, and c/o Whitman Breed Abbott & Morgan 200 Park Avenue New York, New York 10166 Attention: Neil Underberg, Esq.; and if to the Payee, c/o Oscar Gruss & Son, Inc. 74 Broad Street New York, New York 10004, and c/o Gerstein & Churchill, P.C. 300 Park Avenue, 20th Floor New York, New York 10022 Attention: David M. Gerstein, Esq., and c/o Lowenthal, Landau, Fischer & Bring, P.C. 250 Park Avenue New York, New York 10177 Attention: Laurence J. Kaiser, Esq. or to such other address or addresses as any party may, from time to time, designate in writing in the manner above described. 13. This Distributions Guaranty shall be governed by and construed in accordance with the law of the State of New York. It contains the entire understanding among the parties hereto with respect to the guaranty described herein. No waiver, amendment or modification of any of the provisions of this Distributions Guaranty shall be binding unless in writing and signed by the parties hereto. 14. This Distributions Guaranty shall inure to the benefit of the Payees and their respective heirs, legal representatives and assigns. It shall be binding upon the Distributions Guarantors and their respective successors and assigns. IN WITNESS WHEREOF, the undersigned have hereunto set their hands and seals this 30th day of December, 1994. ALEXANDER'S DEPARTMENT STORES OF LEXINGTON AVENUE, INC. By: /s/ BRIAN KURTZ ------------------------------- -4- 84 Title: Vice President --------------------------- ALEXANDER'S, INC. By: /s/ BRIAN KURTZ ------------------------------- Title: Executive Vice President ------------------------ -5- 85 EXHIBIT G ASSIGNMENT OF REDEEMED UNITS EMANUEL GRUSS, RIANE GRUSS and ELIZABETH GOLDBERG [or their Permitted Transferees] (collectively, the "Assignor") whose address is c/o Emanuel Gruss, Oscar Gruss & Son, Inc., 74 Broad Street, New York, New York 10004, hereby assigns and conveys to [SEVEN THIRTY ONE LIMITED PARTNERSHIP] ("Assignee"), a New York limited partnership all of Assignor's right, title and interest in and to its [9,309 Units, 7,170 Units or all remaining Units originally issued to the Gruss Partners, as the case may be] in Seven Thirty One Limited Partnership (the "Redeemed Units"). Assignor represents and warrants as follows: (a) Assignor has good title to the Redeemed Units and it has the lawful right to assign the Redeemed Units without the consent of any other person or entity; (b) The Redeemed Units are free and clear of all liens and encumbrances; and (c) Assignor will at any time and from time to time, at the request of Assignee, execute and deliver to Assignee such instruments as Assignee may reasonably request for the purpose of vesting in Assignee the full right, title and interest of Assignor in and to the Redeemed Units. IN WITNESS WHEREOF, Assignor has duly executed this Assignment this __ day of _________, 199_. /s/ EMANUEL GRUSS ---------------------------- Emanuel Gruss Units Redeemed: 2,792.7 /s/ RIANE GRUSS ---------------------------- Riane Gruss Units Redeemed: 2,792.7 /s/ ELIZABETH GOLDBERG ---------------------------- Elizabeth Goldberg Units Redeemed: 3,723.6 -1- 86 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the _____ day of __________, 199_, before me personally came Emanuel Gruss to me known to be the individual described in and who executed the foregoing instrument, and acknowledged that he executed the same. -------------------------- Notary Public STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the _____ day of _________ 199_, before me personally came Riane Gruss to me known to be the individual described in and who executed the foregoing instrument, and acknowledged that she executed the same. -------------------------- Notary Public STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the _____ day of _________ 199_, before me personally came Elizabeth Goldberg to me known to be the individual described in and who executed the foregoing instrument, and acknowledged that she executed the same. -------------------------- Notary Public -2- EX-10.IC 3 CREDIT AGREEMENT, VORNADO LENDING CORP. 1 Exhibit 10(i)(C) CREDIT AGREEMENT dated as of March 15, 1995 among ALEXANDER'S, INC., as Borrower and VORNADO LENDING CORP., as Lender 2 T A B L E O F C O N T E N T S
SECTION PAGE ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.01. Certain Defined Terms............................ 1 1.02. Computation of Time Periods...................... 13 1.03. Accounting Terms................................. 13 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES 2.01. The Loan......................................... 13 2.02. Repayment........................................ 13 2.03. Prepayments...................................... 13 2.04. Interest......................................... 13 2.05. Loan Fee......................................... 15 2.06. Increased Costs.................................. 15 2.07. Payments and Computations........................ 15 2.08. Taxes............................................ 17 2.09. Payment of Certain Costs and Expenses............ 18 2.10. Use of Proceeds.................................. 18 ARTICLE III CONDITIONS OF LENDING 3.01. Conditions Precedent to Funding Loan............. 18 ARTICLE IV REPRESENTATIONS AND WARRANTIES 4.01. Representations and Warranties of the Borrower... 19
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SECTION ii PAGE ARTICLE V COVENANTS 5.01. Affirmative Covenants of the Borrower............ 24 5.02. Negative Covenants of the Borrower............... 27 5.03. Reporting Requirements........................... 32 5.04. Covenants of the Lender.......................... 34 ARTICLE VI SPECIAL PROVISIONS 6.01. Condemnation and Casualty........................ 36 6.02. Payment of REIT Dividends........................ 37 6.03. Gruss Arrangements............................... 37 6.04. Release of Lexington Avenue Property............. 38 6.05. Exception to Cash Collateral Arrangements for Certain Financings......................... 38 6.06. Construction and Development Financing........... 39 6.07. Release of Cash Collateral Account............... 40 6.08. Optional Release or Assignment................... 40 ARTICLE VII EVENTS OF DEFAULT 7.01. Events of Default................................ 42 ARTICLE VIII MISCELLANEOUS 8.01. Amendments, Etc.................................. 44 8.02. Notices, Etc..................................... 45 8.03. No Waiver; Remedies.............................. 45 8.04. Costs, Expenses.................................. 45 8.05. Merger........................................... 47 8.06. Binding Effect................................... 47 8.07. Lender's Discretion.............................. 47 8.08 Participations................................... 47 8.09. Governing Law.................................... 48
4 SECTION iii PAGE 8.10. Execution in Counterparts........................ 48 8.11. Waiver of Jury Trial............................. 48 8.12. Jurisdiction..................................... 49 8.13. Continuing Enforcement........................... 49
Schedule I - Disclosed Litigation Schedule II - Properties Schedule III - Surviving Debt Schedule IV - Use of Proceeds Schedule V - Subsidiaries of each Loan Party Schedule VI - Defaults Created by Loan Documents Schedule VII - Required Authorizations Schedule VIII (a) - Environmental Non-Compliance Schedule VIII (b) - Environmental Reports Schedule IX - Real Property Schedule X - Leases Schedule XI - Defaults under Material Agreements Schedule XII - Non-compliance with Laws Schedule XIII - Existing Agreements with Vornado Realty Trust Schedule XIV - Subordination Conditions Exhibit A - Form of Bankruptcy Court Order Exhibit B - Form of Guaranty Exhibit C - Form of Mortgage Exhibit D - Form of Note Exhibit E - Form of Pledge Agreement Exhibit F - Form of Subordination, Nondisturbance and Attornment Agreement Exhibit G - Form of Opinion of Shearman & Sterling Exhibit H - Form of Opinion of Wells, Garafalo, Jaworski & Liebman
5 CREDIT AGREEMENT dated as of March 15, 1995 by and between Alexander's, Inc., a Delaware corporation (the "Borrower"), as borrower, and Vornado Lending Corp., a New Jersey corporation (the "Lender"), as lender. (1) WHEREAS, the Borrower has requested that the Lender make a loan in the aggregate principal amount and for purposes herein specified; and (2) WHEREAS, the Lender is willing to make such a loan on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms. As used in this Credit Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term "control" (including the terms "controlling," "controlled by" and "under common control with") of a Person means the possession, direct or indirect, of the power to vote 20% or more of the Voting Stock of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise. "Bankruptcy Court" means the Bankruptcy Court for the Southern District of New York. "Bankruptcy Court Order" means a certified copy of an order of the Bankruptcy Court substantially in the form attached as Exhibit A hereto. "Bankruptcy Plan" means that certain Debtors' First Amended and Restated Joint Plan of Reorganization by the United States Bankruptcy Court, Southern District of New York in a Proceeding for a Reorganization Under Chapter 11, dated July 21, 1993. 6 2 "Bankruptcy Proceeding" means the proceedings for reorganization under Chapter 11 of the United States Bankruptcy Code pending in the Bankruptcy Court entitled In re Alexander's, Inc., et al. (Case Nos. 92B 42704 (CB) through 92B 42720 (CB) inclusive). "Borrower" has the meaning specified in the recital of parties to this Credit Agreement. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday on which banks are not required or authorized to close in New York City. "Capitalized Leases" has the meaning specified in clause (e) of the definition of Debt. "Cash Collateral Account" means an account of the Borrower maintained with the Senior Lender in accordance with the Cash Collateral Agreement. "Cash Collateral Agreement" means the Cash Collateral Agreement, dated of even date herewith, among the Borrower, the Lender and Senior Lender. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as the same may be amended from time to time. "Closing Date" means the date on which the Loan is advanced. "Code" means the Internal Revenue Code of 1986, as amended. "Collateral" means all "Collateral" referred to in the Collateral Documents and all other property that is subject to any Lien in favor of the Lender. "Collateral Documents" means collectively each Guaranty, Pledge Agreement and Mortgage. "Confidential Information" means information that the Borrower furnishes to the Lender on a confidential basis, but does not include any such information that is or becomes generally available to the public other than as a result of a breach by the Lender of its obligations hereunder or that is or becomes available to the Lender from a source other than the Borrower that is not, to the best of the Lender's knowledge, acting in violation of a confidentiality agreement with the Borrower. 7 3 "Consolidated" refers to the consolidation of accounts in accordance with GAAP. "Debt" of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all Obligations of such Person for the deferred purchase price of property or services (other than trade payables not overdue by more than 60 days incurred in the ordinary course of such Person's business), (c) all Obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all Obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Obligations of such Person as lessee under leases that have been or should be, in accordance with GAAP, recorded as capital leases ("Capitalized Leases"), (f) all Obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities, (g) all Debt of others referred to in clauses (a) through (f) above guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such Debt or to advance or supply funds for the payment or purchase of such Debt, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Debt or to assure the holder of such Debt against loss, (iii) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (iv) otherwise to assure a creditor against loss, and (h) all Debt referred to in clauses (a) through (f) above secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt. "Deeply Subordinate" means subordination by Lender of its rights under the Loan Documents in accordance with a subordination agreement entered into with a third party lender substantially in the form of that certain Subordination and Standstill Agreement attached as Exhibit A to that certain Mortgage and Security Agreement, dated as of February 24, 1995 from the Borrower in favor of Greyrock Capital Group Inc. "Default" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. 8 4 "Default Rate" means (a) prior to the Maturity Date, 4% per annum above the rate per annum required to be paid on the Loan pursuant to Sections 2.04(a) and (b) from and after the Maturity Date, 4% per annum above the rate per annum from time to time in effect determined by adding (i) 7.25% or, provided that the Lender shall have entered into the Intercreditor Agreement, 9.92% and (ii) the One-Year Treasury Rate in effect as of the Maturity Date; provided, however, that for purposes of determining the Default Rate, the One-Year Treasury Rate shall be re-determined as of each anniversary of the Maturity Date. "Development Financing" means (i) those financings described in Section 6.06 and (ii) any construction or development financing with respect to a Future Development Property. "Development Properties" means any of the Kings Plaza Store Property and the Paramus Property. "Disclosed Litigation" means the matters described on Schedule I to this Credit Agreement. "Environmental Action" means any administrative, regulatory or judicial action, suit, demand, demand letter, claim, notice of non-compliance or violation, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law or any Environmental Permit including, without limitation, (a) any written claim by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any Environmental Law and (b) any written claim by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment. "Environmental Law" means any applicable federal, state or local law, rule, regulation, order, writ, judgment, injunction, decree, determination or award relating to the environment, health, safety or Hazardous Materials. "Environmental Permit" means any permit, approval, identification number, license or other authorization required under any Environmental Law. "Events of Default" has the meaning specified in Section 7.01. "Existing Debt" means Debt of the Borrower outstanding immediately before the time of execution of this Credit Agreement. 9 5 "Fidelity Credit Agreement" means the Credit Agreement, dated of even date herewith, between the Borrower and First Fidelity. "Financing Properties" means any of the Flushing Property, the Rego Park I Property, the Third Avenue Property and the Fordham Property. "First Fidelity" means First Fidelity Bank, National Association. "Flushing Property" means the ground leasehold estate on the Property designated on Schedule II to this Credit Agreement as the "Flushing Property". "Fordham Property" means the Property designated on Schedule II to this Credit Agreement as the "Fordham Road Property". "Future Development Property" means any or all of the Rego Park II Property, the Rego Park III Property and the Lexington Avenue Property, in each case after the Mortgage on such Property has been released by the Lender. "GAAP" has the meaning specified in Section 1.03. "Gruss Agreement" means that certain letter agreement, dated March __, 1995, among the Gruss Partners, the Lender, the Senior Lender, the Borrower and the Lex Store General Partner. "Gruss Partners" shall have the meaning assigned to such term in the Gruss Partnership Agreement. "Gruss Partnership Agreement" means that certain Amended and Restated Agreement of Limited Partnership, dated as of August 21, 1986, as last amended by that certain Third Amendment to Amended and Restated Agreement of Limited Partnership for Seven Thirty One Limited Partnership, dated as of October 4, 1993, as modified, for purposes of the provisions of this Credit Agreement, by the Gruss Agreement. "Guarantor" means each of Alexander's of Flushing, Inc., Alexander's of Third Avenue, Inc., Alexander's of Fordham Road, Inc., Alexander's of Rego Park, Inc., Alexander's Department Stores of New Jersey, Inc., Alexander's Department Stores of Brooklyn, Inc., Alexander's of Brooklyn, Inc., Alexander's of Rego Park II, Inc., Alexander's of Rego Park III, Inc. and Admo Realty Corp. and subsequent assignees thereof and any other Person who shall execute a Guaranty after the date hereof. 10 6 "Guaranty" means the Guaranty, substantially in the form of Exhibit B to this Credit Agreement, as amended from time to time, duly executed as of the Closing Date by each Guarantor. "Hazardous Materials" means (a) petroleum or petroleum products, natural or synthetic gas, asbestos in any form that is friable, urea formaldehyde foam insulation and radon gas, (b) any substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants," "contaminants" or "pollutants," or words of similar import, under any Environmental Law and (c) any other substance exposure to which is regulated under any Environmental Law. "Indemnified Party" has the meaning specified in Section 8.04(b). "Intercreditor Agreement" means the Subordination and Intercreditor Agreement, dated of even date herewith, among the Vornado Realty Trust and the Lender and the Senior Lender, as modified by the Intercreditor Letter Agreement. "Intercreditor Letter Agreement" means that certain letter agreement, dated of even date herewith, among the Lender and the Senior Lender. "Interest Payment Date" has the meaning specified in Section 2.04(a). "Interest Rate" means a rate per annum equal to (i) prior to the second anniversary of the Closing Date, 13.8% or, provided that the Lender shall have executed the Intercreditor Agreement pursuant to which the Loan Obligations shall be subordinated to the obligations of the Borrower owing to the Senior Lender under the Fidelity Credit Agreement, 16.43% and (ii) on and after the second anniversary of the Closing Date until all amounts owing under this Credit Agreement are paid in full, (A) 7.25% or, provided the Lender shall have executed the Intercreditor Agreement pursuant to which the Loan Obligations shall be subordinated to the obligations of the Borrower owing to the Senior Lender under the Fidelity Credit Agreement, 9.92% plus (B) the One-Year Treasury Rate. "Kings Plaza Mall" means the Kings Plaza Mall property identified as such on the attached Schedule II to this Credit Agreement. "Kings Plaza Store Property" means the Property designated on Schedule II to this Credit Agreement as the "Kings Plaza Store Property". 11 7 "Leasing Agreement" means that certain Real Estate Retention Agreement, dated July 20, 1992, among Vornado, Inc. (as predecessor to Vornado Realty Trust), Keen Realty Consultants and the Borrower as amended from time to time. "Lender's Account" means an account of or specified by the Lender and, until the Lender shall notify the Borrower of a change in such account, shall mean the account of Vornado Realty Trust maintained at National Westminster Bank (Account No. 231313517). "Lex Store General Partner" shall mean Alexander's Department Stores of Lexington Avenue, Inc., as general partner of Seven Thirty One Limited Partnership, a New York limited partnership. "Lexington Avenue Partnership" means the partnership created pursuant to the Gruss Partnership Agreement. "Lexington Avenue Property" means the Property designated on Schedule II to this Credit Agreement as the "59th Street Property". "Lien" means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property. "Loan" has the meaning specified in Section 2.01. "Loan Documents" means this Credit Agreement, the Note, the Collateral Documents and the Guaranty and any other documents executed by any Loan Party in connection with the Loan. "Loan Obligations" means all amounts due and payable to the Lender under the Loan Documents. "Loan Parties" means the Borrower, each Guarantor, and each Mortgagor. "Major Lease" means any lease at Property other than the Kings Plaza Mall (i) for an entire free-standing building, including without limitation a building to be constructed, (ii) for over 10,000 rentable square feet, or (iii) with an anchor tenant. "Make Whole Premium" means (i) with respect to a prepayment of the Loan made pursuant to Section 2.03 on the second anniversary of the Closing Date, zero; and (ii) with respect to a prepayment of the Loan made pursuant to Section 2.03 on 12 8 any date other than the second anniversary of the Closing Date, the present value of the stream of monthly interest payments that would be payable on the entire outstanding principal balance of the Loan commencing on the first day of the calendar month following the first day of the Measuring Period and on the first day of each month thereafter and ending with a final payment of all accrued and unpaid interest on the last day of the Measuring Period, determined as if interest were accruing on said outstanding principal balance at the Make Whole Rate. For purposes of determining such present value, the discount rate used in such computation (the "Discount Rate"), shall be the yield on U.S. Treasury securities, adjusted to a constant maturity of a term equal to the Measuring Period, as made available by the Board of Governors of the Federal Reserve System. "Make Whole Rate" means, with respect to any prepayment, a per annum rate, based on a 360 day year for the actual number of days elapsed, determined by subtracting the Discount Rate from the applicable per annum rate of interest on the Loan in effect on the date of prepayment. "Management Agreement" means that certain Management Agreement, dated as of February 6, 1995, between the Borrower and Vornado Realty Trust, as amended from time to time. "Material Adverse Change" means any material adverse change in the business, financial condition, operations, performance or properties of the Borrower and the Loan Parties taken as a whole. "Material Adverse Effect" means a material adverse effect on (a) the business, financial condition, operations, performance or properties of the Borrower and the Loan Parties taken as a whole, (b) the rights and remedies of the Lender under any Loan Document or Related Document or (c) the ability of any Loan Party to perform its Obligations under any Loan Document or Related Document to which it is or is to be a party. "Maturity Date" means the third anniversary of the Closing Date. "Measuring Period" means the period commencing on the date of a prepayment and ending on (i) the second anniversary of the Closing Date (if such prepayment is made prior to such second anniversary) or (ii) the Maturity Date (if such prepayment is made subsequent to the second anniversary of the Closing Date). "Mortgage" or "Mortgages" means one or more mortgages, in substantially the form of Exhibit C to this Credit Agreement and covering all or any of the Properties, 13 9 as the same may be amended from time to time, duly executed by the applicable Mortgagor in favor of Lender. "Mortgagor" means the Borrower, the Lexington Avenue Partnership, Alexander's of Fordham Road, Inc., and Alexander's Department Stores of New Jersey, Inc., or other mortgagor under a Mortgage, provided that any Mortgagor shall cease to be a Mortgagor upon the release or satisfaction of that Mortgagor's mortgage. "Note" or "Notes" means, collectively, the promissory notes of the Borrower payable to the order of the Lender, in substantially the form of Exhibit D hereto, as amended from time to time, evidencing the indebtedness of the Borrower to the Lender resulting from the Loan made by the Lender. "Obligation" means, with respect to any Person, any obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 7.01(f). Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Loan Documents include (a) the obligation to pay principal, interest, charges, expenses, fees, reasonable attorneys' fees and disbursements, indemnities and other amounts payable by any Loan Party under any Loan Document and (b) the obligation to reimburse any amount in respect of any of the foregoing that the Lender, in accordance with the terms of the applicable Loan Document, may elect to pay or advance on behalf of such Loan Party. "One-Year Treasury Rate" means the weekly average yield of United States Treasury securities adjusted to a constant maturity of one year, as made available by the Board of Governors of the Federal Reserve System as of the first Business Day following the date which is ten (10) days prior to the second anniversary of the Closing Date. "Other Taxes" has the meaning specified in Section 2.08(b). "Participant" has the meaning set forth in Section 8.08. "Permitted Encumbrances" has the meaning specified in the Mortgages. "Permitted Liens" means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: 14 10 (a) Liens for taxes, assessments and governmental charges or levies not yet due and payable; (b) Liens created under the Senior Loan Documents; (c) Permitted Encumbrances; (d) Liens on any of the Properties now existing or hereafter granted in favor of one or more of the Gruss Partners that are required by the terms of the Gruss Partnership Agreement and that are now subordinated to the liens of the Mortgage and the Collateral Documents or hereafter Deeply Subordinated to the liens of the Mortgage and the Collateral Documents; (e) Liens in favor of one or more Gruss Partners on partnership interests of the Lex Store General Partner or the Borrower required to be granted in connection with the exercise of the 4/7 Redemption or the 3/7 Redemption (each as defined in the Gruss Partnership Agreement) provided that one Unit (as defined in the Gruss Partnership Agreement) held by the Lex Stores General Partner as a general partner shall at all times remain free and clear of any liens except those in favor of the Lender or the Senior Lender; (f) with respect to any real property acquired by Borrower or any Subsidiary or Affiliate of Borrower after the date hereof, liens to which such property is subject as of the date of such acquisition, purchase money mortgages or other similar purchase liens and liens in favor of lenders providing construction or development financing in connection with such property provided, that all proceeds of such financings are used for construction or development of such property or the retirement of Existing Debt secured by one or more liens on such Property; (g) Liens permitted to be incurred by Borrower pursuant to the terms of this Agreement; (h) Liens in connection with taxes being contested in good faith in compliance with this Credit Agreement; and (i) any renewal or replacement of any Lien securing Surviving Debt or Lien permitted pursuant to the foregoing clauses (a) through (h), inclusive, provided that any such renewal or replacement Lien secures Debt in an amount not in excess of the Debt secured by the Lien so renewed or replaced, provided, however, that notwithstanding the foregoing, the Lender shall not be required to subordinate to any Lien pursuant to this clause (i) except as otherwise provided in this Credit Agreement. "Permitted Related Owner" means any of (a) any Subsidiary now existing or hereafter created all shares of issued and outstanding capital stock of which are owned by the Borrower or (b) a corporation (x) 90% or more of the economic interests of which shall be held by the Borrower through the ownership of shares of preferred and/or common stock of such corporation and (y) 10% or less of the economic interests of which shall be held by an entity reasonably satisfactory to the Lender through the ownership of shares of common and/or preferred stock of such corporation; provided that (i) all of such stock owned by the Borrower has been or is pledged to the Lender under a pledge agreement substantially in the form of the Pledge Agreement and that creates a first priority lien in favor of the Lender and (ii) such Subsidiary or corporation enters into a guaranty substantially in the form of the Guaranty pursuant to which it guarantees the obligations of the Borrower under the Notes. The conditions regarding share ownership set forth in clauses (x) and (y) 15 11 above may be varied to the extent necessary for any income received by the Borrower to be described in Section 856(c)(2) of the Code or for the Borrower to continue to qualify as a REIT. "Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "Pledge Agreement" means a pledge agreement, in substantially the form of Exhibit D to this Credit Agreement, as amended from time to time, among the Borrower, Alexander's Department Stores of Lexington Avenue, Inc., as pledgors, and the Lender, as pledgee. "Prepayment Date" has the meaning specified in Section 2.03. "Properties" means the properties listed on Schedule II to this Credit Agreement (other than the Kings Plaza Mall) and any real property acquired by the Borrower or any Mortgagor after the Closing Date. "Reciprocal Easement Agreement" means that certain Construction, Operation and Reciprocal Easement Agreement, dated February 2, 1970, among Flatbrook Properties Corp., Kings Plaza Shopping Center of Avenue U, Inc. and Kings Plaza Shopping Center of Flatbush Avenue, Inc. as amended from time to time, and relating to the Kings Plaza Property. "Rego Park I Property" means the Property designated on Schedule II to this Credit Agreement as the "Rego Park Property". "Rego Park II Property" means the Property designated on Schedule II to this Credit Agreement as the "Rego Park II Property". "Rego Park III Property" means the Property designated on Schedule II to this Credit Agreement as the "Rego Park III Property". "REIT" means an entity described in Section 856(a) of the Code and entitled to the benefits of Section 857(a) of the Code. "Release Date" has the meaning set forth in the Mortgage encumbering the Lexington Avenue Property. "Release Price" has the meaning assigned to the term "Assignment Price" in the Gruss Agreement. 16 12 "Secured Debt" means any Debt of the Borrower incurred after the Closing Date that is secured by any of the Properties and/or the Collateral and that otherwise contains terms and conditions satisfactory to the Lender. "Senior Debt" means any Secured Debt that is secured by any of the Properties and/or the Collateral with respect to which the liens have priority over the lien of the Mortgage. "Senior Lender" means First Fidelity or its assignee under the Fidelity Credit Agreement. "Senior Loan" means the loan made by the Senior Lender to the Borrower under the Senior Loan Documents. "Senior Loan Documents" means the Credit Agreement, dated of even date herewith, between the Borrower and the Senior Lender or its assignee (the "Fidelity Credit Agreement") and the other documents defined as "Loan Documents" therein. "Special Financings" means the financing of any Financing Property or Special Financing Property described in Section 6.05 (a) or (b). "Subordinate Debt" means any Debt of the Borrower that is subordinated to the Loan Obligations under the Loan Documents on, and that otherwise contains, terms and conditions satisfactory to the Lender. "Subordination Conditions" means the conditions set forth on Schedule XIV to this Credit Agreement. "Subsidiary" means, with respect to the Borrower, any corporation of which more than 50% of the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned or controlled by the Borrower, by the Borrower and one or more of its other Subsidiaries or by one or more of the Borrower's other Subsidiaries. "Surviving Debt" means the Debt of the Borrower identified on Schedule III to the Credit Agreement. 17 13 "Surviving Debt Agreement" means any agreement or instrument setting forth the terms and conditions of any Surviving Debt, as the same may be amended from time to time. "Taxes" has the meaning specified in Section 2.08(a). "Tenancy In Common Agreement" means that certain Agreement, dated February 1, 1970, between Kings Plaza Shopping Center of Avenue U, Inc. and Kings Plaza Shopping Center of Flatbush Avenue, Inc. and pertaining to the Kings Plaza Mall property. "Third Avenue Property" means the Property designated on Schedule II to the Credit Agreement as the "Third Avenue Property". "Voting Stock" means capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even though the right so to vote has been suspended by the happening of such a contingency. SECTION 1.02. Computation of Time Periods. In this Credit Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding". SECTION 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01(g) ("GAAP"). ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. The Loan. The Lender agrees, on the terms and conditions hereinafter set forth, to make a single advance to the Borrower on the Closing Date in an amount equal to Forty-Five Million and 00/100 Dollars ($45,000,000.00) (such sum being hereinafter referred to as the "Loan"). Amounts borrowed under this Section 2.01 and repaid or prepaid may not be reborrowed. 18 14 SECTION 2.02. Repayment. The Borrower shall repay to the Lender the aggregate principal amount of the Loan and all other Loan Obligations on the third anniversary of the Closing Date or on such earlier date as the Loan Obligations become due as provided in the Loan Documents. SECTION 2.03. Prepayments. The Borrower may, provided that the Borrower shall simultaneously prepay all of its "Loan Obligations" as defined in and in accordance with the Fidelity Credit Agreement, upon at least fifteen (15) days' notice to the Lender stating the date (the "Prepayment Date"), and if such notice is given the Borrower shall, prepay the outstanding aggregate principal amount of the Loan, together with (i) accrued interest to the date of such prepayment on the aggregate principal amount prepaid, (ii) all other accrued and unpaid amounts due hereunder or under any other Loan Document, and (iii) the Make Whole Premium. The Borrower agrees that the Make Whole Premium has been freely bargained for to provide the Lender with compensation for the cost of reinvesting the Loan proceeds and for the loss of the contracted return on the Loan, and that such prepayment premium is reasonable and constitutes a means of providing the Lender with a substitute or alternative source of cash flow if the Loan or any part thereof is prepaid prior to the second anniversary of the Closing Date or after the second anniversary of the Closing Date but prior to the Maturity Date. Except as otherwise provided herein, the Make Whole Premium shall apply to a voluntary or involuntary prepayment of the Loan, whether by acceleration of the principal balance due upon an Event of Default or otherwise. Anything herein contained or contained in the Cash Collateral Agreement to the contrary notwithstanding, the monies on deposit in the Cash Collateral Account may be used by the Borrower to effect a prepayment of the Loan Obligations, provided that all of the Obligations of the Borrower under the Fidelity Credit Agreement shall have been paid. SECTION 2.04. Interest. (a) Ordinary Interest. The Borrower shall pay interest on the unpaid principal amount of the Loan owing to the Lender from the Closing Date, until such principal amount shall be paid in full, payable in arrears on the fifteenth day of each month (each an "Interest Payment Date") at a rate per annum equal to the Interest Rate. (b) Additional Interest. The Borrower shall pay additional interest on the Loan, if applicable, pursuant to Section 6.03 of this Credit Agreement. (c) Default Interest. From and after the Maturity Date and upon the occurrence and during the continuance of an Event of Default specified in Section 7.01 of this Credit Agreement, the Borrower shall pay interest on (i) the unpaid principal amount of the Loan and (ii) the amount of any interest, fee or other amount due and payable hereunder which is not paid when due, from the date such amount shall be due until such amount shall be paid in full, in either clause (i) or (ii) payable immediately on the Maturity Date or on demand after such occurrence and during such continuance, at a rate per annum equal at all times to the Default Rate. 19 15 (d) Late Charges. In the event any payment of principal or any interest is not made within five (5) days after the date on which such amount first becomes due and payable, the Lender may, at its option, require the Borrower to make an additional payment to the Lender as a late charge in an amount equal to 5% of such overdue amount. SECTION 2.05. Loan Fee. The Borrower will pay to the Lender, as consideration for the Lender having agreed to advance funds pursuant to this Credit Agreement, on the Closing Date a fee equal to 2.5% or, provided that the Lender shall have executed the Intercreditor Agreement pursuant to which the Loan Obligations shall be subordinated to the obligations of the Borrower under the Fidelity Credit Agreement, 3.334% of the Loan. SECTION 2.06. Increased Costs. If, with respect to any assignee of the Lender or a Participant that is a bank (a "Bank Lender"), due to either (i) the introduction of or any change in or in the interpretation of any law or regulation (other than a law or regulation relating to taxes) or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the amount of capital required by such Bank Lender or authority to be maintained by such Bank Lender or any corporation controlling Bank Lender as a result of or based upon the existence of Bank Lender's commitment to lend hereunder then, upon demand by Bank Lender, the Borrower shall pay to Bank Lender, from time to time as reasonably specified by Bank Lender, additional amounts sufficient to compensate Bank Lender in the light of such circumstances, to the extent that Bank Lender reasonably determines such increase in capital to be allocable to the existence of the Loan. SECTION 2.07. Payments and Computations. (a) The Borrower shall make each payment required to be made hereunder and under the Notes not later than 11:00 A.M., New York City time, on the day when due in U.S. dollars to the Lender at the Lender's Account in immediately available (same day) funds. (b) All computations of interest and fees shall be made by the Lender on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable. Each determination by the Lender of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error. (c) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest. 20 16 (d) The Borrower covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury or similar law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Credit Agreement, the Notes or the other Loan Documents; and the Borrower (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Lender, but will suffer and permit the execution of every such power as though no such law had been enacted. It is the intent of the Lender and the Borrower in the execution of the Notes, this Credit Agreement and all other instruments now or hereafter securing the Notes or executed in connection therewith or under any other written or oral agreement by the Borrower in favor of the Lender to contract in strict compliance with applicable usury law. In furtherance thereof, the Lender and the Borrower stipulate and agree that none of the terms and provisions contained in the Notes, this Credit Agreement or any other instrument securing the Notes or executed in connection herewith, or in any other written or oral agreement by the Borrower in favor of the Lender, shall ever be construed to create a contract to pay for the use, forbearance or detention of money, interest at a rate in excess of the maximum interest rate permitted to be charged by applicable law. Neither the Borrower nor any guarantors, endorsers or other parties now or hereafter becoming liable for payment of the Notes shall ever be required to pay interest on the Notes or on indebtedness arising under any instrument securing the Notes or executed in connection therewith, or in any other written or oral agreement by the Borrower in favor of the Lender, at a rate in excess of the maximum interest that may be lawfully charged under applicable law, and the provisions of this Section 2.07(d) shall control over all other provisions of the Notes, this Credit Agreement and any other instruments now or hereafter securing the Notes or executed in connection herewith or any other oral or written agreements that may be in apparent conflict herewith. The Lender expressly disavows any intention to charge or collect excessive unearned interest or finance charges in the event the maturity of the Notes is accelerated. If the maturity of the Notes shall be accelerated for any reason or if the principal of the Notes is paid prior to the end of the term of the Notes, and as a result thereof the interest received for the actual period of existence of the Loan exceeds the applicable maximum lawful rate, the Lender shall, at its option, either refund to the Borrower the amount of such excess or credit the amount of such excess against the principal balance of the Notes then outstanding and thereby shall render inapplicable any and all penalties of any kind provided by applicable law as a result of such excess interest. In the event that the Lender shall collect monies and/or any other thing of value that are then or at any time deemed to constitute interest that would increase the effective interest rate on the Notes to a rate in excess of that permitted to be charged by applicable law, an amount equal to interest in excess of the lawful rate shall, upon such determination, at the option of the Lender, be either immediately returned to the Borrower or credited against the principal balance of the Notes then outstanding, in which event any and all penalties of any kind under applicable law as a result of such excess interest shall be inapplicable. By execution of this Credit Agreement, the Borrower 21 17 acknowledges that it believes the Loan to be non-usurious and agrees that if, at any time, the Borrower should have reason to believe, that the Loan is in fact usurious, it will give the Lender notice of such condition and the Borrower agrees that the Lender shall have ninety (90) days after receipt of such notice in which to make appropriate refund or other adjustment in order to correct such condition if in fact such exists. SECTION 2.08. Taxes. (a) Any and all payments by the Borrower hereunder or under the Notes shall be made, in accordance with this Section 2.08, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings other than (i) net income taxes, franchise taxes and similar taxes imposed on the Lender or a Participant, (ii) any tax, assessment or other governmental charge that would not have been imposed but for the failure of the Lender or a purchaser of all or a portion of the Lender's or a Participant's rights and obligations under this Credit Agreement to comply with any certification, identification or other reporting requirements concerning the nationality, residence, identity or connection with the United States of the Lender or a Participant, if compliance is required by statute or by regulation of the United States Treasury Department as a precondition to exemption from such tax, assessment or other governmental charge, (iii) any tax, assessment or other governmental charge that would not have been imposed but for either (a) a sale or other transfer of all or a portion of the Lender's or a Participant's rights and obligations under this Credit Agreement to a Person that is not an entity that is treated as a corporation organized or created under the laws of the United States or of any State for U.S. federal tax purposes or (b) Lender's merger or consolidation with, or transfer of substantially all of its assets to, another entity, and (iv) any tax, assessment or other governmental charge that would not have been imposed but for any present or former connection between the Lender or a Participant (or a shareholder of the Lender or a Participant) and the jurisdiction imposing such tax, assessment or other governmental charge, including, without limitation, the Lender or a Participant's being or having been a citizen or resident of, present or engaged in a trade or business in, such jurisdiction, but excluding a connection arising solely as a result of the Lender's having entered into, received payments under and enforced this Credit Agreement (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under the Notes to the Lender, (i) the sum payable shall be increased as may be necessary so that after making all required deductions for Taxes (including deductions ("Additional Taxes") applicable to additional sums payable pursuant to this sentence), the Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Borrower shall pay any present or future stamp, documentary, excise, property or similar taxes, charges or levies that arise from any payment 22 18 made hereunder or under the Notes or from the execution, delivery or registration of, or otherwise with respect to, this Credit Agreement or the Notes (hereinafter referred to as "Other Taxes"). (c) The Borrower shall indemnify the Lender for the full amount of Taxes, and Other Taxes, paid by the Lender and any liability (including penalties, additions to tax, Additional Taxes, interest and expenses) arising therefrom or with respect thereto except as may arise as a result of the Lender's gross negligence or willful misconduct. (d) Within 30 days after the date of any payment of Taxes, the Borrower shall furnish to the Lender, at its address referred to in Section 8.02, the original receipt of payment thereof or a certified copy of such receipt. (e) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 2.08 shall survive the payment in full of principal and interest hereunder and under the Note. SECTION 2.09. Payment of Certain Costs and Expenses. The Borrower shall pay to the Lender within five (5) days after demand therefor all reasonable costs and expenses (including reasonable attorneys' fees and disbursements) incurred by the Lender in connection with (i) the approval of any lease, (ii) the preparation, negotiation and execution of any non-disturbance agreement requested for any lease, (iii) review and approval of any plans, construction contracts or any other documents relating to construction or development of a Property, and (iv) the assignment of any liens of the Mortgages pursuant Section 6.08. SECTION 2.10. Use of Proceeds. The proceeds of the Loan and of the loan under the Fidelity Credit Agreement shall be available (and the Borrower agrees that it shall use such proceeds) to refinance certain Existing Debt and to provide working capital for the Borrower and its Subsidiaries, and for other uses, in each case as set forth on Schedule IV. ARTICLE III CONDITIONS OF LENDING SECTION 3.01. Conditions Precedent to Funding Loan. The Loan shall be advanced by the Lender at a closing to be held on March 15, 1995, or such later date as the Borrower and the Lender may otherwise agree, provided that the following conditions shall be conditions precedent to the obligations of the Lender hereunder to make the Loan: 23 19 (1) the representations and warranties of the Borrower contained in Section 4.01 shall be true and correct as of the Closing Date as if made on such date; (2) the Bankruptcy Court Order shall have been entered by the Bankruptcy Court and shall have become final and nonappealable; (3) paid-up mortgage title commitments in the form of the marked-up commitments which have been heretofor initialled by the respective attorneys for the Borrower and the Lender for identification purposes (the "Form Commitments "), dated the date of the Closing Date, and containing no title exceptions except those shown on the Form Commitments; (4) Amroc Investments, Inc. shall have executed and delivered to the Borrower a release of certain claims substantially in a form previously provided by the Lender; (5) the Lender shall have received opinion of Shearman & Sterling and Wells, Garofalo, Jaworski & Liebman, counsel and local counsel, respectively, to the Company in substantially the forms attached as Exhibits G and H, respectively dated the Closing Date; (6) the closing of the Senior Loan shall occur simultaneously with the closing of the Loan and the proceeds thereof shall be applied in accordance with Section 2.10 of this Credit Agreement; and (7) all costs and fees of the Lender (including attorneys' fees and expenses) in connection with the Loan shall have been paid. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: (a) Each Loan Party that is a corporation (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of its incorporation, (ii) is duly qualified and in good standing as a foreign corporation in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed is not reasonably likely to have a Material Adverse Effect and 24 20 (iii) has all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted. (b) Each Loan Party that is a partnership (i) is a partnership duly formed and validly existing under the laws of the State of its formation, (ii) is duly qualified in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed is not reasonably likely to have a Material Adverse Effect and (iii) has all requisite partnership power and authority to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted. (c) Set forth on Schedule V hereto is a complete and accurate list of all Subsidiaries of each Loan Party and certain other affiliates, showing as of the date hereof (as to each such Subsidiary) the jurisdiction of its incorporation or formation and, in the case of corporations, the number of shares of each class of capital stock authorized, and the number outstanding, on the date hereof and the percentage of the outstanding shares of each such class owned (directly or indirectly) by such Loan Party and the number of shares covered by all outstanding options, warrants, rights of conversion or purchase and similar rights at the date hereof. All of the outstanding capital stock of all of such corporate Subsidiaries has been validly issued, is fully paid and non-assessable and is owned by such Loan Party or one or more of its Subsidiaries free and clear of all Liens, except those created by the Collateral Documents and the Senior Loan Documents. (d) The execution, delivery and performance by each Loan Party of this Credit Agreement, the Notes, each other Loan Document and each Related Document to which it is or is to be a party, and the consummation of the transactions contemplated herein and therein, are within such Loan Party's corporate or partnership powers, have been duly authorized by all necessary corporate or partnership action, and, to each such Loan Party's knowledge, do not (i) contravene such Loan Party's organizational documents, (ii) violate any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award, except where such violation is not reasonably likely to have a Material Adverse Effect and except as set forth on Schedule VI to this Credit Agreement, (iii) except as set forth on Schedule VI to this Credit Agreement, conflict with or result in the breach of, or constitute a default under, any contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting any Loan Party, any of its Subsidiaries or any of their properties, except where such conflict, breach or default is not reasonably likely to have a Material Adverse Effect or (iv) except for the Liens created by the Collateral Documents and Senior Loan Documents, result in or require the creation or 25 21 imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries. (e) Other than as set forth on Schedule VII to this Credit Agreement, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for (i) the due execution, delivery, recordation, filing or performance by any Loan Party of this Credit Agreement, the Notes, any other Loan Document or any Related Document to which it is or is to be a party, or for the consummation of the transactions contemplated hereby, (ii) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents, (iii) the perfection or maintenance of the Liens created by the Collateral Documents or (iv) the exercise by the Lender of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents. (f) This Credit Agreement has been, and the Notes, each other Loan Document and each Related Document when delivered hereunder will have been, duly executed and delivered by each Loan Party thereto. This Credit Agreement is, and the Notes, each other Loan Document and each Related Document when delivered hereunder will be, the legal, valid and binding obligation of each Loan Party thereto, enforceable against such Loan Party in accordance with its terms. (g) The Consolidated balance sheet of the Borrower and its Subsidiaries as at December 31, 1993, and the related Consolidated statement of income and cash flows of the Borrower and its Subsidiaries for the fiscal year then ended, accompanied by an opinion of Deloitte & Touche, independent public accountants, and the Consolidated balance sheet of the Borrower and its Subsidiaries as at September 30, 1994, and the related Consolidated statement of income and cash flows of the Borrower and its Subsidiaries for the nine months then ended, duly certified by the Chairman of the Board of Borrower or any other officer of Borrower, copies of which have been furnished to the Lender, fairly present, subject, in the case of said balance sheet as at September 30, 1994, and said statement of income and cash flows for the nine months then ended, to year-end audit adjustments, the Consolidated financial condition of the Borrower and its Subsidiaries as at such dates and the Consolidated results of the operations of the Borrower and its Subsidiaries for the periods ended on such dates, all in accordance with generally accepted accounting principles applied on a consistent basis. Since September 30, 1994, there has been no Material Adverse Change. (h) The rent roll for the Properties delivered to the Lender on the Closing Date is true, accurate and complete in all material respects. 26 22 (i) All financial statements delivered by any Loan Party to the Lender, are true, correct and complete in all material respects, fairly represent such Loan Party's financial condition as of the date hereof and thereof, and no information has been omitted that would make the information previously furnished misleading or incorrect in any material respect. (j) To such Loan Party's knowledge, there is no action, suit, investigation, litigation or proceeding affecting any Loan Party not covered by insurance (subject to reasonable deductibles), including any Environmental Action, pending before any court, governmental agency or arbitrator that (i) would be reasonably likely to have a Material Adverse Effect (other than the Disclosed Litigation) or (ii) other than the Bankruptcy Proceeding, purports to affect the legality, validity or enforceability of this Credit Agreement, the Notes, any other Loan Document or any Related Document or the consummation of the transactions contemplated hereby, and there has been no adverse change in the status or financial effect on any Loan Party of the Disclosed Litigation from that described on Schedule I. (k) Except as set forth on Schedule VIII(a) to this Credit Agreement to such Loan Party's knowledge, the operations and properties of each Loan Party and each of its Subsidiaries comply in all material respects with all Environmental Laws, all necessary Environmental Permits have been obtained and are in effect for the operations and properties of each Loan Party and its Subsidiaries, each Loan Party and its Subsidiaries are in compliance in all material respects with all such Environmental Permits, and, no circumstances exist that would be reasonably likely to (i) form the basis of an Environmental Action against any Loan Party or any of its Subsidiaries or any properties described in the Mortgages that could have a Material Adverse Effect or (ii) cause any such property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law. (l) Except as set forth in the environmental reports heretofore delivered to the Lender as set forth on Schedule VIII(b) to this Credit Agreement, none of the Properties is listed or, to the knowledge of any Loan Party, proposed for listing on the National Priorities List under CERCLA or on the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the Environmental Protection Agency or any analogous state list of sites requiring investigation or cleanup or is adjacent to any such property. Except as would not have a Material Adverse Effect, no underground storage tanks, as such term is defined in 42 U.S.C.Section 6991, are located on any Property in violation of applicable Environmental Laws. Except as set forth on the environmental reports heretofore provided to the Lender, the Borrower has no knowledge of any underground storage tank located on any property adjoining any Property. 27 23 (m) Each Loan Party and each of its Subsidiaries has filed or has caused to be filed all income tax returns (Federal, state and local) required to be filed and has paid all taxes shown thereon to be due, together with applicable interest and penalties. The Borrower is not aware of any material unasserted claims for prior taxes against it for which adequate reserves satisfactory to the Lender have not been established. (n) Set forth on Schedule IX to this Credit Agreement is a complete and accurate list of all real property owned by any Mortgagor or any of their Subsidiaries, showing as of the date hereof the street address, county or other relevant jurisdiction, state and record owner thereof. Each Mortgagor, or such Subsidiary, has good, marketable and insurable fee simple title to such real property, free and clear of all Liens, other than those disclosed on such Schedule and Liens created or permitted by the Loan Documents and the Senior Loan Documents. (o) Set forth on Schedule X to this Credit Agreement is a complete and accurate list of all leases of real property under which any Mortgagor or any of their Subsidiaries is the lessee, showing as of the date hereof the street address, county or other relevant jurisdiction, state, lessor, lessee, expiration date and annual base rental cost thereof. To such Mortgagor's knowledge, each such lease is the legal, valid and binding obligation of the lessor thereof, enforceable in accordance with its terms. (p) Except as set forth on Schedule XI to this Credit Agreement, no Loan Party is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained herein or in any material agreement or instrument to which it is a party or by which it or any of its properties is bound including, without limitation, the Bankruptcy Plan, except for any such default which shall be cured on the Closing Date with the proceeds of the borrowings made pursuant to this Credit Agreement. (q) As of the date hereof, there has been no Material Adverse Change since the date of the most recent financial statements provided by the Borrower or such Loan Party to the Lender. (r) No Loan Document or other document, certificate or statement furnished to the Lender by or on behalf of the Borrower or any other Loan Party contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein not misleading. It is specifically understood by the Borrower that all such statements, representations and warranties shall be deemed to have been relied upon by the Lender as an inducement to make the Loan to the Borrower. 28 24 (s) That all of the Allowed Class 6 Claims (as defined in the Bankruptcy Plan) held by Amroc Investments, Inc. shall have been paid in full simultaneously with the funding of the Loan under this Credit Agreement. ARTICLE V COVENANTS SECTION 5.01. Affirmative Covenants of the Borrower. So long as any portion of the Loan shall remain unpaid, the Borrower will, unless the Lender shall otherwise consent in writing: (a) Compliance with Laws, Etc. Comply, and cause each Mortgagor to comply, in all respects, with all applicable laws, rules, regulations and orders, except as set forth on Schedule XII to this Credit Agreement or except where such non-compliance is not likely to have a Material Adverse Effect; and keep, and cause each Mortgagor to keep, at all times in full force and effect all authorizations required for the continued use and operation of the properties of the Borrower and of each Mortgagor except as set forth on such Schedule. (b) Payment of Taxes, Etc. Prepare and timely file all federal, state and local tax returns required to be filed by the Borrower and promptly pay and discharge all taxes, assessments and other governmental charges, imposed upon the Borrower or its income or any of its property, and cause each Subsidiary to do so, with respect to real estate taxes, before interest and penalties commence to accrue thereon and, with respect to all other taxes, before they become a Lien upon such property, except for those taxes, assessments and other governmental charges then being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary has maintained adequate reserves and with respect to which (i) there is not a reasonable likelihood, in the judgment of the Lender, that the Borrower or the Lender shall be subject to any risk of criminal or material civil liability and (ii) there is not a reasonable likelihood, in the judgment of the Lender, that the Borrower's or any of its Subsidiaries' properties or the lien of the Mortgages shall be subject to the risk, respectively, of forfeiture or impairment, provided, however, that all real estate taxes must be paid when due. The Borrower shall submit to the Lender, upon request, an affidavit signed by the Borrower certifying that all federal, state and local income tax returns have been filed to date and all real property taxes, assessments and other governmental charges with respect to the Borrower's or any Subsidiary's properties have been paid to date. 29 25 (c) Compliance with Environmental Laws. Except as set forth on Schedule VIII(a) to this Credit Agreement, comply, and cause each of its Subsidiaries and all lessees and other Persons occupying its properties to comply, in all material respects, with all Environmental Laws and Environmental Permits applicable to its operations and properties, except where the non-compliance with such laws or the absence or non-renewal of such permits is not likely to have a Material Adverse Effect; obtain and renew all Environmental Permits necessary for its operations and properties, except where such non-compliance is not likely to have a Material Adverse Effect; and to the extent and in the timeframe required by applicable Environmental Law conduct, and cause each of its Subsidiaries to conduct, any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all Environmental Laws; provided, however, that neither the Borrower nor any of its Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and with respect to which (i) there is no reasonable likelihood of any risk of criminal or material civil liability to the Lender, (ii) there is no reasonable likelihood that the Borrower's or any of its Subsidiaries' properties or the lien of the Mortgages shall be subject to the risk, respectively, of forfeiture or impairment and (iii) appropriate reserves are being maintained with respect to such circumstances. (d) Maintenance of Insurance. Maintain, and cause each Mortgagor to maintain, insurance with responsible and reputable insurance companies or associations in such amounts (subject to reasonable deductibles) and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates and as otherwise required by the Mortgages, provided, however, that Borrower shall cause the Mortgagors to maintain the insurance required by the Mortgages. (e) Preservation of Corporate or Partnership Existence, Etc. Preserve and maintain, in full force and effect, and cause each Mortgagor and the Lex Store General Partner, where applicable, to preserve and maintain, its corporate or partnership existence, rights (charter and statutory) and franchises and all authorizations and rights material to its business; provided, however, that neither the Borrower nor any Mortgagor shall be required to preserve any right or franchise if the Board of Directors or general partners of the Borrower or such Mortgagor shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Borrower or such Mortgagor, as the case may be, and that the loss thereof is not disadvantageous in any material respect to the Borrower, such Mortgagor or the Lender. 30 26 (f) Inspection Rights. At any reasonable time and from time to time, in each case upon reasonable prior notice and at such times as shall not unreasonably disrupt tenants, permit the Lender or any agents or representatives thereof, to examine, audit and make copies of and abstracts from the records and books of account of, and visit the properties of, the Borrower and any Mortgagor, and to discuss the affairs, finances and accounts of the Borrower and any Mortgagor with any of their officers or directors and with their independent certified public accountants. (g) Keeping of Books. Keep, and cause each Mortgagor and the Lex Store General Partner to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and each such Subsidiary in accordance with generally accepted accounting principles in effect from time to time consistently applied. (h) Compliance with Terms of Lease Agreements. Perform timely all of the obligations, covenants and agreements of the landlord contained in any lease now or hereafter affecting any of the Properties and require the timely performance by the tenant of all of the obligations, covenants and agreements to be performed by such tenant. (i) Approval of Leases. The Borrower shall not, and shall cause each Mortgagor not to, lease space at any of the Properties (other than the Kings Plaza Mall) without the Lender's consent, which consent shall not unreasonably be withheld, provided, however, that no such consent of Lender shall be required for any lease of 10,000 square feet or less unless (i) such lease requires the Lender to provide a non-disturbance agreement to the lessee or (ii) such lease is not on commercially reasonable terms. It is hereby expressly acknowledged and agreed by the Lender that all leases at any Property identified on the certified rent roll delivered to the Lender pursuant to Section 4.01(h) of this Credit Agreement are and shall be deemed to be approved. (j) Transactions with Affiliates. Conduct, and cause each of its Subsidiaries to conduct, all transactions otherwise permitted under the Loan Documents with any of their Affiliates or any Permitted Related Owners on terms that are fair and reasonable and no less favorable to the Borrower or such Subsidiary than it would obtain in a comparable arm's-length transaction with a Person not an Affiliate. Transactions with the Lender, Vornado Realty Trust and any of its Affiliates pursuant to agreements existing as of the date hereof among Borrower or its Subsidiaries and Vornado Realty Trust and its Affiliates as set forth on Schedule XIII to this Credit Agreement are approved. 31 27 (k) Maintenance of Properties. Maintain or cause to be maintained the Properties and all other items constituting Collateral. (l) Compliance with Loan Documents. Comply and cause each Loan Party to comply with all of its covenants set forth in each of the Loan Documents. (m) After Acquired Properties. Subject to the requirements of (i) liens existing at the time of acquisition, (ii) purchase money mortgage liens and (iii) liens in connection with construction or development financing which construction or development financing is reasonably acceptable to the Lender, grant to the Lender a valid mortgage lien, or spread the lien of a Mortgage to encumber, any real property acquired by Borrower or any Subsidiary after the date hereof. (n) Trust Fund. In compliance with Section 13 and Article 3-A of the Lien Law of the State of New York, receive all proceeds of the Loan and hold the right to receive all such proceeds as a trust fund to be used first for the purpose of paying the cost of improvement, and apply all such proceeds first to the payment of the cost of improvement before using any part of such proceeds for any other purpose. (o) Flushing Property. To keep at all times the ground lease covering the Flushing Property in full force and effect. (p) Mandatory Transfer. Cause title to the King's Plaza Store Property, the Rego Park I Property, the Rego Park II Property and the Third Avenue Property to be transferred to a Permitted Related Owner not later than April 15, 1995, provided that such date may be extended to be co-terminus with the expiration of the period during which the Borrower may obtain the benefits of mortgage recording tax exemptions pursuant to an order of the Bankruptcy Court. (q) Reserve for Certain Disclosed Litigation. The Borrower shall, on the date hereof, establish, and until the Loan shall be paid in full, maintain a segregated account with First Fidelity in an amount sufficient, at all times, to pay in full any outstanding claim constituting a part of item number 3 in Schedule I to this Credit Agreement; provided, however, the segregated account need never exceed $7,500,000.00. SECTION 5.02. Negative Covenants. So long as any portion of the Loan Obligations shall remain unpaid, the Borrower will not, or permit any other Loan Party to, at any time, without the written consent of the Lender: (a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any Loan Party or Subsidiary to create, incur, assume or suffer to exist, any Lien on or 32 28 with respect to any of its properties of any character (including, without limitation, accounts) whether now owned or hereafter acquired, or sign or file, or permit any Loan Party or Subsidiary to sign or file, under the Uniform Commercial Code of any jurisdiction, a financing statement that names the Borrower or any Mortgagor or Subsidiary as debtor, or sign, or permit any Loan Party or Subsidiary to sign, any security agreement authorizing any secured party thereunder to file such financing statement, or assign, or permit any Mortgagor to assign, any accounts or other right to receive income, excluding, however, from the operation of the foregoing restrictions the following: (i) Liens created by the Loan Documents or the Senior Loan Documents; (ii) Permitted Liens; (iii) Special Liens (as defined in Section 5.02(b)); (iv) Liens permitted pursuant to Development Financings; (v) Liens in connection with any Special Financings; and (vi) Liens otherwise consented to by the Lender in writing. (b) Debt. Create, incur, assume or suffer to exist, or permit any Mortgagor or Subsidiary to create, incur, assume or suffer to exist, any Debt other than: (i) Debt under the Loan Documents or the Senior Loan Documents; (ii) Debt permitted pursuant to Development Financings; (iii) Surviving Debt; (iv) Subordinate Debt or subordinated indebtedness permitted pursuant to Section 5.02(f) or approved by the Lender; (v) Debt secured by Permitted Liens; and (vi) Debt incurred in connection with Special Financings; provided, however, that the Borrower shall be permitted to enter into any agreement or agreements contemplating the incurrence by the Borrower of Debt in an aggregate amount not to exceed $150,000,000 in connection with the construction or 33 29 development of all or any Financing Property or Development Property, provided that (i) the lien of the lender under any such agreement (each a "Special Lien") shall be Deeply Subordinated to the liens of the Mortgages and (ii) no funds shall be advanced in respect of any such Debt until the requirements set forth in this Credit Agreement with respect to such Financing Property or Development Financing shall have been satisfied by the Borrower or waived by the Lender and the Senior Lender, at which time the Liens of the Lender shall be subordinated or released in accordance with the terms of this Credit Agreement. (c) Mergers, Etc. Merge into or consolidate with any Person or permit any Person to merge into it, or permit any Loan Party or Subsidiary to do so, except that (i) any Loan Party may merge into or consolidate with any other Loan Party; provided that, in the case of any such consolidation, the Person formed by such consolidation shall be a wholly owned Subsidiary of the Borrower; provided further, that the Borrower shall pledge and grant to Lender a first priority perfected lien in and security interest on the capital stock of such Subsidiary owned by the Borrower to the Lender as further collateral for the Loan Obligations, and (ii) any Subsidiary or Permitted Related Owner that is not a Loan Party may merge into or consolidate with any Subsidiary or Permitted Related Owner which is not a Loan Party. (d) Investments in Other Persons. Purchase or acquire the obligations or stock of, or any other interest in, any Person (other than a Permitted Related Owner), except such investments as are made with surplus cash and do not expose the Borrower to any risk of loss in excess of the amount of cash invested. (e) Loans, etc. Make, or permit any Mortgagor to make, loans to any Person, other than to the Borrower, a wholly owned Subsidiary or a Permitted Related Owner, provided that loans may be made to the Lexington Avenue Partnership or the Lex Store General Partner as may be necessary to satisfy the obligations under agreements in effect as of the date hereof of the Borrower, the Lexington Avenue Partnership or the Lex Store General Partner or to provide funds necessary to operate the business of the Lexington Avenue Partnership and the Lex Store General Partner. (f) Dividends, Etc. Declare or pay any dividends, purchase, redeem, retire, defease or otherwise acquire for value any of its capital stock or any warrants, rights or options to acquire such capital stock, now or hereafter outstanding (except that Permitted Related Owners may pay dividends to the Borrower) return any capital to its stockholders as such, make any distribution of assets, capital stock, warrants, rights, options, obligations or securities to its stockholders as such or issue or sell any capital stock or any warrants, rights or options to acquire such capital stock (except for capital stock issued by Permitted Related Owners), or permit any of its 34 30 Subsidiaries to purchase, redeem, retire, defease or otherwise acquire for value any capital stock of the Borrower or any warrants, rights or options to acquire such capital stock or to issue or sell any capital stock or any warrants, rights or options to acquire such capital stock; provided, however, that nothing contained in this paragraph shall prohibit Borrower from (i) paying a dividend or making a distribution in the form of, or from the proceeds of an issuance of, subordinated indebtedness or otherwise (including, without limitation, payment in cash) as may reasonably be required, based upon the advice of counsel, to enable the Borrower to qualify as a REIT under the Code or (ii) paying a dividend or making a distribution from the proceeds of the issuance by the Borrower of equity securities. (g) Change in Nature of Business. Make, or permit any Mortgagor to make, any material change in the nature of its business as carried on at the date hereof and will not, nor permit any Mortgagor to, remove, demolish, materially alter, discontinue the use of, sell, transfer, assign, hypothecate, pledge or otherwise dispose of, except as permitted hereunder and for sales, transfers, assignments and pledges to Subsidiaries or Permitted Related Owners, any part of its assets necessary for the continuance of its business, as presently conducted and as presently contemplated, except (i) in the normal course of business, (ii) as required under the Gruss Partnership Agreement but only to the extent expressly permitted herein, and (iii) in connection with Development Financings or Special Financings; notwithstanding the foregoing, no Mortgagor shall transfer any Property except to a Permitted Related Owner. (h) Charter Amendments. Amend, or permit any Mortgagor or Subsidiary to amend, its certificate of incorporation or bylaws. (i) Accounting Changes. Make or permit, or permit any Mortgagor to make or permit, any change in accounting policies or reporting practices, except as required by generally accepted accounting principles. (j) Amendment, Etc. of Related Documents. Except as may be required in order for the Borrower to qualify as a REIT under the Code, with respect to (i) the Management Agreement, (ii) the Leasing Agreement, (iii) the Tenancy in Common Agreement, (iv) the Reciprocal Easement Agreement, (v) the Senior Loan Documents, (vi) Major Leases and (vii) the Gruss Partnership Agreement, cancel or terminate or consent to or accept any cancellation or termination thereof, amend, modify or change in any material manner any term or condition thereof, waive any material default under or any material breach of any material term or condition thereof, agree in any manner to any other amendment, modification or change of any material term or condition thereof or take any other action in connection therewith that would impair 35 31 the value of the interest or rights of the Borrower thereunder or that would impair the rights or interests of the Lender, or permit any Mortgagor to do any of the foregoing. (k) Future Speculative Development. Develop, or permit any Mortgagor or Subsidiary to develop, any undeveloped real property owned by the Borrower or such Mortgagor in the absence of executed leases approved by Lender for more than 50% of the projected leasable space on such property. (l) Negative Pledge. Except in connection with (i) Existing Debt, (ii) Secured Debt permitted hereby, (iii) Subordinated Debt permitted hereby, (iv) Permitted Liens, (v) Development Financing permitted hereby, (vi) any Special Financing permitted hereby, and (vii) as required under the Gruss Partnership Agreement but only to the extent expressly permitted herein, the Borrower shall not enter into any covenant or other agreement that prevents it or could prevent it in the future from pledging, granting a security interest in, mortgaging, assigning, encumbering or otherwise creating a lien on any of its property (whether real or personal, tangible or intangible, and now owned or hereafter acquired) in favor of the Lender, or that would be breached if the Borrower were to pledge, grant a security interest in, mortgage, assign, encumber or otherwise create a lien on any of its property (whether real or personal, tangible or intangible, and now owned or hereafter acquired) in favor of the Lender. (m) Future Property Acquisition. Except as permitted in Section 6.01, acquire, or permit any Mortgagor or Subsidiary to acquire, any real property without the consent of the Lender and without executing and delivering or causing such Mortgagor or Subsidiary to execute and deliver any instrument the Lender may deem necessary or desirable to effectuate such real property becoming additional security for the Loan in accordance with Section 5.01(m). (n) Payments Under Subordinate Loan Documents. Make any payment in respect of any Subordinate Debt (i) at any time while any amount shall be due and owing under any of the Loan Documents or (ii) after the Loan shall have matured or the Lender shall have accelerated payment of the Loan pursuant to Section 7.01 or prepay any Subordinate Debt while at any time that any Loan Obligation remains unpaid other than as provided in Section 5.02(r). (o) Lex Store General Partner. Cause or permit the Lex Store General Partner to withdraw as sole general partner of the Gruss Partnership, to be other than the sole general partner or to designate a general partner under the Gruss Partnership Agreement other than the Lex Store General Partner. 36 32 (p) Transfer of Properties. Transfer title to any of the Properties except to (i) any Mortgagor, (ii) any Person described in clause (a) of the definition of Permitted Related Owner or (iii) any Person described in clause (b) of the definition of Permitted Related Owner, provided that, in the case of clause (iii), a receiver of a Property sought to be transferred to such Permitted Related Owner has proposed to enter into a lease at such Property or take any other action which would materially adversely affect the Borrower's qualification as a REIT and the Borrower has given ten (10) days' notice to the Lender of its intention to transfer such Property to such Permitted Related Owner. (q) Issuance of Shares. Issue, or permit any Subsidiary (other than a Permitted Related Owner) to issue any shares of stock that are not issued as of the date hereof, except that notwithstanding this paragraph the Borrower shall be permitted to issue shares of stock at any time so long as, taking into account such issuance, Vornado Realty Trust and its Affiliates (including for this purpose Interstate Properties) shall continue to own in the aggregate not less than 20% of the outstanding shares of common stock of the Borrower, and provided further, with respect to the Borrower only, that an automatic exchange involving Excess Stock as defined in and pursuant to the Borrower's Amended and Restated Certificate of Incorporation shall not be treated as an issuance of shares for purposes of this paragraph. (r) Prepayment of Gruss Mortgage. Prepay the 4/7 Redemption Note or the 3/7 Redemption Note (each as defined in the Gruss Partnership Agreement) prior to the release of the Mortgage relating to the Lexington Avenue Property. (s) Lexington Avenue Partnership. Permit the Lex Store General Partner to pledge its entire general partnership interest in the Lexington Avenue Partnership. SECTION 5.03. Reporting Requirements. So long as any portion of the Loan shall remain unpaid, the Borrower will, unless the Lender shall otherwise consent in writing, furnish to the Lender: (a) Quarterly Financials. (i) As soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Borrower, Borrower's Quarterly Report on Form 10-Q for the preceding quarter as filed with the Securities and Exchange Commission (the "Commission"), containing unaudited financial statements as required by law; and (ii) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year, an unaudited consolidating balance sheet of the Borrower and its Subsidiaries as of the end of such quarter and consolidating statement of operations and cash flows of the Borrower and its Subsidiaries for the period commencing at the end of the 37 33 previous fiscal year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding fiscal year, all in reasonable detail and represented to be true and correct (subject to year-end audit adjustments) by the Chairman of the Board of the Borrower or other officer of the Borrower. (b) Annual Financials. (i) As soon as available and in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the Borrower's Annual Report on Form 10-K for such fiscal year as filed with the Commission; and (ii) as soon as available and in any event within 120 days after the end of each fiscal year, an unaudited consolidating balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal year and an unaudited consolidating statement of operations and cash flows of the Borrower and its Subsidiaries for such fiscal year, represented to be true and correct by the Chairman of the Board of the Borrower or other officer of the Borrower. (c) Litigation. Promptly after the commencement thereof, notice of all actions, suits, investigations, litigation and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting any Loan Party of the type described in Section 4.01(j), and promptly after the occurrence thereof, notice of any material adverse change in the status of the Disclosed Litigation from that described on Schedule I to this Credit Agreement. (d) Environmental Conditions. Promptly after the occurrence thereof, notice of any condition or occurrence on any Property that results in a material noncompliance by any Loan Party or any of its Subsidiaries with any Environmental Law or Environmental Permit or would be reasonably likely to (i) form the basis of an Environmental Action against any Loan Party or any of its Subsidiaries or any Property that could have a Material Adverse Effect or (ii) cause any Property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law. (e) Financial Data for Each Property Other Than the Kings Plaza Mall Property. Not later than 120 days after the end of each fiscal year, and not later than sixty (60) days after the end of each fiscal quarter, financial data in form reasonably satisfactory to the Lender relating to the operation of each of the Properties, including, without limitation, certified rent roll and summary of leases represented as true and correct by the Chairman of the Board of the Borrower or other officer of the Borrower. 38 34 (f) Financial Data for Kings Plaza Mall. Notwithstanding anything to the contrary contained herein, the following shall be the financial reporting requirements for the Kings Plaza Mall: (A) within 120 days after the end of each fiscal year of the Kings Plaza Mall, annual financial statements of the Kings Plaza Mall, including a balance sheet and a statement of operations and cash flows then audited by Deloitte & Touche or another independent certified public accountant acceptable to the Lender, and a rent roll and summary of leases prepared by the manager of the Kings Plaza Mall and represented as true and correct by such manager, and (B) no later than 45 days after the end of each fiscal quarter, a quarterly operating statement with respect to the Kings Plaza Mall prepared by the manager of the Kings Plaza Mall and represented as true and correct by such manager. (g) Budget. To the extent required and received under the Management Agreement, not less than 30 days prior to the commencement of each fiscal year, an annual operating budget relating to the Properties for the upcoming fiscal year including, without limitation, the projected gross rental income and projected operating expenses on a line item basis, provided, however, nothing herein contained shall be deemed to require the Borrower to comply with such budgets. (h) Other Information. Such other information respecting the business, financial condition, operations, performance or properties of any Loan Party as the Lender may from time to time reasonably request. SECTION 5.04. Covenants of the Lender. (a) The Lender hereby covenants to Borrower that it will not exercise any rights, including rights exercisable upon the occurrence of an Event of Default, that it has arising from or as a result of this Credit Agreement or any related agreement, including, without limitation, the Pledge Agreement between the Borrower and the Lender, to cause Borrower or any Subsidiary of Borrower or any Permitted Related Owner to (i) enter into a lease or lease amendment that either (A) provides for payments that are based, directly or indirectly (including through sub-leasing), upon the net "income or profits" of any person (as defined in Section 856(d) (2) of the Code) or (B) requires Borrower or any Subsidiary of Borrower or any Permitted Related Owner to provide a service to a tenant, other than through an independent contractor (as defined in Section 856(d)(2) of the Code), where the provision of such service by Borrower or any of its Subsidiaries or any Permitted Related Owner would cause rents received by the Borrower or any of its Subsidiaries to fail to be "rents from real property" under Section 856(d)(2) of the Code, (ii) engage in a new line of business which (A) is unrelated to the development or leasing of real property and (B) would create a substantial risk, as a result of its generation of income not described in Section 856(c)(2) or (c)(3) of the Code, that Borrower would fail to qualify as a REIT under the Code or (iii) acquire an asset that would cause Borrower to fail to satisfy the asset test of Section 856(c)(5) of the Code; provided, however, that the foregoing covenants of this Section 5.04(a) shall not preclude the Lender 39 35 from collecting amounts due to the Lender under this Credit Agreement or from foreclosing on any property securing such indebtedness or (y) be deemed to have been breached or violated by the Lender as a result of any act or action (including, without limitation, the execution of a lease) made, done or taken by any receiver for any property of any Loan Party (including a receiver appointed at the request of the Lender) unless a motion to compel such act or action was made by the Lender to the court which appointed such receiver. (b) The Lender agrees to use reasonable efforts to preserve the confidentiality of any Confidential Information received by it from the Borrower except as required by law or court order. (c) In the event that Borrower proposes to incur Secured Debt in an amount equal to at least $52,500,000 in connection with the construction, development or redevelopment of the Rego Park I Property, then within 15 days after the Lender shall have received written request from the Borrower of such proposed Secured Debt, the Lender will deliver an agreement (a "Deep Subordination Agreement") executed by Lender to the prospective holder of such proposed Secured Debt (herein called the "Prospective New Lender"), provided that if such Deep Subordination Agreement is unacceptable to the Prospective New Lender, and the Lender and the Prospective New Lender do not execute a Deep Subordination Agreement with such modifications thereto acceptable to the Prospective New Lender and deliver same to Borrower within ten (10) days after the expiration of such 15-day period, then upon at least five (5) Business Days, prior notice and request given by Borrower to Lender, the Lender will execute and deliver to Borrower an instrument releasing the lien of the Mortgages relating to the Rego Park I Property, provided that no Default or Event of Default is then continuing; and provided further that the Lender's obligation to deliver a Deep Subordination Agreement in accordance with this paragraph shall be subject to the satisfaction by the Borrower or the waiver in writing by the Lender of the Subordination Conditions simultaneously with the incurrence of such Secured Debt. (d) The Lender shall execute and deliver a non-disturbance agreement substantially in the form of Exhibit F (with such changes as the Lender may reasonably request) in connection with any lease approved by the Lender pursuant to Section 5.01(i) where the tenant is a nationally recognized credit-worthy retail tenant, provided that the tenant under such Lease shall require such non-disturbance agreement. (e) At the direction of the Borrower, the Lender hereby agrees to invest the monies on deposit in the Cash Collateral Account only in U.S. Treasury securities, commercial paper rated A1/P1 by any nationally recognized rating agency, money market instruments and corporate debt instruments rated AAA or the equivalent by any nationally recognized rating agency, provided that the maturity of any such securities shall not be a date after the Maturity Date. 40 36 ARTICLE VI SPECIAL PROVISIONS SECTION 6.01. Condemnation and Casualty. (a) In the event of any condemnation or casualty of any Property in part or in the entirety, the proceeds of such condemnation or casualty, to the extent not retained or otherwise applied by the holder of any mortgage securing Senior Debt on such Property, applied as required pursuant to any Major Lease approved by the Lender at the Property or applied by such mortgagee or in accordance with such Major Lease either to restore the improvements on such Property or to reduce such Senior Debt, shall be immediately deposited by Borrower in the Cash Collateral Account (such proceeds of condemnation so deposited being herein called "Condemnation Proceeds"; such proceeds of casualty so deposited being herein called "Casualty Proceeds"; and Condemnation Proceeds and/or Casualty Proceeds being herein called "Proceeds") and shall constitute additional collateral for the Loan Obligations in accordance with the Cash Collateral Agreement. (b) Provided that no Default or Event of Default shall have occurred and be continuing, the Borrower shall be entitled to withdraw any Condemnation Proceeds from the Cash Collateral Account for the purpose of acquiring additional real estate assets with the consent of the Lender, which consent shall not be unreasonably withheld, provided that, subject to the Senior Loan Documents, (i) Borrower shall have delivered to Lender an appraisal for such real estate (x) for an amount at least equal to the amount of the Condemnation Proceeds sought to be withdrawn by the Borrower to purchase such real estate and (y) issued by an appraisal company and in form and substance reasonably satisfactory to the Lender; (ii) the Borrower shall have delivered to Lender environmental, engineering and such other studies, reports, documents, title reports, violation searches and other information relating to such real estate as would be generally required by the Lender in accordance with good institutional lending practices, all of which studies, reports, documents and other information shall be in form and substance reasonably satisfactory to the Lender; (iii) the Lender shall be granted a priority lien mortgage on said real estate to further secure the Guaranties (the "Additional Mortgage"); (iv) the Borrower shall have delivered to Lender a paid-up mortgage title insurance policy in favor of Lender, insuring the Additional Mortgage as a second priority mortgage, subject only to the lien of the Senior Loans, on such real estate, subject to no encumbrances or other title exceptions except those title exceptions which Lender reasonably determines are acceptable based on good institutional lending practices; and (v) the Borrower shall have paid all reasonable costs and expenses of the Lender (including reasonable attorneys' fees and expenses) incurred by the Lender in connection with the review of any of the foregoing conditions. (c) The Borrower shall also have the right to withdraw the Condemnation 41 37 Proceeds remaining in the Cash Collateral Account to pay for the cost of constructing improvements on any Property covered by any Mortgage, and the Borrower shall have the right to withdraw any Casualty Proceeds in the Cash Collateral Account to pay for the repair and restoration of improvements whose damage or destruction generated such Casualty Proceeds, provided that, in all cases, subject to the Senior Loan Documents, (i) no Default or Event of Default shall be continuing; (ii) the Lender shall have approved the plans and specifications for the construction of such improvements as well as the general contract and other major contracts to be entered into by the Borrower in connection with such construction, which approval will not unreasonably be withheld; (iii) the Lender shall have received such certification and assurances as Lender shall reasonably request to assure it that the cost of constructing the improvements as shown on the plans approved by Lender does not exceed the amount of the Proceeds sought to be withdrawn by the Borrower to pay for such improvements; and (iv) the Lender may impose such further conditions and restrictions upon the disbursement of such Proceeds as the Lender deems necessary or desirable, consistent with prudent institutional construction lending practices, to assure the completion of the proposed improvements subject to no liens or encumbrances (except Permitted Liens) and in accordance with the aforesaid approved plans and all applicable laws. SECTION 6.02. Payment of REIT Dividends. In the event that the Borrower shall determine, upon the advice of counsel then generally used by Borrower for tax advice, that it shall be required to pay a dividend or make a distribution to stockholders in order to preserve its qualification as a REIT, whether or not the Proceeds shall have been applied as contemplated pursuant to Section 6.01(b) or (c), then, anything herein to the contrary notwithstanding, the Borrower may, with the consent of the Lender (i) incur unsecured subordinated indebtedness for the purpose of paying such dividend or making such distribution or to pay such dividend or make such distribution in the form of subordinated indebtedness and/or (ii) withdraw Proceeds from the Cash Collateral Account to pay such dividend or make such distribution. SECTION 6.03. Gruss Arrangements. (a) In the event that the Release Price is paid to the Lender on a date on which the Loan, if prepaid in its entirety on such date pursuant to Section 2.03, would require the payment of a Make Whole Premium, then a one-time payment of additional interest shall accrue on the Loan in an amount equal to the Make Whole Premium, if any, that would be due and payable pursuant to Section 2.03 if the Loan were prepaid on such date (assuming for purposes of this Section 6.03 that Section 2.03 permitted partial prepayments), and if the Make Whole Premium were calculated on the maximum principal amount of the Loan that could be paid out of the Release Price after deducting therefrom all interest, default interest and other sums (including the additional interest payable pursuant to this Section 6.03), other than principal, then due and payable on the Loan. 42 38 (b) Notwithstanding any provision of this Credit Agreement to the contrary, nothing contained herein shall prohibit the Borrower from (i) making or permitting to be made distributions (including Guaranteed Distributions, as defined in the Gruss Partnership Agreement) required to be made under the Gruss Partnership Agreement, (ii) making or permitting to be made any payments which are required to be made under the Note Guaranty or the Distributions Guaranty (each as defined in the Gruss Partnership Agreement), (iii) providing any Collateral to the Gruss Partners which is required to be provided to the Gruss Partners to meet a Debt Coverage Requirement (as defined in the Gruss Partnership Agreement) pursuant to the Gruss Partnership Agreement (provided that (A) the Borrower shall not grant or permit to be granted to the Gruss Partners any Lien on the last Unit (as defined in the Gruss Partnership Agreement) held by the Lex Store General Partner as general partner and (B) Liens on any of the Properties granted to the Gruss Partners shall be Deeply Subordinated to the liens of the Mortgage and the Collateral Documents, as applicable), (iv) making or permitting to be made any payments as they become due under the 4/7 Redemption Note or the 3/7 Redemption Note (each as defined in the Gruss Partnership Agreement) or (v) otherwise make any payments required to be made by the ALX Partners (as defined in the Gruss Partnership Agreement) or the Lexington Avenue Partnership under the Gruss Partnership Agreement. SECTION 6.04. Release of Lexington Avenue Property. The Borrower shall have the right, in connection with the development of the Lexington Avenue Property, at its election upon fifteen (15) days' notice to the Lender and provided that there shall not have been an entry of a foreclosure order or judgment with respect to the Mortgage relating to the Lexington Avenue Property, to deposit an amount in cash equal to the Release Price into the Cash Collateral Account, whereupon the Lender shall agree to a full release of the lien of the Mortgage relating to the Lexington Avenue Property. SECTION 6.05. Exception to Cash Collateral Arrangements for Certain Financings. (a) In the event that the Borrower shall notify the Lender of a proposed financing of one or more of the Financing Properties (but in any event including the Fordham Property) which is proposed to generate gross proceeds (the "Financing Properties Gross Proceeds") equal to or greater than $110,000,000 (the calculation of which shall be represented by the Chairman of the Board or other officer of the Borrower), then provided that no Default or Event of Default shall have occurred and be continuing, the Lender shall permit the Borrower to effect such financing and, upon at least ten (10) days' prior notice by the Borrower to the Lender of the Borrower's request that the Lender release the lien of the Mortgages on all of the Financing Properties, the Lender, subject to the last clause of Section 6.06(b), upon receipt by the Lender of such documents and other information reasonably requested by the Lender evidencing the proposed financing and the receipt by the Borrower of the Financing Gross Proceeds and upon the deposit of the amount, if any, of such Financing Properties Gross Proceeds (net of all expenses) in excess of $150,000,000 into the Cash Collateral Account as additional collateral for the Loan Obligations in accordance with 43 39 the Cash Collateral Agreement, shall release the lien of the Mortgages on all of the Financing Properties. (b) In the event that the Borrower shall notify the Lender of a proposed financing of all or any of the Financing Properties excluding the Fordham Property (the "Special Financing Properties") which is proposed to generate gross proceeds (the "Special Financing Gross Proceeds") equal to or greater than $80,000,000 (the calculation of which shall be certified by the Chairman of the Board or other officer of the Borrower), then provided that no Default or Event of Default shall have occurred and be continuing, the Lender shall permit the Borrower to effect such financing and, upon at least ten (10) days' prior notice by the Borrower to the Lender of the Borrower's request that Lender release the lien of the Mortgages on all of the Special Financing Properties, the Lender, subject to the last clause of Section 6.06(b), upon receipt by the Lender of such documents and other information reasonably requested by the Lender evidencing the proposed financing and receipt by the Borrower of the Special Financing Gross Proceeds and upon the deposit of the amount, if any, of such Special Financing Properties Gross Proceeds (net of all expenses) in excess of $120,000,000 to the Cash Collateral Account as additional collateral for the Loan Obligations in accordance with the Cash Collateral Agreement, shall release the lien of the Mortgages on all of the Special Financing Properties. (c) Provided that the Borrower shall deposit into the Cash Collateral Account as additional collateral for the Loan Obligations in accordance with the Cash Collateral Agreement an amount equal to the Rego Release Amount, then, provided that no Default or Event of Default shall have occurred and be continuing, the Lender shall release the lien of the Mortgages on the Rego Park II Property and the Rego Park III Property. The "Rego Release Amount" shall mean $5,000,000 or, in the event the lien of the Mortgages on any of the Financing Properties shall have been released pursuant to Section 6.05(a) or 6.05(b), $7,500,000, provided, however, that if, subsequent to the deposit into the Cash Collateral Account of a Rego Release Amount equal to $5,000,000 in accordance with this Section 6.05(c), the lien of the Mortgages on any of the Financing Properties shall be released pursuant to Section 6.05(a) or 6.05(b), the Borrower shall, simultaneous with any such release of the Financing Properties, deposit an additional $2,500,000 into the Cash Collateral Account; provided, however, that the Lender shall not be obligated to release the Rego Park II Property and the Rego Park III Property pursuant to this paragraph if the separation of the ownership of the Rego Park I Property from the Rego Park II Property and the Rego Park III Property cause the Rego Park I Property to be in violation of any zoning, parking or other land use law or regulation. SECTION 6.06. Construction and Development Financing. (a) Provided that no Default or Event of Default shall have occurred and be continuing, and provided that the Subordination Conditions shall have been satisfied, the Lender shall subordinate the lien of the Mortgages relating to each Development Property to any construction or development 44 40 loan or loans made to Borrower with respect to such Development Property by an institutional lender, in the principal amount equal to C/D Subordination Amount or any greater amount to the extent that cash equal to the excess of such greater amount over the C/D Subordination Amount is deposited into the Cash Collateral Account. "C/D Subordination Amount" means, with respect to the Kings Plaza Store Property, $10,000,000, and with respect to the Paramus Property, $30,000,000 (which sum shall be reduced to $22,500,000 when the tenant at such Property reimburses the Borrower or the C/D Lender for $7,500,000 of tenant improvements), provided that (i) the C/D Subordination Amount shall be reduced by any condemnation or casualty proceeds that have been applied to repay Senior Debt as permitted pursuant to Section 6.01 and (ii) the Borrower agrees that the amount of any tenant reimbursement not applied to reduce the construction loan superior to the Loan shall be deposited into the Cash Collateral Account. (b) In addition to the subordination by the Lender of the lien of the Mortgages with respect to each Development Property pursuant to Section 6.06(a), the Lender shall further agree to Deeply Subordinate its rights under the Loan Documents to the loan of the C/D Lender with respect to each Development Property in an amount equal to the C/D Subordination Amount, provided (i) the Subordination Conditions are satisfied and (ii) the Borrower shall deposit into the Cash Collateral Account an additional sum for such Development Property equal to $5,000,000 or, in the event the lien of the Mortgages on any of the Financing Properties shall have been released pursuant to Section 6.05(a) or 6.05(b), $7,500,000, provided, however, that, subsequent to the deposit into the Cash Collateral Account of the Additional Amount equal to $5,000,000 in accordance with this Section 6.06(b), the Borrower shall, simultaneous with any such release of the Financing Properties, deposit an additional $2,500,000 into the Cash Collateral Account, payment of which shall be a condition to the release of the Financing Properties in accordance with Section 6.05(a) or 6.05(b). SECTION 6.07. Release of Cash Collateral Account. Anything contained in this Article VI to the contrary notwithstanding, the Borrower shall have the right, provided that the Lender shall consent in writing, to withdraw monies on deposit in the Cash Collateral Account (excluding monies deposited pursuant to Section 6.01) in excess of $75,000,000 for any purpose. SECTION 6.08. Optional Release or Assignment. (a) Notwithstanding the express provisions thereof, wherever it is provided in any of the provisions of this Credit Agreement that the Lender shall release all or any portion of the lien of any of the Mortgages in consideration for the Borrower's deposit of cash into the Cash Collateral Account, the Borrower may, with the prior written consent of the Lender, elect that such release by the Lender be effectuated not as a release but as an assignment of such Mortgage or portion thereof, provided that the Borrower shall prepay the outstanding Loan Obligations in an amount equal to the sum of (i) the amount that would otherwise effectuate such release, 45 41 plus (ii) the Make Whole Premium, if any, that would be due and payable pursuant to Section 2.03 (assuming for purposes of this Section 6.08 that Section 2.03 permitted partial prepayments) calculated on the amount specified in the foregoing clause (i), plus (iii) the amount of interest accrued and unpaid on the amount specified in the foregoing clause (i) to the date of such prepayment. The Lender hereby agrees that, in connection with any such election, the Lender shall permit the application of the monies in the Cash Collateral Account toward such prepayment. (b) The Borrower's right to receive an assignment of Mortgage or portion thereof pursuant to Section 6.08(a) hereof, shall be conditioned upon the satisfaction of the following conditions: (i) No Default or Event of Default shall be continuing; (ii) The Borrower and Lender shall execute and deliver such mortgage and/or note splitter or severance agreements, and substitute note(s) and other documents as Lender or Borrower may reasonably request to effectuate the assignment to Borrower of the portion of the Loan Obligations covered by such release; any such assignment by Lender shall be expressly stated to be without representation or warranty by, or recourse, to, Lender; (iii) The Borrower and the assignee shall agree in writing and the mortgage(s) and note or substitute note so assigned shall state, that such note or substitute note so assigned to the assignee (the "Assigned Note") is secured solely by the mortgage(s) simultaneously being assigned to the assignee, and that no mortgage, guaranty or other security interest or collateral held by Lender (other than such mortgage being assigned to the assignee) shall secure, in any manner, such Assigned Note. (iv) The Lender, Borrower and the assignee shall execute other instruments or documents as Lender or Borrower may reasonably request to further confirm or assure the intent of the provisions of this Section 6.08(b); (v) The Borrower shall pay to Lender all reasonable attorneys' fees and expenses incurred by Lender in connection with such assignment of the Assigned Note and the mortgage(s) secured thereby; and (vi) If the Borrower is entitled under Section 6.04 to obtain a release of the Mortgage on the Lexington Avenue Property, and Borrower seeks to obtain an assignment of that Mortgage pursuant to this Section 6.08, then in addition to satisfying all of the foregoing conditions set forth in this Section 6.08(b), Borrower shall cause the assignee of the Assigned Note to execute and deliver to Lender an 46 42 instrument, in form and substance satisfactory to Lender, pursuant to which said assignee assumes all of the obligations of Lender under the Gruss Agreement and agrees to indemnify, defend and hold harmless Lender, its successors and assigns, from and against all claims, liabilities, damages, losses, costs and expenses (including reasonable attorneys' fees and disbursements) asserted against, suffered or incurred by Lender as a result of any claim that such assignee, or any of its successors or assigns, breached or defaulted under any of the obligations of Lender under the Gruss Agreement. ARTICLE VII EVENTS OF DEFAULT SECTION 7.01. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing: (a) the Borrower shall fail to pay (i) any principal of the Loan, when the same becomes due and payable or (ii) any other payment under any Loan Document, in each case under this clause (ii) within five days after notice of the same becoming due and payable; or (b) any representation or warranty made by any Loan Party (or any of its officers) under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made; or (c) the Borrower shall fail to perform or observe, in any material respect, any term, covenant or agreement contained in Section 5.02; or (d) except as otherwise specified in such Loan Document, any Loan Party shall fail to perform any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for 30 days after written notice (or such longer period, if any, as may be set forth in the applicable covenant or agreement) thereof shall have been given to the Borrower by the Lender; or (e) any Loan Party or any of its Subsidiaries shall fail to pay any principal of, premium or interest on or any other amount payable in respect of any Senior Debt or any Subordinated Debt (other than the Debt under the Senior Loan Documents) of such Loan Party or such Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, 47 43 demand or otherwise), and such failure shall continue after the applicable notice and grace period, if any, specified in the agreement or instrument relating to such Senior Debt or Subordinated Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Senior Debt or any Subordinated Debt (other than the Debt under the Senior Loan Documents) and shall continue after the applicable notice and grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate the maturity of such Senior Debt or Subordinated Debt or otherwise to cause such Senior Debt or Subordinated Debt to mature; or any such Senior Debt or Subordinated Debt shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Senior Debt or Subordinated Debt shall be required to be made, in each case prior to the stated maturity thereof; or (f) any Loan Party shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against any Loan Party seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it) that is being diligently contested by it in good faith, either such proceeding shall remain undismissed or unstayed for a period of 60 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or any substantial part of its property) shall occur; or any Loan Party shall take any corporate action to authorize any of the actions set forth above in this subsection (f); provided, however, that no Event of Default shall, in any way, be triggered by application of this clause (f) due to the existence or any continuation of the Bankruptcy Proceeding; or (g) any judgment or order for the payment of money in excess of $500,000 shall be rendered against any Loan Party, and either (i) enforcement proceedings shall have been commenced and be continuing by any creditor upon such judgment or order or (ii) there shall be any period of 20 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or 48 44 (h) any non-monetary judgment or order shall be rendered against any Loan Party that is reasonably likely to have a Material Adverse Effect, and there shall be any period of 20 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (i) any material provision of any Loan Document after delivery thereof shall for any reason cease to be valid and binding on or enforceable against any Loan Party to it, or any such Loan Party shall so state in writing; or (j) except as otherwise permitted under Section 5.02(a), any Collateral Document after delivery thereof shall for any reason (other than pursuant to the terms thereof) cease to create a valid and perfected Lien on the Collateral purported to be covered thereby with the priority of liens set forth therein; or (k) the Lex Store General Partner shall cease to be the general partner of Lexington Avenue Partnership; or (l) any Event of Default (as such term is defined in any Mortgage or other Loan Document) shall occur and be continuing; then, and in any such event, the Lender may, by notice to the Borrower, declare the Loan Obligations, together with all interest thereon and all other amounts payable under this Credit Agreement and the other Loan Documents, to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to any Loan Party under the United States Bankruptcy Code other than in connection with the Bankruptcy Proceeding, the Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. ARTICLE VIII MISCELLANEOUS SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision of this Credit Agreement or the Notes, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and 49 45 signed by the Borrower and the Lender, and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 8.02. Notices, Etc. All notices and communications under this Credit Agreement shall be in writing and shall be given by either (a) hand-delivery, (b) facsimile transmission, (c) first class mail (postage prepaid), or (d) reliable overnight commercial courier (charges prepaid) (i) if to the Borrower, to: Alexander's, Inc. 31 West 34th Street New York, New York 10001 Attention: Steven Santora Facsimile No. (212) 695-4221 (ii) if to the Lender, to: Vornado Lending Corp. c/o Vornado Realty Trust Park 80 West, Plaza II Saddle Brook, New Jersey 07663 Attention: Chief Financial Officer Facsimile No.: (201) 587-0600 Notice shall be deemed to have been given and received: (i) if by hand delivery, upon delivery; (ii) if by facsimile, upon transmission; (iii) if by mail, three (3) calendar days after the date first deposited in the United States mail; and (iv) if by overnight courier, on the date scheduled for delivery. A party may change its address by giving written notice to the other party as specified herein. SECTION 8.03. No Waiver; Remedies. No failure on the part of the Lender to exercise, and no delay in exercising, any right hereunder or under the Notes shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 8.04. Costs, Expenses. (a) The Borrower agrees to pay on demand (i) all reasonable costs and expenses of the Lender in connection with the preparation, execution, delivery, administration, modification and amendment of the Loan Documents (including, without limitation, the reasonable fees and expenses of counsel for the Lender with respect thereto) and (ii) all reasonable costs and expenses of the Lender in 50 46 connection with the enforcement of the Loan Documents, whether in any action, suit or litigation, any bankruptcy, insolvency or other similar proceeding affecting creditors' rights generally or otherwise (including, without limitation, the reasonable fees and expenses of counsel for the Lender with respect thereto). (b) The Borrower agrees to indemnify and hold harmless the Lender and each of their Affiliates and their officers, directors, employees, agents and advisors (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of, or in connection with the preparation for a defense of, any investigation, litigation or proceeding arising out of, related to or in connection with (i) the transactions contemplated hereby, (ii) the actual or alleged presence of Hazardous Materials on any property described in the Mortgages or any Environmental Action relating in any way to any Loan Party or any of its Subsidiaries, (iii) disputes with any architect, general contractor, subcontractor, materialman or supplier, or on account of any act or omission to act by the Lender in connection with any Property, (iv) any untrue statement of a material fact contained in information submitted to the Lender by the Borrower or the omission of any material fact necessary to be stated therein in order to make such statement not misleading or incomplete, (v) the failure of the Borrower or any Loan Party to perform any obligations required to be performed by the Borrower or any Loan Party under any Loan Document and (vi) the ownership, construction, occupancy, operation, use or maintenance of any of the Properties, in each case whether or not the transactions contemplated hereby are consummated, except (I) to the extent such claim, damage, loss, liability or expense is found to have resulted from any Indemnified Party's gross negligence or willful misconduct. Notwithstanding the foregoing provisions of this Section 8.04(b), the Borrower shall have no obligation to indemnify any Indemnified Party against, or hold it harmless from, (i) any judgment rendered by a court of competent jurisdiction against any Indemnified Party and in favor of the Borrower, or (ii) any legal fees and expenses incurred by the Indemnified Party in defending the action brought by the Borrower which resulted in such judgment in favor of the Borrower, but the foregoing provisions of this sentence shall not diminish or otherwise affect the Borrower's liability for payment of all legal fees and expenses incurred by the Lender in enforcing the Lender's rights and remedies under any of the Loan Documents. (c) In case any action shall be brought against the Lender or any other Indemnified Party in respect of which indemnity may be sought against the Borrower, the Lender or such other Indemnified Party shall promptly notify the Borrower and the Borrower shall assume the defense thereof, including the employment of counsel selected by the Borrower and reasonably satisfactory to the Lender, the payment of all costs and expenses and the right to negotiate and consent to settlement. The failure of the Lender to so notify the Borrower shall not relieve the Borrower of any liability it may have under the foregoing indemnification provisions or from any liability which it may otherwise have to the Lender or 51 47 any of the other Indemnified Parties except to the extent that the Borrower incurs actual expenses or suffers actual monetary loss as a result of such failure to give notice. The Lender shall have the right, at its sole option, to employ separate counsel and as long as Borrower is complying with its indemnification obligations hereunder, the fees and disbursements of such separate counsel shall be paid by Lender. The Borrower shall not be liable for any settlement of any such action effected without its consent, but if settled with the Borrower's consent, or if there be a final judgment for the claimant in any such action, the Borrower agrees to indemnify and save harmless the Lender from and against any loss or liability by reason of such settlement or judgment. (d) If any Loan Party fails to pay when due any costs, expenses or other amounts payable by it under any Loan Document, including, without limitation, fees and expenses of counsel and indemnities, such amount may be paid on behalf of such Loan Party by the Lender, in its sole discretion. (e) The provisions of this Section 8.04 shall survive the repayment or other satisfaction of the Borrower's Obligations hereunder. SECTION 8.05. Merger. This Credit Agreement and the other Loan Documents constitute the sole agreement of the parties with respect to the transactions contemplated herein and therein and supersede all oral negotiations and prior writings with respect thereto. SECTION 8.06. Binding Effect. This Credit Agreement shall become effective when it shall have been executed by the Borrower and the Lender and thereafter shall be binding upon and inure to the benefit of the Borrower, the Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lender. SECTION 8.07 Lender's Discretion. Except as otherwise specified in this Credit Agreement, whenever this Credit Agreement provides that the Lender's consent or approval is required, or that any action may be taken or not taken at the Lender's option, such consent or approval may be given or not, and such action may be taken or not, in the Lender's sole discretion. Any reference in this Credit Agreement to Lender's consent or approval being required shall be deemed to refer to Lender's prior consent or approval given in writing. SECTION 8.08 Participations. (a) The Lender may sell participations in [up to one-third of] its rights and obligations under this Credit Agreement (including, without limitation, of its Loan and the Notes held by it) (the purchaser of any rights and obligations being referred to herein as a "Participant"); provided, however, that (i) the obligations of the Borrower and the Lender under this Credit Agreement and the other Loan Documents shall 52 48 remain unchanged, (ii) the Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower shall continue to deliver all notices, communications and payments solely to the Lender and any such notice, communication or payment shall be valid and effective for all purposes hereunder notwithstanding any such sale of participations. Upon the sale of any participation permitted hereunder, the Borrower shall cooperate with such reasonable requests of the Lender, at the sole expense of the Lender, to sever and split the note issued hereunder among the Lender and any Participants. (b) The Lender may, in connection with any participation or proposed participation pursuant to this Section 8.08, disclose to the Participant or proposed Participant, any information relating to the Borrower furnished to the Lender by or on behalf of the Borrower; provided, however, that, prior to any such disclosure, the Participant or proposed Participant shall agree to preserve the confidentiality of any Confidential Information received by it from the Lender. (c) Notwithstanding any other provision set forth in this Credit Agreement, the Lender may at any time create a security interest in all or any portion of its rights under this Credit Agreement (including, without limitation, the Loan and the Notes held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System. SECTION 8.09. Governing Law. This Credit Agreement and the Note shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 8.10. Execution in Counterparts. This Credit Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Credit Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Credit Agreement. SECTION 8.11. Waiver of Jury Trial. Each of the Borrower and the Lender hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to any of the Loan Documents, the Loan or the actions of the Lender in the negotiation, administration, performance or enforcement thereof. The Borrower acknowledges and agrees that this section is a specific and material aspect of this Credit Agreement and that the Lender would not extend credit to the Borrower if the waiver set forth in this section were not a part of this Credit Agreement. 53 49 SECTION 8.12. Jurisdiction. The Borrower irrevocably appoints each and every owner, partner and/or officer of the Borrower as its attorneys upon whom may be served, by regular or certified mail at the address set forth herein, any notice, process or pleading in any action or proceeding against it arising out of or in connection with this Credit Agreement or any other Loan Document; and the Borrower hereby consents that any action or proceeding against it may be commenced and maintained in any court within the State of New Jersey or the State of New York or in the United States District Court for the District of New Jersey or the United States District Court for the Southern District of New York by service of process on any such owner, partner and/or officer; and the Borrower agrees that the courts of the State of New Jersey and the courts for the State of New York and the courts for the United States District Court for the District of New Jersey and the courts for the United States District Court for the Southern District of New York shall have jurisdiction with respect to the subject matter hereof and the person of the Borrower and all collateral securing the obligations of the Borrower. The Borrower agrees not to assert any defense to any proceeding initiated by the Lender in such court based upon improper venue or inconvenient forum. The foregoing shall not limit, restrict or otherwise affect the right of the Borrower or the Lender to commence any action on this Credit Agreement or any other Loan Document in any other courts having jurisdiction. SECTION 8.13. Continuing Enforcement. If, after receipt of any payment of all or any part of the Borrower's Obligations hereunder, the Lender is required by law in connection with insolvency, fraudulent conveyance, bankruptcy or similar proceedings to surrender such payment then this Credit Agreement and the other Loan Documents shall continue in full force and effect, and the Borrower shall be liable for, and shall indemnify, defend and hold harmless the Lender with respect to the full amount so surrendered. The provisions of this Section 8.13 shall survive the termination of this Credit Agreement and the other Loan Documents and shall remain effective notwithstanding the payment of the Borrower's Obligations hereunder, the cancellation of the Notes or any other Loan Document, the release of any security interest, lien or encumbrance securing the Borrower's Obligations hereunder or any other action which the Lender may have taken in reliance upon its receipt of such payment. Any cancellation, release or other such action by the Lender shall be deemed to have been conditioned upon any payment of the Borrower's Obligations hereunder having become final and irrevocable. 54 IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. ALEXANDER'S, INC. By /s/ Stephen Mann ------------------------------------- Name: Stephen Mann Title: Chairman VORNADO LENDING CORP. By /s/ Joseph Macnow ------------------------------------- Name: Joseph Macnow Title: Vice President 55 PROMISSORY NOTE $45,000,000.00 New York, New York March 15, 1995 FOR VALUE RECEIVED, the undersigned, ALEXANDER'S, INC., a Delaware corporation (herein sometimes referred to as "Maker" or the "undersigned"), hereby promises to pay to the order of VORNADO LENDING CORP. ("LENDER"), the principal sum of Forty-Five Million and 0/100 Dollars ($45,000,000.00), or such lesser amount as shall have been advanced by Lender under the Credit Agreement (as hereinafter defined) (the "LOAN"), in United States Dollars, together with interest including without limitation additional interest payable pursuant to Section 2.04(b) and 6.03 of the Credit Agreement thereon as provided in that certain Credit Agreement, dated as of March 15, 1995, by and between Maker and Lender (the "CREDIT AGREEMENT"). 1. CERTAIN DEFINED TERMS. Terms used herein and not otherwise defined have the meanings ascribed to such terms in the Credit Agreement. 2. PAYMENT OF PRINCIPAL. The entire unpaid principal amount hereof, together with accrued and unpaid interest thereon at the Interest Rate to but excluding March 15, 1998 (the "Maturity Date") and all other amounts payable hereunder shall be due and payable on the Maturity Date. 3. APPLICATION OF PAYMENTS. Except as otherwise specified herein, each payment or prepayment, if any, made under this Note shall be applied to pay late charges, accrued and unpaid interest, principal, escrows (if any), and any other fees, costs and expenses which the undersigned is obligated to pay under this Note, in such order as Lender may elect from time to time in its sole discretion. 4. TENDER OF PAYMENT. All payments on this Note are payable on or before 11:00 a.m. on the due date thereof, to the account of Vornado Realty Trust at National Westminster Bank (Account No. 231313517), or such other account or place as Lender shall designate in writing from time to time and shall be credited on the date the funds become available lawful money of the United States. All sums payable to Lender which are due on a day that is not a Business Day shall be made on the next succeeding Business Day and such extended time shall be included in the computation of interest. For purposes of this paragraph, "Business Day" shall mean any Monday, Tuesday, Wednesday, Thursday or Friday on which banks in New York are not authorized or required by law to be closed. 56 2 5. PREPAYMENT. The principal amount of this Note may not be prepaid except in accordance with and subject to the terms and conditions of the Credit Agreement. 6. SECURITY FOR THE NOTE. 6.1. This Note is executed and delivered in accordance with a commercial transaction described in the Credit Agreement. As security for the payment of the monies owing under this Note, the undersigned has delivered or has caused to be delivered to Lender, inter alia, the Collateral Documents referred to in the Credit Agreement. 6.2. The undersigned hereby grants to Lender a continuing security interest in all property of the undersigned, now or hereafter in the possession of Lender or any Affiliate (as defined below) in any capacity whatsoever, including, but not limited to, any balance or share of any deposit, trust or agency account, as security for the payment of this Note and any other liabilities of the undersigned to Lender, which security interest shall be enforceable and subject to all the provisions of this Note, as if such property were specifically pledged hereunder and the proceeds of such property may be applied at any time and without notice to any of the undersigned's liabilities. 7. ADDITIONAL PAYMENTS; INTEREST; LATE CHARGE; DEFAULT RATE. In addition to the other payments provided for above, the undersigned promises to pay on demand any interest and any other monies required to be paid or advanced by the undersigned or by any other party obligated under any of the Loan Documents (other than the Lender) or paid or advanced on behalf of the undersigned or such party by Lender pursuant to the terms of the Credit Agreement, the Mortgage or any other Loan Document, which obligation shall be continuing and shall survive any judgment entered with respect to this Note or any foreclosure of the Mortgage. This Note shall evidence, and the Mortgage and other Collateral Documents shall secure the payment of, all such sums so advanced or paid. 8. REMEDIES. Upon the occurrence and during the continuance of an Event of Default, Lender may exercise any right, power or remedy permitted by law or as set forth herein or in the Credit Agreement, the Collateral Documents or any other Loan Document including, without limitation, the right to declare the entire unpaid principal amount hereof and all interest accrued hereon, and all other sums secured by the Collateral Documents or any other Loan Document to be, and such principal, interest and other sums shall thereupon become, forthwith due and payable. 9. MISCELLANEOUS. 9.1. REMEDIES CUMULATIVE. The rights and remedies of Lender as provided herein and in any other Loan Document shall be cumulative and concurrent, may be pursued separately, successively or together against the undersigned or the Mortgaged Premises (as 57 3 defined in the Mortgage) or any other collateral security for payment of amounts due hereunder, or any guarantor thereof, at the sole discretion of Lender, may be exercised as often as occasion therefor shall arise, and shall be in addition to any other rights or remedies conferred upon Lender at law or in equity. The failure, at any one or more times, of Lender to exercise any such right or remedy shall in no event be construed as a waiver or release thereof. Lender shall have the right to take any action it deems appropriate without the necessity of resorting to any collateral securing this Note. 9.2. INTEGRATION. This Note and the other Loan Documents constitute the sole agreement of the parties with respect to the transaction contemplated hereby and supersede all oral negotiations and prior writings with respect thereto. 9.3. ATTORNEYS' FEES AND EXPENSES. If Lender retains the services of counsel by reason of a default or an Event of Default hereunder or under any of the other Loan Documents, or on account of any matter involving this Note, or for examination of matters subject to Lender's approval under the Loan Documents, all costs of suit and all reasonable attorneys' fees and such other reasonable expenses so incurred by Lender shall forthwith, on demand, become due and payable and shall be evidenced hereby. 9.4. NO IMPLIED WAIVER. Lender shall not be deemed to have modified or waived any of its rights or remedies hereunder unless such modification or waiver is in writing and signed by Lender, and then only to the extent specifically set forth therein. A waiver in one event shall not be construed as continuing or as a waiver of or bar to such right or remedy on a subsequent event. 9.5. WAIVER. The undersigned waives demand, notice, presentment, protest, demand for payment, notice of dishonor, notice of protest and diligence of collection of this Note. The undersigned consents to any and all extensions of time, renewals, waivers, or modifications that may be granted by Lender with respect to the payment or other provisions of this Note, and to the release of any collateral, with or without substitution. The undersigned agrees that makers, endorsers, guarantors and sureties may be added or released without notice and without affecting the undersigned's liability hereunder. The liability of the undersigned shall not be affected by the failure of Lender to perfect or otherwise obtain or maintain the priority or validity of any security interest in any collateral. The liability of the undersigned shall be absolute and unconditional and without regard to the liability of any other party hereto. 9.6. NO USURIOUS AMOUNTS. Anything herein contained to the contrary notwithstanding, the undersigned does not agree and shall not be obligated to pay interest hereunder at a rate which is in excess of the maximum rate permitted by law. If by the terms of this Note, the undersigned is at any time required to pay interest at a rate in excess of such maximum rate, the rate of interest under this Note shall be deemed to be immediately reduced to such maximum legal rate and the portion of all prior interest payments in excess of such maximum legal rate shall be applied to and shall be deemed to have been payments in reduction of the outstanding principal balance. The undersigned agrees that in determining 58 4 whether or not any interest payable under this Note exceeds the highest rate permitted by law, any non-principal payment, including without limitation, late charges, shall be deemed to the extent permitted by law to be an expense, fee, premium or penalty rather than interest. 9.7. PARTIAL INVALIDITY. The invalidity or unenforceability of any one or more provisions of this Note shall not render any other provision invalid or unenforceable. 9.8. BINDING EFFECT. The covenants, conditions, waivers, releases and agreements contained in this Note shall bind, and the benefits thereof shall inure to, the parties hereto and their respective heirs, executors, administrators, successors and assigns; provided, however, that this Note cannot be assigned by the undersigned without the prior written consent of Lender, and any such assignment or attempted assignment by the undersigned shall be void and of no effect with respect to Lender. 9.9. MODIFICATIONS. This Note may not be supplemented, extended, modified or terminated except by an agreement in writing signed by the party against whom enforcement of any such waiver, change, modification or discharge is sought. 9.10. AFFILIATE. As used herein, "AFFILIATE" shall mean First Fidelity Bancorporation and any of its direct and indirect affiliates and subsidiaries. 9.11. JURISDICTION. The undersigned irrevocably appoints each and every owner, partner and/or officer of the undersigned as its attorneys upon whom may be served, by regular or certified mail at the address set forth below, any notice, process or pleading in any action or proceeding against it arising out of or in connection with this Note or any other Loan Document; and the undersigned hereby consents that any action or proceeding against it be commenced and maintained in any court within the State of New York or the State of New Jersey or in the United States District Court for the Southern District of New York or the United States District Court for the Southern District of New Jersey by service of process on any such owner, partner and/or officer; and the undersigned agrees that the courts of the State of New York and the State of New Jersey and the United States District Court for the Southern District of New York and the United States District Court for the District of New Jersey shall have jurisdiction with respect to the subject matter hereof and the person of the undersigned. The undersigned agrees not to assert any defense to any action or proceeding initiated by Lender in such courts based upon improper venue or inconvenient forum. The foregoing shall not restrict or otherwise affect the right of the Lender to commence any action or proceeding on this Note or any other Loan Document in any other court or courts having jurisdiction. 9.12. NOTICES. All notices and communications relating to this Note shall be in writing and shall be given in the manner provided in the Credit Agreement. 9.13. GOVERNING LAW. This Note shall be governed by and construed in accordance with the substantive laws of the State of New York. 59 5 9.14. WAIVER OF JURY TRIAL. THE UNDERSIGNED AND LENDER AGREE THAT ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR COUNTERCLAIM, BROUGHT BY LENDER OR THE UNDERSIGNED, ON OR WITH RESPECT TO THIS NOTE OR ANY OTHER LOAN DOCUMENT OR THE DEALINGS OF THE PARTIES WITH RESPECT HERETO OR THERETO, SHALL BE TRIED ONLY BY A COURT AND NOT BY A JURY. LENDER AND THE UNDERSIGNED EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING. FURTHER, EACH OF THE UNDERSIGNED AND LENDER WAIVE ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY SPECIAL, EXEMPLARY, PUNITIVE, CONSEQUENTIAL OR OTHER DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES, BUT THE FOREGOING SHALL NOT BE CONSTRUED TO PROHIBIT, RESTRICT OR OTHERWISE IMPAIR THE EXERCISE OF ANY RIGHTS OR REMEDIES EXPRESSLY PROVIDED TO ANY PARTY IN ANY OF THE LOAN DOCUMENTS. THE UNDERSIGNED ACKNOWLEDGES AND AGREES THAT THIS SECTION IS A SPECIFIC AND MATERIAL ASPECT OF THIS NOTE AND THAT LENDER WOULD NOT EXTEND CREDIT TO THE UNDERSIGNED IF THE WAIVERS SET FORTH IN THIS SECTION WERE NOT A PART OF THIS NOTE. 9.15. REGISTERED FORM. This Note may be transferred only through its surrender to Maker for the issuance of a new note or notes to a new holder or holders. IN WITNESS WHEREOF, the undersigned, intending to be legally bound, has duly executed and delivered this Note as of the day and year first above written. ATTEST: ALEXANDER'S, INC. (a Delaware corporation) By: /s/ Stephen Mann ----------------------------------- Name: Stephen Mann Title: Chairman EX-10.ID 4 CREDIT AGREEMENT, FIRST FIDELITY BANK 1 Exhibit 10(i)(D) CREDIT AGREEMENT dated as of March 15, 1995 among ALEXANDER'S, INC., as Borrower and FIRST FIDELITY BANK, NATIONAL ASSOCIATION, as Lender 2 T A B L E O F C O N T E N T S
SECTION PAGE ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.01. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.02. Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 1.03. Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES 2.01. The Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.02. Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.03. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.04. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2.05. Loan Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2.06. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2.07. Payments and Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2.08. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 2.09. Payment of Certain Costs and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 2.10. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE III CONDITIONS OF LENDING 3.01 Conditions Precedent to Funding Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE IV REPRESENTATIONS AND WARRANTIES 4.01. Representations and Warranties of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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SECTION PAGE ARTICLE V COVENANTS 5.01. Affirmative Covenants of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 5.02. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 5.03. Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 5.04. Covenants of the Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 ARTICLE VI SPECIAL PROVISIONS 6.01. Condemnation and Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 6.02. Payment of REIT Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 6.03. Gruss Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 6.04. Release of Lexington Avenue Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 6.05. Exception to Cash Collateral Arrangements for Certain Financings . . . . . . . . . . . . . . . . . . . . . . . . 38 6.06. Construction and Development Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 6.07. Release of Cash Collateral Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 6.08. Optional Release of Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 ARTICLE VII EVENTS OF DEFAULT 7.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 ARTICLE VIII MISCELLANEOUS 8.01. Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 8.02. Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 8.03. No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 8.04. Costs, Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 8.05. Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 8.06. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 8.07. Lender's Discretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 8.08 Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 8.09. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
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SECTION PAGE 8.10. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 8.11. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 8.12. Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 8.13. Continuing Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Schedule I - Disclosed Litigation Schedule II - Properties Schedule III - Surviving Debt Schedule IV - Use of Proceeds Schedule V - Subsidiaries of each Loan Party Schedule VI - Defaults Created by Loan Documents Schedule VII - Required Authorizations Schedule VIII (a) - Environmental Non-Compliance Schedule VIII (b) - Environmental Reports Schedule IX - Real Property Schedule X - Leases Schedule XI - Defaults under Material Agreements Schedule XII - Non-compliance with Laws Schedule XIII - Existing Agreements with Vornado Realty Trust Schedule XIV - Subordination Conditions Exhibit A - Form of Bankruptcy Court Order Exhibit B - Form of Guaranty Exhibit C - Form of Mortgage Exhibit D - Form of Note Exhibit E - Form of Pledge Agreement Exhibit F - Form of Subordination, Nondisturbance and Attornment Agreement Exhibit G - Form of Opinion of Shearman & Sterling Exhibit H - Form of Opinion of Wells, Garafalo, Jaworski & Liebman
5 CREDIT AGREEMENT dated as of March 15, 1995 by and between Alexander's, Inc., a Delaware corporation (the "Borrower"), as borrower, and First Fidelity Bank, National Association (the "Lender"), as lender. (1) WHEREAS, the Borrower has requested that the Lender make a loan in the aggregate principal amount and for purposes herein specified; and (2) WHEREAS, the Lender is willing to make such a loan on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms. As used in this Credit Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term "control" (including the terms "controlling," "controlled by" and "under common control with") of a Person means the possession, direct or indirect, of the power to vote 20% or more of the Voting Stock of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise. "Bankruptcy Court" means the Bankruptcy Court for the Southern District of New York. "Bankruptcy Court Order" means a certified copy of an order of the Bankruptcy Court substantially in the form attached as Exhibit A hereto. "Bankruptcy Plan" means that certain Debtors' First Amended and Restated Joint Plan of Reorganization by the United States Bankruptcy Court, Southern District of New York in a Proceeding for a Reorganization Under Chapter 11, dated July 21, 1993. 6 2 "Bankruptcy Proceeding" means the proceedings for reorganization under Chapter 11 of the United States Bankruptcy Code pending in the Bankruptcy Court entitled In re Alexander's, Inc., et al. (Case Nos. 92B 42704 (CB) through 92B 42720 (CB) inclusive). "Borrower" has the meaning specified in the recital of parties to this Credit Agreement. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday on which banks are not required or authorized to close in New York City. "Capitalized Leases" has the meaning specified in clause (e) of the definition of Debt. "Cash Collateral Account" means an account of the Borrower maintained with the Lender in accordance with the Cash Collateral Agreement. "Cash Collateral Agreement" means the Cash Collateral Agreement, dated of even date herewith, among the Borrower, the Lender and Vornado Lending Corp. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as the same may be amended from time to time. "Closing Date" means the date on which the Loan is advanced. "Code" means the Internal Revenue Code of 1986, as amended. "Collateral" means all "Collateral" referred to in the Collateral Documents and all other property that is subject to any Lien in favor of the Lender. "Collateral Documents" means collectively each Guaranty, Pledge Agreement and Mortgage. "Confidential Information" means information that the Borrower furnishes to the Lender on a confidential basis, but does not include any such information that is or becomes generally available to the public other than as a result of a breach by the Lender of its obligations hereunder or that is or becomes available to the Lender from a source other than the Borrower that is not, to the best of the Lender's knowledge, acting in violation of a confidentiality agreement with the Borrower. 7 3 "Consolidated" refers to the consolidation of accounts in accordance with GAAP. "Debt" of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all Obligations of such Person for the deferred purchase price of property or services (other than trade payables not overdue by more than 60 days incurred in the ordinary course of such Person's business), (c) all Obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all Obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Obligations of such Person as lessee under leases that have been or should be, in accordance with GAAP, recorded as capital leases ("Capitalized Leases"), (f) all Obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities, (g) all Debt of others referred to in clauses (a) through (f) above guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such Debt or to advance or supply funds for the payment or purchase of such Debt, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Debt or to assure the holder of such Debt against loss, (iii) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (iv) otherwise to assure a creditor against loss, and (h) all Debt referred to in clauses (a) through (f) above secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt. "Deeply Subordinate" means subordination by Lender of its rights under the Loan Documents in accordance with a subordination agreement entered into with a third party lender substantially in the form of that certain Subordination and Standstill Agreement attached as Exhibit A to that certain Mortgage and Security Agreement, dated as of February 24, 1995 from the Borrower in favor of Greyrock Capital Group Inc. "Default" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. 8 4 "Default Rate" means (a) prior to the Maturity Date, 4% per annum above the rate per annum required to be paid on the Loan pursuant to Sections 2.04(a) and (b) from and after the Maturity Date, 4% per annum above the rate per annum from time to time in effect determined by adding (i) 7.25% or, provided that the Lender shall have executed the Intercreditor Agreement, 3.25% and (ii) the One-Year Treasury Rate in effect as of the Maturity Date; provided, however, that for purposes of determining the Default Rate, the One-Year Treasury Rate shall be re-determined as of each anniversary of the Maturity Date. "Development Financing" means (i) those financings described in Section 6.06 and (ii) any construction or development financing with respect to a Future Development Property. "Development Properties" means any of the Kings Plaza Store Property and the Paramus Property. "Disclosed Litigation" means the matters described on Schedule I to this Credit Agreement. "Environmental Action" means any administrative, regulatory or judicial action, suit, demand, demand letter, claim, notice of non-compliance or violation, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law or any Environmental Permit including, without limitation, (a) any written claim by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any Environmental Law and (b) any written claim by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment. "Environmental Law" means any applicable federal, state or local law, rule, regulation, order, writ, judgment, injunction, decree, determination or award relating to the environment, health, safety or Hazardous Materials. "Environmental Permit" means any permit, approval, identification number, license or other authorization required under any Environmental Law. "Events of Default" has the meaning specified in Section 7.01. "Existing Debt" means Debt of the Borrower outstanding immediately before the time of execution of this Credit Agreement. 9 5 "Financing Properties" means any of the Flushing Property, the Rego Park I Property, the Third Avenue Property and the Fordham Property. "Flushing Property" means the ground leasehold estate on the Property designated on Schedule II to this Credit Agreement as the "Flushing Property". "Fordham Property" means the Property designated on Schedule II to this Credit Agreement as the "Fordham Road Property". "Future Development Property" means any or all of the Rego Park II Property, the Rego Park III Property and the Lexington Avenue Property, in each case after the Mortgage on such Property has been released by the Lender. "GAAP" has the meaning specified in Section 1.03. "Gruss Agreement" means that certain letter agreement, dated March __, 1995, among the Gruss Partners, the Lender, the Subordinate Lender, the Borrower and the Lex Store General Partner. "Gruss Partners" shall have the meaning assigned to such term in the Gruss Partnership Agreement. "Gruss Partnership Agreement" means that certain Amended and Restated Agreement of Limited Partnership, dated as of August 21, 1986, as last amended by that certain Third Amendment to Amended and Restated Agreement of Limited Partnership for Seven Thirty One Limited Partnership, dated as of October 4, 1993, as modified, for purposes of the provisions of this Credit Agreement, by the Gruss Agreement. "Guarantor" means each of Alexander's of Flushing, Inc., Alexander's of Third Avenue, Inc., Alexander's of Fordham Road, Inc., Alexander's of Rego Park, Inc., Alexander's Department Stores of New Jersey, Inc., Alexander's Department Stores of Brooklyn, Inc., Alexander's of Brooklyn, Inc., Alexander's Department Stores of Lexington Avenue, Inc., Alexander's of Rego Park II, Inc., Alexander's of Rego Park III, Inc. and Admo Realty Corp. and subsequent assignees thereof and any other Person who shall execute a Guaranty after the date hereof. "Guaranty" means the Guaranty, substantially in the form of Exhibit A to this Credit Agreement, as amended from time to time, duly executed as of the Closing Date by each Guarantor. 10 6 "Hazardous Materials" means (a) petroleum or petroleum products, natural or synthetic gas, asbestos in any form that is friable, urea formaldehyde foam insulation and radon gas, (b) any substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants," "contaminants" or "pollutants," or words of similar import, under any Environmental Law and (c) any other substance exposure to which is regulated under any Environmental Law. "Indemnified Party" has the meaning specified in Section 8.04(b). "Intercreditor Agreement" means the Subordination and Intercreditor Agreement, dated of even date herewith, among the Lender, Vornado Realty Trust and Vornado Lending Corp., as modified by the Intercreditor Letter Agreement. "Intercreditor Letter Agreement" means that certain letter agreement, dated of even date herewith, among the Lender and the Subordinate Lender as acknowledged by the Borrower solely with respect to a certain provision thereof. "Interest Payment Date" has the meaning specified in Section 2.04(a). "Interest Rate" has the meaning set forth in Section 2.04(a). "Kings Plaza Mall" means the Kings Plaza Mall property identified as such on the attached Schedule II to this Credit Agreement. "Kings Plaza Store Property" means Property designated on Schedule II to this Credit Agreement as the "Kings Plaza Store Property". "Leasing Agreement" means that certain Real Estate Retention Agreement, dated July 20, 1992, among Vornado, Inc. (as predecessor to Vornado Realty Trust), Keen Realty Consultants and the Borrower as amended from time to time. "Lender's Account" means the account of the Lender maintained at 550 Broad Street, Newark, New Jersey 07102. "Lex Store General Partner" shall mean Alexander's Department Stores of Lexington Avenue, Inc., as general partner of Seven Thirty One Limited Partnership, a New York limited partnership. "Lexington Avenue Partnership" means the partnership created pursuant to the Gruss Partnership Agreement. 11 7 "Lexington Avenue Property" means the Property designated on Schedule II to this Credit Agreement as the "59th Street Property". "Lien" means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property. "Loan" has the meaning specified in Section 2.01. "Loan Documents" means this Credit Agreement, the Note, the Collateral Documents and the Guaranty and any other documents executed by any Loan Party in connection with the Loan. "Loan Obligations" means all amounts due and payable to the Lender under the Loan Documents. "Loan Parties" means the Borrower, each Guarantor, and each Mortgagor. "Major Lease" means any lease at Property other than the Kings Plaza Mall (i) for an entire free-standing building, including without limitation a building to be constructed, (ii) for over 10,000 rentable square feet, or (iii) with an anchor tenant. "Make Whole Premium" means (i) with respect to a prepayment of the Loan made pursuant to Section 2.03 on the second anniversary of the Closing Date, zero; and (ii) with respect to a prepayment of the Loan made pursuant to Section 2.03 on any date other than the second anniversary of the Closing Date, the present value of the stream of monthly interest payments that would be payable on the entire outstanding principal balance of the Loan commencing on the first day of the calendar month following the first day of the Measuring Period and on the first day of each month thereafter and ending with a final payment of all accrued and unpaid interest on the last day of the Measuring Period, determined as if interest were accruing on said outstanding principal balance at the Make Whole Rate. For purposes of determining such present value, the discount rate used in such computation (the "Discount Rate"), shall be the yield on U.S. Treasury securities, adjusted to a constant maturity of a term equal to the Measuring Period, as made available by the Board of Governors of the Federal Reserve System. "Make Whole Rate" means, with respect to any prepayment, a per annum rate, based on a 360 day year for the actual number of days elapsed, determined by subtracting the Discount Rate from the applicable per annum rate of interest on the Loan in effect on the date of prepayment. 12 8 "Management Agreement" means that certain Management Agreement, dated as of February 6, 1995, between the Borrower and Vornado Realty Trust, as amended from time to time. "Material Adverse Change" means any material adverse change in the business, financial condition, operations, performance or properties of the Borrower and the Loan Parties taken as a whole. "Material Adverse Effect" means a material adverse effect on (a) the business, financial condition, operations, performance or properties of the Borrower and the Loan Parties taken as a whole, (b) the rights and remedies of the Lender under any Loan Document or Related Document or (c) the ability of any Loan Party to perform its Obligations under any Loan Document or Related Document to which it is or is to be a party. "Maturity Date" means the third anniversary of the Closing Date. "Measuring Period" means the period commencing on the date of a prepayment and ending on (i) the second anniversary of the Closing Date (if such prepayment is made prior to such second anniversary) or (ii) the Maturity Date (if such prepayment is made subsequent to the second anniversary of the Closing Date). "Mortgage" or "Mortgages" means one or more mortgages, in substantially the form of Exhibit C to this Credit Agreement and covering all or any of the Properties, as the same may be amended from time to time, duly executed by the applicable Mortgagor in favor of Lender, provided that the Mortgage executed by the Lexington Avenue Partnership shall secure only the Note in the amount of $30,000,000. "Mortgagor" means the Borrower, the Lexington Avenue Partnership, Alexander's of Fordham Road, Inc., and Alexander's Department Stores of New Jersey, Inc. or other mortgagor under a Mortgage, provided that any Mortgagor shall cease to be a Mortgagor upon the release or satisfaction of that Mortgagor's mortgage. "Note" or "Notes" means, collectively, the two promissory notes of the Borrower payable to the order of the Lender, in substantially the form of Exhibit D hereto, as amended from time to time, evidencing the indebtedness of the Borrower to the Lender resulting from the Loan made by the Lender. "Obligation" means, with respect to any Person, any obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is 13 9 reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 7.01(f). Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Loan Documents include (a) the obligation to pay principal, interest, charges, expenses, fees, reasonable attorneys' fees and disbursements, indemnities and other amounts payable by any Loan Party under any Loan Document and (b) the obligation to reimburse any amount in respect of any of the foregoing that the Lender, in accordance with the terms of the applicable Loan Document, may elect to pay or advance on behalf of such Loan Party. "One-Year Treasury Rate" means the weekly average yield of United States Treasury securities adjusted to a constant maturity of one year, as made available by the Board of Governors of the Federal Reserve System as of the first Business Day following the date which is ten (10) days prior to the second anniversary of the Closing Date. "Other Taxes" has the meaning specified in Section 2.08(b). "Participant" has the meaning set forth in Section 8.08. "Permitted Encumbrances" has the meaning specified in the Mortgages. "Permitted Liens" means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (a) Liens for taxes, assessments and governmental charges or levies not yet due and payable; (b) Liens created under the Subordinate Loan Documents; (c) Permitted Encumbrances; (d) Liens on any of the Properties now existing or hereafter granted in favor of one or more of the Gruss Partners that are required by the terms of the Gruss Partnership Agreement and that are now subordinated to the liens of the Mortgage and the Collateral Documents or hereafter Deeply Subordinated to the liens of the Mortgage and the Collateral Documents; (e) Liens in favor of one or more Gruss Partners on partnership interests of the Lex Store General Partner or the Borrower required to be granted in connection with the exercise of the 4/7 Redemption or the 3/7 Redemption (each as defined in the Gruss Partnership Agreement) provided that one Unit (as defined in the Gruss Partnership Agreement) held by the Lex Stores General Partner as a general partner shall at all times remain free and clear of any liens except those in favor of the Lender or the Subordinate Lender; (f) with respect to any real property acquired by Borrower or any Subsidiary or Affiliate of Borrower after the date hereof, liens to which such property is subject as of the date of such acquisition, purchase money mortgages or other similar purchase liens and liens in favor of lenders providing construction or development financing in connection with 14 10 such property provided, that all proceeds of such financings are used for construction or development of such property or the retirement of Existing Debt secured by one or more liens on such Property; (g) Liens permitted to be incurred by Borrower pursuant to the terms of this Agreement; (h) Liens in connection with taxes being contested in good faith in compliance with this Credit Agreement; and (i) any renewal or replacement of any Lien securing Surviving Debt or Lien permitted pursuant to the foregoing clauses (a) through (h), inclusive, provided that any such renewal or replacement Lien secures Debt in an amount not in excess of the Debt secured by the Lien so renewed or replaced, provided, however, that notwithstanding the foregoing, the Lender shall not be required to subordinate to any Lien pursuant to this clause (i) except as otherwise provided in this Credit Agreement. "Permitted Related Owner" means any of (a) any Subsidiary now existing or hereafter created all shares of issued and outstanding capital stock of which are owned by the Borrower or (b) a corporation (x) 90% or more of the economic interests of which shall be held by the Borrower through the ownership of shares of preferred and/or common stock of such corporation and (y) 10% or less of the economic interests of which shall be held by an entity reasonably satisfactory to the Lender through the ownership of shares of common and/or preferred stock of such corporation; provided that (i) all of such stock owned by the Borrower has been or is pledged to the Lender under a pledge agreement substantially in the form of the Pledge Agreement and that creates a first priority lien in favor of the Lender and (ii) such Subsidiary or corporation enters into a guaranty substantially in the form of the Guaranty pursuant to which it guarantees the obligations of the Borrower under the Note or Notes. The conditions regarding share ownership set forth in clauses (x) and (y) above may be varied to the extent necessary for any income received by the Borrower to be described in Section 856(c)(2) of the Code or for the Borrower to continue to qualify as a REIT. "Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "Pledge Agreement" means a pledge agreement, in substantially the form of Exhibit D to this Credit Agreement, as amended from time to time, among the Borrower, Alexander's Department Stores of Lexington Avenue, Inc., as pledgors, and the Lender, as pledgee. "Prepayment Date" has the meaning specified in Section 2.03. 15 11 "Properties" means the properties listed on Schedule II to this Credit Agreement (other than the Kings Plaza Mall) and any real property acquired by the Borrower or any Mortgagor after the Closing Date. "Reciprocal Easement Agreement" means that certain Construction, Operation and Reciprocal Easement Agreement, dated February 2, 1970, among Flatbrook Properties Corp., Kings Plaza Shopping Center of Avenue U, Inc. and Kings Plaza Shopping Center of Flatbush Avenue, Inc. as amended from time to time, and relating to the Kings Plaza Property. "Rego Park I Property" means the Property designated on Schedule II to this Credit Agreement (other than the Kings Plaza Mall) as the "Rego Park Property". "Rego Park II Property" means the Property designated on Schedule II to this Credit Agreement (other than the Kings Plaza Mall) as the "Rego Park II Property". "Rego Park III Property" means the Property designated on Schedule II to this Credit Agreement (other than the Kings Plaza Mall) as the "Rego Park III Property". "REIT" means an entity described in Section 856(a) of the Code and entitled to the benefits of Section 857(a) of the Code. "Release Date" has the meaning set forth in the Mortgage encumbering the Lexington Avenue Property. "Release Price" has the meaning assigned to the term "Assignment Price" in the Gruss Agreement. "Secured Debt" means any Debt of the Borrower incurred after the Closing Date that is secured by any of the Properties and/or the Collateral and that otherwise contains terms and conditions satisfactory to the Lender. "Senior Debt" means any Secured Debt that is secured by any of the Properties and/or the Collateral with respect to which the liens have priority over the lien of the Mortgage. "Special Financings" means the financing of any Financing Property or Special Financing Property described in Section 6.05 (a) or (b). "Subordinate Debt" means any Debt of the Borrower that is subordinated to the Obligations of the Borrower under the Loan Documents on, and that otherwise contains, terms and conditions satisfactory to the Lender. 16 12 "Subordinate Lender" means Vornado Lending Corp. or its assignee under the Vornado Credit Agreement. "Subordinate Loan" means the loan made by the Subordinate Lender to the Borrower under the Subordinate Loan Documents. "Subordinate Loan Documents" means the Credit Agreement, dated of even date herewith, between the Borrower and Vornado Lending Corp. or its assignee (the "Vornado Credit Agreement") and the other documents defined as "Loan Documents" therein. "Subordination Conditions" means the conditions set forth on Schedule XIV to this Credit Agreement. "Subsidiary" means, with respect to the Borrower, any corporation of which more than 50% of the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned or controlled by the Borrower, by the Borrower and one or more of its other Subsidiaries or by one or more of the Borrower's other Subsidiaries. "Surviving Debt" means the Debt of the Borrower identified on Schedule III to the Credit Agreement. "Surviving Debt Agreement" means any agreement or instrument setting forth the terms and conditions of any Surviving Debt, as the same may be amended from time to time. "Taxes" has the meaning specified in Section 2.08(a). "Tenancy In Common Agreement" means that certain Agreement, dated February 1, 1970, between Kings Plaza Shopping Center of Avenue U, Inc. and Kings Plaza Shopping Center of Flatbush Avenue, Inc. and pertaining to the Kings Plaza Mall property. "Third Avenue Property" means the Property designated on Schedule II to the Credit Agreement as the "Third Avenue Property". "Voting Stock" means capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of 17 13 contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even though the right so to vote has been suspended by the happening of such a contingency. SECTION 1.02. Computation of Time Periods. In this Credit Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding". SECTION 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01(g) ("GAAP"). ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. The Loan. The Lender agrees, on the terms and conditions hereinafter set forth, to make a single advance to the Borrower on the Closing Date in an amount equal to Thirty Million One Hundred and 00/100 Dollars ($30,000,100.00) (such sum being hereinafter referred to as the "Loan"). Amounts borrowed under this Section 2.01 and repaid or prepaid may not be reborrowed. SECTION 2.02. Repayment. The Borrower shall repay to the Lender the aggregate principal amount of the Loan and all other Obligations owing to the Lender on the third anniversary of the Closing Date or on such earlier date as the Loan Obligations become due as provided in the Loan Documents. SECTION 2.03. Prepayments. The Borrower may, provided that the Borrower shall simultaneously prepay all of its "Obligations" as defined in and in accordance with the Vornado Credit Agreement, upon at least fifteen (15) days' notice to the Lender which must be accompanied by the consent of the Subordinate Lender stating the date (the "Prepayment Date"), and if such notice and consent is given the Borrower shall, prepay the outstanding aggregate principal amount of the Loan, together with (i) accrued interest to the date of such prepayment on the aggregate principal amount prepaid, (ii) all other accrued and unpaid amounts due hereunder or under any other Loan Document, and (iii) the Make Whole Premium. The Borrower agrees that the Make Whole Premium has been freely bargained for to provide the Lender with compensation for the cost of reinvesting the Loan proceeds and for the loss of the contracted return on the Loan, and that such prepayment premium is reasonable and constitutes a means of providing the Lender with a substitute or alternative 18 14 source of cash flow if the Loan or any part thereof is prepaid prior to the second anniversary of the Closing Date or after the second anniversary of the Closing Date but prior to the Maturity Date. Except as otherwise provided herein, the Make Whole Premium shall apply to a voluntary or involuntary prepayment of the Loan, whether by acceleration of the principal balance due upon an Event of Default or otherwise. Anything herein contained or contained in the Cash Collateral Agreement to the contrary notwithstanding, the monies on deposit in the Cash Collateral Account may be used by the Borrower to effect a prepayment of the Loan Obligations and, provided that all of the Loan Obligations shall have been paid, the obligations of the Borrower under the Vornado Credit Agreement. SECTION 2.04. Interest. (a) Ordinary Interest. The Borrower shall pay interest on the unpaid principal amount of the Loan owing to the Lender from the Closing Date, until such principal amount shall be paid in full, payable in arrears on the fifteenth day of each month (each an "Interest Payment Date") at a rate per annum (the "Interest Rate") equal to (i) prior to the second anniversary of the Closing Date, 13.80% or, provided that the Lender shall have executed the Intercreditor Agreement pursuant to which the obligations of the Borrower owing to the Subordinate Lender under the Vornado Credit Agreement shall be subordinated to the Loan Obligations, 9.86% and (ii) on and after the second anniversary of the Closing Date until all amounts owing under this Credit Agreement are paid in full, (A) 7.25% or, provided that the Lender shall have executed the Intercreditor Agreement pursuant to which the obligations of the Borrower owing to the Subordinate Lender under the Vornado Credit Agreement shall be subordinated to the Loan Obligations, 3.25% plus (B) the One-Year Treasury Rate. (b) Additional Interest. The Borrower shall pay additional interest on the Loan, if applicable, pursuant to Section 6.03 of this Credit Agreement. (c) Default Interest. From and after the Maturity Date and upon the occurrence and during the continuance of an Event of Default specified in Section 7.01 of this Credit Agreement, the Borrower shall pay interest on (i) the unpaid principal amount of the Loan and (ii) the amount of any interest, fee or other amount due and payable hereunder which is not paid when due, from the date such amount shall be due until such amount shall be paid in full, in either clause (i) or (ii) payable immediately on the Maturity Date or on demand after such occurrence and during such continuance, at a rate per annum equal at all times to the Default Rate. (d) Late Charges. In the event any payment of principal or any interest is not made within five (5) days after the date on which such amount first becomes due and payable, the Lender may, at its option, require the Borrower to make an additional payment to the Lender as a late charge in an amount equal to 5% of such overdue amount. 19 15 SECTION 2.05. Loan Fee. The Borrower will pay to the Lender, as consideration for the Lender having agreed to advance funds pursuant to this Credit Agreement, on the Closing Date a fee equal to 2.5% or, provided that the Lender shall have executed the Intercreditor Agreement pursuant to which the obligations of the Borrower owing to the lender under the Vornado Credit Agreement shall be subordinated to the Loan Obligations, 1.25% of the Loan. SECTION 2.06. Increased Costs. If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation (other than a law or regulation relating to taxes) or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the amount of capital required by such bank or authority to be maintained by the Lender or any corporation controlling the Lender as a result of or based upon the existence of the Lender's commitment to lend hereunder then, upon demand by the Lender, the Borrower shall pay to the Lender, from time to time as reasonably specified by the Lender, additional amounts sufficient to compensate the Lender in the light of such circumstances, to the extent that the Lender reasonably determines such increase in capital to be allocable to the existence of the Loan. SECTION 2.07. Payments and Computations. (a) The Borrower shall make each payment required to be made hereunder and under the Notes not later than 11:00 A.M., New York City time, on the day when due in U.S. dollars to the Lender at the Lender's Account in immediately available (same day) funds. (b) All computations of interest and fees shall be made by the Lender on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable. Each determination by the Lender of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error. (c) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day or a day when the Lender's principal office in New Jersey is open for business, such payment shall be made on the next succeeding Business Day or day when such office is open for business, and such extension of time shall in such case be included in the computation of payment of interest. The Borrower shall not prepay all or any part of the Loan Obligations on any day other than a Business Day on which the Lender's principal office in Newark, New Jersey is open for business. (d) The Borrower covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury or similar law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Credit 20 16 Agreement, the Notes or the other Loan Documents; and the Borrower (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Lender, but will suffer and permit the execution of every such power as though no such law had been enacted. It is the intent of the Lender and the Borrower in the execution of the Notes, this Credit Agreement and all other instruments now or hereafter securing the Notes or executed in connection therewith or under any other written or oral agreement by the Borrower in favor of the Lender to contract in strict compliance with applicable usury law. In furtherance thereof, the Lender and the Borrower stipulate and agree that none of the terms and provisions contained in the Notes, this Credit Agreement or any other instrument securing the Notes or executed in connection herewith, or in any other written or oral agreement by the Borrower in favor of the Lender, shall ever be construed to create a contract to pay for the use, forbearance or detention of money, interest at a rate in excess of the maximum interest rate permitted to be charged by applicable law. Neither the Borrower nor any guarantors, endorsers or other parties now or hereafter becoming liable for payment of the Notes shall ever be required to pay interest on the Notes or on indebtedness arising under any instrument securing the Notes or executed in connection therewith, or in any other written or oral agreement by the Borrower in favor of the Lender, at a rate in excess of the maximum interest that may be lawfully charged under applicable law, and the provisions of this Section 2.07(d) shall control over all other provisions of the Notes, this Credit Agreement and any other instruments now or hereafter securing the Notes or executed in connection herewith or any other oral or written agreements that may be in apparent conflict herewith. The Lender expressly disavows any intention to charge or collect excessive unearned interest or finance charges in the event the maturity of the Notes is accelerated. If the maturity of the Notes shall be accelerated for any reason or if the principal of the Notes is paid prior to the end of the term of the Notes, and as a result thereof the interest received for the actual period of existence of the Loan exceeds the applicable maximum lawful rate, the Lender shall, at its option, either refund to the Borrower the amount of such excess or credit the amount of such excess against the principal balance of the Notes then outstanding and thereby shall render inapplicable any and all penalties of any kind provided by applicable law as a result of such excess interest. In the event that the Lender shall collect monies and/or any other thing of value that are then or at any time deemed to constitute interest that would increase the effective interest rate on the Notes to a rate in excess of that permitted to be charged by applicable law, an amount equal to interest in excess of the lawful rate shall, upon such determination, at the option of the Lender, be either immediately returned to the Borrower or credited against the principal balance of the Notes then outstanding, in which event any and all penalties of any kind under applicable law as a result of such excess interest shall be inapplicable. By execution of this Credit Agreement, the Borrower acknowledges that it believes the Loan to be non-usurious and agrees that if, at any time, the Borrower should have reason to believe, that the Loan is in fact usurious, it will give the Lender notice of such condition and the Borrower agrees that the Lender shall have ninety 21 17 (90) days after receipt of such notice in which to make appropriate refund or other adjustment in order to correct such condition if in fact such exists. SECTION 2.08. Taxes. (a) Any and all payments by the Borrower hereunder or under the Notes shall be made, in accordance with this Section 2.08, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings other than (i) net income taxes, franchise taxes and similar taxes imposed on the Lender or a Participant, (ii) any tax, assessment or other governmental charge that would not have been imposed but for the failure of the Lender or a purchaser of all or a portion of the Lender's or a Participant's rights and obligations under this Credit Agreement to comply with any certification, identification or other reporting requirements concerning the nationality, residence, identity or connection with the United States of the Lender or a Participant, if compliance is required by statute or by regulation of the United States Treasury Department as a precondition to exemption from such tax, assessment or other governmental charge, (iii) any tax, assessment or other governmental charge that would not have been imposed but for either (a) a sale or other transfer of all or a portion of the Lender's or a Participant's rights and obligations under this Credit Agreement to a Person that is not an entity that is treated as a corporation organized or created under the laws of the United States or of any State for U.S. federal tax purposes or (b) Lender's merger or consolidation with, or transfer of substantially all of its assets to, another entity, and (iv) any tax, assessment or other governmental charge that would not have been imposed but for any present or former connection between the Lender or a Participant (or a shareholder of the Lender or a Participant) and the jurisdiction imposing such tax, assessment or other governmental charge, including, without limitation, the Lender or a Participant's being or having been a citizen or resident of, present or engaged in a trade or business in, such jurisdiction, but excluding a connection arising solely as a result of the Lender's having entered into, received payments under and enforced this Credit Agreement (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under the Notes to the Lender, (i) the sum payable shall be increased as may be necessary so that after making all required deductions for Taxes (including deductions ("Additional Taxes") applicable to additional sums payable pursuant to this sentence), the Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Borrower shall pay any present or future stamp, documentary, excise, property or similar taxes, charges or levies that arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, or otherwise with respect to, this Credit Agreement or the Notes (hereinafter referred to as "Other Taxes"). 22 18 (c) The Borrower shall indemnify the Lender for the full amount of Taxes, and Other Taxes, paid by the Lender and any liability (including penalties, additions to tax, Additional Taxes, interest and expenses) arising therefrom or with respect thereto except as may arise as a result of the Lender's gross negligence or willful misconduct. (d) Within 30 days after the date of any payment of Taxes, the Borrower shall furnish to the Lender, at its address referred to in Section 8.02, the original receipt of payment thereof or a certified copy of such receipt. (e) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 2.08 shall survive the payment in full of principal and interest hereunder and under the Note. SECTION 2.09. Payment of Certain Costs and Expenses. The Borrower shall pay to the Lender within five (5) days after demand therefor all reasonable costs and expenses (including reasonable attorneys' fees and disbursements) incurred by the Lender in connection with (i) the approval of any lease, (ii) the preparation, negotiation and execution of any non-disturbance agreement requested for any lease, (iii) review and approval of any plans, construction contracts or any other documents relating to construction or development of a Property, and (iv) the assignment of any liens of the Mortgages pursuant Section 6.08. SECTION 2.10. Use of Proceeds. The proceeds of the Loan and of the loan under the Vornado Credit Agreement shall be available (and the Borrower agrees that it shall use such proceeds) to refinance certain Existing Debt and to provide working capital for the Borrower and its Subsidiaries, and for other uses, in each case as set forth on Schedule IV. ARTICLE III CONDITIONS OF LENDING SECTION 3.01. Conditions Precedent to Funding Loan. The Loan shall be advanced by the Lender at a closing to be held on March 15, 1995, or such later date as the Borrower and the Lender may otherwise agree, provided that the following conditions shall be conditions precedent to the obligations of the Lender hereunder to make the Loan: (1) the representations and warranties of the Borrower contained in the Loan Documents shall be true and correct as of the Closing Date as if made on such date; 23 19 (2) the Bankruptcy Court Order shall have been entered by the Bankruptcy Court and shall have become final and nonappealable; (3) the Borrower shall deliver to the Lender paid-up mortgagee title commitments in the form of the marked-up commitments which have been heretofore initialled by the respective attorneys for the Borrower and the Lender for identification purposes (the "Form Commitments"), dated the date of the Closing Date, and containing no title exceptions except those shown on the Form Commitments and all conditions stated therein for the omission of title exceptions stated on such mark-ups to be omitted or the issuance of affirmative insurance stated on such mark-ups to be issued shall have been satisfied or waived by the title company under such Form Commitments; (4) Amroc Investments, Inc. shall have executed and delivered to the Borrower a release of certain claims substantially in a form previously provided by the Lender; (5) the Lender shall have received opinions of Shearman & Sterling and Wells, Garofalo, Jaworski & Liebman, counsel and local counsel, respectively, to the Company in substantially the forms as Exhibits G and H, respectively, dated the Closing Date; (6) the closing of the Subordinate Loan shall occur simultaneously with the closing of the Loan and the proceeds thereof shall be applied in accordance with Section 2.10 of this Credit Agreement; and (7) all costs and fees of the Lender (including attorneys' fees and expenses) in connection with the Loan shall have been paid. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: (a) Each Loan Party that is a corporation (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of its incorporation, (ii) is duly qualified and in good standing as a foreign corporation in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so 24 20 qualify or be licensed is not reasonably likely to have a Material Adverse Effect and (iii) has all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted. (b) Each Loan Party that is a partnership (i) is a partnership duly formed and validly existing under the laws of the State of its formation, (ii) is duly qualified in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed is not reasonably likely to have a Material Adverse Effect and (iii) has all requisite partnership power and authority to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted. (c) Set forth on Schedule V hereto is a complete and accurate list of all Subsidiaries of each Loan Party and certain other affiliates, showing as of the date hereof (as to each such Subsidiary) the jurisdiction of its incorporation or formation and, in the case of corporations, the number of shares of each class of capital stock authorized, and the number outstanding, on the date hereof and the percentage of the outstanding shares of each such class owned (directly or indirectly) by such Loan Party and the number of shares covered by all outstanding options, warrants, rights of conversion or purchase and similar rights at the date hereof. All of the outstanding capital stock of all of such corporate Subsidiaries has been validly issued, is fully paid and non-assessable and is owned by such Loan Party or one or more of its Subsidiaries free and clear of all Liens, except those created by the Collateral Documents and the Subordinate Loan Documents. (d) The execution, delivery and performance by each Loan Party of this Credit Agreement, the Notes, each other Loan Document and each Related Document to which it is or is to be a party, and the consummation of the transactions contemplated herein and therein, are within such Loan Party's corporate or partnership powers, have been duly authorized by all necessary corporate or partnership action, and, to each such Loan Party's knowledge, do not (i) contravene such Loan Party's organizational documents, (ii) violate any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award, except where such violation is not reasonably likely to have a Material Adverse Effect and except as set forth on Schedule VI to this Credit Agreement, (iii) except as set forth on Schedule VI to this Credit Agreement conflict with or result in the breach of, or constitute a default under, any contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting any Loan Party, any of its Subsidiaries or any of their properties, except where such conflict, breach or default is not reasonably likely to have a Material Adverse Effect or (iv) except for the Liens created by the 25 21 Collateral Documents and Subordinate Loan Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries. (e) Other than as set forth on Schedule VII to this Credit Agreement, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for (i) the due execution, delivery, recordation, filing or performance by any Loan Party of this Credit Agreement, the Notes, any other Loan Document or any Related Document to which it is or is to be a party, or for the consummation of the transactions contemplated hereby, (ii) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents, (iii) the perfection or maintenance of the Liens created by the Collateral Documents or (iv) the exercise by the Lender of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents. (f) This Credit Agreement has been, and the Notes, each other Loan Document and each Related Document when delivered hereunder will have been, duly executed and delivered by each Loan Party thereto. This Credit Agreement is, and the Notes, each other Loan Document and each Related Document when delivered hereunder will be, the legal, valid and binding obligation of each Loan Party thereto, enforceable against such Loan Party in accordance with its terms. (g) The Consolidated balance sheet of the Borrower and its Subsidiaries as at December 31, 1993, and the related Consolidated statement of income and cash flows of the Borrower and its Subsidiaries for the fiscal year then ended, accompanied by an opinion of Deloitte & Touche, independent public accountants, and the Consolidated balance sheet of the Borrower and its Subsidiaries as at September 30, 1994, and the related Consolidated statement of income and cash flows of the Borrower and its Subsidiaries for the nine months then ended, duly certified by the Chairman of the Board of Borrower or any other officer of Borrower, copies of which have been furnished to the Lender, fairly present, subject, in the case of said balance sheet as at September 30, 1994, and said statement of income and cash flows for the nine months then ended, to year-end audit adjustments, the Consolidated financial condition of the Borrower and its Subsidiaries as at such dates and the Consolidated results of the operations of the Borrower and its Subsidiaries for the periods ended on such dates, all in accordance with generally accepted accounting principles applied on a consistent basis. Since September 30, 1994, there has been no Material Adverse Change. (h) The rent roll for the Properties delivered to the Lender on the Closing Date is true, accurate and complete in all material respects. 26 22 (i) All financial statements delivered by any Loan Party to the Lender, are true, correct and complete in all material respects, fairly represent such Loan Party's financial condition as of the date hereof and thereof, and no information has been omitted that would make the information previously furnished misleading or incorrect in any material respect. (j) To such Loan Party's knowledge, there is no action, suit, investigation, litigation or proceeding affecting any Loan Party not covered by insurance (subject to reasonable deductibles), including any Environmental Action, pending before any court, governmental agency or arbitrator that (i) would be reasonably likely to have a Material Adverse Effect (other than the Disclosed Litigation) or (ii) other than the Bankruptcy Proceeding, purports to affect the legality, validity or enforceability of this Credit Agreement, the Notes, any other Loan Document or any Related Document or the consummation of the transactions contemplated hereby, and there has been no adverse change in the status or financial effect on any Loan Party of the Disclosed Litigation from that described on Schedule I. (k) Except as set forth on Schedule VIII(a) to this Credit Agreement, to such Loan Party's knowledge, the operations and properties of each Loan Party and each of its Subsidiaries comply in all material respects with all Environmental Laws, all necessary Environmental Permits have been obtained and are in effect for the operations and properties of each Loan Party and its Subsidiaries, each Loan Party and its Subsidiaries are in compliance in all material respects with all such Environmental Permits, and no circumstances exist that would be reasonably likely to (i) form the basis of an Environmental Action against any Loan Party or any of its Subsidiaries or any properties described in the Mortgages that could have a Material Adverse Effect or (ii) cause any such property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law. (l) Except as set forth in the environmental reports heretofore delivered to the Lender as set forth on Schedule VIII (b) to this Credit Agreement, none of the Properties is listed or, to the knowledge of any Loan Party, proposed for listing on the National Priorities List under CERCLA or on the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the Environmental Protection Agency or any analogous state list of sites requiring investigation or cleanup or is adjacent to any such property. Except as would not have a Material Adverse Effect, no underground storage tanks, as such term is defined in 42 U.S.C.Section 6991, are located on any Property in violation of applicable Environmental Laws. Except as set forth on the environmental reports heretofore provided to the Lender, the Borrower has no knowledge of any underground storage tank located on any property adjoining any Property. 27 23 (m) Each Loan Party and each of its Subsidiaries has filed or has caused to be filed all income tax returns (Federal, state and local) required to be filed and has paid all taxes shown thereon to be due, together with applicable interest and penalties. The Borrower is not aware of any material unasserted claims for prior taxes against it for which adequate reserves satisfactory to the Lender have not been established. (n) Set forth on Schedule IX to this Credit Agreement is a complete and accurate list of all real property owned by any Mortgagor or any of their Subsidiaries, showing as of the date hereof the street address, county or other relevant jurisdiction, state and record owner thereof. Each Mortgagor, or such Subsidiary, has good, marketable and insurable fee simple title to such real property, free and clear of all Liens, other than those disclosed on such Schedule and Liens created or permitted by the Loan Documents and the Subordinate Loan Documents. (o) Set forth on Schedule X to this Credit Agreement is a complete and accurate list of all leases of real property under which any Mortgagor or any of their Subsidiaries is the lessee, showing as of the date hereof the street address, county or other relevant jurisdiction, state, lessor, lessee, expiration date and annual base rental cost thereof. To such Mortgagor's knowledge, each such lease is the legal, valid and binding obligation of the lessor thereof, enforceable in accordance with its terms. (p) Except as set forth on Schedule XI to this Credit Agreement, no Loan Party is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained herein or in any material agreement or instrument to which it is a party or by which it or any of its properties is bound including, without limitation, the Bankruptcy Plan, except for any such default which shall be cured on the Closing Date with the proceeds of the borrowings made pursuant to this Credit Agreement. (q) As of the date hereof, there has been no Material Adverse Change since the date of the most recent financial statements provided by the Borrower or such Loan Party to the Lender. (r) No Loan Document or other document, certificate or statement furnished to the Lender by or on behalf of the Borrower or any other Loan Party contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein not misleading. It is specifically understood by the Borrower that all such statements, representations and warranties shall be deemed to have been relied upon by the Lender as an inducement to make the Loan to the Borrower. 28 24 (s) That all of the Allowed Class 6 Claims (as defined in the Bankruptcy Plan) held by Amroc Investments, Inc. shall have been paid in full simultaneously with the funding of the Loan under this Credit Agreement. ARTICLE V COVENANTS SECTION 5.01. Affirmative Covenants of the Borrower. So long as any portion of the Loan shall remain unpaid, the Borrower will, unless the Lender shall otherwise consent in writing: (a) Compliance with Laws, Etc. Comply, and cause each Mortgagor to comply, in all respects, with all applicable laws, rules, regulations and orders, except as set forth on Schedule XII to this Credit Agreement or except where such non-compliance is not likely to have a Material Adverse Effect; and keep, and cause each Mortgagor to keep, at all times in full force and effect all authorizations required for the continued use and operation of the properties of the Borrower and of each Mortgagor except as set forth on such Schedule. (b) Payment of Taxes, Etc. Prepare and timely file all federal, state and local tax returns required to be filed by the Borrower and promptly pay and discharge all taxes, assessments and other governmental charges, imposed upon the Borrower or its income or any of its property, and cause each Subsidiary to do so, with respect to real estate taxes, before interest and penalties commence to accrue thereon and, with respect to all other taxes, before they become a Lien upon such property, except for those taxes, assessments and other governmental charges then being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary has maintained adequate reserves and with respect to which (i) there is a not a reasonable likelihood, in the judgment of the Lender, that the Borrower or the Lender shall be subject to any risk of criminal or material civil liability and (ii) there is not a reasonable likelihood, in the judgment of the Lender, that the Borrower's or any of its Subsidiaries' properties or the lien of the Mortgages shall be subject to the risk, respectively, of forfeiture or impairment, provided, however, that all real estate taxes must be paid when due. The Borrower shall submit to the Lender, upon request, an affidavit signed by the Borrower certifying that all federal, state and local income tax returns have been filed to date and all real property taxes, assessments and other governmental charges with respect to the Borrower's or any Subsidiary's properties have been paid to date. 29 25 (c) Compliance with Environmental Laws. Except as set forth on Schedule VIII (a) to this Credit Agreement, comply, and cause each of its Subsidiaries and all lessees and other Persons occupying its properties to comply, in all material respects, with all Environmental Laws and Environmental Permits applicable to its operations and properties, except where the non-compliance with such laws or the absence or non-renewal of such permits is not likely to have a Material Adverse Effect; obtain and renew all Environmental Permits necessary for its operations and properties, except where such non-compliance is not likely to have a Material Adverse Effect; and to the extent and in the timeframe required by applicable Environmental Law conduct, and cause each of its Subsidiaries to conduct, any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all Environmental Laws; provided, however, that neither the Borrower nor any of its Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and with respect to which (i) there is no reasonable likelihood of any risk of criminal or material civil liability to the Lender, (ii) there is no reasonable likelihood that the Borrower's or any of its Subsidiaries' properties or the lien of the Mortgages shall be subject to the risk, respectively, of forfeiture or impairment and (iii) appropriate reserves are being maintained with respect to such circumstances. (d) Maintenance of Insurance. Maintain, and cause each Mortgagor to maintain, insurance with responsible and reputable insurance companies or associations in such amounts (subject to reasonable deductibles) and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates and as otherwise required by the Mortgages, provided, however, that Borrower shall cause the Mortgagors to maintain the insurance required by the Mortgages. (e) Preservation of Corporate or Partnership Existence, Etc. Preserve and maintain, in full force and effect, and cause each Mortgagor and the Lex Store General Partner, where applicable, to preserve and maintain, its corporate or partnership existence, rights (charter and statutory) and franchises and all authorizations and rights material to its business; provided, however, that neither the Borrower nor any Mortgagor shall be required to preserve any right or franchise if the Board of Directors or general partners of the Borrower or such Mortgagor shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Borrower or such Mortgagor, as the case may be, and that the loss thereof is not disadvantageous in any material respect to the Borrower, such Mortgagor or the Lender. 30 26 (f) Inspection Rights. At any reasonable time and from time to time, in each case upon reasonable prior notice and at such times as shall not unreasonably disrupt tenants, permit the Lender or any agents or representatives thereof, to examine, audit and make copies of and abstracts from the records and books of account of, and visit the properties of, the Borrower and any Mortgagor, and to discuss the affairs, finances and accounts of the Borrower and any Mortgagor with any of their officers or directors and with their independent certified public accountants. (g) Keeping of Books. Keep, and cause each Mortgagor and the Lex Store General Partner to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and each such Subsidiary in accordance with generally accepted accounting principles in effect from time to time consistently applied. (h) Compliance with Terms of Lease Agreements. Perform timely all of the obligations, covenants and agreements of the landlord contained in any lease now or hereafter affecting any of the Properties and require the timely performance by the tenant of all of the obligations, covenants and agreements to be performed by such tenant. (i) Approval of Leases. The Borrower shall not, and shall cause each Mortgagor not to, lease space at any of the Properties (other than the Kings Plaza Mall) without the Lender's consent, which consent shall not unreasonably be withheld, provided, however, that no such consent of Lender shall be required for any lease of 10,000 square feet or less unless (i) such lease requires the Lender to provide a non-disturbance agreement to the lessee or (ii) such lease is not on commercially reasonable terms. It is hereby expressly acknowledged and agreed by the Lender that all leases at any Property identified on the certified rent roll delivered to the Lender pursuant to Section 4.01(h) of this Credit Agreement are approved. (j) Transactions with Affiliates. Conduct, and cause each of its Subsidiaries to conduct, all transactions otherwise permitted under the Loan Documents with any of their Affiliates or any Permitted Related Owners on terms that are fair and reasonable and no less favorable to the Borrower or such Subsidiary than it would obtain in a comparable arm's-length transaction with a Person not an Affiliate. Transactions with Vornado Realty Trust and any of its Affiliates pursuant to agreements existing as of the date hereof among Borrower or its Subsidiaries and Vornado Realty Trust and its Affiliates as set forth on Schedule XIII to this Credit Agreement are hereby deemed to be approved. 31 27 (k) Maintenance of Properties. Maintain or cause to be maintained the Properties and all other items constituting Collateral. (l) Compliance with Loan Documents. Comply and cause each Loan Party to comply with all of its covenants set forth in each of the Loan Documents. (m) After Acquired Properties. Subject to the requirements of (i) liens existing at the time of acquisition, (ii) purchase money mortgage liens and (iii) liens in connection with construction or development financing which construction or development financing is reasonably acceptable to the Lender, grant to the Lender a valid mortgage lien, or spread the lien of a Mortgage to encumber, any real property acquired by Borrower or any Subsidiary after the date hereof. (n) Trust Fund. In compliance with Section 13 and Article 3-A of the Lien Law of the State of New York, receive all proceeds of the Loan and hold the right to receive all such proceeds as a trust fund to be used first for the purpose of paying the cost of improvement, and apply all such proceeds first to the payment of the cost of improvement before using any part of such proceeds for any other purpose. (o) Flushing Property. To keep at all times the ground lease covering the Flushing Property in full force and effect. (p) Mandatory Transfer. Cause title to the King's Plaza Store property, the Rego Park I Property, the Rego Park II Property and the Third Avenue Property to be transferred to a Permitted Related Owner not later than April 15, 1995, provided that such date may be extended to be co-terminus with the expiration of the period during which the Borrower may obtain the benefits of mortgage recording tax exemptions pursuant to an order of the Bankruptcy Court. (q) Reserve for Certain Disclosed Litigation. The Borrower shall, on the date hereof, establish, and until the Loan shall be paid in full, maintain a segregated account with First Fidelity in an amount sufficient, at all times, to pay in full any outstanding claim constituting a part of item number 3 in Schedule I to this Credit Agreement; provided, however , the segregated account need never exceed $7,500,000.00. SECTION 5.02. Negative Covenants. So long as any portion of the Loan Obligations shall remain unpaid, the Borrower will not, or permit any other Loan Party to, at any time, without the written consent of the Lender: (a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any Loan Party or Subsidiary to create, incur, assume or suffer to exist, any Lien on or 32 28 with respect to any of its properties of any character (including, without limitation, accounts) whether now owned or hereafter acquired, or sign or file, or permit any Loan Party or Subsidiary to sign or file, under the Uniform Commercial Code of any jurisdiction, a financing statement that names the Borrower or any Mortgagor or Subsidiary as debtor, or sign, or permit any Loan Party or Subsidiary to sign, any security agreement authorizing any secured party thereunder to file such financing statement, or assign, or permit any Mortgagor to assign, any accounts or other right to receive income, excluding, however, from the operation of the foregoing restrictions the following: (i) Liens created by the Loan Documents or the Subordinate Loan Documents; (ii) Permitted Liens; (iii) Special Liens (as defined in Section 5.02 (b); (iv) Liens permitted pursuant to Development Financings; (v) Liens in connection with any Special Financings; and (vi) Liens otherwise consented to by the Lender in writing. (b) Debt. Create, incur, assume or suffer to exist, or permit any Mortgagor or Subsidiary to create, incur, assume or suffer to exist, any Debt other than: (i) Debt under the Loan Documents or the Subordinate Loan Documents, (ii) Debt permitted pursuant to Development Financings; (iii) Surviving Debt; (iv) Subordinate Debt or subordinated indebtedness permitted pursuant to Section 5.02(f) or approved by the Lender; (v) Debt secured by Permitted Liens; and (vi) Debt incurred in connection with Special Financings; provided, however, that the Borrower shall be permitted to enter into any agreement or agreements contemplating the incurrence by the Borrower of Debt in an aggregate 33 29 amount not to exceed $150,000,000 in connection with the construction or development of all or any Financing Property or Development Property, provided that (i) the lien of the lender under any such agreement (each a " Special Lien") shall be Deeply Subordinated to the liens of the Mortgages and (ii) no funds shall be advanced in respect of any such Debt until the requirements set forth in this Credit Agreement with respect to such Financing Property or Development Financing as set forth, shall have been satisfied by the Borrower or waived by the Lender and the Subordinate Lender, at which time the Liens of the Lender shall be subordinated or released in accordance with the terms of this Credit Agreement, (c) Mergers, Etc. Merge into or consolidate with any Person or permit any Person to merge into it, or permit any Loan Party or Subsidiary to do so, except that (i) any Loan Party may merge into or consolidate with any other Loan Party; provided that, in the case of any such consolidation, the Person formed by such consolidation shall be a wholly owned Subsidiary of the Borrower; provided further, that the Borrower shall pledge and grant to Lender a first priority perfected lien in and security interest on the capital stock of such Subsidiary owned by the Borrower to the Lender as further collateral for the Loan Obligations, and (ii) any Subsidiary or Permitted Related Owner that is not a Loan Party may merge into or consolidate with any Subsidiary or Permitted Related Owner which is not a Loan Party. (d) Investments in Other Persons. Purchase or acquire the obligations or stock of, or any other interest in, any Person (other than a Permitted Related Owner), except such investments as are made with surplus cash and do not expose the Borrower to any risk of loss in excess of the amount of cash invested. (e) Loans, etc. Make, or permit any Mortgagor to make, loans to any Person, other than to the Borrower, a wholly owned Subsidiary or a Permitted Related Owner, provided that loans may be made to the Lexington Avenue Partnership or the Lex Store General Partner as may be necessary to satisfy the obligations under agreements in effect as of the date hereof of the Borrower, the Lexington Avenue Partnership or the Lex Store General Partner or to provide funds necessary to operate the business of the Lexington Avenue Partnership and the Lex Store General Partner. (f) Dividends, Etc. Declare or pay any dividends, purchase, redeem, retire, defease or otherwise acquire for value any of its capital stock or any warrants, rights or options to acquire such capital stock, now or hereafter outstanding (except that Permitted Related Owners may pay dividends to the Borrower), return any capital to its stockholders as such, make any distribution of assets, capital stock, warrants, rights, options, obligations or securities to its stockholders as such or issue or sell any capital stock or any warrants, rights or options to acquire such capital stock (except 34 30 for capital stock issued by Permitted Related Owners), or permit any of its Subsidiaries to purchase, redeem, retire, defease or otherwise acquire for value any capital stock of the Borrower or any warrants, rights or options to acquire such capital stock or to issue or sell any capital stock or any warrants, rights or options to acquire such capital stock; provided, however, that nothing contained in this paragraph shall prohibit Borrower from (i) paying a dividend or making a distribution in the form of, or from the proceeds of an issuance of, subordinated indebtedness or otherwise (including, without limitation, payment in cash) as may reasonably be required, based upon the advice of counsel, to enable the Borrower to qualify as a REIT under the Code or (ii) paying a dividend or making a distribution from the proceeds of the issuance by the Borrower of equity securities. (g) Change in Nature of Business. Make, or permit any Mortgagor to make, any material change in the nature of its business as carried on at the date hereof and will not, nor permit any Mortgagor to, remove, demolish, materially alter, discontinue the use of, sell, transfer, assign, hypothecate, pledge or otherwise dispose of, except as permitted hereunder and for sales, transfers, assignments and pledges to Subsidiaries or Permitted Related Owners, any part of its assets necessary for the continuance of its business, as presently conducted and as presently contemplated, except (i) in the normal course of business, (ii) as required under the Gruss Partnership Agreement but only to the extent expressly permitted herein, and (iii) in connection with Development Financings or Special Financings; notwithstanding the foregoing, no Mortgagor shall transfer any Property except to a Permitted Related Owner. (h) Charter Amendments. Amend, or permit any Mortgagor or Subsidiary to amend, its certificate of incorporation or bylaws. (i) Accounting Changes. Make or permit, or permit any Mortgagor to make or permit, any change in accounting policies or reporting practices, except as required by generally accepted accounting principles. (j) Amendment, Etc. of Related Documents. Except as may be required in order for the Borrower to qualify as a REIT under the Code, with respect to (i) the Management Agreement, (ii) the Leasing Agreement, (iii) the Tenancy in Common Agreement, (iv) the Reciprocal Easement Agreement, (v) the Subordinate Loan Documents, (vi) Major Leases and (vii) the Gruss Partnership Agreement, cancel or terminate or consent to or accept any cancellation or termination thereof, amend, modify or change in any material manner any term or condition thereof, waive any material default under or any material breach of any material term or condition thereof, agree in any manner to any other amendment, modification or change of any material term or condition thereof or take any other action in connection therewith 35 31 that would impair the value of the interest or rights of the Borrower thereunder or that would impair the rights or interests of the Lender, or permit any Mortgagor to do any of the foregoing. (k) Future Speculative Development. Develop, or permit any Mortgagor or Subsidiary to develop, any undeveloped real property owned by the Borrower or such Mortgagor in the absence of executed leases approved by Lender for more than 50% of the projected leasable space on such property. (l) Negative Pledge. Except in connection with (i) Existing Debt, (ii) Secured Debt permitted hereby, (iii) Subordinated Debt permitted hereby, (iv) Permitted Liens, (v) Development Financing permitted hereby, (vi) any Special Financing permitted hereby, and (vii) as required under the Gruss Partnership Agreement but only to the extent expressly permitted herein, the Borrower shall not enter into any covenant or other agreement that prevents it or could prevent it in the future from pledging, granting a security interest in, mortgaging, assigning, encumbering or otherwise creating a lien on any of its property (whether real or personal, tangible or intangible, and now owned or hereafter acquired) in favor of the Lender, or that would be breached if the Borrower were to pledge, grant a security interest in, mortgage, assign, encumber or otherwise create a lien on any of its property (whether real or personal, tangible or intangible, and now owned or hereafter acquired) in favor of the Lender. (m) Future Property Acquisition. Except as permitted in Section 6.01, acquire, or permit any Mortgagor or Subsidiary to acquire, any real property without the consent of the Lender and without executing and delivering or causing such Mortgagor or Subsidiary to execute and deliver any instrument the Lender may deem necessary or desirable to effectuate such real property becoming additional security for the Loan in accordance with Section 5.01(m). (n) Payments Under Subordinate Loan Documents. Make any payment in respect of any Subordinate Debt (i) at any time while any amount shall be due and owing under any of the Loan Documents or (ii) after the Loan shall have matured or the Lender shall have accelerated payment of the Loan pursuant to Section 7.01 or prepay any Subordinate Debt while at any time that any Loan Obligation remains unpaid other than as provided in Section 5.02(r). (o) Lex Store General Partner. Cause or permit the Lex Store General Partner to withdraw as sole general partner of the Gruss Partnership, to be other than the sole general partner or to designate a general partner under the Gruss Partnership Agreement other than the Lex Store General Partner. 36 32 (p) Transfer of Properties. Transfer title to any of the Properties except to (i) any Mortgagor, (ii) any Person described in clause (a) of the definition of Permitted Related Owner or (iii) any Person described in clause (b) of the definition of Permitted Related Owner, provided that, in the case of clause (iii), a receiver of a Property sought to be transferred to such Permitted Related Owner has proposed to enter into a lease at such Property or take any other action which would materially adversely affect the Borrower's qualification as a REIT and the Borrower has given ten (10) days' notice to the Lender of its intention to transfer such Property to such Permitted Related Owner. (q) Issuance of Shares. Issue, or permit any Subsidiary (other than any Permitted Related Owner) to issue any shares of stock that are not issued as of the date hereof, except that notwithstanding this paragraph the Borrower shall be permitted to issue shares of stock at any time so long as, taking into account such issuance, Vornado Realty Trust and its Affiliates (including for this purpose Interstate Properties) shall continue to own in the aggregate not less than 20% of the outstanding shares of common stock of the Borrower, and provided further, with respect to the Borrower only, that an automatic exchange involving Excess Stock as defined in and pursuant to the Borrower's Amended and Restated Certificate of Incorporation shall not be treated as an issuance of shares for purposes of this paragraph. (r) Prepayment of Gruss Mortgage. Prepay the 4/7 Redemption Note or the 3/7 Redemption Note (each as defined in the Gruss Partnership Agreement) prior to the release of the Mortgage relating to the Lexington Avenue Property. (s) Lexington Avenue Partnership. Permit the Lex Store General Partner to pledge its entire general partnership interest in the Lexington Avenue Partnership. SECTION 5.03. Reporting Requirements. So long as any portion of the Loan shall remain unpaid, the Borrower will, unless the Lender shall otherwise consent in writing, furnish to the Lender: (a) Quarterly Financials. (i) As soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Borrower, Borrower's Quarterly Report on Form 10-Q for the preceding quarter as filed with the Securities and Exchange Commission (the "Commission"), containing unaudited financial statements as required by law; and (ii) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year, an unaudited consolidating balance sheet of the Borrower and its Subsidiaries as of the end of such quarter and consolidating statement of operations and cash flows of the Borrower and its Subsidiaries for the period commencing at the end of the 37 33 previous fiscal year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding fiscal year, all in reasonable detail and represented to be true and correct (subject to year-end audit adjustments) by the Chairman of the Board of the Borrower or other officer of the Borrower. (b) Annual Financials. (i) As soon as available and in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the Borrower's Annual Report on Form 10-K for such fiscal year as filed with the Commission; and (ii) as soon as available and in any event within 120 days after the end of each fiscal year, an unaudited consolidating balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal year and an unaudited consolidating statement of operations and cash flows of the Borrower and its Subsidiaries for such fiscal year, represented to be true and correct by the Chairman of the Board of the Borrower or other officer of the Borrower. (c) Litigation. Promptly after the commencement thereof, notice of all actions, suits, investigations, litigation and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting any Loan Party of the type described in Section 4.01(j), and promptly after the occurrence thereof, notice of any material adverse change in the status of the Disclosed Litigation from that described on Schedule I to this Credit Agreement. (d) Environmental Conditions. Promptly after the occurrence thereof, notice of any condition or occurrence on any Property that results in a material noncompliance by any Loan Party or any of its Subsidiaries with any Environmental Law or Environmental Permit or would be reasonably likely to (i) form the basis of an Environmental Action against any Loan Party or any of its Subsidiaries or any Property that could have a Material Adverse Effect or (ii) cause any Property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law. (e) Financial Data for Each Property Other Than the Kings Plaza Mall Property. Not later than 120 days after the end of each fiscal year, and not later than sixty (60) days after the end of each fiscal quarter, financial data in form reasonably satisfactory to the Lender relating to the operation of each of the Properties, including, without limitation, certified rent roll and summary of leases represented as true and correct by the Chairman of the Board of the Borrower or other officer of the Borrower. 38 34 (f) Financial Data for Kings Plaza Mall. Notwithstanding anything to the contrary contained herein, the following shall be the financial reporting requirements for the Kings Plaza Mall: (A) within 120 days after the end of each fiscal year of the Kings Plaza Mall, annual financial statements of the Kings Plaza Mall, including a balance sheet and a statement of operations and cash flows then audited by Deloitte & Touche or another independent certified public accountant acceptable to the Lender, and a rent roll and summary of leases prepared by the manager of the Kings Plaza Mall and represented as true and correct by such manager,and (B) no later than 45 days after the end of each fiscal quarter, a quarterly operating statement with respect to the Kings Plaza Mall prepared by the manager of the Kings Plaza Mall and represented as true and correct by such manager. (g) Budget. To the extent required and received under the Management Agreement, not less than 30 days prior to the commencement of each fiscal year, an annual operating budget relating to the Properties for the upcoming fiscal year including, without limitation, the projected gross rental income and projected operating expenses on a line item basis, provided, however, nothing herein contained shall be deemed to require the Borrower to comply with such budgets. (h) Other Information. Such other information respecting the business, financial condition, operations, performance or properties of any Loan Party as the Lender may from time to time reasonably request. SECTION 5.04. Covenants of the Lender. (a) The Lender hereby covenants to Borrower that it will not exercise any rights, including rights exercisable upon the occurrence of an Event of Default, that it has arising from or as a result of this Credit Agreement or any related agreement, including, without limitation, the Pledge Agreement between the Borrower and the Lender, to cause Borrower or any Subsidiary of Borrower or any Permitted Related Owner to (i) enter into a lease or lease amendment that either (a) provides for payments that are based, directly or indirectly (including through sub-leasing), upon the net "income or profits" of any person (as defined in Section 856(d) (2) of the Code) or (b) requires Borrower or any Subsidiary of Borrower or any Permitted Related Owner to provide a service to a tenant, other than through an independent contractor (as defined in Section 856(d)(2) of the Code), where the provision of such service by Borrower or any of its Subsidiaries or any Permitted Related Owner would cause rents received by the Borrower or any of its Subsidiaries to fail to be "rents from real property" under Section 856(d)(2) of the Code, (ii) engage in a new line of business which (a) is unrelated to the development or leasing of real property and (b) would create a substantial risk, as a result of its generation of income not described in Section 856(c)(2) or (c)(3) of the Code, that Borrower would fail to qualify as a REIT under the Code or (iii) acquire an asset that would cause Borrower to fail to satisfy the asset test of Section 856(c)(5) of the Code; provided, however, that the foregoing covenants of this Section 5.04(a) shall not preclude the Lender 39 35 from collecting amounts due to the Lender under this Credit Agreement or from foreclosing on any property securing such indebtedness or (y) be deemed to have been breached or violated by the Lender as a result of any act or action (including, without limitation, the execution of a lease) made, done or taken by any receiver for any property of any Loan Party (including a receiver appointed at the request of the Lender) unless a motion to compel such act or action was made by the Lender to the court which appointed such receiver. (b) The Lender agrees to use reasonable efforts to preserve the confidentiality of any Confidential Information received by it from the Borrower except as required by law or court order. (c) In the event that Borrower proposes to incur Secured Debt in an amount equal to at least $52,500,000 in connection with the construction, development or redevelopment of the Rego Park I Property, then within 15 days after the Lender shall have received written request from the Borrower of such proposed Secured Debt, the Lender will deliver an agreement (a "Deep Subordination Agreement") executed by Lender to the prospective holder of such proposed Secured Debt (herein called the "Prospective New Lender"), provided that if such Deep Subordination Agreement is unacceptable to the Prospective New Lender, and the Lender and the Prospective New Lender do not execute a Deep Subordination Agreement with such modifications thereto acceptable to the Prospective New Lender and deliver same to Borrower within ten (10) days after the expiration of such 15-day period, then upon at least five (5) Business Days, prior notice and request given by Borrower to Lender, the Lender will execute and deliver to Borrower an instrument releasing the lien of the Mortgages relating to the Rego Park I Property, provided that no Default or Event of Default is then continuing; and provided further that the Lender's obligation to deliver a Deep Subordination Agreement in accordance with this paragraph shall be subject to the satisfaction by the Borrower or the waiver in writing by the Lender of the Subordination Conditions simultaneously with the incurrence of such Secured Debt. (d) The Lender shall execute and deliver a non-disturbance agreement substantially in the form of Exhibit F (with such changes as the Lender may reasonably request) in connection with any lease approved by the Lender pursuant to Section 5.01(i) where the tenant is a nationally recognized credit-worthy retail tenant, provided that the tenant under such Lease shall require such non-disturbance agreement. (e) At the direction of the Borrower, the Lender hereby agrees to invest the monies on deposit in the Cash Collateral Account only in U.S. Treasury securities, commercial paper rated A1/P1 by any nationally recognized rating agency, money market instruments and corporate debt instruments rated AAA or the equivalent by any nationally recognized rating agency, provided that the maturity of any such securities shall not be a date after the Maturity Date. 40 36 ARTICLE VI SPECIAL PROVISIONS SECTION 6.01. Condemnation and Casualty. (a) In the event of any condemnation or casualty of any Property in part or in the entirety, the proceeds of such condemnation or casualty, to the extent not retained by the holder of any mortgage securing Senior Debt on such Property, applied as required pursuant to any Major Lease approved by Lender at the Property or applied by such mortgagee or in accordance with such Major Lease either to restore the improvements on such Property or to reduce such Senior Debt, shall be immediately deposited by Borrower in the Cash Collateral Account (such proceeds of condemnation so deposited being herein called "Condemnation Proceeds"; such proceeds of casualty so deposited being herein called "Casualty Proceeds"; and Condemnation Proceeds and/or Casualty Proceeds being herein called "Proceeds") and shall constitute additional collateral for the Loan Obligations in accordance with the Cash Collateral Agreement. (b) Provided that no Default or Event of Default shall have occurred and be continuing, the Borrower shall be entitled to withdraw any Condemnation Proceeds from the Cash Collateral Account for the purpose of acquiring additional real estate assets with the consent of the Lender, which consent shall not be unreasonably withheld, provided that (i) Borrower shall have delivered to Lender an appraisal for such real estate (x) for an amount at least equal to the amount of the Condemnation Proceeds sought to be withdrawn by the Borrower to purchase such real estate and (y) issued by an appraisal company and in form and substance reasonably satisfactory to the Lender; (ii) the Borrower shall have delivered to Lender environmental, engineering and such other studies, reports, documents, title reports, violation searches and other information relating to such real estate as would be generally required by the Lender in accordance with good institutional lending practices, all of which studies, reports, documents and other information shall be in form and substance reasonably satisfactory to the Lender; (iii) the Lender shall be granted a first lien mortgage on said real estate to further secure the Guaranties (the "Additional Mortgage"); (iv) the Borrower shall have delivered to Lender a paid-up mortgage title insurance policy in favor of Lender, insuring the Additional Mortgage as a first priority mortgage on such real estate, subject to no encumbrances or other title exceptions except those title exceptions which Lender reasonably determines are acceptable based on good institutional lending practices; and (v) the Borrower shall have paid all reasonable costs and expenses of the Lender (including reasonable attorneys' fees and expenses) incurred by the Lender in connection with the review of any of the foregoing conditions. (c) The Borrower shall also have the right to withdraw the Condemnation 41 37 Proceeds remaining in the Cash Collateral Account to pay for the cost of constructing improvements on any Property covered by any Mortgage, and the Borrower shall have the right to withdraw any Casualty Proceeds in the Cash Collateral Account to pay for the repair and restoration of improvements whose damage or destruction generated such Casualty Proceeds, provided that, in all cases, (i) no Default or Event of Default shall be continuing, (ii) the Lender shall have approved the plans and specifications for the construction of such improvements as well as the general contract and other major contracts to be entered into by the Borrower in connection with such construction, which approval will not unreasonably be withheld; (iii) the Lender shall have received such certification and assurances as Lender shall reasonably request to assure it that the cost of constructing the improvements as shown on the plans approved by Lender does not exceed the amount of the Proceeds sought to be withdrawn by the Borrower to pay for such improvements; and (iv) the Lender may impose such further conditions and restrictions upon the disbursement of such Proceeds as the Lender deems necessary or desirable, consistent with prudent institutional construction lending practices, to assure the completion of the proposed improvements subject to no liens or encumbrances (except Permitted Liens) and in accordance with the aforesaid approved plans and all applicable laws. SECTION 6.02. Payment of REIT Dividends. In the event that the Borrower shall determine, upon the advice of counsel then generally used by Borrower for tax advice, that it shall be required to pay a dividend or make a distribution to stockholders in order to preserve its qualification as a REIT, whether or not the Proceeds shall have been applied as contemplated pursuant to Section 6.01(b) or (c), then, anything herein to the contrary notwithstanding, but provided that no Default or Event of Default shall have occurred and be continuing, the Borrower is hereby expressly permitted (i) to incur unsecured subordinated indebtedness for the purpose of paying such dividend or making such distribution or to pay such dividend or make such distribution in the form of subordinated indebtedness and/or (ii) to withdraw Proceeds from the Cash Collateral Account to pay such dividend or make such distribution, provided that the Subordinate Lender shall simultaneously therewith close the purchase of a portion of the Loan Obligations from Lender as provided in and in accordance with the Intercreditor Letter Agreement. SECTION 6.03. Gruss Arrangements. (a) In the event that the Release Price is paid to the Lender on a date on which the Loan, if prepaid in its entirety on such date pursuant to Section 2.03, would require the payment of a Make Whole Premium, then a one-time payment of additional interest shall accrue on the Loan in an amount equal to the Make Whole Premium, if any, that would be due and payable pursuant to Section 2.03 if the Loan were prepaid on such date (assuming for purposes of this Section 6.03 that Section 2.03 permitted partial prepayments), and if the Make Whole Premium were calculated on the maximum principal amount of the Loan that could be paid out of the Release Price after deducting therefrom all interest, default interest and other sums (including the additional 42 38 interest payable pursuant to this Section 6.03), other than principal, then due and payable on the Loan. (b) Notwithstanding any provision of this Credit Agreement to the contrary, nothing contained herein shall prohibit the Borrower from (i) making or permitting to be made distributions (including Guaranteed Distributions, as defined in the Gruss Partnership Agreement) required to be made under the Gruss Partnership Agreement, (ii) making or permitting to be made any payments which are required to be made under the Note Guaranty or the Distributions Guaranty (each as defined in the Gruss Partnership Agreement), (iii) providing any Collateral to the Gruss Partners which is required to be provided to the Gruss Partners to meet a Debt Coverage Requirement (as defined in the Gruss Partnership Agreement) pursuant to the Gruss Partnership Agreement (provided that (A) the Borrower shall not grant or permit to be granted to the Gruss Partners any Lien on the last Unit (as defined in the Gruss Partnership Agreement) held by the Lex Store General Partner as general partner and (B) Liens on any of the Properties granted to the Gruss Partners shall be Deeply Subordinated to the liens of the Mortgage and the Collateral Documents, as applicable), (iv) making or permitting to be made any payments as they become due under the 4/7 Redemption Note or the 3/7 Redemption Note (each as defined in the Gruss Partnership Agreement) or (v) otherwise make any payments required to be made by the ALX Partners (as defined in the Gruss Partnership Agreement) or the Lexington Avenue Partnership under the Gruss Partnership Agreement. SECTION 6.04. Release of Lexington Avenue Property. The Borrower shall have the right, in connection with the development of the Lexington Avenue Property, at its election upon fifteen (15) days' notice to the Lender and provided that there shall not have been an entry of a foreclosure order or judgment with respect to the Mortgage relating to the Lexington Avenue Property, to deposit an amount in cash equal to the Release Price into the Cash Collateral Account, whereupon the Lender shall agree to a full release of the lien of the Mortgage relating to the Lexington Avenue Property. SECTION 6.05. Exception to Cash Collateral Arrangements for Certain Financings. (a) In the event that the Borrower shall notify the Lender of a proposed financing of one or more of the Financing Properties (but in any event including the Fordham Property) which is proposed to generate gross proceeds (the "Financing Properties Gross Proceeds") equal to or greater than $110,000,000 (the calculation of which shall be represented by the Chairman of the Board or other officer of the Borrower), then provided that no Default or Event of Default shall have occurred and be continuing, the Lender shall permit the Borrower to effect such financing and, upon at least ten (10) days' prior notice by the Borrower to the Lender of the Borrower's request that the Lender release the lien of the Mortgages on all of the Financing Properties, the Lender, subject to the last clause of Section 6.06(b), upon receipt by the Lender of such documents and other information reasonably requested by the Lender evidencing the proposed financing and the receipt by the Borrower 43 39 of the Financing Gross Proceeds and upon the deposit of the amount, if any, of such Financing Properties Gross Proceeds (net of all expenses) in excess of $150,000,000 into the Cash Collateral Account as additional collateral for the Loan Obligations in accordance with the Cash Collateral Agreement, shall release the lien of the Mortgages on all of the Financing Properties. (b) In the event that the Borrower shall notify the Lender of a proposed financing of all or any of the Financing Properties excluding the Fordham Property (the "Special Financing Properties") which is proposed to generate gross proceeds (the "Special Financing Gross Proceeds") equal to or greater than $80,000,000 (the calculation of which shall be certified by the Chairman of the Board or other officer of the Borrower), then provided that no Default or Event of Default shall have occurred and be continuing, the Lender shall permit the Borrower to effect such financing and, upon at least ten (10) days' prior notice by the Borrower to the Lender of the Borrower's request that Lender release the lien of the Mortgages on all of the Special Financing Properties, the Lender, subject to the last clause of Section 6.06(b), upon receipt by the Lender of such documents and other information reasonably requested by the Lender evidencing the proposed financing and receipt by the Borrower of the Special Financing Gross Proceeds and upon the deposit of the amount, if any, of such Special Financing Properties Gross Proceeds (net of all expenses) in excess of $120,000,000 to the Cash Collateral Account as additional collateral for the Loan Obligations in accordance with the Cash Collateral Agreement, shall release the lien of the Mortgages on all of the Special Financing Properties. (c) Provided that the Borrower shall deposit into the Cash Collateral Account as additional collateral for the Loan Obligations in accordance with the Cash Collateral Agreement an amount equal to the Rego Release Amount, then, provided that no Default or Event of Default shall have occurred and be continuing, the Lender shall release the lien of the Mortgages on the Rego Park II Property and the Rego Park III Property. The "Rego Release Amount" shall mean $5,000,000 or, in the event the lien of the Mortgages on any of the Financing Properties shall have been released pursuant to Section 6.05(a) or 6.05(b), $7,500,000, provided, however, that if, subsequent to the deposit into the Cash Collateral Account of a Rego Release Amount equal to $5,000,000 in accordance with this Section 6.05(c), the lien of the Mortgages on any of the Financing Properties shall be released pursuant to Section 6.05(a) or 6.05(b), the Borrower shall, simultaneous with any such release of the Financing Properties, deposit an additional $2,500,000 into the Cash Collateral Account; provided, however, that Lender shall not be obligated to release the Rego Park II Property and the Rego Park III Property pursuant to this paragraph if the separation of the ownership of the Rego Park I Property from the Rego Park II Property and the Rego Park III Property cause the Rego Park I Property to be in violation of any zoning, parking or other land use law or regulation. 44 40 SECTION 6.06. Construction and Development Financing. (a) Provided that no Default or Event of Default shall have occurred and be continuing, and provided that the Subordination Conditions shall have been satisfied, the Lender shall subordinate the lien of the Mortgages relating to each Development Property to any construction or development loan or loans made to Borrower with respect to such Development Property by an institutional lender, in the principal amount equal to C/D Subordination Amount or any greater amount to the extent that cash equal to the excess of such greater amount over the C/D Subordination Amount is deposited into the Cash Collateral Account. "C/D Subordination Amount" means, with respect to the Kings Plaza Store Property, $10,000,000, and with respect to the Paramus Property, $30,000,000 (which sum shall be reduced to $22,500,000 when the tenant at such Property reimburses the Borrower or the C/D Lender for $7,500,000 of tenant improvements), provided that (i) the C/D Subordination Amount shall be reduced by any condemnation or casualty proceeds that have been applied to repay Senior Debt as permitted pursuant to Section 6.01 and (ii) the Borrower agrees that the amount of any tenant reimbursement not applied to reduce the construction loan superior to the Loan shall be deposited into the Cash Collateral Account. (b) In addition to the subordination by the Lender of the lien of the Mortgages with respect to each Development Property pursuant to Section 6.06(a), the Lender shall further agree to Deeply Subordinate its rights under the Loan Documents to the loan of the C/D Lender with respect to each Development Property in an amount equal to the C/D Subordination Amount, provided (i) the Subordination Conditions are satisfied and (ii) the Borrower shall deposit into the Cash Collateral Account an additional sum for such Development Property equal to $5,000,000 or, in the event the lien of the Mortgages on any of the Financing Properties shall have been released pursuant to Section 6.05(a) or 6.05(b), $7,500,000, provided, however, that, subsequent to the deposit into the Cash Collateral Account of the Additional Amount equal to $5,000,000 in accordance with this Section 6.06(b), the Borrower shall, simultaneous with any such release of the Financing Properties, deposit an additional $2,500,000 into the Cash Collateral Account, payment of which shall be a condition to the release of the Financing Properties in accordance with Section 6.05(a) or 6.05(b). SECTION 6.07. Release of Cash Collateral Account. Anything contained in this Article VI to the contrary notwithstanding, the Borrower shall have the right, provided that the Subordinate Lender shall consent in writing, to withdraw monies on deposit in the Cash Collateral Account (excluding monies deposited pursuant to Section 6.01) in excess of $35,000,000 for any purpose. SECTION 6.08. Optional Release or Assignment. (a) Notwithstanding the express provisions thereof, wherever it is provided in any of the provisions of this Credit Agreement that the Lender shall release all or any portion of the lien of any of the Mortgages in consideration for the Borrower's deposit of cash into the Cash Collateral 45 41 Account, the Borrower may, at its sole option but with the prior written consent of the Subordinate Lender elect to require that such release by the Lender be effectuated not as a release but as an assignment of such Mortgage or portion thereof, provided that the Borrower shall prepay the outstanding Loan Obligations in an amount equal to the sum of (i) the amount that would otherwise effectuate such release, plus (ii) the Make Whole Premium, if any, that would be due and payable pursuant to Section 2.03 (assuming for purposes of this Section 6.08 that Section 2.03 permitted partial prepayments) calculated on the amount specified in the foregoing clause (i), plus (iii) the amount of interest accrued and unpaid on the amount specified in the foregoing clause (i) to the date of such prepayment. The Lender hereby agrees that, in connection with any such election, the Lender shall permit the application of the monies in the Cash Collateral Account toward such prepayment. (b) The Borrower's right to receive an assignment of Mortgage or portion thereof pursuant to Section 6.08(a) hereof, shall be conditioned upon the satisfaction of the following conditions: (i) No Default or Event of Default shall be continuing: (ii) the Borrower and Lender shall execute and deliver such mortgage and/or note splitter or severance agreements, and substitute note(s) and other documents as Lender or Borrower may reasonably request to effectuate the assignment to Borrower of the portion of the Loan Obligations covered by such release; any such assignment by Lender shall be expressly stated to be without representation or warranty by, or recourse, to, Lender; (iii) the Borrower and the assignee shall agree in writing and the mortgage(s) and note or substitute note so assigned shall state, that such note or substitute note so assigned to the assignee (the "Assigned Note") is secured solely by the mortgage(s) simultaneously being assigned to the assignee, and that no mortgage, guaranty or other security interest or collateral held by Lender (other than such mortgage being assigned to the assignee) shall secure, in any manner, such Assigned Note;. (iv) the Borrower, the Lender and the assignee shall execute other instruments or documents as Lender or Borrower may reasonably request to further confirm or assure the intent of the provisions of this Section 6.08(b); (v) the Borrower shall pay to Lender all reasonably attorneys' fees and expenses incurred by Lender in connection with such assignment of the Assigned Note and the mortgage(s) secured thereby; and 46 42 (vi) if the Borrower is entitled under Section 6.04 to obtain a release of the Mortgage on the Lexington Avenue Property, and Borrower seeks to obtain an assignment of that Mortgage pursuant to this Section 6.08, then in addition to satisfying all of the foregoing conditions set forth in this Section 6.08(b), Borrower shall cause the assignee of the Assigned Note to execute and deliver to Lender an instrument, in form and substance satisfactory to Lender, pursuant to which said assignee assumes all of the obligations of Lender under the Gruss Agreement and agrees to indemnify, defend and hold harmless Lender, its successors and assigns, from and against all claims, liabilities, damages, losses, costs and expenses (including reasonable attorneys' fees and disbursements) asserted against, suffered or incurred by Lender as a result of any claim that such assignee, or any of its successors or assigns, breached or defaulted under any of the obligations of Lender under the Gruss agreement. ARTICLE VII EVENTS OF DEFAULT SECTION 7.01. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing: (a) the Borrower shall fail to pay (i) any principal of the Loan, when the same becomes due and payable or (ii) any other payment under any Loan Document, in each case under this clause (ii) within five days after notice of the same becoming due and payable; or (b) any representation or warranty made by any Loan Party (or any of its officers) under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made; or (c) the Borrower shall fail to perform or observe, in any material respect, any term, covenant or agreement contained in Section 5.02; or (d) except as otherwise specified in such Loan Document, any Loan Party shall fail to perform any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for 30 days after written notice (or such longer period, if any, as may be set forth in the applicable covenant or agreement) thereof shall have been given to the Borrower by the Lender; or 47 43 (e) any Loan Party or any of its Subsidiaries shall fail to pay any principal of, premium or interest on or any other amount payable in respect of any Senior Debt or any Subordinated Debt (other than the Debt under the Subordinate Loan Documents) of such Loan Party or such Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable notice and grace period, if any, specified in the agreement or instrument relating to such Senior Debt or Subordinated Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Senior Debt or any Subordinated Debt (other than the Debt under the Subordinate Loan Documents) and shall continue after the applicable notice and grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate the maturity of such Senior Debt or Subordinated Debt or otherwise to cause such Senior Debt or Subordinated Debt to mature; or any such Senior Debt or Subordinated Debt shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Senior Debt or Subordinated Debt shall be required to be made, in each case prior to the stated maturity thereof; or (f) any Loan Party shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against any Loan Party seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it) that is being diligently contested by it in good faith, either such proceeding shall remain undismissed or unstayed for a period of 60 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or any substantial part of its property) shall occur; or any Loan Party shall take any corporate action to authorize any of the actions set forth above in this subsection (f); provided, however, that no Event of Default shall, in any way, be triggered by application of this clause (f) due to the existence or any continuation of the Bankruptcy Proceeding; or (g) any judgment or order for the payment of money in excess of $500,000 shall be rendered against any Loan Party, and either (i) enforcement proceedings shall have been commenced and be continuing by any creditor upon such judgment or order 48 44 or (ii) there shall be any period of 20 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (h) any non-monetary judgment or order shall be rendered against any Loan Party that is reasonably likely to have a Material Adverse Effect, and there shall be any period of 20 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (i) any material provision of any Loan Document after delivery thereof shall for any reason cease to be valid and binding on or enforceable against any Loan Party to it, or any such Loan Party shall so state in writing; or (j) except as otherwise permitted under Section 5.02(a), any Collateral Document after delivery thereof shall for any reason (other than pursuant to the terms thereof) cease to create a valid and perfected Lien on the Collateral purported to be covered thereby with the priority of liens set forth therein; or (k) the Lex Store General Partner shall cease to be the general partner of Lexington Avenue Partnership; or (l) any Event of Default (as such term is defined in any Mortgage or other Loan Document) shall occur and be continuing; then, and in any such event, the Lender may, by notice to the Borrower, declare the Loan Obligations, together with all interest thereon and all other amounts payable under this Credit Agreement and the other Loan Documents, to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to any Loan Party under the United States Bankruptcy Code other than in connection with the Bankruptcy Proceeding, the Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. 49 45 ARTICLE VIII MISCELLANEOUS SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision of this Credit Agreement or the Notes, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Borrower and the Lender, and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 8.02. Notices, Etc. All notices and communications under this Credit Agreement shall be in writing and shall be given by either (a) hand-delivery, (b) facsimile transmission, (c) first class mail (postage prepaid), or (d) reliable overnight commercial courier (charges prepaid) (i) if to the Borrower, to: Alexander's, Inc. 31 West 34th Street New York, New York 10001 Attention: Steven Santora Facsimile No. (212) 695-4221 with a copy to: Vornado Realty Trust Park 80 West, Plaza II Saddle Brook, New Jersey 07663 Attention: Chief Financial Officer Facsimile No.: (201) 587-0600 50 46 (ii) if to the Lender, to: First Fidelity Bank, National Association, 550 Broad Street, B55003 Newark, New Jersey 07102 Attention: Commercial Real Estate Department Head Facsimile No. (201) 565-3996 Notice shall be deemed to have been given and received: (i) if by hand delivery, upon delivery; (ii) if by facsimile, upon transmission; (iii) if by mail, three (3) calendar days after the date first deposited in the United States mail; and (iv) if by overnight courier, on the date scheduled for delivery. A party may change its address by giving written notice to the other party as specified herein. SECTION 8.03. No Waiver; Remedies. No failure on the part of the Lender to exercise, and no delay in exercising, any right hereunder or under the Notes shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 8.04. Costs, Expenses. (a) The Borrower agrees to pay on demand (i) all reasonable costs and expenses of the Lender in connection with the preparation, execution, delivery, administration, modification and amendment of the Loan Documents (including, without limitation, the reasonable fees and expenses of counsel for the Lender with respect thereto) and (ii) all reasonable costs and expenses of the Lender in connection with the enforcement of the Loan Documents, whether in any action, suit or litigation, any bankruptcy, insolvency or other similar proceeding affecting creditors' rights generally or otherwise (including, without limitation, the reasonable fees and expenses of counsel for the Lender with respect thereto). (b) The Borrower agrees to indemnify and hold harmless the Lender and each of their Affiliates and their officers, directors, employees, agents and advisors (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of, or in connection with the preparation for a defense of, any investigation, litigation or proceeding arising out of, related to or in connection with (i) the transactions contemplated hereby, (ii) the actual or alleged presence of Hazardous Materials on any property described in the Mortgages or any Environmental Action relating in any way to any Loan Party or any of its Subsidiaries, (iii) disputes with any architect, general contractor, subcontractor, materialman or supplier, or on account of any act or 51 47 omission to act by the Lender in connection with any Property, (iv) any untrue statement of a material fact contained in information submitted to the Lender by the Borrower or the omission of any material fact necessary to be stated therein in order to make such statement not misleading or incomplete, (v) the failure of the Borrower or any Loan Party to perform any obligations required to be performed by the Borrower or any Loan Party under any Loan Document and (vi) the ownership, construction, occupancy, operation, use or maintenance of any of the Properties, in each case whether or not the transactions contemplated hereby are consummated, except (I) to the extent such claim, damage, loss, liability or expense is found to have resulted from any Indemnified Party's gross negligence or willful misconduct. Notwithstanding the foregoing provisions of this Section 8.04(b), the Borrower shall have no obligation to indemnify any Indemnified Party against, or hold it harmless from, (i) any judgment rendered by a court of competent jurisdiction against any Indemnified Party and in favor of the Borrower, or (ii) any legal fees and expenses incurred by the Indemnified Party in defending the action brought by the Borrower which resulted in such judgment in favor of the Borrower, but the foregoing provisions of this sentence shall not diminish or otherwise affect the Borrower's liability for payment of all legal fees and expenses incurred by the Lender in enforcing the Lender's rights and remedies under any of the Loan Documents. (c) In case any action shall be brought against the Lender or any other Indemnified Party in respect of which indemnity may be sought against the Borrower, the Lender or such other Indemnified Party shall promptly notify the Borrower and the Borrower shall assume the defense thereof, including the employment of counsel selected by the Borrower and reasonably satisfactory to the Lender, the payment of all costs and expenses and the right to negotiate and consent to settlement. The failure of the Lender to so notify the Borrower shall not relieve the Borrower of any liability it may have under the foregoing indemnification provisions or from any liability which it may otherwise have to the Lender or any of the other Indemnified Parties except to the extent that the Borrower incurs actual expenses or suffers actual monetary loss as a result of such failure to give notice. The Lender shall have the right, at its sole option, to employ separate counsel and as long as Borrower is complying with its indemnification obligations hereunder, the fees and disbursements of such separate counsel shall be paid by Lender. The Borrower shall not be liable for any settlement of any such action effected without its consent, but if settled with the Borrower's consent, or if there be a final judgment for the claimant in any such action, the Borrower agrees to indemnify and save harmless the Lender from and against any loss or liability by reason of such settlement or judgment. (d) If any Loan Party fails to pay when due any costs, expenses or other amounts payable by it under any Loan Document, including, without limitation, fees and expenses of counsel and indemnities, such amount may be paid on behalf of such Loan Party by the Lender, in its sole discretion. 52 48 (e) The provisions of this Section 8.04 shall survive the repayment or other satisfaction of the Borrower's Obligations hereunder. SECTION 8.05. Merger. This Credit Agreement and the other Loan Documents constitute the sole agreement of the parties with respect to the transactions contemplated herein and therein and supersede all oral negotiations and prior writings with respect thereto. SECTION 8.06. Binding Effect. This Credit Agreement shall become effective when it shall have been executed by the Borrower and the Lender and thereafter shall be binding upon and inure to the benefit of the Borrower, the Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lender. SECTION 8.07 Lender's Discretion. Except as otherwise specified in this Credit Agreement, whenever this Credit Agreement provides that the Lender's consent or approval is required, or that any action may be taken or not taken at the Lender's option, such consent or approval may be given or not, and such action may be taken or not, in the Lender's sole discretion. Any reference in this Credit Agreement to Lender's consent or approval being required shall be deemed to refer to Lender's prior consent or approval given in writing. SECTION 8.08 Participations. (a) The Lender may sell participations in up to one-third of its rights and obligations under this Credit Agreement (including, without limitation, of its Loan and the Notes held by it) (the purchaser of any rights and obligations being referred to herein as a "Participant"); provided, however, that (i) the obligations of the Borrower and the Lender under this Credit Agreement and the other Loan Documents shall remain unchanged, (ii) the Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower shall continue to deliver all notices, communications and payments solely to the Lender and any such notice, communication or payment shall be valid and effective for all purposes hereunder notwithstanding any such sale of participations. Upon the sale of any participation permitted hereunder, the Borrower shall cooperate with such reasonable requests of the Lender, at the sole expense of the Lender, to sever and split the note issued hereunder among the Lender and any Participants. (b) The Lender may, in connection with any participation or proposed participation pursuant to this Section 8.08, disclose to the Participant or proposed Participant, any information relating to the Borrower furnished to the Lender by or on behalf of the Borrower; provided, however, that, prior to any such disclosure, the Participant or proposed Participant shall agree to preserve the confidentiality of any Confidential Information received by it from the Lender. 53 49 (c) Notwithstanding any other provision set forth in this Credit Agreement, the Lender may at any time create a security interest in all or any portion of its rights under this Credit Agreement (including, without limitation, the Loan and the Notes held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System. SECTION 8.09. Governing Law. This Credit Agreement and the Note shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 8.10. Execution in Counterparts. This Credit Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Credit Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Credit Agreement. SECTION 8.11. Waiver of Jury Trial. Each of the Borrower and the Lender hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to any of the Loan Documents, the Loan or the actions of the Lender in the negotiation, administration, performance or enforcement thereof. The Borrower acknowledges and agrees that this section is a specific and material aspect of this Credit Agreement and that the Lender would not extend credit to the Borrower if the waiver set forth in this section were not a part of this Credit Agreement. SECTION 8.12. Jurisdiction. The Borrower irrevocably appoints each and every owner, partner and/or officer of the Borrower as its attorneys upon whom may be served, by regular or certified mail at the address set forth herein, any notice, process or pleading in any action or proceeding against it arising out of or in connection with this Credit Agreement or any other Loan Document; and the Borrower hereby consents that any action or proceeding against it may be commenced and maintained in any court within the State of New Jersey or the State of New York or in the United States District Court for the District of New Jersey or the United States District Court for the Southern District of New York by service of process on any such owner, partner and/or officer; and the Borrower agrees that the courts of the State of New Jersey and the courts for the State of New York and the courts for the United States District Court for the District of New Jersey and the courts for the United States District Court for the Southern District of New York shall have jurisdiction with respect to the subject matter hereof and the person of the Borrower and all collateral securing the obligations of the Borrower. The Borrower agrees not to assert any defense to any proceeding initiated by the Lender in such court based upon improper venue or inconvenient forum. The foregoing shall not limit, restrict or otherwise affect the right of 54 50 the Borrower or the Lender to commence any action on this Credit Agreement or any other Loan Document in any other courts having jurisdiction. SECTION 8.13. Continuing Enforcement. If, after receipt of any payment of all or any part of the Borrower's Obligations hereunder, the Lender is required by law in connection with insolvency, fraudulent conveyance, bankruptcy or similar proceedings to surrender such payment then this Credit Agreement and the other Loan Documents shall continue in full force and effect, and the Borrower shall be liable for, and shall indemnify defend and hold harmless the Lender with respect to the full amount so surrendered. The provisions of this Section 8.13 shall survive the termination of this Credit Agreement and the other Loan Documents and shall remain effective notwithstanding the payment of the Borrower's Obligations hereunder, the cancellation of the Notes or any other Loan Document, the release of any security interest, lien or encumbrance securing the Borrower's Obligations hereunder or any other action which the Lender may have taken in reliance upon its receipt of such payment. Any cancellation, release or other such action by the Lender shall be deemed to have been conditioned upon any payment of the Borrower's Obligations hereunder having become final and irrevocable. 55 IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. ALEXANDER'S, INC. By /s/ Stephen Mann --------------------------------------- Name: Stephen Mann Title: Chairman of the Board of Directors FIRST FIDELITY BANK, NATIONAL ASSOCIATION By /s/ Joseph Tkac --------------------------------------- Name: Joseph Tkac Title: Vice President 56 [FIRST FIDELITY LOGO] FOR INTERNAL USE ONLY OBLIGOR #____________________ OBLIGATION #_________________ Commercial Mortgage Loan PROMISSORY NOTE $30,000,000.00 New York, New York March 15, 1995 FOR VALUE RECEIVED, the undersigned, ALEXANDER'S, INC., a Delaware corporation (herein sometimes referred to as "MAKER" or the "UNDERSIGNED"), hereby promises to pay to the order of FIRST FIDELITY BANK, NATIONAL ASSOCIATION (the "BANK"), the principal sum of Thirty Million and 0/100 Dollars ($30,000,000.00), or such lesser amount as shall have been advanced by Lender under the Credit Agreement (as hereinafter defined), (the "LOAN") in United States Dollars, together with interest (including without limitation additional interest payable pursuant to Section 2.04(b) and 6.03 of the Credit Agreement thereon as provided in that certain Credit Agreement, dated as of March 15, 1995, by and between Maker and Bank (the "CREDIT AGREEMENT"). 1. CERTAIN DEFINED TERMS. Terms used herein and not otherwise defined have the terms ascribed to such terms in the Credit Agreement. 2. PAYMENT OF PRINCIPAL. The entire unpaid principal amount hereof, together with accrued and unpaid interest thereon at the Interest Rate to but excluding March 15, 1998 (the "MATURITY DATE") and all other amounts payable hereunder shall be due and payable on the Maturity Date. 3. APPLICATION OF PAYMENTS. Except as otherwise specified herein, each payment or prepayment, if any, made under this Note shall be applied to pay late charges, accrued and unpaid interest, principal, escrows (if any), and any other fees, costs and expenses which the undersigned is obligated to pay under this Note, in such order as Bank may elect from time to time in its sole discretion. 4. TENDER OF PAYMENT. All payments on this Note are payable on or before 11:00 a.m. on the due date thereof, at the office of Bank located at 550 Broad Street, Newark, New Jersey 07102, or at such other place as Bank shall designate in writing from time to time and shall be credited on the date the funds become available lawful money of the United States. 57 2 All sums payable to Bank which are due on a day on which Bank is not open for business shall be made on the next succeeding Business Day and such extended time shall be included in the computation of interest. 5. PREPAYMENT. The principal amount of this Note may not be prepaid except in accordance with and subject to the terms and conditions of the Credit Agreement. 6. SECURITY FOR THE NOTE. 6.1. This Note is executed and delivered in accordance with a commercial transaction described in the Credit Agreement. As security for the payment of the monies owing under this Note, the undersigned has delivered or has caused to be delivered to Bank, inter alia, the Collateral Documents referred to in the Credit Agreement. 6.2. The undersigned hereby grants to Bank a continuing security interest in all property of the undersigned, now or hereafter in the possession of Bank or any Affiliate (as defined below) in any capacity whatsoever, including, but not limited to, any balance or share of any deposit, trust or agency account, as security for the payment of this Note and any other liabilities of the undersigned to Bank, which security interest shall be enforceable and subject to all the provisions of this Note, as if such property were specifically pledged hereunder and the proceeds of such property may be applied at any time and without notice to any of the undersigned's liabilities. 6.3. For purposes of this Section 6.3, all capitalized terms used herein but not defined herein shall have the meaning ascribed thereto in the "Gruss Agreement" (as such term is defined in the Credit Agreement), that is, that certain letter agreement dated March 15, 1995, by and among First Fidelity Bank, National Association, Emanuel Gruss, Riane Gruss, Elizabeth Goldberg, Vornado Lending Corp., Alexander's Department Stores of Lexington Avenue, Inc. and Alexander's, Inc. If the Closing under the Gruss Agreement shall occur, then, from and after such Closing, the Gruss Partners and their successors and assigns shall have no right or claim to or interest in any mortgage, security interest or other collateral given by any other person or party as security or further security for any of the obligations evidenced by this Note other than the Assigned New Mortgage. 7. ADDITIONAL PAYMENTS; INTEREST; LATE CHARGE; DEFAULT RATE. In addition to the other payments provided for above, the undersigned promises to pay on demand any interest and any other monies required to be paid or advanced by the undersigned or by any other party obligated under any of the Loan Documents (other than the Bank) or paid or advanced on behalf of the undersigned or such party by Bank pursuant to the terms of the Credit Agreement, the Mortgage or any other Loan Document, which obligation shall be continuing and shall survive any judgment entered with respect to this Note or any 58 3 foreclosure of the Mortgage. This Note shall evidence, and the Mortgage and other Collateral Documents shall secure the payment of, all such sums so advanced or paid. 8. REMEDIES. Upon the occurrence and during the continuance of an Event of Default, Bank may exercise any right, power or remedy permitted by law or as set forth herein or in the Credit Agreement, the Collateral Documents or any other Loan Document including, without limitation, the right to declare the entire unpaid principal amount hereof and all interest accrued hereon, and all other sums secured by the Collateral Documents or any other Loan Document to be, and such principal, interest and other sums shall thereupon become, forthwith due and payable. 9. MISCELLANEOUS. 9.1. REMEDIES CUMULATIVE. The rights and remedies of Bank as provided herein and in any other Loan Document shall be cumulative and concurrent, may be pursued separately, successively or together against the undersigned or the Mortgaged Premises (as defined in the Mortgage) or any other collateral security for payment of amounts due hereunder, or any guarantor thereof, at the sole discretion of Bank, may be exercised as often as occasion therefor shall arise, and shall be in addition to any other rights or remedies conferred upon Bank at law or in equity. The failure, at any one or more times, of Bank to exercise any such right or remedy shall in no event be construed as a waiver or release thereof. Bank shall have the right to take any action it deems appropriate without the necessity of resorting to any collateral securing this Note. 9.2. INTEGRATION. This Note and the other Loan Documents constitute the sole agreement of the parties with respect to the transaction contemplated hereby and supersede all oral negotiations and prior writings with respect thereto. 9.3. ATTORNEYS' FEES AND EXPENSES. If Bank retains the services of counsel by reason of a default or an Event of Default hereunder or under any of the other Loan Documents, or on account of any matter involving this Note, or for examination of matters subject to Bank's approval under the Loan Documents, all costs of suit and all reasonable attorneys' fees and such other reasonable expenses so incurred by Bank shall forthwith, on demand, become due and payable and shall be evidenced hereby. 9.4. NO IMPLIED WAIVER. Bank shall not be deemed to have modified or waived any of its rights or remedies hereunder unless such modification or waiver is in writing and signed by Bank, and then only to the extent specifically set forth therein. A waiver in one event shall not be construed as continuing or as a waiver of or bar to such right or remedy in a subsequent event. 9.5. WAIVER. The undersigned waives demand, notice, presentment, protest, demand for payment, notice of dishonor, notice of protest and diligence of collection of this Note. The undersigned consents to any and all extensions of time, renewals, waivers, or modifications that may be granted by Bank with respect to the payment or other provisions of 59 4 this Note, and to the release of any collateral, with or without substitution. The undersigned agrees that makers, endorsers, guarantors and sureties may be added or released without notice and without affecting the undersigned's liability hereunder. The liability of the undersigned shall not be affected by the failure of Bank to perfect or otherwise obtain or maintain the priority or validity of any security interest in any collateral. The liability of the undersigned shall be absolute and unconditional and without regard to the liability of any other party hereto. 9.6. NO USURIOUS AMOUNTS. Anything herein contained to the contrary notwithstanding, the undersigned does not agree and shall not be obligated to pay interest hereunder at a rate which is in excess of the maximum rate permitted by law. If by the terms of this Note, the undersigned is at any time required to pay interest at a rate in excess of such maximum rate, the rate of interest under this Note shall be deemed to be immediately reduced to such maximum legal rate and the portion of all prior interest payments in excess of such maximum legal rate shall be applied to and shall be deemed to have been payments in reduction of the outstanding principal balance. The undersigned agrees that in determining whether or not any interest payable under this Note exceeds the highest rate permitted by law, any non-principal payment, including without limitation, late charges, shall be deemed to the extent permitted by law to be an expense, fee, premium or penalty rather than interest. 9.7. PARTIAL INVALIDITY. The invalidity or unenforceability of any one or more provisions of this Note shall not render any other provision invalid or unenforceable. 9.8. BINDING EFFECT. The covenants, conditions, waivers, releases and agreements contained in this Note shall bind, and the benefits thereof shall inure to, the parties hereto and their respective heirs, executors, administrators, successors and assigns; provided, however, that this Note cannot be assigned by the undersigned without the prior written consent of Bank, and any such assignment or attempted assignment by the undersigned shall be void and of no effect with respect to Bank. 9.9. MODIFICATIONS. This Note may not be supplemented, extended, modified or terminated except by an agreement in writing signed by the party against whom enforcement of any such waiver, change, modification or discharge is sought. 9.10. AFFILIATE. As used herein, "AFFILIATE" shall mean First Fidelity Bancorporation and any of its direct and indirect affiliates and subsidiaries. 9.11. JURISDICTION. The undersigned irrevocably appoints each and every owner, partner and/or officer of the undersigned as its attorneys upon whom may be served, by regular or certified mail at the address set forth below, any notice, process or pleading in any action or proceeding against it arising out of or in connection with this Note or any other Loan Document; and the undersigned hereby consents that any action or proceeding against it be commenced and maintained in any court within the State of New York or the State of New Jersey or in the United States District Court for the Southern District of New York or the United States District Court for the District of New Jersey by service of process on any such 60 5 owner, partner and/or officer; and the undersigned agrees that the courts of the State of New York and the State of New Jersey and the United States District Court for the Southern District of New York and the United States District Court for the District of New Jersey shall have jurisdiction with respect to the subject matter hereof and the person of the undersigned. The undersigned agrees not to assert any defense to any action or proceeding initiated by Bank in such courts based upon improper venue or inconvenient forum. The foregoing shall not restrict or otherwise affect the right of the Bank to commence any action or proceeding on this Note or any other Loan Document in any other court or courts having jurisdiction. 9.12. NOTICES. All notices and communications relating to this Note shall be in writing and shall be given in the manner provided in the Credit Agreement. 9.13. GOVERNING LAW. This Note shall be governed by and construed in accordance with the substantive laws of the State of New York. 9.14. WAIVER OF JURY TRIAL. THE UNDERSIGNED AND BANK AGREE THAT ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR COUNTERCLAIM, BROUGHT BY BANK OR THE UNDERSIGNED, ON OR WITH RESPECT TO THIS NOTE OR ANY OTHER LOAN DOCUMENT OR THE DEALINGS OF THE PARTIES WITH RESPECT HERETO OR THERETO, SHALL BE TRIED ONLY BY A COURT AND NOT BY A JURY. BANK AND THE UNDERSIGNED EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING. FURTHER, EACH OF THE UNDERSIGNED AND BANK WAIVE ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY SPECIAL, EXEMPLARY, PUNITIVE, CONSEQUENTIAL OR OTHER DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES, BUT THE FOREGOING SHALL NOT BE CONSTRUED TO PROHIBIT, RESTRICT OR OTHERWISE IMPAIR THE EXERCISE OF ANY RIGHTS OR REMEDIES EXPRESSLY PROVIDED TO ANY PARTY IN ANY OF THESE LOAN DOCUMENTS. THE UNDERSIGNED ACKNOWLEDGES AND AGREES THAT THIS SECTION IS A SPECIFIC AND MATERIAL ASPECT OF THIS NOTE AND THAT BANK WOULD NOT EXTEND CREDIT TO THE UNDERSIGNED IF THE WAIVERS SET FORTH IN THIS SECTION WERE NOT A PART OF THIS NOTE. IN WITNESS WHEREOF, the undersigned, intending to be legally bound, has duly executed and delivered this Note as of the day and year first above written. ATTEST: ALEXANDER'S, INC. (a Delaware corporation) ______________________________ By:__________________________________ Name: Stephen Mann Title: Chairman EX-10.IE 5 BUILDING LOAN AGREEMENT 1 Exhibit 10(i)(e) =============================================================================== BUILDING LOAN AGREEMENT Dated as of March 29, 1995 among ALEXANDER'S, INC., as Borrower, UNION BANK OF SWITZERLAND (New York Branch), as Lender, and UNION BANK OF SWITZERLAND (New York Branch), as Agent LOCATION OF PREMISES: Corner of 63rd Road and Queens Boulevard in Rego Park, Queens County, New York =============================================================================== "Lenders' Counsel": Dewey Ballantine 1301 Avenue of the Americas New York, New York 10019-6092 Attention: George C. Weiss, Esq. --------------------- 2 TABLE OF CONTENTS
Page ---- ARTICLE I. PARTICULAR TERMS AND DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.01. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.02. Additional Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE II. THE LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2.01. Advances, Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2.02. Certification of Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 2.03. Procedures for Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 2.04. Advances of Held-Back Amounts; Advances for Indirect Costs Subsequent to Completion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 2.05. Advances for Stored Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2.06. Acceleration of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.07. Reallocation of Amounts on Project Cost Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2.08. Certain Limitations on Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2.09. Nature of Lenders' Obligations; Borrower's Rights and Obligations in Event a Lender Fails to Make an Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2.10. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2.11. Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2.12. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 2.13. Limitation on Number of Interest Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 2.14. Conversions of Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 2.15. Inapplicability of LIBO Based Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 2.16. Late Payment Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 2.17. Extension of Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE III. YIELD MAINTENANCE ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3.01. Additional Costs and Other Effects of Regulatory Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3.02. Limitations on Availability of LIBO Based Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 3.03. Certain Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 3.04. "Lender" to Include Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 ARTICLE IV. CONDITIONS PRECEDENT TO LENDERS' OBLIGATION TO MAKE THE INITIAL ADVANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 4.01. Conditions Precedent to Initial Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 4.02. Items to Be Received and Approved by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 4.03. Items to Be Received and Approved by Construction Consultant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 4.04. Items to Be Received and Approved by Lenders' Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
i 3 ARTICLE V. CONDITIONS PRECEDENT TO LENDERS' OBLIGATIONS TO MAKE ADVANCES AFTER THE INITIAL ADVANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 5.01. Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 5.02. Last Direct Costs Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 ARTICLE VI. BORROWER'S REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 6.01. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 6.02. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 6.03. Continuing Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 ARTICLE VII. AGENT; RELATIONS AMONG LENDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 7.01. Appointment, Powers and Immunities of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 7.02. Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 7.03. Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 7.04. Rights of Agent as Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 7.05. Sharing of Costs by Lenders; Indemnification of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 7.06. Non-Reliance on Agent and Other Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 7.07. Failure of Agent to Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 7.08. Resignation or Removal of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 7.09. Amendments Concerning Agency Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 7.10. Liability of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 7.11. Transfer of Agency Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 7.12. Non-Receipt of Funds by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 7.13. Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 7.14. Sharing of Payments among Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 7.15. Possession of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 7.16. Effect of a Lender's Failure to Make an Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 7.17. Cure by Delinquent Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 7.18. Delinquent Lender Not Excused . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 7.19. Notices Regarding Delinquent Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 7.20. Replacement Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ii 4 ARTICLE VIII. GENERAL CONDITIONS AND PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 8.01. Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 8.02. Documentation Etc. to Be Satisfactory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 8.03. Loan Balancing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 8.04. No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 8.05. Direct Advances to Contractors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 8.06. Lenders Authorized to Advance for Interest Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 8.07. Concerning Irrevocable Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 8.08. Ratification of Requisition by Acceptance of Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 8.09. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 8.10. Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 8.11. Expenses; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 8.12. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 8.13. Assignment; Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 8.14. Amendments and Waivers in Writing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 8.15. Agent's Determination Conclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 8.16. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 8.17. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 8.18. CERTAIN WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 8.19. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 8.20. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 ARTICLE IX. PARTICULAR PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 9.01. Cash Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 9.02. Minimum Commitment by UBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 9.03. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Exhibits -------- A Lien Law Statement B Borrower's Requisition B-1 Contractor's Cost Certification B-2 Payment Receipt C Borrower's Architect's Letter D Contractor's Letter E Assignment and Assumption Agreement F Pending Disbursements Clause G Requisition Authorization Statement H Form of Note I Notice-of-Assignment of Lease J Litigation Schedule K Environmental Reports Schedules (attached to Exhibit B) --------------------------------- I Direct Cost Statement I-A Stored Materials Statement II Indirect Cost Statement
iii 5 BUILDING LOAN AGREEMENT dated as of March 29, 1995 among ALEXANDER'S, INC., a Delaware corporation ("Borrower"), UNION BANK OF SWITZERLAND (New York Branch) (in its individual capacity and not as administrative agent, "UBS"; UBS and the lenders who from time to time become Lenders pursuant to Section 7.20 or Section 8.13, each a "Lender" and collectively, "Lenders"), and UBS, as administrative agent for Lenders (in such capacity, together with its successors in such capacity, "Agent"). Borrower desires that Lenders extend credit as provided herein, and Lenders are prepared to extend such credit. Accordingly, Borrower, each Lender and Agent agree as follows: ARTICLE I. PARTICULAR TERMS AND DEFINITIONS 1.01. Certain Definitions. As used in this Agreement, the following terms shall have the respective meanings indicated opposite each of them; where the meaning of any term is stated to be "None", provisions in this Agreement involving the application of that term shall be disregarded. "Aggregate Change Order Amount" - $500,000 "Borrower's Architects" - (1) Dal Pos Architects, P.C. "Borrower's Interest in - Fee the Premises" "Change Order Amount" - $50,000 "Completion Date" - July 1, 1996, subject to extension for delays caused by events beyond Borrower's control to a date not later than the earlier to occur of (i) the Original Maturity or (ii) the earliest date (as such earliest date may be extended by tenant under any Major Lease) by which completion of the Improvements is required under any Major Lease "Construction Consultant" - (2) Inspection and Valuation International "General Contractor" - HRH Construction Corporation "Loan Amount" - $38,739,611
------------------ (1) The architects and/or engineers responsible for preparing the Plans and supervising construction of the Improvements, and any successor engaged with Agent's consent. (2) Or other firm designated by Agent. 6 "Maturity Date" - April 1, 1997, as it may be extended pursuant to Section 2.17 "Retainage Percentage" - With respect to each contractor, subcontractor or supplier (other than for General Conditions for the General Contractor for which the Retainage Percentage shall be 0%), 10% until such contractor, subcontractor or supplier's work is 50% complete to the reasonable satisfaction of Lender and 0% thereafter but in no event less than the actual retainage specified for such contractor, subcontractor or supplier in its respective contract "Stored Material Amount" - $1,000,000 "Improvements" - The redevelopment of the building presently located on the Premises containing approximately 348,100 SFGLA into a retail center containing a 122,000 SFGLA Caldor's, a 36,100 SFGLA Marshalls and a 190,000 SFGLA Sears, together with the construction of a 1,172 stall parking garage
1.02. Additional Definitions. The following terms, as used herein, shall have the following meanings: "Additional Costs" -- Any costs, losses or expenses actually incurred by any Lender which it reasonably determines are attributable to its making or maintaining its Pro Rata Share of the Loan, or its obligation to make any Loan advances, or any reduction in any amount receivable by any Lender under the Loan or its Note. "Agent's Office" -- Agent's Office as set forth on the signature page of this Agreement, or such other address in the United States as Agent may designate by written notice to Borrower and Lenders. "Applicable Lending Office" -- For each Lender and for the portions of the outstanding principal balance under its Note bearing interest at the Prime Based Rate or the LIBO Based Rate, as 2 7 applicable, the lending office of such Lender (or of an affiliate of such Lender) designated as such on the signature page of this Agreement or in the applicable Assignment and Assumption Agreement, or such other office of such Lender (or of an affiliate of such Lender) as such Lender may from time to time specify to Agent and Borrower as the office by which the portions of the outstanding principal balance under its Note bearing interest at the Prime Based Rate or the LIBO Based Rate, as applicable, are to be made and maintained. "Assignee" -- Has the meaning specified in Section 8.13. "Assignment and Assumption Agreement -- An Assignment and Assumption Agreement, substantially in the form of EXHIBIT E hereto, pursuant to which a Lender assigns and an Assignee assumes rights and obligations in accordance with Section 8.13. "Building Loan Trust Account" -- A separate bank account of Borrower with the Depositary Bank (account no. 302-4-941035) which shall (i) not be drawn upon except to pay approved Direct and Indirect Costs, (ii) be the depository for all advances made to Borrower hereunder and (iii) be established so that Agent receives, or is entitled to receive upon request, from the Depositary Bank, duplicate copies of regular monthly statements of all deposits and withdrawals, including checks. "Business Day" -- Any day on which commercial banks are not authorized or required to close in New York City; or, whenever such day relates to a LIBOR Amount, an Interest Period with respect to a LIBOR Amount, or notice with respect to a LIBOR Amount, any such day in which United States Dollar deposits are also carried out in the London interbank market and banks are open for business in London. "Cash Collateral -- the sum of $5,000,000 cash to be funded by Borrower to Agent to be held pursuant to Section 9.01. "Change Orders" -- Any amendments or modifications to the Plans, General Contract or Major Subcontracts. "Default" -- Any event which, with the giving of notice or lapse of time, or both, would become an Event of Default. "Delinquency Amount"; "Delinquency Notice"; "Delinquent Lender" -- Have the respective meanings specified in Section 7.16. "Depositary Bank" -- First Fidelity Bank, National Association, Newark, New Jersey. "Direct Costs" -- The aggregate costs of all labor, materials, equipment and fixtures necessary for completion of construction of the Improvements. 3 8 "Direct Costs Loan"; "Indirect Costs Loan" -- That portion of the Loan Amount applicable and equal to the sum of the Loan Budget Amounts for Direct Costs and Indirect Costs, respectively, shown on the Project Cost Statement. "Direct Cost Statement" -- A statement in the form of SCHEDULE I of EXHIBIT B hereto of Direct Costs incurred and to be incurred, trade by trade, to be prepared by the General Contractor (or Borrower's supervisor of construction if there is no General Contractor). "Electing Lender"; "Election Notice"; "Election Period" -- Have the respective meanings specified in Section 7.16. "Environmental Law" -- Any applicable law relating to pollution or the environment, including laws relating to noise or to emissions, discharges, releases or threatened releases of Hazardous Materials into the work place, the community or the environment, or otherwise relating to the generation, manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials. "Event of Default" -- Has the meaning specified in the Mortgage. "Federal Funds Rate" -- For any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions as published by the Federal Reserve Bank of New York for such day, provided that (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the immediately preceding Business Day as so published on the next succeeding Business Day, and (ii) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average of the rates quoted by three Federal Funds brokers to Agent on such day on such transactions. "Financial Statements" -- Statements of the assets, liabilities (direct or contingent), income, expenses and cash flow of Borrower, prepared in accordance with generally accepted accounting principles. "General Contract" -- Any contract (together with all riders, addenda and other instruments referred to therein as "contract documents") between Borrower and the General Contractor or any other person which requires the General Contractor or such other person to provide, or supervise or manage the procurement of, substantially all labor and materials needed for completion of the Improvements. "Governmental Authorities" -- The United States, the State of New York and any political subdivision, agency, department, commission, board, bureau or instrumentality of either of 4 9 them, including any local authorities, which exercises jurisdiction over the Premises or the Improvements. "Hazardous Materials" -- Any pollutant, effluents, emissions, contaminants, toxic or hazardous wastes or substances, as any of those terms are defined from time to time in or for the purposes of any relevant Environmental Law, including asbestos fibers and friable asbestos, polychlorinated biphenyls, and any petroleum or hydrocarbon-based products or derivatives. "Indemnity" -- An agreement from Borrower, whereby, among other things, Lenders and Agent are indemnified against any Hazardous Materials. "Indirect Costs" -- Certain costs (other than Direct Costs) of completion of the Improvements, including but not limited to, architects', engineers' and Lenders' attorneys' fees, ground rents, interest on and recording taxes and title charges in respect of building loan mortgages, real estate taxes, water and sewer rents, survey costs, loan commitment fees, insurance and bond premiums and such other non-construction costs as are part of the "cost of improvement", as such quoted term is defined in the Lien Law. "Indirect Cost Statement" -- A statement in the form of SCHEDULE II of EXHIBIT B hereto of Indirect Costs incurred and to be incurred, to be prepared by Borrower. "Individual Loan Commitment" -- With respect to each Lender, the amount set forth below opposite the name of such Lender (subject to adjustment in accordance with the provisions of Section 7.16, Section 7.20 and Section 8.13).
Lender Individual Loan Commitment ------ -------------------------- UBS $38,739,611
"Initial Advance" -- The first advance of Loan proceeds to be made hereunder. "Interest Period" -- The period during which interest at the LIBO Based Rate, determined as provided in this Agreement, shall be applicable to the LIBO Rate Request Amount in question, provided, however, that each such period shall be either one (1), two (2), three (3) or six (6) months, which shall be measured from the date specified by Borrower in each LIBO Rate Request for the commencement of the computation of interest at the LIBO Based Rate, to the numerically corresponding day in the calendar month in which such period terminates (or, if there be no numerical correspondent in such month, or if the date selected by Borrower for such commencement is the last Business Day of a calendar month, then the last Business Day of the calendar month in which such period terminates, or if the numerically corresponding day is not a Business Day then 5 10 the next succeeding Business Day, unless such next succeeding Business Day enters a new calendar month, in which case such period shall end on the next preceding Business Day) and in no event shall any such period extend beyond the Maturity Date. "Involuntary Rate" -- Has the meaning specified in the Mortgage. "LIBO Based Rate" -- With respect to any LIBOR Amount, the rate per annum (expressed as a percentage) determined by Agent to be equal to the sum of (i) the quotient of the LIBO Rate for the LIBOR Amount and Interest Period in question divided by [1 minus the Reserve Requirement] (rounded up to the nearest 1/100 of 1%) and (ii) the LIBOR Margin. "LIBO Rate" -- The rate per annum (rounded up to the nearest 1/100 of 1%) offered to the London branch of Union Bank of Switzerland by prime banks in the London interbank market at approximately 11 A.M. (London time) two (2) Business Days prior to the first day of the applicable Interest Period, for deposits in immediately available funds, in Dollars, of amounts comparable to the LIBO Rate Request Amount for the same period of time as the Interest Period selected by Borrower in the LIBO Rate Request. "LIBO Rate Request" -- Borrower's telephonic notice (to be promptly confirmed in writing), to be received by Agent by 12 Noon (New York time) three (3) Business Days prior to the date specified in the LIBO Rate Request for the commencement of the Interest Period (which specified date must be a Business Day), of (a) its intention to have (i) all or any portion of the Principal Amount or of the outstanding principal amount under the Other Notes which is not then the subject of an Interest Period (other than an Interest Period which is terminating on the Business Day specified in the notice), and/or (ii) all or any portion of any advance of proceeds of the Loan or the Other Loan, and evidenced by, respectively, the Notes or the Other Notes, which is to be made on the Business Day specified in the notice, bear interest at the LIBO Based Rate and (b) the Interest Period desired by Borrower in respect of the amount specified. "LIBO Rate Request Amount" -- The amount, to be specified by Borrower in each LIBO Rate Request, which Borrower desires bear interest at the LIBO Based Rate and which shall in no event be less than $1,000,000 and which, at Agent's option, shall be an integral multiple of $100,000. "LIBOR Amount" -- Each portion of the Principal Amount or the outstanding principal amount under the Other Notes bearing interest at the LIBO Based Rate pursuant to a particular LIBO Rate Request. "LIBOR Margin" -- 1.625% per annum. 6 11 "Lien Law"; "Lien Law Statement" -- The Lien Law of the State of New York, as amended; the verified statement of Borrower, annexed hereto as EXHIBIT A, required by the Lien Law. "Loan" -- The Loan to be made by Lenders to Borrower under this Agreement, in an amount up to the Loan Amount, consisting of the Direct Costs Loan and Indirect Costs Loan. "Loan Budget Amounts" -- The portion of the Loan Amount, as set forth on the Project Cost Statement, to be advanced for each category of Direct and Indirect Costs. "Loan Documents" -- Collectively, this Agreement, the Notes, the Mortgage, UCC-1 financing statements and the Indemnity. "Major Leases" -- Any leases for space in the Improvements, including, without limitation, Caldor's for 122,000 SFGLA, Marshalls for 36,100 SFGLA and Sears for 190,000 SFGLA. "Major Subcontractor"; "Major Subcontract" -- Any subcontractor or supplier engaged by the General Contractor and any contractor or supplier engaged by Borrower, under one or more contracts or work orders aggregating $500,000 or more; any such contract or work order. "Mortgage" -- The building loan mortgage, assignment of leases and rents and security agreement made to Agent as agent for Lenders to secure the Notes and Borrower's other obligations in respect of the Loan. The Mortgage shall be a first lien (ahead of the lien of the Other Mortgage) on the Premises. "Mortgaged Property" -- The Premises and other property constituting the "Mortgaged Property", as said quoted term is defined in the Mortgage. "Non-Delinquent Lender" -- Each Lender other than the Delinquent Lender(s). "Note"; "Notes" -- Have the respective meanings specified in Section 2.10. "Original Maturity" -- April 1, 1997. "Other Loan Documents" -- The Other Notes, the Other Mortgage and the project loan agreement pursuant to which the Other Notes shall be advanced. "Other Notes"; "Other Loan"; "Other Mortgage" -- The note(s), dated the date hereof, for the principal amount of $46,260,389, to be made by Borrower to Lenders; the loan in said amount to be advanced pursuant to a project loan agreement dated the date hereof by Lenders to Borrower for certain non-cost-of-improvement items with respect to the Premises, evidenced thereby; the mortgage, assignment of leases and rents and 7 12 security agreement to be made to Agent as agent for Lenders to secure the Other Notes and Borrower's other obligations in respect of the Other Loan. The Other Mortgage shall be a second lien on the Premises (behind the lien of the Mortgage). "Participants; Participations" -- Have the meanings specified in Section 8.13. "Payment Receipts" -- Payment receipts, in the form of EXHIBIT B-2 hereto, for labor and materials furnished in connection with the construction of the Improvements. "Plans" -- All final drawings, plans and specifications prepared by Borrower, Borrower's Architects, the General Contractor or Major Subcontractors, and approved by Agent and the Construction Consultant, which describe and show the labor, materials, equipment, fixtures and furnishings necessary for the construction of the Improvements, including all amendments and modifications thereof made by approved Change Orders and Change Orders not required to be approved by Agent under this Agreement (and also showing minimum grade of finishes and furnishings for all areas of the Improvements to be leased or sold in ready-for-occupancy condition). "Premises" -- The real property described on Schedule A to the Mortgage and located as indicated on the cover hereof, upon all or part of which the Improvements are to be constructed. "Prime Based Rate" -- The rate per annum equal to the Prime Margin plus the greater of (i) the Federal Funds Rate plus 1/2 of 1% per annum or (ii) the prime commercial lending rate as announced from time to time by UBS at its Principal Office, each change in said rates to be effective as of the date of such change. "Prime Margin" -- .625% per annum. "Principal Amount" -- At any time, the aggregate outstanding principal amount of the Notes. "Principal Office" -- The principal office of UBS in the United States, presently located at 299 Park Avenue, New York, New York 10171. "Pro Rata Share" -- With respect to each Lender, the ratio of such Lender's Individual Loan Commitment to the Loan Amount. As of the date hereof, Lenders' respective Pro Rata Shares are as follows:
Lender Pro Rata Share ------ -------------- UBS 100%
8 13 "Project Cost Statement" -- A statement in form approved by Agent setting forth, by category, the costs of completion of the Improvements and the Loan Budget Amounts in respect of the Direct Costs Loan and Indirect Costs Loan. "Regulation D" -- Regulation D of the Board of Governors of the Federal Reserve System, as from time to time amended or supplemented, or any replacement regulation from time to time in effect. "Regulatory Change" -- With respect to any Lender and the charging and collecting of interest at the LIBO Based Rate, any change after the date hereof in United States federal, state or foreign laws or regulations (including Regulation D) or the adoption or making after such date of any interpretations, directives or requests applying to a class of banks including such Lender under any United States federal, state or foreign laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof, excluding any change the effect of which is reflected in a change in the LIBO Based Rate. "Replacement Lender" -- Has the meaning specified in Section 7.20. "Required Lenders" -- At any time, those Non-Delinquent Lenders holding more than 66-2/3% of that portion of the aggregate outstanding principal amount of those of the Notes held by the Non-Delinquent Lenders. "Requisition" -- A statement by or on behalf of Borrower in the form of EXHIBIT B hereto setting forth the amount of the Loan advance requested in each instance and including: (i) the Direct and Indirect Cost Statements; (ii) a "Contractor's Cost Certification" in the form of EXHIBIT B-1 hereto; (iii) Payment Receipts from all contractors, subcontractors or suppliers; and (iv) proof of payment of all Indirect Costs covered by a previous Requisition. "Requisition Authorization Statement" -- A statement by Borrower in the form of EXHIBIT G hereto setting forth the name and containing the signature of each person authorized to execute Requisitions under this Agreement on Borrower's behalf. "Reserve Requirement" -- The average maximum rate at which reserves (including any marginal, supplemental or emergency reserves) are actually required to be maintained by any Lender or any Lender's respective Participants in the Loan, if any, under 9 14 Regulation D against "Euro-Currency Liabilities", as such quoted term is used in Regulation D. Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained by any Lender or any Lender's respective Participants in the Loan by reason of any Regulatory Change against (i) any category of liabilities which includes deposits by reference to which the LIBO Based Rate is to be determined as provided in this Agreement or (ii) any category of extensions of credit or other assets which includes loans the interest rate on which is determined on the basis of rates used in determining the LIBO Rate. "SFGLA" -- Square foot (feet) of gross leaseable area. "Stored Materials Statement" -- A statement in the form of SCHEDULE I-A of Exhibit B which, if advances are to be made for stored materials pursuant to Section 2.05 hereof, shall be prepared by Borrower as part of the Direct Cost Statement. "Supplemental Fee Letter" -- That certain letter agreement, dated the date hereof, between UBS and Borrower, providing for Borrower's payment to UBS on the Closing Date and thereafter of certain fees in connection with the Loan and the Other Loan, such fees to be for UBS' own account. "Title Insurer" -- The issuer(s), approved by Agent of the title insurance policy or policies insuring the Mortgage. ARTICLE II. THE LOAN 2.01. Advances, Generally. Subject to the provisions of this Agreement, each Lender will advance its Pro Rata Share of, and Borrower will accept, the Loan Amount in installments as follows: The Initial Advance will be made upon the satisfaction of the applicable conditions set forth in Article IV hereof, and all subsequent advances shall be made monthly thereafter, upon the satisfaction of the applicable conditions set forth in Article V hereof, in amounts which shall be equal to the aggregate of the Direct and Indirect Costs incurred by Borrower through the end of the period covered by the Requisition less: (a) the greater of the Retainage Percentage of such Direct Costs or the actual "Retained Amounts" specified on the Direct Cost Statement; and (b) the total of the Loan advances theretofore made; and, at the election of Agent, less any combination of the following further amounts: 10 15 (c) all or a portion of the amount by which any Direct or Indirect Costs are or are estimated by Agent to be greater than the respective Loan Budget Amounts for such costs; and/or (d) any costs covered by the Requisition not approved, certified or verified as provided in Section 2.02, any Indirect Costs covered by a previous Requisition for which any requested proof of payment has not been received by Agent, and/or any Direct Costs covered by a previous Requisition for which any requested Payment Receipts have not been received by Agent and the Construction Consultant. Lenders shall fund each advance of the Loan ratably in accordance with the respective undisbursed amounts of their Individual Loan Commitments. 2.02. Certification of Costs. Direct Costs are to be certified by the General Contractor or Borrower's supervisor of construction if there is no General Contractor. Verification of the monthly progress and Direct Costs which have been incurred by Borrower from time to time, and the estimated total Direct Costs, shall be conclusively determined by the Construction Consultant, except that both Direct and Indirect Costs are also subject to approval and verification by Agent from time to time. 2.03. Procedures for Advances. All advances to Borrower are to be made at Agent's Office. Borrower shall submit Requisitions to Agent no later than 10:00 a.m. (New York time) on the date which is seven (7) Business Days prior to the date the advance is to be made. Agent, no later than three (3) Business Days prior to the date an advance is to be made, shall (i) notify each Lender by telephone (to be promptly confirmed in writing) of the amount requested by Borrower, the amount approved by Agent, the portion of such advance to be funded by such Lender, the proposed date of such advance and the anticipated rate at which such advance shall bear interest and (ii) send to each Lender by facsimile the summary pages of Borrower's Requisition (without attachments except for the Direct and Indirect Cost Statements). Not later than 10:00 a.m. (New York time) on the date of each advance, each Lender shall, through its Applicable Lending Office and subject to the conditions of this Agreement, make the amount to be advanced by it on such day available to Agent, at Agent's Office and in immediately available funds. The amount so received by Agent shall, subject to the conditions of this Agreement, be made available to Borrower, by Agent's depositing said amount into the Building Loan Trust Account. Subsequent to the making of an advance, Agent shall deliver to a Lender, within ten (10) Business Days of such Lender's request, such material relating to the Requisition for such advance as such Lender may reasonably request. 2.04. Advances of Held-Back Amounts; Advances for Indirect Costs Subsequent to Completion. (a) With respect to each 11 16 contractor, subcontractor or supplier, amounts not advanced pursuant to paragraph (a) of Section 2.01 during the course of construction of the Improvements shall be advanced upon the satisfactory completion of such contractor's, subcontractor's or supplier's work as reasonably determined by Lender and receipt of a final Payment Receipt and a final lien waiver from such contractor, subcontractor or supplier but in no event shall such advance be made sooner than as specified in its respective contract. (b) Loan Budget Amounts for Indirect Costs not advanced prior to completion of construction of the Improvements shall be advanced until exhausted, not more frequently than once a month, for Indirect Costs as incurred after such completion. (c) Any amounts remaining to be advanced under this Agreement after full funding under paragraphs (a) and (b) of this Section 2.04 shall be advanced upon the satisfaction of the conditions set forth in Section 5.02 and the following additional conditions: (i) permanent certificates of occupancy have been issued for the space demised by each Major Lease, (ii) each of the tenants under the Major Leases is in occupancy, is paying full base or fixed rent pursuant to its Major Lease and is not subject to any bankruptcy or similar insolvency proceedings, (iii) final Payment Receipts and lien waivers have been received from all contractors, subcontractors and suppliers who have been retained in respect of the Improvements and (iv) the monthly base or fixed rent payable under the Major Leases is equal to or greater than 150% of the monthly interest expense payable on the Notes and the Other Notes assuming they are outstanding in the aggregate principal amount of $60,000,000. 2.05. Advances for Stored Materials. (a) Lenders shall not make Loan advances for building materials which are stored on the Premises but not yet affixed to or incorporated into the Improvements, except in the case of major building materials approved by Agent and intended to be incorporated into the Improvements pursuant to the Plans, and not until Agent shall have received (a) bills of sale and other documentation evidencing payment in full of such materials, Borrower's ownership thereof and the release of any right, title or lien in respect thereof by any vendor, (b) evidence that such materials are covered by the insurance policies required by this Agreement and are identified and protected against loss, theft and damage in a manner acceptable to the Construction Consultant and (c) evidence that advances made by Lenders for any stored materials do not, at any one time, exceed, in the aggregate, the Stored Material Amount, inclusive of the amount requested. (b) In addition, Lenders shall from time to time make Loan advances, in accordance with the terms of this Agreement, for pre-cast concrete, which is stored at locations off the Premises acceptable to Agent prior to its incorporation into the Improvements pursuant to the Plans, provided that, in the case of 12 17 each such advance, Agent shall have received (i) such security agreements, financing statements and other documents as Agent may require sufficient to create, perfect and protect a first lien on said materials, (ii) evidence that said materials are covered by the insurance policies required by this Agreement, (iii) a written statement from the storer of said materials to the effect that Agent and the Construction Consultant may freely inspect said materials at all reasonable times and (iv) evidence that advances made by Lenders for said materials and for materials stored on the Premises pursuant to paragraph (a) of this Section 2.05 do not, at any one time, exceed, in the aggregate, the Stored Material Amount, inclusive of the amount requested. Each request for an advance of Loan proceeds for materials to be stored off-site shall constitute Borrower's representation to Lenders that said materials are (1) stored in a designated and secure area, conspicuously marked to show that they are the subject of a security interest held by Agent for the benefit of Lenders, and that said materials will not be moved except in connection with their delivery to the Premises, (2) effectively segregated from all other materials of whatever kind located at the off-site location in question and (3) reasonably anticipated to be incorporated into the Improvements within 120 days of the date of the advance therefor. Borrower covenants to deliver to Agent with a Requisition containing a request for any such advance (x) paid bills and original warehouse receipts or other documents of title which correspond to the materials so purchased and stored off-site, (y) a statement from the seller of said materials to the effect that title thereto has passed to Borrower outright, and that no lien has or will be filed or claimed by the seller in connection therewith and (z) a certificate of Borrower to the effect that said materials are owned by Borrower outright, free and clear of all liens other than the lien held by Lender and that all of the terms of this paragraph have been complied with (the representations set forth above and the statements contained in such certificate shall be deemed to be "representations and warranties" of Borrower with the same force and effect as if they had been set forth in Section 6.01 of this Agreement and the accuracy thereof shall be subject to independent verification by Agent and the Construction Consultant). 2.06. Acceleration of Advances. (a) Lenders may, in their absolute discretion, accelerate all or any portion of the amounts to be advanced hereunder without regard to Borrower's satisfaction of the conditions to its entitlement to Loan proceeds and no person dealing with Borrower or the General Contractor or any other person shall have standing to demand any different performance from Lenders, provided, however, that if Borrower chooses to deposit with Agent the amount of any Loan advances in excess of the amount which Borrower would be entitled to pursuant to Section 2.01, Lenders shall give Borrower a credit against the interest due on the Notes equal to the interest which would accrue on the amount so deposited as if it bore interest at the interest rate that would be applicable thereto under the Notes. 13 18 (b) CONTRACTORS, SUBCONTRACTORS, LABORERS, MATERIALMEN and SUPPLIERS are cautioned that if Loan advances are made under the alternative set forth in paragraph (a) above, proceeds of the Loan remaining to be advanced at the time of the completion of the Improvements, or any time prior thereto, may be inadequate to pay all lienable claims incurred by Borrower and unpaid at that time. All potential lienors are therefore cautioned to exercise sound business judgment in the extension of credit to Borrower and should not expect Lenders to make Loan advances in such amounts and at such times that it will not be necessary for said parties to exercise such judgment for themselves. Moreover, they are reminded that subdivision (3) of Section 13 of the Lien Law provides that "[n]othing in this subdivision shall be considered as imposing upon the lender any obligation to see to the proper application of such advances by the owner," and Agent and Lenders have no intention of voluntarily imposing such obligation on themselves. 2.07. Reallocation of Amounts on Project Cost Statement. If at any time the undisbursed balance of the Loan Budget Amount for any category of cost shown on the Project Cost Statement is, in Agent's judgment, excessive, the excess may be reallocated to any other Loan Budget Amount balance including "Contingency" which Agent deems to be insufficient. Any reallocation of Loan Budget Amounts pursuant to this Section 2.07 will not have the effect of reducing the net sum which Borrower estimates will be available to it from the Loan to pay contractors, subcontractors, laborers, materialmen and suppliers for the Improvements as set forth on the Lien Law Statement. 2.08. Certain Limitations on Advances. Notwithstanding anything to the contrary contained in this Agreement, Lenders shall have no obligation to advance any portion of the Loan Budget Amount, if any, for (a) "Tenant Work" unless Agent shall have received and approved copies, certified to be true and complete, of the leases for space in the Improvements to which such tenant work relates, or in respect of any lease at a rate per SFGLA in excess of said Loan Budget Amount divided by the aggregate number of SFGLA in the Improvements, irrespective of Borrower's agreement regarding tenant work with any tenant as set forth in any lease or otherwise and (b) "Interest on Loan" (i) if, when and to the extent that Agent, in its sole judgment, determines that the Premises and/or Improvements are generating, on a cash basis, positive cash flow in excess of Borrower's other usual, reasonable and customary expenses regarding the Premises and/or Improvements or (ii) if and to the extent that Borrower shall have previously paid any interest under the Notes from sources other than advances under this Agreement or agreements supplemental hereto. 2.09. Nature of Lenders' Obligations; Borrower's Rights and Obligations in Event a Lender Fails to Make an Advance. The obligations of Lenders under this Agreement are several, and no Lender shall be responsible for the failure of any other Lender to fund the portion required to be funded by such other Lender of an advance of the Loan. In cases where a Delinquent Lender fails to 14 19 fund the portion required to be funded by it of an advance and (x) none of the other Lenders elects to be an Electing Lender pursuant to Section 7.16 and to fund the Delinquent Lender's share of the advance and (y) Borrower is unable to procure a Replacement Lender in accordance with Section 7.20, the obligation of the Non-Delinquent Lenders to fund their respective portions of such advance and each subsequent advance shall be conditioned on (i) Borrower's committing in writing to Lenders, prior to any such advance, that it will fund the entire Delinquency Amount and (ii) Borrower's submitting satisfactory evidence to Agent, at the time of each advance, that Borrower has paid, from its own funds, a portion of the Direct and Indirect Costs that are the subject of such advance in an amount equal to the Delinquent Lender's portion of such advance. 2.10. Notes. The Loan shall be evidenced by notes of Borrower in the form of EXHIBIT H hereto, duly completed and executed by Borrower (one for each Lender in an amount equal to such Lender's Individual Loan Commitment, payable for the account of such Lender's Applicable Lending Office), in an aggregate principal amount equal to the Loan Amount (such notes, as the same may hereafter be amended, modified, extended, severed, assigned, renewed or restated from time to time (including, without limitation, any substitute or replacement notes pursuant to Section 7.16, Section 7.20 or Section 8.13), each, a "Note" and collectively, the "Notes"). The Notes shall mature, and all outstanding principal and other sums thereunder shall be paid in full, on the Maturity Date, as the same may be accelerated or extended. 2.11. Method of Payment. Borrower shall make each payment under this Agreement and under the Notes not later than 11:00 a.m. (New York time) on the date when due to Agent at Agent's Office in immediately available funds. Agent will thereafter, on the day of its receipt of each such payment, cause to be distributed to each Lender such Lender's appropriate share (based upon the respective outstanding principal amounts of the Notes and the respective rates of interest thereunder) of the payments of principal and interest in like funds for the account of such Lender's Applicable Lending Office. Borrower hereby authorizes Agent and Lenders, if and to the extent payment by Borrower is not made when due under this Agreement or under the Notes, to charge from time to time against any account Borrower maintains with Agent or any Lender any amount so due to Agent and/or Lenders. Except to the extent provided in this Agreement, whenever any payment to be made under this Agreement or under the Notes is due on any day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of the payment of interest, as the case may be. Notwithstanding the foregoing provisions of this Section, (i) Agent shall make no payment to a Delinquent Lender until the Non- 15 20 Delinquent Lenders have been paid in full all outstanding principal, accrued and unpaid interest and any other sums owing to them under the Loan Documents, it being understood that payments of interest on account of the outstanding principal amount of the Note held by the Delinquent Lender shall be held by Agent in a non-interest bearing account and not distributed to the Delinquent Lender until such time as all principal, interest and other sums due to the Non-Delinquent Lenders have been paid in full; (ii) any payments (other than interest, as provided in clause (i) above) which would otherwise be due a Delinquent Lender shall be distributed to the Non-Delinquent Lenders until all Non-Delinquent Lenders have been paid all outstanding principal, accrued and unpaid interest and other sums owing to them under the Loan Documents (except that any such amounts otherwise due a Delinquent Lender received by Agent during an Election Period shall be retained by Agent until the expiration of the Election Period and either paid to the Delinquent Lender, if the delinquency is cured, or paid to the Non-Delinquent Lenders, if the delinquency is not cured); and (iii) Agent shall deduct, from amounts due (or, in the case of a Delinquent Lender, amounts that would otherwise be payable to such Delinquent Lender being held by Agent pursuant to clause (i) above) a Lender in default under its obligations under Section 7.05, the amount owing by such Lender pursuant to said Section 7.05 and pay the amount so deducted to itself, the other Lenders, or such other party as is entitled to such amount, as applicable. Except as provided above in this Section and in Section 7.16, each Lender's Pro Rata Share of the Loan shall be of equal priority with the Pro Rata Share of each other Lender. 2.12. Interest. Borrower shall have the option, subject to the terms and conditions set forth in this Agreement, of paying interest on the Principal Amount or portions thereof at the Prime Based Rate or the LIBO Based Rate. If Borrower desires the application of the LIBO Based Rate, it shall submit a LIBO Rate Request to Agent, which LIBO Rate Request shall be irrevocable, subject to Borrower's right to convert the rate of interest payable under the Note with respect to any LIBOR Amount from the LIBO Based Rate to the Prime Based Rate as provided in Section 2.14. Agent shall, on the day of its receipt of the LIBO Rate Request from Borrower, notify each Lender by telephone (to be promptly confirmed in writing) of the specified LIBOR Amount and the amount of the Lender's portion thereof, the Interest Period and date of commencement thereof, and the interest rate applicable to such LIBOR Amount. Each LIBO Rate Request shall be applicable to the Notes in accordance with the Lenders' respective Pro Rata Shares, so that, barring a conversion or suspension of the LIBO Based Rate by one or more, but not all, Lenders, pursuant to Article III hereof, the outstanding principal amounts of each of the Notes shall contain segments bearing interest at the Prime Based Rate and/or LIBO Based Rate(s) under particular Interest Period(s), each of which segments shall correspond to a proportional segment of the outstanding principal amount of every other Note. Notwithstanding 16 21 the foregoing, if a Lender shall fail to fund the portion it is required to fund of any advance of the Loan and an Electing Lender shall commit to fund the Delinquency Amount pursuant to Section 7.16, then from and after the time of the first disbursement of the Delinquency Amount by the Electing Lender, (i) in the case of a LIBO Rate Request with respect to an advance, such LIBO Rate Request shall be applicable to the Notes in accordance with the respective portions of such advance made by the Lenders; (ii) in the case of a LIBO Rate Request with respect to a portion of the Principal Amount bearing interest at the Prime Based Rate to be converted to the LIBO Based Rate, such LIBO Rate Request shall be applicable to the Notes ratably in accordance with the portions of the outstanding principal balances under the respective Notes bearing interest at the Prime Based Rate; and (iii) in the case of a LIBO Rate Request with respect to an existing LIBOR Amount that is to be the subject of a new Interest Period, such LIBO Rate Request shall be applicable to the Notes ratably in accordance with the respective portions of such existing LIBOR Amount allocable to the respective Notes. In the event that Borrower fails to submit a LIBO Rate Request with respect to a LIBOR Amount not later than 12 Noon (New York time) three (3) Business Days prior to the last day of the relevant Interest Period, the LIBOR Amount in question shall bear interest, commencing at the end of such Interest Period, at the Prime Based Rate. Interest shall be computed on an actual/360-day basis (i.e., interest for each day during which any portion of the Principal Amount is bearing interest at a particular interest rate per annum shall be computed at such rate divided by 360. Borrower shall pay interest on the Principal Amount to Agent for the account of Lenders. Prior to the date on which (i) Borrower shall have satisfied all conditions set forth in Section 5.02 to its entitlement to the last Direct Costs Loan advance and (ii) the Improvements have been completed, interest on the Principal Amount, whether calculated at the Prime Based Rate or the LIBO Based Rate, shall be payable, in arrears, on the first day of each month. Following the satisfaction of the conditions set forth in clauses (i) and (ii) above, interest on the portion of the Principal Amount bearing interest at the Prime Based Rate shall be payable, in arrears, on the first day of each month, and interest on the portion(s) of the Principal Amount bearing interest at the LIBO Based Rate shall be payable on the last day of the relevant Interest Period and, in the case of Interest Periods longer than three (3) months, on the first day of each calendar quarter during such Interest Period. If any payment under Section 2.01(a) of the Mortgage is not paid when due, the Principal Amount shall bear interest at the Involuntary Rate until such payment is made. 2.13. Limitation on Number of Interest Periods. Borrower shall not have the right to have more than five (5) Interest Periods, in the aggregate, in respect of the Loan and the Other Loan, in effect at any one time, whether or not any portion of the Principal Amount is then bearing interest at the Prime Based Rate. 17 22 2.14. Conversions of Interest Rate. Provided there exists no Event of Default, Borrower shall have the right to convert, from time to time, the rate of interest payable under the Notes with respect to any portion of the Principal Amount to the LIBO Based Rate or the Prime Based Rate, subject to the terms of this Agreement (including, without limitation, the payment of all amounts due in connection with any such conversion from the LIBO Based Rate on a date other than the last day of an applicable Interest Period) and provided that, in the case of a conversion from the LIBO Based Rate, the entire LIBOR Amount is the subject of the conversion. Conversions shall be accomplished (i) in the case of a conversion from the Prime Based Rate to the LIBO Based Rate, by Borrower's submission of a LIBO Rate Request in accordance with Section 2.12 or (ii) in the case of a conversion from the LIBO Based Rate to the Prime Based Rate, by Borrower's request to Agent by telephone (to be promptly confirmed in writing), to be received by Agent at least three (3) Business Days prior to the date specified for such conversion, specifying the LIBOR Amount with respect to which the interest rate is to be converted and the date of the conversion. On the date of its receipt of such request, Agent shall notify each Lender thereof by telephone. 2.15. Inapplicability of LIBO Based Rate. Any portion of the Principal Amount to which the LIBO Based Rate is not or cannot pursuant to the terms of this Agreement be applicable shall bear interest at the Prime Based Rate. Upon the occurrence of an Event of Default, the entire Principal Amount shall, at the option of the Required Lenders, immediately and without notice to Borrower, bear interest at the Prime Based Rate. In addition, following the occurrence of such an Event of Default, Borrower shall have no right to submit a LIBO Rate Request with respect to any LIBOR Amount for which the current Interest Period is expiring. The foregoing provisions shall not be construed as a waiver by Lenders of their right to pursue any other remedies available to them under the Mortgage or any other Loan Document nor shall they be construed to limit in any way the application of the Involuntary Rate as provided in the Mortgage. 2.16. Late Payment Premium. Borrower shall pay to Agent for the account of Lenders a late payment premium in the amount of 4% of any payments of principal or interest under the Loan made more than ten (10) days after the due date thereof, which shall be due with any such late payment. 2.17. Extension of Maturity. Borrower shall have the option, exercisable once, to extend the Maturity Date for a period of one (1) year, subject to (i) Agent's receipt of a written request from Borrower for such extension not later than thirty (30) days prior to the Original Maturity indicating the aggregate principal amount of the Loan and the Other Loan (the "Loans") to be extended (the "Aggregate Principal Amount") and Borrower's (1) repayment of any principal amount of the Loans above the Aggregate Principal Amount and (2) consent to cancellation of any unfunded portions of the Loans in excess of the Aggregate Principal Amount, (ii) the 18 23 absence, as of the Original Maturity, of any Default or Event of Default, (iii) Agent's receipt, on behalf of Lenders, of an extension fee in the amount of $106,250, (iv) the execution and delivery of such note extension and modification agreement(s) as Lenders may require to give effect to such extension and (v) Agent's determination (which shall be conclusive so long as made on a reasonable basis) that the annual net operating income available for debt service from the Premises as of the Original Maturity is at least 120% of the annual debt service which would be payable on the Aggregate Principal Amount assuming an interest rate equal to 2% in excess of the interest rate on 10-year U.S. treasury notes quoted as of the Original Maturity and assuming principal amortization on a 30-year amortization schedule providing for uniform combined payments of principal and interest. ARTICLE III. YIELD MAINTENANCE ETC. 3.01. Additional Costs and Other Effects of Regulatory Changes. Borrower shall pay directly to a Lender, promptly upon demand, such amounts as are necessary to compensate such Lender for Additional Costs resulting from any Regulatory Change which (i) subjects such Lender to any tax, duty or other charge with respect to the Loan or its Note, or changes the basis of taxation of any amounts payable to such Lender under the Loan or its Note (other than (x) taxes imposed on the overall net income of such Lender or of its Applicable Lending Office or (y) a tax described in Section 7.13), (ii) imposes, modifies or deems applicable any reserve, special deposit or similar requirements relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, such Lender, (iii) imposes on such Lender or, in the case of LIBOR Amounts, on the London interbank market, any other condition (unrelated to the basis of taxation referred to in paragraph (i) above) affecting the Loan or its Note, or any of such extensions of credit or liabilities or (iv) imposes any capital adequacy requirements on such Lender by virtue of the Loan or the Notes. Such Lender will notify Borrower (with a copy to Agent) of any event occurring after the date hereof which would entitle it to compensation pursuant to this paragraph as promptly as practicable after it obtains knowledge thereof and determines to request such compensation, and will designate a different Applicable Lending Office for those portions of the Loan affected by such event if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in such Lender's sole opinion, be disadvantageous to it, provided that such Lender shall have no obligation to so designate an Applicable Lending Office located in the United States. Without limiting the effect of the immediately preceding paragraph, in the event that, by reason of any Regulatory Change, (i) a Lender incurs Additional Costs based on or measured by the excess above a specified level of the amount of (1) a category of 19 24 deposits or other liabilities of such Lender which includes deposits by reference to which the LIBO Rate is determined as provided in this Agreement and/or (2) a category of extensions of credit or other assets of such Lender which includes loans the interest on which is determined on the basis of rates referred to in the definition of "LIBO Rate" in Section 1.02, (ii) a Lender becomes subject to restrictions on the amount of such a category of liabilities or assets which it may hold or (iii) it shall be unlawful or impossible for a Lender to make or maintain its Pro Rata Share of the Loan (or any portion thereof) at the LIBO Based Rate, then such Lender's obligation to make or maintain its Pro Rata Share of the Loan (or portions thereof) at the LIBO Based Rate (and Borrower's right to request the same) shall be suspended and such Lender shall give notice thereof to Borrower (with a copy to Agent) and, upon the giving of such notice, interest payable on the affected Note shall be converted to the Prime Based Rate, unless such Lender may lawfully continue to maintain its Pro Rata Share of the Loan (or any portion thereof) then bearing interest at the LIBO Based Rate to the end of the current Interest Period(s), at which time the interest rate on the affected Note shall convert to the Prime Based Rate. If subsequent to any conversion to the Prime Based Rate as provided above such Lender determines that such Regulatory Change has ceased to be in effect, such Lender will so notify Borrower (with a copy to Agent), and Borrower may convert the rate of interest payable under the Notes with respect to those portions of the Principal Amount bearing interest at the Prime Based Rate to the LIBO Based Rate by submitting a LIBO Rate Request in respect thereof and otherwise complying with the provisions of this Agreement with respect thereto. Determinations by each Lender of the existence or effect of any Regulatory Change on its costs of making or maintaining its Pro Rata Share of the Loan, or portions thereof, at the LIBO Based Rate, or on amounts receivable by it in respect thereof, and of the additional amounts required to compensate such Lender in respect of Additional Costs, shall be included in a calculation of such amounts given to Borrower and shall be conclusive, so long as made on a reasonable basis. 3.02. Limitations on Availability of LIBO Based Rate. Anything herein to the contrary notwithstanding, if, at the time of or prior to the determination of the LIBO Based Rate in respect of any LIBO Rate Request Amount as provided in this Agreement, a Lender determines (which determination shall be conclusive, so long as made on a reasonable basis) that (i) by reason of circumstances affecting the London interbank market generally, adequate and fair means do not or will not exist for determining the LIBO Based Rate applicable to an Interest Period or (ii) the LIBO Rate, as determined by such Lender, will not accurately reflect the cost to such Lender of making or maintaining its Pro Rata Share of the Loan (or any portion thereof) at the LIBO Based Rate, then such Lender shall give Borrower prompt notice thereof (with a copy to Agent), and such Lender's portion of the LIBO Rate Request Amount in question shall bear interest, or continue to bear interest, as the 20 25 case may be, at the Prime Based Rate. If at any time subsequent to such Lender's giving of such notice, such Lender determines that because of a change in circumstances the LIBO Based Rate is again available to Borrower under its Note, such Lender shall so notify Borrower (with a copy to Agent) and Borrower may convert the rate of interest payable under such Note from the Prime Based Rate to the LIBO Based Rate by submitting a LIBO Rate Request and otherwise complying with the provisions of this Agreement with respect thereto. 3.03. Certain Compensation. Other than in connection with a conversion of an affected Note pursuant to the second paragraph of Section 3.01, Borrower shall pay directly to a Lender, immediately upon request, which request shall include a calculation of the amounts due, and notwithstanding contrary provisions contained in the Mortgage or other Loan Documents, such amounts as shall, in the judgment of such Lender (which shall be conclusive so long as made on a reasonable basis), compensate it for any loss, cost or expense incurred by it as a result of (i) any payment or prepayment (under any circumstances whatsoever, whether voluntary or involuntary) of any portion of the Principal Amount bearing interest at the LIBO Based Rate on a date other than the last day of an applicable Interest Period, (ii) the conversion (for any reason whatsoever, whether voluntary or involuntary) of the rate of interest payable under such Lender's Note from the LIBO Based Rate to the Prime Based Rate with respect to any portion of the Principal Amount then bearing interest at the LIBO Based Rate on a date other than the last day of an applicable Interest Period, (iii) the failure of all or a portion of an advance of the Loan which was to have borne interest at the LIBO Based Rate pursuant to a LIBO Rate Request to be made or (iv) the failure of Borrower to borrow in accordance with a LIBO Rate Request submitted by it, which amounts shall include, without limitation, an amount equal to the present value (using as the discount rate an interest rate equal to the rate determined under (y) below) of the excess, if any, of (x) the amount of interest (less the LIBOR Margin) that would have accrued at the LIBO Based Rate on the amount so prepaid, converted, not advanced or not borrowed, as the case may be, for the period from the date of occurrence to the last day of the applicable Interest Period over (y) the amount of interest (as reasonably determined in good faith by such Lender) based upon the interest rate which such Lender would have bid in the London interbank market for U.S. dollar deposits in an amount comparable to the amount so prepaid, converted, not advanced or not borrowed, as the case may be, for the period from the date of occurrence to the last day of the applicable Interest Period. 3.04. "Lender" to Include Participants. For purposes of this Article III and of the definition of "Additional Costs" in Section 1.02, the term "Lender" shall, at each Lender's option, be deemed to include such Lender's present and future Participants in the Loan to the extent of each such Participant's actual Additional Costs or other losses, costs or expenses payable pursuant to this Article III. 21 26 ARTICLE IV. CONDITIONS PRECEDENT TO LENDERS' OBLIGATION TO MAKE THE INITIAL ADVANCE 4.01. Conditions Precedent to Initial Advance. Lenders shall not be obligated to make the Initial Advance until the following conditions shall have been satisfied. (a) Agent shall have received and approved the items specified in Section 4.02; (b) The Construction Consultant shall have received and approved the items specified in Section 4.03; (c) Lenders' Counsel shall have received and approved the items specified in Section 4.04; (d) The representations and warranties made in Article VI hereof shall be true and correct on and as of the date of the Initial Advance with the same effect as if made on such date; (e) The Improvements, if any, shall not have been materially injured or damaged by fire or other casualty unless Agent shall have received insurance proceeds sufficient in the judgment of the Construction Consultant to effect the satisfactory restoration of the Improvements and to permit completion of the Improvements prior to the Completion Date; and (f) There shall exist no Default or Event of Default. 4.02. Items to Be Received and Approved by Agent. The items to be received and approved by Agent prior to the Initial Advance shall be: (a) Fees and Expenses. Payment of (i) an administration fee of $60,000 for the first Loan year to be retained by Agent for its own account; (ii) those fees required by the Supplemental Fee Letter to be paid on or before the Initial Advance, to be retained by UBS for its own account; and (iii) all fees and expenses incurred by Agent (including, without limitation, the reasonable fees and expenses of Lenders' Counsel, the Construction Consultant, Lenders' environmental consultant, and the preparer of the appraisal required below); (b) Current Financial Statements and such other financial data as Lenders shall require; (c) An appraisal of the Premises and Improvements; (d) Advice from the Construction Consultant to the effect that (i) the Plans have been approved by him and by 22 27 Governmental Authorities, (ii) the Improvements as shown by the Plans will comply with applicable zoning ordinances and regulations, (iii) a General Contract and/or Major Subcontracts are in effect which satisfactorily provide for the construction of the Improvements, (iv) all roads and utilities necessary for the full utilization of the Improvements for their intended purposes have been completed or the presently installed and proposed roads and utilities will be sufficient for the full utilization of the Improvements for their intended purpose and (v) the construction of the Improvements theretofore performed, if any, was performed in accordance with the Plans and the construction of the Improvements will be finished along with all necessary roads and utilities on or before the Completion Date; (e) A copy of the General Contract, certified by Borrower to be true and complete, or if there is no General Contractor, copies of the Major Subcontracts so certified, together with a copy of Borrower's agreement with Borrower's Architects so certified; (f) The policies of hazard and other insurance required by the Mortgage, including flood insurance, if applicable (together with evidence of the payment of the premiums therefor) which policies will contain an endorsement specifically providing that, in the case of any damage, all insurance proceeds will be paid to Agent; (g) Performance bonds naming Agent as co-obligee and labor and materials payment bonds, each in AIA Document No. A-311 (1970 Edition), for penal sums equal to the amounts of the General Contract and such of the Major Subcontracts as Agent shall have designated; (h) A progress schedule or chart showing the interval of time over which each item of Direct Cost is projected to be incurred or paid; (i) The Project Cost Statement; (j) A Requisition for the Initial Advance, together with, if requested by Agent, proof of payment of any Indirect Costs included therein; (k) Evidence that the Premises and the Improvements thereon are not currently and have never been subject to Hazardous Materials except for conditions disclosed in the environmental reports listed in Exhibit K (the "Environmental Reports"); such evidence shall include, without limitation, at Borrower's expense, a detailed report and certification by a properly qualified engineer, which shall include, inter alia, a certification that such engineer has obtained and examined the list of prior owners, tenants and other users required by paragraph (j) of Section 4.04, and has made an on-site 23 28 physical examination of the Premises, and a visual observation of the surrounding areas, and has found no evidence of past or present Hazardous Materials activities or the presence of Hazardous Materials; (l) Copies of the items required by paragraphs (c) and (g) of Section 4.04; (m) Copies of any and all brokerage or leasing agreements and property management agreements with respect to the Premises; and (n) the Cash Collateral. 4.03. Items to Be Received and Approved by Construction Consultant. The items to be received and approved by the Construction Consultant prior to the Initial Advance shall be: (a) Copies of a soil-engineer's report, a site plan (showing all necessary approvals, utility connections and site Improvements) and the Plans; (b) Copies of the items required by paragraphs (e), (h), (i) and (k) of Section 4.02 and by paragraphs (c), (d) and (f) of Section 4.04; (c) Copies of each Major Lease which contains any requirements or specifications in respect of construction of the Improvements; (d) Copies of all inspection and test records and reports made by or for Borrower's Architects; (e) Copies of all documents listed as exceptions to title in the title policy required by Section 4.04; and (f) If the Initial Advance consists in whole or in part of advances for Direct Costs, a copy of the Requisition therefor. 4.04. Items to Be Received and Approved by Lenders' Counsel. The items to be received and approved, on Lenders' behalf, by Lenders' Counsel prior to the Initial Advance shall be: (a) The executed Notes, Mortgage, Supplemental Fee Letter, Indemnity, this Agreement, the Requisition Authorization Statement and UCC-1 financing statements relating to the Mortgaged Property and the Cash Collateral; (b) A paid title insurance policy or policies, in the amount of the Mortgage, in ALTA (1992) form with New York endorsements, issued by the Title Insurer, which shall be assignable to a permanent mortgagee without additional cost, shall insure the Mortgage to be a valid lien on Borrower's 24 29 Interest in the Premises free and clear of all defects and encumbrances except those previously received and approved by Lenders' Counsel, and shall contain: (i) full coverage against mechanics' liens (filed and inchoate), (ii) a reference to the survey but no survey exceptions except those theretofore approved by Lenders' Counsel, (iii) such affirmative insurance and endorsements as Lenders' Counsel may require, (iv) a Pending Disbursements Clause in the form of EXHIBIT F hereto; and, if any such policy is dated earlier than the date of the Initial Advance, a continuation of or endorsement to such policy, in a form approved by Lenders' Counsel, conforming to the requirements of said EXHIBIT F and setting forth no additional exceptions except those approved by Lenders' Counsel, and (v) containing such co-insurance provisions as Lenders' Counsel may require, and shall be accompanied by such reinsurance agreements between the Title Insurer and title companies approved by Agent, in ALTA 1990 Facultative form, as Agent may require; (c) Copies of any and all authorizations including plot plan and subdivision approvals, certificates of occupancy, zoning variances, sewer, building and other permits required by Governmental Authorities for the construction, use, occupancy and operation of the Premises and/or Improvements for the purposes contemplated by the Plans in accordance with all applicable building, environmental, ecological, landmark, subdivision and zoning codes, laws and regulations; (d) Letters from Borrower's Architects and the General Contractor in the forms of EXHIBITS C and D hereto, respectively, and letters, also in the form of said EXHIBIT D, from all Major Subcontractors specified by Lenders; (e) UCC searches against Borrower or other owner of the Premises and advice from the Title Insurer to the effect that searches of proper public records disclose no leases of personalty or financing statements filed or recorded against the Premises, Borrower or other owner of any Mortgaged Property; (f) A survey (current to within ten (10) days of the Initial Advance) of the Premises certified to Agent and the Title Insurer showing: 25 30 (i) the location of the perimeter of the Premises by courses and distances, (ii) all easements, rights-of-way and utility lines referred to in the title policy required by this Agreement or which actually service or cross the Premises, (iii) the lines of the streets abutting the Premises and the width thereof, and any established building lines, (iv) encroachments and the extent thereof upon the Premises, (v) the Improvements, to the extent constructed, and the relationship of the Improvements by distances to the perimeter of the Premises, established building lines and street lines, and (vi) if the Premises are described as being on a filed map, a legend relating the survey to said map; (g) Executed counterparts of each Major Lease, accompanied by an estoppel certificate from the tenant thereunder and, an executed notice-of-assignment letter in the form of EXHIBIT I hereto in respect thereof; (h) An opinion of Borrower's counsel to the effects set forth in paragraphs (a), (e) and (f) of Section 6.01, and to the effects, in addition to such other effects incident to the transactions contemplated hereby as Lenders' Counsel may require, that: (i) there exist no violations of any statutes, rules, orders, ordinances, regulations or requirements of any Governmental Authorities with respect to the Improvements and that the anticipated use thereof complies with all applicable statutes, ordinances, regulations (including, but not limited to, zoning, environmental, ecological, landmark and all other applicable categories) and restrictions, covenants, leases and easements affecting the Premises, (ii) the Premises are not part of a larger tract of land owned by Borrower or its affiliates, or otherwise considered as part of one zoning or tax lot, or, if they are, that any authorization or variance required for the subdivision of such larger tract which a sale of the Premises would entail has been obtained from all appropriate Governmental Authorities so that the Premises and Improvements constitute one zoning or tax lot (including parking and utility facilities and street access, if relevant) capable of being (1) conveyed as such and (2) 26 31 developed in the manner contemplated by this Agreement, and (iii) this Agreement, the Notes, Mortgage and Indemnity have each been duly authorized, executed and delivered by the parties thereto (other than Agent and Lenders) and are valid and binding instruments enforceable against such parties in accordance with their respective terms, including without limitation, any governing law designations made therein, subject, however, to the qualifications that (1) some of the rights and remedies set forth in this Agreement and the Notes and Mortgage may be limited by bankruptcy, insolvency, reorganization and other laws of general application to the enforcement of creditors' rights and (2) certain remedies and waivers contained in the Mortgage may be limited by applicable law, none of which qualifications will materially interfere with the practical realization of the benefits and security provided by said documents except for the economic consequences of any procedural delay which may result therefrom; and (i) Copies of the following documents with respect to Borrower: (i) a good-standing certificate from the jurisdiction of its incorporation and from the State of New York, (ii) a resolution, certified by the corporate secretary, of the shareholders or directors of the corporation authorizing the consummation of the transactions contemplated hereby and the execution, delivery and performance of the Loan Documents to be executed, delivered or performed by said corporation, and (iii) a certificate of the corporate secretary as to the incumbency of the officers executing any of the documents required hereby; (j) A list, certified by the Title Insurer, of the prior owners, tenants and other users, during the period from January 1, 1940 to the date of such certification, of all or any portion of the Premises or the Improvements thereon. ARTICLE V. CONDITIONS PRECEDENT TO LENDERS' OBLIGATIONS TO MAKE ADVANCES AFTER THE INITIAL ADVANCE 5.01. Generally. Lenders' obligation to make Loan advances after the Initial Advance shall be subject to the satisfaction of the following conditions: 27 32 (a) All conditions of Article IV shall have been and remain satisfied as of the date of such advances; (b) Agent and the Construction Consultant shall have received a Requisition for the advance, together with such other documentation and information as either of them may require; (c) Agent shall have received a continuation report of or endorsement to the title policy insuring the Mortgage to the date of such advance, in the form approved by Lenders' Counsel, conforming to the pending disbursement requirements set forth in EXHIBIT F hereto and setting forth no additional exceptions (including survey exceptions) except those approved by Lenders' Counsel; (d) If required by Agent, it shall have received a survey of the Premises certified to it and the Title Insurer, updated, with respect to all relevant requirements and information, to within ten (10) days of the advance; (e) The representations and warranties made in Article VI hereof shall be true and correct on and as of the date of the advance with the same effect as if made on such date; and (f) There shall exist no Default or Event of Default. 5.02. Last Direct Costs Advance. In the case of the last Loan advance as provided in Section 2.04(c), Agent shall also have received: (a) Advice from the Construction Consultant to the effect that construction of the Improvements has been completed, and any necessary utilities and roads have been finished and made available for use, in accordance with the Plans and that he has received satisfactory evidence of the issuance by Governmental Authorities of a temporary certificate of occupancy for the shell of the Improvements, including the parking garage; (b) A current final survey of the Premises, certified to Agent and the Title Insurer, showing the completed Improvements; and (c) No notice from any tenant under a Major Lease, not theretofore complied with, that, for purposes of the Major Lease, the Improvements have not been satisfactorily completed. 28 33 ARTICLE VI. BORROWER'S REPRESENTATIONS, WARRANTIES AND COVENANTS 6.01. Representations and Warranties. Borrower represents and warrants that: (a) Due Formation, Power and Authority. Borrower is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, has stock outstanding which has been duly and validly issued, is qualified to do business and is in good standing in the State of New York with full power and authority to consummate the transactions contemplated hereby; (b) Legally Enforceable Agreements. Each Loan Document is a legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency and other similar Laws affecting creditors' rights generally; (c) Plans Etc. Satisfactory. The Plans are satisfactory to it, have been reviewed and approved by the General Contractor, all tenants who have the right to approve the Plans, Borrower's Architects and, to the extent required by applicable law or any effective restrictive covenant, by all Governmental Authorities and the beneficiary of any such covenant; all construction, if any, already performed on the Improvements has been performed on the Premises in accordance with the Plans approved by the persons named above and with any restrictive covenants applicable thereto; there are no structural defects in the Improvements or violations of any requirement of any Governmental Authorities with respect thereto; the planned use of the Improvements complies with applicable zoning ordinances, regulations and restrictive covenants affecting the Premises as well as all environmental, ecological, landmark, and other applicable laws and regulations; and all requirements for such use have been satisfied; (d) Financial Statements. Financial Statements have been heretofore delivered to Lenders which are true, correct and current in all respects and which fairly present the respective financial conditions of the subjects thereof as of the respective dates thereof; no material adverse change has occurred in the financial conditions reflected therein since the respective dates thereof and no borrowing (other than the Loan) which might give rise to a lien or claim against the Mortgaged Property or Loan proceeds has been made by Borrower or others since the dates thereof; (e) Litigation; Compliance with Judgments. There are no actions, suits or proceedings, if any, pending or to the 29 34 knowledge of Borrower threatened against or affecting it, the Premises, the validity or enforceability of the Mortgage or the priority of the lien thereof at law, in equity or before or by any Governmental Authorities except actions, suits or proceedings which are identified in EXHIBIT J hereto and which are fully covered by insurance, subject to reasonable deductibles, or would, if adversely determined, not substantially impair the ability of Borrower to pay when due any amounts which may become payable under the Loan Documents; to Borrower's knowledge, it is not in default with respect to any order, writ, injunction, decree or demand of any court or Governmental Authorities, except where such default would not substantially impair the ability of Borrower to pay when due any amounts which may become payable under the Loan Documents; (f) No Conflicts. The consummation of the transactions contemplated hereby and performance of this Agreement, the Notes, Mortgage, and Indemnity have not and will not result in any breach of, or constitute a default under, any mortgage, deed of trust, lease, bank loan or credit agreement, corporate charter, by-laws or other instrument to which Borrower is a party or by which it may be bound or affected, except where such breach or default would not substantially impair the ability of Borrower to pay when due any amounts which may become payable under the Loan Documents; (g) Utilities Available. All utility services necessary for the construction of the Improvements and the operation thereof for their intended purposes are available at the boundaries of the Premises, including water supply, storm and sanitary sewer, gas, electric power and telephone facilities; (h) Requisition Constitutes Reaffirmation. Each Requisition presented to Agent, and the receipt of the funds requested thereby, shall constitute an affirmation that the representations and warranties contained in this Section 6.01 remain true and correct as of the respective dates thereof; (i) Creation of Liens. It has entered into no contract or arrangement of any kind the performance of which by the other party thereto would give rise to a lien on the Mortgaged Property prior to the Mortgage except for its arrangements with Borrower's Architects, the General Contractor, Major Subcontractors and contractors or subcontractors who have filed lien waivers or signed Payment Receipts for all payments due under said arrangements as of the end of the period covered by the last Requisition; (j) Roads. All roads necessary for the full utilization of the Improvements for their intended purposes have either been completed or the necessary rights of way therefor have been acquired by appropriate Governmental Authorities or dedicated to public use and accepted by said Governmental Authorities, and all necessary steps have been taken by 30 35 Borrower and said Governmental Authorities to assure the complete construction and installation thereof no later than the Completion Date or any earlier date required by any law, order or regulation or Major Lease; (k) Leases. Each Major Lease is unmodified (except for modifications previously delivered to Agent) and in full force and effect, there are no defaults under any thereof and all conditions to the effectiveness and continuing effectiveness thereof required to be satisfied as of the date hereof have been satisfied; (l) No Default. There exists no Default or Event of Default; (m) Plans. The approved Plans referred to in paragraph (b) above are scheduled by sheet number, title, date and revised date in the letter from Borrower's Architects required by paragraph (d) of Section 4.04, which schedule is hereby certified by Borrower to be true and correct, and are the same as the filed plans referred to in the building permits for the Improvements; (n) Construction Prior to Closing. It advised the Title Insurer in writing prior to the issuance of the title policy insuring the Mortgage whether any survey, soils-testing, site-development, excavation or other work related to construction of the Improvements was begun or done before the Mortgage was recorded; (o) Flood Hazard Zone. The Premises are not located in an area designated by the Secretary of Housing and Urban Development as having special flood hazards, or, if they are, Borrower has obtained the flood-hazard insurance required by the NFIA of 1968, as amended (42 USC 4013, et seq.); (p) Lien Law Statement. Attached hereto as EXHIBIT A and made a part hereof is the Lien Law Statement in conformity with Section 22 of the Lien Law; (q) Environmental Protection. The Premises and the Improvements thereon, and, to the best of Borrower's knowledge, the surrounding areas, are not currently and have never been subject to Hazardous Materials or their effects except as disclosed in the Environmental Reports; there are no claims, litigation, administrative or other proceedings, whether actual or threatened, or judgments or orders, regarding any Hazardous Materials relating in any way to the Premises or the Improvements thereon; and (r) Accuracy of Information; Full Disclosure. Neither this Agreement nor any documents, financial statements, reports, notices, schedules, certificates, statements or other writings furnished by or on behalf of Borrower to Agent or any 31 36 Lender in connection with the negotiation of this Agreement or the consummation of the transactions contemplated hereby, or required herein to be furnished by or on behalf of Borrower, contains any untrue or misleading statement of a material fact or omits a material fact necessary to make the statements herein or therein not misleading; there is no fact which Borrower has not disclosed to Agent and Lenders in writing which materially affects adversely nor, so far as Borrower can now foresee, will materially affect adversely any of the Mortgaged Property or the business, profits or financial condition of Borrower, or the ability of Borrower to perform this Agreement and the other Loan Documents. 6.02. Covenants. Borrower covenants and agrees that it will: (a) Compliance with Laws. Promptly comply in all material respects with all laws, ordinances, orders, rules, statutes and regulations of Governmental Authorities relating to the Mortgaged Property and promptly furnish Agent with reports of any official searches made by Governmental Authorities and any claims of violations thereof; (b) Right of Inspection. Permit Agent, Lenders and their representatives and the Construction Consultant to enter upon the Premises, inspect the Improvements and all materials to be used in the construction thereof and examine all detailed plans and shop drawings which are or may be kept at the construction site; cooperate and cause the General Contractor and Major Subcontractors to cooperate with the Construction Consultant to enable him to perform his functions hereunder; and, at the time of each inspection by the Construction Consultant, make available to said consultant, on demand, daily log sheets covering the period since the immediately preceding inspection showing the date, weather, subcontractors on the job, number of workers and status of construction; (c) Payment of Costs. Pay all Direct and Indirect Costs and expenses required for completion of the Improvements (and all costs and expenses required for the operation, management, leasing and maintenance thereof following such completion) and for the satisfaction of the conditions of this Agreement (irrespective of the amounts set forth in Column C of the Project Cost Statement and irrespective of the absence of any amount in said Column C for a particular item of Direct or Indirect Costs), including, without limitation: (i) all document and stamp taxes, recording and filing expenses and fees and commissions lawfully due to brokers in connection with the transactions contemplated hereby, 32 37 (ii) any taxes, insurance premiums, liens, security interests or other claims or charges against the Premises or Improvements, and (iii) all costs of completion of the work to be performed by Borrower in space to be occupied in the Improvements (including public space) to permit the lawful occupancy thereof for the purposes contemplated by actual or prospective lessees or owners of such space as set forth in the individual leases, subleases or in detailed work letters or other agreements or letters of intent with respect thereto, or, in cases where there are no such leases, subleases, work letters or other documents as aforesaid, to the level of building standard in accordance with industry practices, as conclusively determined by the Construction Consultant; (d) Construction of the Improvements. Commence construction of the Improvements no later than sixty (60) days from the date hereof; submit a Requisition for the Initial Advance within thirty (30) days after such commencement and subsequent advances on a monthly basis thereafter; cause the construction thus begun to be prosecuted with diligence and continuity in a good and workmanlike manner in accordance with the Plans except during the existence of delays (which delays shall not cause the Improvements to fail to be completed by the Completion Date in Agent's reasonable judgment) caused by events beyond its control; use only materials, fixtures, furnishings and equipment in connection with construction of the Improvements that are not used or obsolete; and complete construction of the Improvements, and the installation of all necessary roads and utilities, in accordance with the Plans, on or before the Completion Date free and clear of defects and liens or claims for liens for material supplied or labor or services performed in connection with the construction of the Improvements; time being of the essence as to this paragraph (d); (e) Project Sign. Promptly following the execution of this Agreement, place a sign, at its own expense, on the Premises at a location satisfactory to Agent indicating, among other things, that Lenders are financing the construction of the Improvements; (f) Trust Fund. Receive and deposit in the Building Loan Trust Account all advances made hereunder; hold the same and the right to receive the same as a trust fund for the purpose of paying only the "cost of improvement", as such quoted term is defined in the Lien Law, including payments for such purpose itemized on the Direct and Indirect Cost Statements made by Borrower prior to the Initial Advance but subsequent to the commencement of construction of the Improvements; 33 38 (g) Indemnification re: Brokers. Indemnify Agent and Lenders against claims of brokers arising by reason of the execution hereof or the consummation of the transactions contemplated hereby; (h) Certain Materials to be Submitted. Upon request, deliver to Agent and/or the Construction Consultant copies of all contracts, bills of sale, statements, receipted vouchers or agreements under which Borrower claims title to any materials, fixtures or articles incorporated in the Improvements or subject to the lien of the Mortgage, or under which it has incurred costs for which it is entitled to a Loan advance, and deliver to Agent such other data or documents in connection with the Improvements as Agent may from time to time request; (i) Correction of Defects and Departures from Plans. Upon demand of Agent or the Construction Consultant, correct any defects (including structural) in the Improvements or any departures from the Plans not approved by Agent; (j) Leases. Deliver to Agent an executed counterpart of each lease of the Premises executed after the date hereof, and keep each lease in full force and effect; (k) Performance of Change Order Work. Not permit the performance of any work pursuant to any General Contract, Major Subcontract, Change Order or Plans until Agent and the Construction Consultant (i) shall have received copies thereof and (ii) in the case of Plans or Change Orders which will result in (A) a change in the aggregate of the contract prices for the construction of the Improvements in excess of the Change Order Amount or which, together with the aggregate of Change Orders theretofore executed by Borrower (excluding those approved by Agent pursuant to this paragraph) will result in a change in such prices in excess of the Aggregate Change Order Amount or (B) a change in the character of the Improvements, shall have given specific written approval thereof; it being understood that approval of any Plans or Change Order will not obligate Lenders to increase or advance any Loan Budget Amount on account of any such Plans or Change Order; (l) Certain Requirements Regarding General Contract and Major Subcontracts. Require covenants from the General Contractor and Major Subcontractors who have contracts directly with Borrower to the same effect as the covenant made by Borrower in the immediately preceding paragraph; and it will provide in every General Contract that the General Contractor will deliver to Agent or the Construction Consultant copies of all Major Subcontracts, Change Orders and any other contract, purchase order or subcontract covering labor, materials, equipment or furnishings to or for the Improvements, and the names of all persons with whom the 34 39 General Contractor has contracted or intends to contract for the construction of the Improvements or for the furnishing of labor or materials therefor; (m) Security of Site. Employ suitable means to protect from theft or vandalism all portions of the Improvements and all tools and building materials stored on the Premises; (n) Compliance with Covenants, Restrictions and Easements; Satisfaction of Conditions. Comply with all restrictions, covenants and easements affecting the Premises or the Improvements and cause the satisfaction of all conditions of this Agreement; (o) Notice of Material Adverse Change. Give written notice of, as soon as practical, and in any event within five (5) days after its knowledge of the occurrence of, any event or occurrence of whatever nature which is likely to (i) have a material adverse effect on the ability of Borrower to perform its obligations under the Loan Documents or (ii) create a risk of sale or forfeiture of any of the Mortgaged Property or otherwise materially impair the value of the Mortgaged Property or Lenders' rights therein; and (p) Administration and Other Fees. Pay to Agent, for the account of Agent, an adminstration fee for the second Loan year, payable in advance in quarterly installments of $15,000 on the first (1st) day of April, July and October in 1996 and January in 1997 and on the first (1st) day of each quarter thereafter, if the Loan is extended pursuant to Section 2.17; and pay to UBS, for its own account, any fees owed under the Supplemental Fee Letter when due and payable thereunder. 6.03. Continuing Accuracy of Representations and Warranties. Borrower covenants that the representations and warranties made by it in Section 6.01 and the other Loan Documents will be continuously true and correct. ARTICLE VII. AGENT; RELATIONS AMONG LENDERS 7.01. Appointment, Powers and Immunities of Agent. Each Lender hereby irrevocably appoints and authorizes Agent to act as its agent hereunder and under any other Loan Document with such powers as are specifically delegated to Agent by the terms of this Agreement and any other Loan Document, together with such other powers as are reasonably incidental thereto. Agent shall perform its obligations under this Agreement and the other Loan Documents in good faith according to the same standard of care as that customarily exercised by Agent in administering its own real estate loans. Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and any other Loan Document 35 40 or required by law, and shall not by reason of this Agreement be a fiduciary or trustee for any Lender except to the extent that Agent acts as an agent with respect to the receipt or payment of funds. Agent shall not be responsible to Lenders for any recitals, statements, representations or warranties made by Borrower or any officer, partner or official of Borrower or any other person contained in this Agreement or any other Loan Document, or in any certificate or other document or instrument referred to or provided for in, or received by any of them under, this Agreement or any other Loan Document, or for the value, legality, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or any other document or instrument referred to or provided for herein or therein, for the perfection or priority of any lien securing the obligations hereunder or thereunder or for any failure by Borrower or any other obligor to perform any of its obligations hereunder or thereunder. Agent may employ agents and attorneys-in-fact and shall not be responsible, except as to money or securities received by it or its authorized agents, for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. Neither Agent nor any of its directors, officers, employees or agents shall be liable or responsible for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith, except for its or their own gross negligence or willful misconduct. 7.02. Reliance by Agent. Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telex, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper person or persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by Agent. Agent may deem and treat each Lender as the holder of the Pro Rata Share of the Loan made by it for all purposes hereof and shall not be required to deal with any person who has acquired a Participation interest in the Loan from a Lender. As to any matters not expressly provided for by this Agreement or any other Loan Document, Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder in accordance with instructions signed by the Required Lenders, and such instructions of the Required Lenders and any action taken or failure to act pursuant thereto shall be binding on all of Lenders and any other holder of all or any portion of the Loan or Participation therein. 7.03. Defaults. Agent shall not be deemed to have knowledge of the occurrence of a Default or of an Event of Default unless Agent has actual knowledge thereof or has received notice from a Lender or Borrower specifying such Default or Event of Default and stating that such notice is a "Notice of Default." In the event that Agent has such actual knowledge or receives such a notice of the occurrence of a Default or Event of Default, Agent shall give prompt notice thereof to Lenders. Agent, following consultation with Lenders, shall (subject to Section 7.07) take such action with 36 41 respect to such Default or Event of Default which is continuing as shall be directed by the Required Lenders; provided that, unless and until Agent shall have received such directions, Agent may take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem to be in the best interest of Lenders. In no event shall Agent be required to take any such action which it determines to be contrary to law. 7.04. Rights of Agent as Lender. With respect to its Individual Loan Commitment and its Pro Rata Share of the Loan, Agent in its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include Agent in its capacity as a Lender. Agent and its affiliates may (without having to account therefor to any Lender) accept deposits from, lend money to (on a secured or unsecured basis), and generally engage in any kind of banking, trust or other business with Borrower (and any of its affiliates) as if it were not acting as Agent. 7.05. Sharing of Costs by Lenders; Indemnification of Agent. Each Lender agrees to pay its ratable share, based on the respective outstanding principal balances under its Note and the other Notes, of any expenses incurred (and not paid or reimbursed by Borrower after demand for payment is made by Agent) by or on behalf of Lenders in connection with any Default or Event of Default, including, without limitation, costs of enforcement of the Loan Documents and any advances to pay taxes or insurance premiums or otherwise to preserve the lien of the Mortgage or to preserve or protect the Mortgaged Property. In the event a Lender fails to pay its share of expenses as aforesaid, and all or a portion of such unpaid amount is paid by Agent and/or one or more of the other Lenders, then the defaulting Lender shall reimburse Agent and/or the other Lender(s) for the portion of such unpaid amount paid by it or them, as the case may be, together with interest thereon at the Prime Based Rate from the date of payment by Agent and/or the other Lender(s). In addition, each Lender agrees to reimburse and indemnify Agent (to the extent it is not paid by on or behalf of Borrower, after demand for payment is made by Agent, under Section 8.11 or under the applicable provisions of any other Loan Document, but without limiting the obligation of Borrower under said Section 8.11 or such provisions), for such Lender's ratable share, based upon the respective outstanding principal balances under its Note and the other Notes, of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against Agent in any way relating to or arising out of this Agreement, any other Loan Document or any other documents contemplated by or referred to herein or the transactions contemplated hereby or thereby (including, without limitation, the costs and expenses which Borrower is obligated to pay under Section 8.11) or under the applicable provisions of any other Loan Document or the enforcement 37 42 of any of the terms hereof or thereof or of any such other documents or instruments; provided that no Lender shall be liable for (i) any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the party to be indemnified, (ii) any loss of principal or interest with respect to Agent's Pro Rata Share of the Loan or (iii) any loss suffered by Agent in connection with a swap or other interest rate hedging arrangement entered into between Agent and Borrower. 7.06. Non-Reliance on Agent and Other Lenders. Each Lender agrees that it has, independently and without reliance on Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of Borrower and the decision to enter into this Agreement and that it will, independently and without reliance upon Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any other Loan Document. Agent shall not be required to keep itself informed as to the performance or observance by Borrower of this Agreement or any other Loan Document or any other Document referred to or provided for herein or therein or to inspect the properties (including, without limitation, the Premises) or books of Borrower. Except for notices, reports and other documents and information expressly required to be furnished to Lenders by Agent hereunder, Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition or business of Borrower (or any of its affiliates) which may come into the possession of Agent or any of its affiliates. 7.07. Failure of Agent to Act. Except for action expressly required of Agent hereunder, Agent shall in all cases be fully justified in failing or refusing to act hereunder unless it shall have received further assurances (which may include cash collateral) of the indemnification obligations of Lenders under Section 7.05 in respect of any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. 7.08. Resignation or Removal of Agent. Agent may be removed at any time with cause by the Required Lenders, provided that Borrower and the other Lenders shall be promptly notified thereof. Upon any such removal, the Required Lenders shall have the right to appoint a successor Agent, which successor Agent shall be subject to Borrower's approval, such approval not to be unreasonably withheld or delayed. If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within twenty (20) days after the Required Lenders' removal of the retiring Agent, then the retiring Agent may, on behalf of Lenders, appoint a successor Agent, which shall be one of Lenders, within ten (10) days. The Required Lenders or the retiring Agent, as the case may be, shall upon the appointment of a successor Agent promptly so notify Borrower and the other 38 43 Lenders. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's removal hereunder as Agent, the provisions of this Article VII shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. 7.09. Amendments Concerning Agency Function. Notwithstanding anything to the contrary contained in this Agreement, Agent shall not be bound by any waiver, amendment, supplement or modification of this Agreement or any other Loan Document which affects its duties, rights, and/or function hereunder or thereunder unless it shall have given its prior written consent thereto. 7.10. Liability of Agent. Agent shall not have any liabilities or responsibilities to Borrower on account of the failure of any Lender to perform its obligations hereunder or to any Lender on account of the failure of Borrower to perform its obligations hereunder or under any other Loan Document. 7.11. Transfer of Agency Function. Without the consent of Borrower or any Lender, Agent may at any time or from time to time transfer its functions as Agent hereunder to any of its offices wherever located in the United States, provided that Agent shall promptly notify Borrower and Lenders thereof. 7.12. Non-Receipt of Funds by Agent. Unless Agent shall have received notice from a Lender or Borrower (either one as appropriate being the "Payor") prior to the date on which such Lender is to make payment hereunder to Agent of Loan proceeds or Borrower is to make payment to Agent, as the case may be (either such payment being a "Required Payment"), which notice shall be effective upon receipt, that the Payor will not make the Required Payment in full to Agent, Agent may assume that the Required Payment has been made in full to Agent on such date, and Agent in its sole discretion may, but shall not be obligated to, in reliance upon such assumption, make the amount thereof available to the intended recipient on such date. If and to the extent the Payor shall not have in fact so made the Required Payment in full to Agent, the recipient of such payment shall repay to Agent forthwith on demand such amount made available to it together with interest thereon, for each day from the date such amount was so made available by Agent until the date Agent recovers such amount, at the Federal Funds Rate. 7.13. Withholding Taxes. Each Lender represents at all times during the term of this Agreement that it is entitled to receive any payments to be made to it hereunder without the withholding of any tax and will furnish to Agent and Borrower such forms, certifications, statements and other documents as Agent or Borrower may reasonably request from time to time to evidence such Lender's 39 44 exemption from the withholding of any tax imposed by any jurisdiction or to enable Agent or Borrower to comply with any applicable laws or regulations relating thereto. Without limiting the effect of the foregoing, if any Lender is not created or organized under the laws of the United States or any state thereof, such Lender will furnish to Agent and Borrower a United States Internal Revenue Service Form 4424 in respect of all payments made to such Lender by Borrower or Agent under this Agreement or any other Loan Document or a United States Internal Revenue Service Form 1001 establishing such Lender's complete exemption from United States withholding tax in respect of payments to be made to such Lender by Borrower or Agent under this Agreement or any other Loan Document, or such other forms, certifications, statements or documents, duly executed and completed by such Lender as evidence of such Lender's exemption from the withholding of United States tax with respect thereto. Agent shall not be obligated to make any payments hereunder to such Lender in respect of the Loan until such Lender shall have furnished to Agent and Borrower the requested form, certification, statement or document. 7.14. Sharing of Payments among Lenders. If a Lender shall obtain payment of any principal of its Note or of or interest thereon through the exercise of any right of setoff, banker's lien, counterclaim, or by any other means (including direct payment), and such payment results in such Lender receiving a greater payment than it would have been entitled to had such payment been paid directly to Agent for disbursement to Lenders, then such Lender shall promptly purchase for cash from the other Lenders Participations in the Loan in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all Lenders shall share ratably the benefit of such payment. To such end Lenders shall make appropriate adjustments among themselves (by the resale of Participations sold or otherwise) if such payment is rescinded or must otherwise be restored. Borrower agrees that any Lender so purchasing a Participation in the Loan may exercise all rights of setoff, banker's lien, counterclaim or similar rights with respect to such Participation. Nothing contained herein shall require any Lender to exercise any such right or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness of Borrower. 7.15. Possession of Documents. Each Lender shall maintain possession of its own Note. Agent shall hold all other Loan Documents and related documents in its possession and maintain separate records and accounts with respect to the Loan, reflecting the interests of Lenders in the Loan, and shall permit Lenders and their representatives access at all reasonable times to inspect such Loan Documents, related documents, records and accounts. 7.16. Effect of a Lender's Failure to Make an Advance. In the event any Lender fails for any reason to fund the portion it is required to fund of any advance of Loan proceeds by 3:00 p.m. on the second Business Day after the date established by Agent as the 40 45 date such advance is to be made, such Lender shall be a "Delinquent Lender" for all purposes hereunder until and unless such delinquency is cured in accordance with the terms and by the time permitted under Section 7.17, and the following provisions shall apply: (a) Agent shall notify (such notice being referred to as the "Delinquency Notice") each Lender and Borrower of any Lender's failure to fund. Each Non-Delinquent Lender shall have the right, but in no event or under any circumstance the obligation, to fund such Delinquent Lender's portion of such advance, provided that, within twenty (20) days of the date of the Delinquency Notice (the "Election Period"), such Non-Delinquent Lender (the "Electing Lender") irrevocably commits by notice in writing (an "Election Notice") to Agent, the other Lenders and Borrower to fund the Delinquent Lender's portion of the advance that is the subject of the delinquency and to assume the Delinquent Lender's obligations with respect to the advancing of the entire undisbursed portion of the Delinquent Lender's Individual Loan Commitment (such entire undisbursed portion of the Delinquent Lender's Individual Loan Commitment, including its portion of the advance that is the subject of the delinquency, the "Delinquency Amount"). If Agent receives more than one Election Notice within the Election Period, then the Non-Delinquent Lenders who have so elected (collectively, the "Electing Lenders") shall be deemed to have committed to fund ratable shares of the Delinquency Amount based upon the amounts of their respective Individual Loan Commitments. If there are one or more Electing Lenders and the Delinquent Lender fails to cure during the Election Period as provided in Section 7.17, then upon the expiration of the Election Period, each Electing Lender's Individual Loan Commitment shall be automatically increased by the Delinquency Amount (if there is only one Electing Lender) or such Electing Lender's ratable share, determined as aforesaid, of the Delinquency Amount (if there are two or more Electing Lenders), and the Delinquent Lender's Individual Loan Commitment shall automatically be reduced by the Delinquency Amount. Agent shall thereupon notify Borrower and each Lender of (i) the adjusted amounts of the Individual Loan Commitments and (ii) if the advance that was the subject of the delinquency was not made pursuant to Section 7.12 or was refunded by Borrower pursuant to paragraph (e) of this Section, the rescheduled date of such advance (which shall be no sooner than three (3) Business Days after such notice). In the event Agent shall have funded, pursuant to Section 7.12, the entire advance that was the subject of the delinquency (including the Delinquent Lender's portion), and Borrower shall not have refunded such advance pursuant to paragraph (e) of this Section, the Electing Lender(s) shall remit to Agent the Delinquent Lender's portion of the advance, or their ratable shares thereof, as the case may be, within three (3) Business Days of the notice provided for in the immediately preceding sentence, and Agent shall reimburse itself from such funds for making the Delinquent Lender's portion of the advance. 41 46 Notwithstanding anything to the contrary contained herein, if Agent advances its own funds in respect of a Delinquent Lender's portion of an advance, Agent shall be entitled to the interest on the portion of the Principal Amount represented thereby, from the date Agent makes such advance until the date it is reimbursed therefor. (b) In connection with the adjustment of the amounts of the Individual Loan Commitments of the Delinquent Lender and Electing Lender(s) upon the expiration of the Election Period as aforesaid, Borrower covenants that it shall, promptly following the request of the Electing Lender(s), execute and deliver to each Electing Lender and the Delinquent Lender replacement notes substantially in the form of EXHIBIT H hereto and stating: "This Note is a replacement note as contemplated by Section 7.16 of the Loan Agreement; it replaces and is in lieu of that certain note made by Maker dated [Closing Date] to the order of [Lender] in the principal sum of [Lender's original Individual Loan Commitment]." Such replacement notes shall be in amounts equal to such Lenders' respective Individual Loan Commitments, as adjusted. All such replacement notes shall constitute "Notes" for purposes of this Agreement and the other Loan Documents. The execution and delivery of replacement notes as required above shall be a condition precedent to any further advances of Loan proceeds. (c) In the event that no Lender elects to commit to fund the Delinquency Amount within the Election Period as provided in paragraph (a) of this Section, Agent shall, upon the expiration of the Election Period, so notify Borrower and each Lender and the provisions of Section 2.09 shall apply. (d) Subject to a Delinquent Lender's right to cure as provided in Section 7.17, but notwithstanding anything else to the contrary contained in this Agreement, the Delinquent Lender's interest in, and any and all amounts due to a Delinquent Lender under, the Loan Documents (including, without limitation, all principal, interest, fees and expenses) shall be subordinate in lien priority and to the repayment of all amounts (including, without limitation, interest) then or thereafter due or to become due to the Non-Delinquent Lenders under the Loan Documents (including future advances), and the Delinquent Lender thereafter shall have no right to participate in any discussions among and/or decisions by the Lenders hereunder and/or under the other Loan Documents. Further, any Delinquent Lender shall be bound by any amendment to, or waiver of, any provision of, or any action taken or omitted to be taken by Agent and/or the Non-Delinquent Lenders under, any Loan Document which is made subsequent to the Delinquent Lender's becoming a Delinquent Lender. (e) If, pursuant to the operation of Section 7.12, an advance of Loan proceeds is made without Agent's receipt of a Delinquent Lender's portion thereof, Borrower shall, upon 42 47 demand of Agent, refund the entire such advance to Agent. Borrower's failure to do so within ten (10) days of such demand shall, notwithstanding anything to the contrary contained herein or in the Mortgage, constitute an Event of Default under the Mortgage. Upon its receipt of such funds from Borrower, Agent shall promptly remit to each Non-Delinquent Lender its appropriate share thereof. 7.17. Cure by Delinquent Lender. A Delinquent Lender may cure a delinquency arising out of its failure to fund its required portion of any advance if, within the Election Period, it remits to Agent its required portion of such advance (together with interest thereon at the Involuntary Rate from the date such advance was to have been made if such advance was made by Agent and not refunded by Borrower pursuant to paragraph (e) of Section 7.16), in which event Agent shall so notify Borrower and the Non-Delinquent Lenders (i) of its receipt of such funds and (ii)(A) if the advance that was the subject of the delinquency shall not have been made (or shall have been refunded by Borrower pursuant to paragraph (e) of Section 7.16), of the rescheduled date of the advance (which shall be no sooner than three (3) Business Days after such notice) or (B) if Agent shall have funded the entire advance that was the subject of the delinquency (including the Delinquent Lender's portion) and Borrower shall not have refunded such advance pursuant to paragraph (e) of Section 7.16, of its intention to reimburse itself from funds received from the Delinquent Lender (which reimbursement is hereby authorized) for funding the Delinquent Lender's required portion of the advance. In the event any Delinquent Lender cures a delinquency prior to the expiration of the Election Period (or thereafter with the consent of all of the Non-Delinquent Lenders), such Delinquent Lender nonetheless shall be bound by any amendment to or waiver of any provision of, or any action taken or omitted to be taken by Agent and/or the Non-Delinquent Lenders under, any Loan Document which is made subsequent to that Lender's becoming a Delinquent Lender and prior to its curing the delinquency as provided in this Section, provided that such amendment or waiver of action was taken in accordance with the provisions of this Agreement. A Delinquent Lender shall have absolutely no right to cure any delinquency after the expiration of the Election Period unless all Lenders in their sole discretion elect to permit such cure. 7.18. Delinquent Lender Not Excused. Nothing contained in Sections 7.16 or 7.17 shall release or in any way limit a Delinquent Lender's obligations as a Lender hereunder and/or under any other of the Loan Documents. Further, a Delinquent Lender shall indemnify and hold harmless Agent and each of the Non-Delinquent Lenders from any claim, loss, or costs incurred by Agent and/or the Non-Delinquent Lenders as a result of a Delinquent Lender's failure to comply with the requirements of this Agreement, including, without limitation, any and all additional losses, damages, costs and expenses (including, without limitation, attorneys' fees) incurred by Agent and any Lender as a result of and/or in connection with (i) a Non-Delinquent Lender's acting as 43 48 an Electing Lender, (ii) any enforcement action brought by Agent against a Delinquent Lender, and (iii) any action brought against Agent and/or Lenders. The indemnification provided above shall survive any termination of this Agreement. 7.19. Notices Regarding Delinquent Lender. Notices by Agent or Lenders pursuant to Sections 7.16 or 7.17 may be by telephone (to be promptly confirmed in writing). 7.20. Replacement Lender. In the event any Lender becomes a Delinquent Lender and none of the other Lenders elects to be an Electing Lender pursuant to Section 7.16, Borrower shall have the right, provided there exists no Default or Event of Default, to cause another financial institution reasonably acceptable to the Required Lenders to assume the Delinquent Lender's obligations with respect to the Delinquency Amount on the then-existing terms and conditions of the Loan Documents (such replacement institution, a "Replacement Lender"). Such assumption shall be pursuant to a written instrument reasonably satisfactory to the Required Lenders. Upon such assumption, the Replacement Lender shall become a "Lender" for all purposes hereunder, with an Individual Loan Commitment in an amount equal to the Delinquency Amount, and the Delinquent Lender's Individual Loan Commitment shall automatically be reduced by the Delinquency Amount. In connection with the foregoing, Borrower shall execute and deliver to the Replacement Lender and the Delinquent Lender replacement notes substantially in the form of EXHIBIT H hereto and stating: "This Note is a replacement note as contemplated by Section 7.20 of the Loan Agreement; it replaces and is in lieu of that certain note made by Maker dated [Closing Date] to the order of [Delinquent Lender] in the principal sum of [Delinquent Lender's original Individual Loan Commitment]." Such replacement notes shall be in amounts equal to, in the case of the Replacement Lender's note, the Delinquency Amount and, in the case of the Delinquent Lender's note, its Individual Loan Commitment, as reduced as aforesaid. Such replacement notes shall constitute "Notes" for purposes of this Agreement and the other Loan Documents. Lenders shall reasonably cooperate with Borrower's attempts to obtain a Replacement Lender, but they shall not be obligated to modify the Loan Documents in connection therewith, other than such modifications as may be required to reflect the admission of the Replacement Lender as a Lender. As part of the first advance of Loan proceeds following the admission of the Replacement Lender, Lenders shall advance to Borrower, subject to the satisfaction of all conditions of this Agreement, an amount equal to the Direct and Indirect Costs paid by Borrower pursuant to clause (ii) of Section 2.09. 44 49 ARTICLE VIII. GENERAL CONDITIONS AND PROVISIONS 8.01. Trust Fund. This Agreement is subject to the trust fund provisions of the Lien Law, including, without limitation, Section 13 thereof. 8.02. Documentation Etc. to Be Satisfactory. All documentation and proceedings required by, or deemed by Agent or Lenders' Counsel to be necessary or required in connection with this Agreement and the documents relating hereto shall be subject to the prior approval of, and satisfactory to, both of them as to form and substance. In addition, the persons or parties responsible for the execution and delivery of, and signatories to, all of such documentation, shall be acceptable to, and subject to the approval of, Agent and Lenders' Counsel. Agent or Lenders' Counsel shall receive copies (certified if requested) of all documents which they may require in connection with the transaction contemplated hereby. 8.03. Loan Balancing. If at any time Agent notifies Borrower that, in Agent's sole judgment, the undisbursed balance of the Loan is insufficient to pay the remaining Direct and Indirect Costs, Borrower shall either (i) deposit with Agent an amount equal to such deficiency, which Agent may from time to time apply, or allow Borrower to apply, to such Costs or (ii) pay for such Costs in the amount of such deficiency so that the amount of the Loan which remains to be disbursed shall be sufficient to complete the Improvements, and Borrower shall furnish Agent with such evidence thereof as Agent shall require. Borrower hereby agrees that Agent shall have a lien on and security interest in, for the benefit of Lenders, any sums deposited pursuant to clause (i) above and that Borrower shall have no right to withdraw any such sums except for the payment of the aforesaid Costs as approved by Agent. Any such sums not used as provided in said clause (i) shall be released to Borrower when and to the extent that Agent determines that the amount thereof is more than the excess, if any, of the total remaining costs of completion of the Improvements over the undisbursed balance of the Loan, provided, however, that should an Event of Default occur, Agent shall, if the Required Lenders so elect, apply such amounts either to the costs of completion of the Improvements or to the immediate reduction of outstanding principal and/or interest under the Notes. 8.04. No Third-Party Beneficiaries. This Agreement is solely for the benefit of Lenders, Agent and Borrower. All conditions of the obligations of Lenders to make advances hereunder are imposed solely and exclusively for the benefit of Lenders and may be freely waived or modified in whole or in part by Lenders (or, to the extent permitted by this Agreement, the Required Lenders or Agent) at any time if in its or their sole discretion it or they, as the case may be, deem it advisable to do so, and no person other than Borrower (provided, however, that all conditions have been 45 50 satisfied) shall have standing to require Lenders to make any Loan advances or to be a beneficiary of this Agreement or any advances to be made hereunder. 8.05. Direct Advances to Contractors. During the existence of any Default or Event of Default, Borrower hereby irrevocably authorizes Lenders to advance any undisbursed Loan proceeds directly to the General Contractor, Major Subcontractors and other persons to pay for completion of the Improvements. All such direct advances shall satisfy pro tanto the obligations of Lenders to Borrower hereunder regardless of the disposition thereof by the General Contractor, any Major Subcontractor or other person. 8.06. Lenders Authorized to Advance for Interest Etc. Borrower hereby irrevocably authorizes Lenders to disburse, at the option of the Required Lenders, proceeds of the Loan to pay interest accrued on the Notes as it comes due, or to satisfy any of the conditions of this Agreement, including, without limitation, the payment of the fees and expenses of Lenders' Counsel and the Construction Consultant. 8.07. Concerning Irrevocable Authorizations. Any and all advances made at any time by Lenders pursuant to the irrevocable authorizations granted by Sections 8.05 and 8.06 shall require no further direction, authorization or request for disbursement from Borrower and, in the case of advances under said Section 8.06, may be made whether or not there exists a Default or Event of Default. Any and all such disbursements shall be added to the outstanding principal balance evidenced by the Notes and shall be secured by the Mortgage. The aforesaid authorizations shall (i) not prevent Borrower from paying the contractors and other persons, from paying the interest, or from satisfying the conditions and obligations referred to in said Sections, out of its own funds, (ii) in no event be construed so as to relieve Borrower or others from their obligations to pay such contractors or other persons, to pay interest as and when due under the Notes, or to satisfy such conditions and obligations and (3) in no event obligate Lenders to disburse Loan proceeds for any such purposes. 8.08. Ratification of Requisition by Acceptance of Advance. Borrower agrees that, by its acceptance of any advance of Loan proceeds under this Agreement, it shall be bound in all respects by the Requisition submitted on its behalf in connection therewith with the same force and effect as if Borrower had itself executed and submitted the Requisition and whether or not the Requisition is executed and/or submitted by an authorized person. 8.09. Successors and Assigns. Except as herein provided, this Agreement shall be binding upon and inure to the benefit of Borrower, Agent and Lenders and their respective heirs, personal representatives, successors and assigns. Notwithstanding the foregoing, Borrower may not assign, transfer or set over to another, in whole or in part, all or any part of its benefits, rights, duties and obligations hereunder, including, but not 46 51 limited to, performance of and compliance with conditions hereof and the right to receive the proceeds of current or future advances, except to a wholly owned subsidiary of Borrower which has assumed the obligations of Borrower under the Loan Documents and the Other Loan Documents in a manner satisfactory to Agent such that Borrower and such subsidiary shall be jointly and severally liable thereunder. 8.10. Setoff. To the extent permitted or not expressly prohibited by applicable law, Borrower agrees that, in addition to (and without limitation of) any right of setoff, bankers' lien or counterclaim a Lender may otherwise have, each Lender shall be entitled, at its option, to offset balances (general or special, time or demand, provisional or final) held by it for the account of Borrower at any of such Lender's offices against any amount payable by Borrower to such Lender under this Agreement or the Notes, or any other Loan Document which is not paid when due (regardless of whether such balances are then due to Borrower), in which case it shall promptly notify Borrower and Agent thereof; provided that such Lender's failure to give such notice shall not affect the validity thereof. Payments by Borrower hereunder or under the other Loan Documents shall be made without setoff or counterclaim. 8.11. Expenses; Indemnification. Borrower agrees to pay all reasonable costs, expenses, and charges (including, without limitation, all reasonable fees and charges of engineers, appraisers, the Construction Consultant and Lenders' Counsel) incurred by Agent or any Lender in connection with the preparation for and consummation of the transactions contemplated by this Agreement and for the performance and enforcement of this Agreement and the other Loan Documents, and for any services which may be required in addition to those normally and reasonably contemplated hereby; provided, however, that Borrower shall not be responsible for (i) the fees and expenses of legal counsel for Lenders other than UBS incurred in connection with said counsel's review of this Agreement and other Loan Documents and (ii) costs, expenses and charges incurred by Agent and Lenders in connection with the administration or syndication of the Loan (other than the administration fee required by Section 6.02(p)). If Borrower fails promptly to pay costs, charges and expenses required to be paid by it as aforesaid, and any Lender or Agent pays such costs, charges or expenses, Borrower shall reimburse Agent or such Lender, as appropriate, on demand for the amounts so paid, together with interest thereon at the Involuntary Rate. Borrower agrees to indemnify Agent and each Lender and their respective directors, officers, employees and agents from, and hold each of them harmless against, any and all losses, arising out of or by reason of any investigation or litigation or other proceedings (including any threatened investigation or litigation or other proceedings) relating to any actual or proposed use by Borrower of the proceeds of the Loan, including without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation or litigation or other proceedings (but excluding any such losses, liabilities, claims, damages or expenses incurred by 47 52 reason of the gross negligence or willful misconduct of the party to be indemnified). The obligations of Borrower under this Section shall survive the repayment of all amounts due under or in connection with any of the Loan Documents and the termination of the Loan. 8.12. Notices. Except as otherwise provided herein, all notices under this Agreement shall be in writing and sent by registered or certified mail or Federal Express or other overnight courier from which proof of delivery is available or telecopy, receipt confirmed, addressed to a party at its address on the signature page of this Agreement, or such other address of which the party being notified shall have notified, in accordance with the foregoing requirements, the party giving notice. Notices permitted by this Agreement to be given by telephone shall be promptly confirmed in writing in accordance with the foregoing requirements. Notices shall be effective: (w) if by telephone, at the time of such telephone conversation, (x) if given by registered or certified mail, three (3) days after mailing, (y) if given by overnight courier, upon receipt and (z) if given by telecopy, upon receipt. 8.13. Assignment; Participation. Any Lender may at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Loan (the "Participations"). In the event of any such grant by a Lender of a participating interest to a Participant, such Lender shall remain responsible for the performance of its obligations hereunder, and Borrower and Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations hereunder. Any agreement pursuant to which any Lender may grant such a participating interest shall provide that such Lender shall retain the sole right and responsibility to enforce the obligations of Borrower hereunder and under any other Loan Document, including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement or any other Loan Document; provided that such participation agreement may provide that such Lender will not agree to any modification, amendment or waiver of this Agreement described in Section 8.11 without the consent of the Participant. Each Lender agrees to provide Borrower with notice of all Participations sold by such Lender. Borrower agrees to provide all assistance reasonably requested by a Lender to enable such Lender to sell Participations as aforesaid, or make assignments of its Loan as hereinafter provided in this Section, provided, however, any assignment or Participation shall be without cost or expense to Borrower except for the reasonable fees of Agent's counsel in connection with any assignment to an Assignee (as defined below). A Lender may at any time assign (i) to any bank or other institution with the acknowledgment of Agent and the consent of UBS and Borrower, which consent shall not be unreasonably withheld or delayed (such assignee, a "Consented Assignee"), or (ii) to one or 48 53 more banks or other institutions which are subsidiaries of a Lender or of the parent of a Lender (each Consented Assignee or subsidiary bank or institution, an "Assignee") all, or a proportionate part of all, of its rights and obligations under this Agreement and its Note, and such Assignee shall assume rights and obligations, pursuant to an Assignment and Assumption Agreement executed by such Assignee and the assigning Lender, provided that, in each case, after giving effect to such assignment each Lender's and each Assignee's portion of the Loan will be equal to or greater than $5,000,000. Upon execution and delivery of such instrument and payment by such Assignee to the assigning Lender of an amount equal to the purchase price agreed between such Lender and such Assignee, such Assignee shall be a party to this Agreement and shall have all the rights and obligations of a Lender as set forth in such Assignment and Assumption Agreement, and the assigning Lender shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this paragraph, substitute notes, in the form of EXHIBIT H hereto, shall be issued to the assigning Lender and Assignee by Borrower, in exchange for the return of the original Note. All such substitute notes shall constitute "Notes" and the obligations evidenced by such substitute notes shall constitute obligations secured by the Mortgage. If the Assignee is not incorporated under the Laws of the United States of America or a state thereof, it shall, prior to the first date on which interest or fees are payable hereunder for its account, deliver to Borrower and Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 7.13. Any Lender may at any time assign all or any portion of its rights under this Agreement and its Note to a Federal Reserve Bank. No such assignment shall release the transferor Lender from its obligations hereunder. Borrower recognizes that in connection with a Lender's selling of Participations or making of assignments, any or all documentation, financial statements, appraisals and other data, or copies thereof, relevant to Borrower, Premises or the Loan may be exhibited to and retained by any such Participant or Assignee or prospective Participant or Assignee. A Lender's delivery of any financial statements and appraisals to any such Participant or Assignee or prospective Participant or Assignee shall be done on a confidential basis. Borrower shall be entitled to rely on any statement made in writing by Agent that the consent of any Assignee has been received with respect to any act or matter under this Agreement. 8.14. Amendments and Waivers in Writing; Remedies Cumulative. No amendment or material waiver of any provision of this Agreement or any other Loan Document nor consent to any material departure by Borrower or any other obligor therefrom, shall in any event be effective unless the same shall be in writing and signed by the 49 54 party against whom such amendment, waiver or consent is sought to be enforced (it being understood, however, that the signatures of the Required Lenders and, solely for purposes of its acknowledgement thereof, Agent, shall be sufficient to bind Lenders to any such amendment, waiver or consent), and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given, provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all Lenders, do any of the following: (i) reduce the principal of, or interest on, the Notes or any fees due hereunder or any other amount due hereunder or under any Loan Document; (ii) postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees due hereunder or under any Loan Document; (iii) change the definition of Required Lenders; (iv) release any material portion of the Mortgaged Property or other collateral for the Loan other than in accordance with the Loan Documents; (v) amend this Section or any other provision requiring the consent of all Lenders; or (vi) release, in whole or in part, any obligor in respect of the Loan. Any advance of proceeds of the Loan made prior to or without the fulfillment by Borrower of all of the conditions precedent thereto, whether or not known to Agent and Lenders, shall not constitute a waiver of the requirement that all conditions, including the non-performed conditions, shall be required with respect to all future advances. No failure on the part of Agent or any Lender to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof or preclude any other or further exercise thereof or the exercise of any other right. The remedies provided in the Loan Documents are cumulative and not exclusive of any other remedies provided in the Loan Documents or by law. 8.15. Agent's Determination Conclusive. Agent shall, at all times, be free to independently establish to its satisfaction and in its absolute discretion the existence or nonexistence of any fact or facts the existence or nonexistence of which is a condition of this Agreement. 8.16. Severability. The provisions of this Agreement are intended to be severable. If for any reason any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction. 8.17. Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any party hereto may execute this Agreement by signing any such counterpart. 8.18. CERTAIN WAIVERS. TO THE EXTENT PERMITTED OR NOT EXPRESSLY PROHIBITED BY APPLICABLE LAW, IN CONNECTION WITH THE OBLIGATIONS AND LIABILITIES AS AFORESAID, BORROWER HEREBY WAIVES: 50 55 (I) PROMPTNESS AND DILIGENCE; (II) NOTICE OF ANY ACTIONS TAKEN BY AGENT OR ANY LENDER UNDER THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY OTHER AGREEMENT OR INSTRUMENT RELATING THERETO EXCEPT TO THE EXTENT OTHERWISE PROVIDED HEREIN; (III) ALL OTHER NOTICES, DEMANDS AND PROTESTS, AND ALL OTHER FORMALITIES OF EVERY KIND IN CONNECTION WITH THE ENFORCEMENT OF BORROWER'S OBLIGATIONS HEREUNDER AND UNDER THE OTHER LOAN DOCUMENTS, THE OMISSION OF OR DELAY IN WHICH, BUT FOR THE PROVISIONS OF THIS SECTION, MIGHT CONSTITUTE GROUNDS FOR RELIEVING BORROWER OF ITS OBLIGATIONS HEREUNDER OR UNDER THE OTHER LOAN DOCUMENTS; (IV) ANY REQUIREMENT THAT AGENT OR ANY LENDER PROTECT, SECURE, PERFECT OR INSURE ANY LIEN ON ANY COLLATERAL FOR THE LOAN OR EXHAUST ANY RIGHT OR TAKE ANY ACTION AGAINST BORROWER OR ANY OTHER PERSON OR ANY COLLATERAL FOR THE LOAN; (V) ANY RIGHT OR CLAIM OF RIGHT TO CAUSE A MARSHALLING OF THE ASSETS OF BORROWER; AND (VI) IF THERE IS NO MORE THAN ONE ENTITY COMPRISING BORROWER, ALL RIGHTS OF SUBROGATION OR CONTRIBUTION, WHETHER ARISING BY CONTRACT OR OPERATION OF LAW (INCLUDING, WITHOUT LIMITATION, ANY SUCH RIGHT ARISING UNDER THE FEDERAL BANKRUPTCY CODE) OR OTHERWISE BY REASON OF PAYMENT BY BORROWER PURSUANT TO THIS AGREEMENT OR OTHER LOAN DOCUMENTS. EXCEPT TO THE EXTENT EXPRESSLY PROHIBITED BY APPLICABLE LAW, BORROWER FURTHER HEREBY EXPRESSLY AND UNCONDITIONALLY WAIVES, IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING BROUGHT BY OR ON BEHALF OF AGENT OR LENDERS WITH RESPECT TO THIS AGREEMENT, THE NOTES OR THE LOAN, ANY AND EVERY RIGHT BORROWER MAY HAVE TO (W) INJUNCTIVE RELIEF, (X) A TRIAL BY JURY, (Y) TO THE EXTENT PERMITTED OR NOT EXPRESSLY PROHIBITED BY APPLICABLE LAW, INTERPOSE ANY COUNTERCLAIM THEREIN (OTHER THAN A COMPULSORY COUNTERCLAIM) AND (Z) TO THE EXTENT PERMITTED OR NOT EXPRESSLY PROHIBITED BY APPLICABLE LAW, HAVE THE SAME CONSOLIDATED WITH ANY OTHER OR SEPARATE SUIT, ACTION OR PROCEEDING. NOTHING HEREIN CONTAINED SHALL PREVENT OR PROHIBIT BORROWER FROM INSTITUTING OR MAINTAINING A SEPARATE ACTION AGAINST AGENT OR LENDERS WITH RESPECT TO ANY ASSERTED CLAIM. 8.19. Rules of Construction. When used in this Agreement, "or" is not exclusive; "hereunder", "herein" and the like refer to this Agreement as a whole; and, unless otherwise indicated, "Article" and "Section" refer to Articles and Sections of this Agreement. Except as otherwise provided in this Agreement, (i) terms defined in the singular shall have a correlative meaning when used in the plural and vice versa; (ii) a reference to a person shall include its permitted successors and permitted assigns; (iii) a reference to a law includes any amendment or modification to such law; and (iv) a reference to an agreement, instrument or document shall mean such agreement, instrument or document as the same may be amended, modified or supplemented from time to time in accordance with its terms and as permitted by the Loan Documents. The cover page and all Exhibits and Schedules to this Agreement shall be incorporated herein and made a part hereof. The table of contents and headings and captions hereunder are for convenience only and shall not affect the interpretation of this Agreement. 8.20. Governing Law. This Agreement and the rights and obligations of the parties hereunder shall in all respects be 51 56 governed by, and construed and enforced in accordance with, the laws of the State of New York (without giving effect to New York's principles of conflicts of law). Borrower, Agent and each Lender hereby irrevocably submit to the non-exclusive jurisdiction of any New York State or Federal court sitting in New York County, New York (or any county in New York State where any portion of the Mortgaged Property is located) over any suit, action or proceeding arising out of or relating to this Agreement, and hereby agree and consent that, in addition to any methods of service of process provided for under applicable law, all service of process in any such suit, action or proceeding in any New York State or Federal court sitting in New York County (or such other county in New York State) may be made by certified or registered mail, return receipt requested, directed to a party at its address indicated on the signature page hereof, and service so made shall be complete five (5) days after the same shall have been so mailed. ARTICLE IX. PARTICULAR PROVISIONS The foregoing Articles of this Agreement are subject to the following further provisions: 9.01. Cash Collateral. Borrower hereby assigns to Agent, for the benefit of Lenders, all of its right, title and interest in and to the Cash Collateral as security for the payment and performance of Borrower's obligations hereunder and under the Other Loan Documents. Agent will immediately deposit and hold the same in an interest-bearing cash collateral account (no. 292443) (the "Account"). Borrower hereby assigns the Account and all sums therein (including interest) to Agent, for the benefit of Lenders, as security for the payment and performance of Borrower's obligations hereunder, under the other Loan Documents, under the Other Notes and under the Other Loan Documents, and Borrower acknowledges that it shall have no rights to such sums except to the extent specifically provided for herein. If, at any time, an Event of Default shall occur, Agent shall, if the Required Lenders so elect, apply all amounts in the Account to the immediate reduction of amounts owed under the Loan Documents or the Other Loan Documents in such order and proportions as the Required Lenders may elect. After the completion of the Improvements, the satisfaction of the conditions to the last Loan advance in Section 5.02 and each of the tenants under the Major Leases is paying full or base rent pursuant to its Major Lease, any amounts in the Account shall be disbursed to Borrower. Borrower agrees to execute such further documents and do such further acts as Agent may reasonably request to confirm and perfect the assignment and security interest provided for in this Section. 9.02. Minimum Commitment by UBS. Subsequent to the Initial Advance, UBS hereby agrees to maintain an aggregate Individual Loan Commitment under the Loans in an amount no less than the lesser of 52 57 $25,000,000 or 40% of the aggregate Individual Loan Commitments under the Loan and the Other Loan, and further agrees to hold and not to participate or assign any of such amount other than an assignment to a Federal Reserve Bank or to the parent or a majority-owned subsidiary of UBS. 9.03. Letters of Credit. If requested by Borrower, UBS shall issue a standby, unconditional, irrevocable letter of credit (the "L/C") in favor of Sears, Roebuck and Co. for Borrower's account, as required under its Major Lease, the expiration date of the L/C not to be later than the Maturity Date. Borrower hereby acknowledges and agrees that a portion of the loan budget amount set forth in the Project Cost Statement for "Building/Garage" in an amount equal to the amount of the L/C from time to time shall be allocated toward repaying the amounts, if any, drawn under the L/C, and for no other purpose, and a portion of the outstanding principal amount under the Notes in the amount of the L/C from time to time shall evidence Borrower's obligations in connection with any such drawing. Each Lender hereby acknowledges that, notwithstanding the existence of a Default or Event of Default, in the event of any drawing under the L/C, it shall be obligated to advance Loan proceeds (such advances to be made by Lenders ratably in accordance with the respective undisbursed amounts of their Individual Loan Commitments) to reimburse UBS, for its own account, for any such drawing. Borrower shall pay to Agent, for the account of Lenders in accordance with their respective Pro Rata Shares, a fee for the initial term of the L/C (to be determined by UBS in good faith and in its reasonable discretion taking into account the limited additional credit risk), which fee shall be payable at the issuance thereof. If the L/C is returned or reduced, undrawn, to UBS, the parties hereto agree that the loan budget amount set forth in the Project Cost Statement for "Building/Garage" shall be increased by the amount of such reduction (or the full amount of the L/C if returned). 53 58 IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written, the execution hereof by Borrower constituting (a) a certification by the party or parties executing on its behalf that the representations and warranties made in Article VI are true and correct as of the date hereof and that each of them duly holds and is incumbent in the position indicated under his name, and (b) the undertaking of said party or parties that each Requisition, whether or not personally made by any or all of them, shall constitute the personal affirmation on the part of each of them that at the time thereof said representations and warranties are true and correct. ALEXANDER'S, INC., a Delaware corporation By /s/ Brian N. Kurtz ------------------------------ Name: Brian Kurtz Title: Executive Vice President Address for notices: c/o Vornado Realty Trust Park 80 West Plaza II Saddle Brook, New Jersey 07663 Attention: Steven Roth and Joseph Macnow Telephone: (201) 587-1000 Telecopy: (201) 587-0600 54 59 UNION BANK OF SWITZERLAND (New York Branch), as Lender and Agent By /s/ Albert Rabil, III ------------------------------ Name: Albert Rabil, III Title: Vice President By /s/ Joeseph Bossil ------------------------------ Name: Joeseph Bossil Title: Assistant Vice President Address for notices, Agent's Office and Applicable Lending Office: 299 Park Avenue 38th Floor New York, New York 10171-0026 Attention: Albert Rabil, III and Mara Martez Telephone: (212) 821-3872 Telecopy: (212) 821-3943 55 60 Borrower Acknowledgment STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 29th day of March, 1995, before me personally came Brian Kurtz, to me known, who, being by me duly sworn, did depose and say that he resides at 31 West 34th St, N.Y., N.Y.; Executive Vice President of Alexander's, Inc., the corporation described in and which executed the above instrument; and that he signed his name thereto by order of the board of directors of said corporation. Mary R. Hoets ---------------------------- Notary Public 61 UBS Acknowledgments STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 29th day of March, 1995, before me personally came Albert Rabil, III, to me known, who being by me duly sworn, did depose and say that he resides at 270 Park Ave. So.; that he is the Vice President of Union Bank of Switzerland (New York Branch) described in and which executed the above instrument; and that he signed his name thereto by order of the board of directors of Union Bank of Switzerland (New York Branch). Mary R. Hoets ---------------------------- Notary Public STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 29th day of March, 1995, before me personally came Joesph Bossil, to me known, who being by me duly sworn, did depose and say that he resides at 581-10th St, Brooklyn N.Y.; that he is the Asst. Vice President of Union Bank of Switzerland (New York Branch) described in and which executed the above instrument; and that he signed his name thereto by order of the board of directors of Union Bank of Switzerland (New York Branch). Mary R. Hoets ---------------------------- Notary Public 62 EXHIBIT H NOTE (Building Loan) $38,739,611 New York, New York March 29, 1995 For value received, ALEXANDER'S, INC., a Delaware corporation ("Maker") hereby covenants and promises to pay to the order of UNION BANK OF SWITZERLAND (New York Branch) or its successors or assigns (collectively, the "Bank"), at the principal office of Union Bank of Switzerland (New York Branch) located at 299 Park Avenue, New York, New York 10171 ("Agent") for the account of the Applicable Lending Office at the Bank, the principal sum of Thirty Eight Million Seven Hundred Thirty Nine Thousand Six Hundred Eleven Dollars ($38,739,611), or if less, the amount loaned by the Bank to Maker pursuant to the Loan Agreement (as defined below) and actually outstanding, in lawful money of the United States and in immediately available funds, in accordance with the terms set forth in the Loan Agreement. Maker also covenants and promises to pay interest on the unpaid principal balance hereof, for the period such balance is outstanding, in like money, at said office for the account of said Applicable Lending Office, at the time and at a rate per annum as provided in the Loan Agreement. Any amount of principal hereof which is not paid when due, whether at stated maturity, by acceleration, or otherwise, shall bear interest from the date when due until said principal amount is paid in full, payable on demand, at the Involuntary Rate. The date and amount of each advance of the Loan which is evidenced hereby made by the Bank to Maker under the Loan Agreement referred to below, and each repayment thereof, shall be recorded by the Bank on its books and, prior to any transfer of this Note (or, at the discretion of the Bank, at any other time), endorsed by the Bank on the schedule attached hereto and any continuation thereof. This Note constitutes, as of the date hereof, the "Notes" referred to in the Building Loan Agreement, dated the date hereof (as the same may be amended from time to time, the "Loan Agreement"), among Maker, as Borrower, the Bank, as Lender, and Agent, as Agent for Lenders. All of the terms, conditions and provisions of the Loan Agreement are hereby incorporated by reference. All capitalized terms used herein and not defined herein shall have the meanings given to them in the Loan Agreement. This Note is secured by the Mortgage which contains, among other things, provisions for the prepayment of and acceleration of this Note upon the happening of certain stated events. Reference to the Mortgage is hereby made for a description of the "Mortgaged Property" encumbered thereby and 63 the rights of Maker and the Lenders (including the Bank) with respect to such Mortgaged Property. Maker agrees that it shall be bound by any agreement extending the time or modifying the terms of payment set forth above and in the Loan Agreement, made by or on behalf of the Lenders and the owner or owners of the Mortgaged Property, whether with or without notice to Maker, and Maker shall continue liable to pay the amount due hereunder in accordance with the terms set forth herein and in the Loan Agreement, but with interest at a rate no greater than the rate of interest provided in the Loan Agreement, according to the terms of any such agreement of extension or modification. Should the indebtedness represented by this Note or any part thereof be collected at law or in equity, or in bankruptcy, receivership or any other court proceeding (whether at the trial or appellate level), or should this Note be placed in the hands of attorneys for collection upon default, Maker agrees to pay, in addition to the principal, interest and other sums due and payable hereon, all costs of collecting or attempting to collect this Note, including reasonable attorneys' fees and expenses. All parties to this Note, whether principal, surety, guarantor or endorser, hereby waive presentment for payment, demand, protest, notice of protest and notice of dishonor. This Note shall be governed by the laws of the State of New York, provided that, as to the maximum lawful rate of interest which may be charged or collected, if the laws applicable to the Bank permit it to charge or collect a higher rate than the laws of the State of New York, then such law applicable to the Bank shall apply to the Bank under this Note. 2 64 IN WITNESS WHEREOF, Maker has executed and delivered this Note as of the date first above written, intending the same to take effect as a sealed instrument. ALEXANDER'S, INC., a Delaware corporation By /s/ Brian Kurtz [SEAL] --------------------- Name: Brian Kurtz Title: Vice-President This is to certify that this Note was executed in my presence on the date hereof by the party(ies) whose signature(s) appear(s) above in the capacity(ies) indicated. /s/ Mary R. Hoets ----------------------------- Notary Public My commission expires: August 19, 1995 ----------------------------- 3 65 EXHIBIT I Notice-of-Assignment of Lease (On Letterhead of Borrower) , 1995 --------------- ------------------------------ ------------------------------ ------------------------------ Re: Lease Dated: -------------------- Deed of Trust Dated: ---------------------------------- Gentlemen: The undersigned has assigned by a mortgage or deed of trust (the "Mortgage") dated as shown above to Union Bank of Switzerland (New York Branch), as agent (hereinafter termed the "Bank"), all its estate, right, title and interest in, to and under the Lease between you and the undersigned dated as set forth above, as said Lease may have been heretofore modified or amended (the "Lease"), together with all right, title and interest of the undersigned as lessor thereunder, including, without limitation, the right upon the occurrence of an Event of Default (as defined in the Mortgage) to collect and receive all earnings, revenues, rents, issues, profits and income of the property subject to the Mortgage. You are hereby notified pursuant to Section 291-f of the Real Property Law of the State of New York that certain provisions of the Mortgage, the text of which is attached hereto, restrict the undersigned's rights under the Lease. However, the aforesaid assignment does not impair or diminish any of our obligations to you under the provisions of the Lease, nor are any such obligations imposed upon the Bank, its successors or assigns. Pursuant to said assignment you are hereby notified that in the event of a demand on you by the Bank or its successors and assigns for the payment to it of the rents due under the Lease, you may, and are hereby authorized and directed to, pay said rent to the Bank and we hereby agree that the receipt by you of such a demand shall be conclusive evidence of the right of the Bank to the receipt thereof and that the payment of the rents by you to the Bank pursuant to such demand shall constitute performance in full of your obligation under the Lease for the payment of rent to the undersigned. 66 Kindly indicate your receipt of this letter and your agreement to the effect set forth below by signing the enclosed copy thereof and mailing it to Union Bank of Switzerland (New York Branch), 299 Park Avenue, New York, New York 10171, Attention: Real Estate Finance Office. ALEXANDER'S, INC., a Delaware corporation By ----------------------------- Name: Title: The undersigned acknowledges receipt of the original of this letter and agrees for the benefit of the Bank that it shall notify the Bank of any default on the part of the landlord under the Lease which would entitle the undersigned to cancel the Lease or to abate the rent payable thereunder. ------------------------------ By ---------------------------- [Attachment: Section 1.14 of Mortgage] 2 EX-10.IF 6 PROJECT LOAN AGREEMENT 1 Exhibit 10(i)(F) ================================================================================ "Loan Amount": $46,260,389 PROJECT LOAN AGREEMENT Dated as of March 29, 1995 among ALEXANDER'S, INC., as Borrower, UNION BANK OF SWITZERLAND (New York Branch), as Lender, and UNION BANK OF SWITZERLAND (New York Branch), as Agent LOCATION OF PREMISES: Corner of 63rd Road and Queens Boulevard in Rego Park, Queens County, New York ================================================================================ "Lenders' Counsel": Dewey Ballantine 1301 Avenue of the Americas New York, New York 10019-6092 Attention: George C. Weiss, Esq. 2 PROJECT LOAN AGREEMENT, dated as of March 29, 1995 among ALEXANDER'S, INC., a Delaware corporation ("Borrower"), UNION BANK OF SWITZERLAND (New York Branch) (in its individual capacity and not as agent, "UBS"; UBS and the lenders who from time to time become Lenders pursuant to Section 7.16, 7.20 or 8.13 of the BLA referred to below, each a "Lender" and collectively, "Lenders"), and UBS, as administrative agent for Lenders (in such capacity, together with its successors in such capacity, "Agent"). Borrower desires that Lenders extend credit as provided herein, and Lenders are prepared to extend such credit. Accordingly, Borrower, each Lender and Agent agree as follows: 1. Loan. (a) On the basis of the representations, warranties and covenants made by Borrower herein and in the Mortgage (as defined below) and in the building loan agreement (the "BLA") of even date herewith among Borrower, Lenders and Agent relative to the construction of the "Improvements" (as such quoted term is defined in the BLA) on the Premises (as defined below), and subject to Borrower's satisfaction of the conditions herein set forth, each Lender agrees to advance its Pro Rata Share (as defined below) of, and Borrower agrees to accept, a loan (the "Loan") in the Loan Amount. The Loan shall be evidenced by Borrower's notes (as the same may be amended, modified, extended, severed, assigned, renewed and restated, from time to time including any substitute or replacement note pursuant to Section 7.16, Section 7.20 or Section 8.13 of the BLA, as incorporated herein pursuant to paragraph 5 hereof, each, a "Note" and collectively, the "Notes") to Lenders in an aggregate principal amount equal to the Loan Amount and secured by a mortgage, assignment of leases and rents and security agreement (the "Mortgage") from Borrower to Agent, for the benefit of Lenders, of Borrower's interest in respect of the real property described in Schedule A to the Mortgage (the "Premises"). This Agreement, the Notes, the Mortgage and related UCC-1 financing statements, and the "Indemnity" (as such quoted term is defined in the BLA) are hereinafter referred to collectively as the "Loan Documents". (b) The Loan Amount shall be advanced as provided herein in respect of certain non-construction costs incurred by Borrower in connection with the Premises and the Improvements. Lenders shall fund each advance of the Loan ratably in accordance with the respective undisbursed amounts of their Individual Loan Commitments. For purposes of this Agreement, "Individual Loan Commitment" means, with respect to each Lender, the amount set forth in the table below opposite the name of such Lender (subject to adjustment in accordance with the provisions of Section 7.16, Section 7.20 and Section 8.13 of the BLA, as incorporated herein pursuant to paragraph 5 hereof); and "Pro 3 Rata Share" means, with respect to each Lender, the ratio of such Lender's Individual Loan Commitment to the Loan Amount.
Lender Individual Loan Commitment ------ -------------------------- UBS $46,260,389
2. Advances. Advances of Loan proceeds shall be made to Borrower in respect of the categories of costs and expenses (hereinafter "such Costs") set forth on the budget annexed hereto as EXHIBIT A and made a part hereof up to the loan budget amount set forth on said EXHIBIT A with respect to each such category. Advances shall be made monthly upon the satisfaction of the conditions set forth in paragraph 3 hereof, shall be in the amount of such Costs actually incurred by Borrower and shall be made at "Agent's Office" (as such quoted term is defined in the BLA), upon at least seven business days' prior written notice to Agent. Requests for an advance of Loan proceeds shall be in form and substance satisfactory to Agent and shall be accompanied by (i) such supporting documentation for such Costs as Agent may require, (ii) Borrower's certificate to the effect that it has actually incurred such Costs in the amount of the requested advance, that such Costs have not been made the basis for any other request for an advance under this Agreement or under the BLA, and that no material adverse change in Borrower's or Guarantor's financial condition has occurred since the immediately preceding advance and (iii) a notice of title continuation of or an endorsement to the title policy referred to in paragraph 3 below indicating that, since the date of the last preceding advance, there has been no change in the state of title and no survey exception not theretofore approved by Agent, which endorsement shall have the effect of redating said policy to the date, and increasing the coverage thereof by the amount, of the advance then being made. Notwithstanding anything to the contrary contained in this Agreement, Lenders shall have no obligation to advance any portion of the Loan budget amount, if any, for "Interest on Loan" (x) if, when and to the extent that Agent, in its sole judgment, determines that the Premises and/or Improvements are generating, on a cash basis, positive cash flow in excess of Borrower's other usual, reasonable and customary expenses regarding the Premises and/or Improvements or (y) if and to the extent that Borrower shall have previously paid any interest under the Notes from sources other than advances under this Agreement or agreements supplemental hereto. 3. Conditions Precedent. Lenders' obligations under this Agreement shall be conditioned upon, and no portion of the Loan shall be advanced until, the satisfaction of the following conditions: 2 4 (a) There shall be no default under this Agreement, the Notes or Mortgage or under any mortgage given to Agent in connection with the BLA; (b) Agent shall have received: (i) executed counterparts of this Agreement, the Notes and Mortgage, (ii) the commitment fee, if any, for the Loan which shall be retained by Lenders whether or not any advances are made hereunder, (iii) policies or certificates of insurers evidencing the insurance required by the Mortgage, (iv) a paid title insurance policy, in ALTA 1992 form with New York endorsements, in the amount of the Mortgage, insuring the Mortgage to be a valid lien on Borrower's interest in the Premises free and clear of all defects and encumbrances not approved by Lenders' Counsel, which shall contain no unacceptable survey exceptions, full coverage against mechanics' and materialmen's liens, such affirmative insurance and endorsements as Lenders' Counsel may require, an undertaking by the issuer thereof to provide the notice of title continuation or endorsement referred to in paragraph 2 above and a pending disbursements clause in the form of EXHIBIT B hereto, (v) an opinion of Borrower's counsel to the effect that the Notes, Mortgage and this Agreement have each been duly authorized, executed and delivered by the parties thereto, and are valid and binding instruments enforceable against said parties in accordance with their respective terms subject, however, to the qualifications that (1) some of the rights and remedies set forth in the Notes and Mortgage may be limited by bankruptcy, insolvency, reorganization and other laws of general application to the enforcement of creditors' rights and (2) certain remedies and waivers contained in the Mortgage may be limited by applicable laws, none of which qualifications will materially interfere with the practical realization of the benefits and security provided by said documents except for the economic consequences of any procedural delay which may result therefrom, and (vi) documents, in respect of the Loan, of the character required by clauses (ii) and (iii) of paragraph (i) of Section 4.04 of the BLA for the loan contemplated thereby; and (c) Borrower shall have simultaneously made a requisition for an advance under the BLA and satisfied all conditions to the receipt of an advance thereunder. 4. Reallocation of Costs. If at any time the undisbursed balance of Loan proceeds for any category of cost or expense shown on EXHIBIT A hereto is, in Agent's judgment, excessive or deficient, the excess or deficiency may be reallocated to any other balance which Agent deems to be excessive or insufficient, as the case may be. 3 5 5. Certain General Conditions and Representations. The provisions of Sections 2.09 and 2.11 through 2.17 of the BLA; Article III of the BLA; paragraphs (a), (b), (d), (e), (f), (k), (l), (o), (q) and (r) of Section 6.01 of the BLA; Article VII of the BLA; and Sections 8.01, 8.02, 8.04, 8.06 through 8.10, and 8.12 through 8.18 of the BLA, and all the related definitions in the BLA (other than the definitions of those terms that are otherwise defined herein), are hereby incorporated herein by reference, as if fully and completely set forth herein, so that said provisions, as incorporated herein, shall refer to and apply in all respects to the Loan, the Loan Amount, each Lender's Individual Loan Commitment and Pro Rata Share, the Mortgage, the Notes, this Agreement and the other Loan Documents; provided, however, that, as used in said provisions as incorporated herein, the term "Other Loan" shall refer to the loan made pursuant to the BLA, and the term "Other Notes" shall refer to the notes evidencing such loan (it being intended that the provisions of the BLA pertaining to interest rate options shall permit Borrower to select, in a coordinated fashion, interest rates under the notes evidencing the Loan and the loan made pursuant to the BLA). 6. Governing Law. This Agreement and the rights and obligations of the parties hereunder shall in all respects be governed by, and construed and enforced in accordance with, the laws of the State of New York (without giving effect to New York's principles of conflicts of law). Borrower, Lenders and Agent hereby irrevocably submit to the non-exclusive jurisdiction of any New York State or Federal court sitting in New York County, New York (or any county in New York State where any portion of the "Mortgaged Property", as such quoted term is defined in the Mortgage, is located) over any suit, action or proceeding arising out of or relating to this Agreement, and hereby agree and consent that, in addition to any methods of service of process provided for under applicable law, all service of process in any such suit, action or proceeding in any New York State or Federal court sitting in New York County (or such other county in New York State) may be made by certified or registered mail, return receipt requested, directed to a party at the address indicated on the signature page hereof, and service so made shall be complete five (5) days after the same shall have been so mailed. 7. Developer's Fee. With respect to the Loan Budget amount for "Developer's Fee", $90,000 shall be advanced monthly until $1,300,000 remains to be funded and the remainder shall be advanced upon the satisfaction of the conditions set forth in Section 5.02 of the BLA. 8. Final Advance. The advance of Loan proceeds prior to the time when $25,000,000 of Loan proceeds remains to be advanced (if not sooner advanced) shall be advanced upon the satisfaction of 4 6 the conditions to Section 2.04(c) of the BLA. The final $25,000,000 of Loan proceeds (the "Final Advance") shall be advanced only upon all of the other conditions to an advance under this Agreement having been satisfied (including without limitation Section 2.04(c) of the BLA) and the satisfaction of the following additional conditions at the time of Borrower's request for the Final Advance (the "Request Date"): (a) Agent having received (i) an independent third-party appraisal satisfactory to Agent indicating that the value of the Premises and Improvements as of the Request Date is at least $121,500,000 and (ii) a fully executed commitment for the permanent financing or acquisition of the Premises by the Maturity Date in the amount of at least $85,000,000 from an entity satisfactory to Agent and containing such terms and conditions to the funding thereof which are satisfactory to Agent; (b) the net operating income from the Premises for the twelve-month period prior to the Request Date (the "NOI") determined in accordance with generally accepted accounting principles being at least $14,450,000; (c) the NOI being at least 200% of the annual interest expense which would be payable on an $85,000,000 loan bearing interest at 2% over the interest rate on 10 year U.S. treasury notes quoted as of the Request Date; (d) there existing no default under any other loan made to Alexander's, Inc. or any of its subsidiaries; (e) there existing no material adverse change in the financial condition of Alexander's, Inc. and its consolidated subsidiaries; and (f) any mortgages encumbering the Premises not held by Lender are subordinated to the Final Advance in a manner satisfactory to Lender. 9. Administration Fee. If the Final Advance is made, Borrower shall pay to Agent, for the account of Agent, an administration fee of $25,000 per annum during the remainder of the Loan term including any extension periods, payable quarterly in advance commencing upon the making of the Final Advance. 5 7 IN WITNESS WHEREOF, Borrower, Lenders and Agent have caused this Agreement to be executed the day and year first above written. ALEXANDER'S, INC., a Delaware corporation By /s/ Brian Kurtz ---------------------------- Name: Brian Kurtz Title: Executive Vice President Address for notices: c/o Vornado Realty Trust Park 80 West Plaza II Saddle Brook, New Jersey 07663 Attention: Steven Roth and Joseph Macnow Telephone: (201) 587-1000 Telecopy: (201) 587-0600 6 8 UNION BANK OF SWITZERLAND (New York Branch), as Lender and Agent By /s/ Albert Rabil, III --------------------------------- Name: Albert Rabil, III Title: Vice President By /s/ Joseph Bassil --------------------------------- Name: Joseph Bassil Title: Assistant Vice President Address for notices, Agent's Office and Applicable Lending Office: 299 Park Avenue 38th Floor New York, New York 10171-0026 Attention: Albert Rabil, III and Mara Martez Telephone: (212) 821-3872 Telecopy: (212) 821-3943 EXHIBIT A - Project Cost Statement EXHIBIT B - Pending Disbursements Clause 7 9 NOTE (Project Loan) $46,260,389 New York, New York March 29, 1995 For value received, ALEXANDER'S, INC., a Delaware corporation ("Maker") hereby covenants and promises to pay to the order of UNION BANK OF SWITZERLAND (New York Branch) or its successors or assigns (collectively, the "Bank"), at the principal office of Union Bank of Switzerland (New York Branch) located at 299 Park Avenue, New York, New York 10171 ("Agent") for the account of the Applicable Lending Office at the Bank, the principal sum of Forty Six Million Two Hundred Sixty Thousand Three Hundred Eighty Nine Dollars ($46,260,389), or if less, the amount loaned by the Bank to Maker pursuant to the Loan Agreement (as defined below) and actually outstanding, in lawful money of the United States and in immediately available funds, in accordance with the terms set forth in the Loan Agreement. Maker also covenants and promises to pay interest on the unpaid principal balance hereof, for the period such balance is outstanding, in like money, at said office for the account of said Applicable Lending Office, at the time and at a rate per annum as provided in the Loan Agreement. Any amount of principal hereof which is not paid when due, whether at stated maturity, by acceleration, or otherwise, shall bear interest from the date when due until said principal amount is paid in full, payable on demand, at the Involuntary Rate. The date and amount of each advance of the Loan which is evidenced hereby made by the Bank to Maker under the Loan Agreement referred to below, and each repayment thereof, shall be recorded by the Bank on its books and, prior to any transfer of this Note (or, at the discretion of the Bank, at any other time), endorsed by the Bank on the schedule attached hereto and any continuation thereof. This Note constitutes, as of the date hereof, the "Notes" referred to in the Project Loan Agreement, dated the date hereof (as the same may be amended from time to time, the "Loan Agreement"), among Maker, as Borrower, the Bank, as Lender, and Agent, as Agent for Lenders. All of the terms, conditions and provisions of the Loan Agreement (which, in turn, incorporates certain terms, conditions and provisions of the Building Loan Agreement, dated as of the date hereof, among Maker, the Bank and Agent) are hereby incorporated by reference. All capitalized terms used herein and not defined herein shall have the meanings given to them in the Loan Agreement. This Note is secured by the Mortgage which contains, among other things, provisions for the prepayment of and acceleration of this Note upon the happening of certain stated 10 events. Reference to the Mortgage is hereby made for a description of the "Mortgaged Property" encumbered thereby and the rights of Maker and the Lenders (including the Bank) with respect to such Mortgaged Property. Maker agrees that it shall be bound by any agreement extending the time or modifying the terms of payment set forth above and in the Loan Agreement, made by or on behalf of the Lenders and the owner or owners of the Mortgaged Property, whether with or without notice to Maker, and Maker shall continue liable to pay the amount due hereunder in accordance with the terms set forth herein and in the Loan Agreement, but with interest at a rate no greater than the rate of interest provided in the Loan Agreement, according to the terms of any such agreement of extension or modification. Should the indebtedness represented by this Note or any part thereof be collected at law or in equity, or in bankruptcy, receivership or any other court proceeding (whether at the trial or appellate level), or should this Note be placed in the hands of attorneys for collection upon default, Maker agrees to pay, in addition to the principal, interest and other sums due and payable hereon, all costs of collecting or attempting to collect this Note, including reasonable attorneys' fees and expenses. All parties to this Note, whether principal, surety, guarantor or endorser, hereby waive presentment for payment, demand, protest, notice of protest and notice of dishonor. This Note shall be governed by the laws of the State of New York, provided that, as to the maximum lawful rate of interest which may be charged or collected, if the laws applicable to the Bank permit it to charge or collect a higher rate than the laws of the State of New York, then such law applicable to the Bank shall apply to the Bank under this Note. 2 11 IN WITNESS WHEREOF, Maker has executed and delivered this Note as of the date first above written, intending the same to take effect as a sealed instrument. ALEXANDER'S, INC., a Delaware corporation By /s/ Brian Kurtz [SEAL] --------------------- Name: Brian Kurtz Title: Vice-President This is to certify that this Note was executed in my presence on the date hereof by the party(ies) whose signature(s) appear(s) above in the capacity(ies) indicated. Mary Hoets ----------------------------- Notary Public My commission expires: August 19, 1995 ----------------------------- 3 EX-10.IG2 7 EXTENSION AGMT. TO THE REAL ESTATE RETENTION AGMT. 1 Exhibit 10(i)(G)(2) Alexander's, Inc. 31 W. 34th Street New York, New York 10001 February 6, 1995 Vornado Realty Trust Park 80 West, Plaza II Saddle Brook, New Jersey 07663 Extension Agreement Gentlemen: Reference is made to (1) that certain Real Estate Retention Agreement, dated July 20, 1992 (the "Retention Agreement"), among Vornado, Inc., predecessor in interest to Vornado Realty Trust, Keen Realty Consultants Inc. and Alexander's, Inc. ("Alexander's") and (2) that certain Management and Development Agreement, dated as of February 6, 1995 (the "Management Agreement"), between Alexander's, certain affiliates of Alexander's and other parties that are signatories thereto (collectively, "Owners") and Vornado Realty Trust ("Manager"). All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Management Agreement. The parties hereto hereby acknowledge and agree that the term of the Retention Agreement shall be extended so that the term of the Retention Agreement shall become coterminus with the term of the Management Agreement, as the same may be renewed in accordance with Article II, Section A of the Management Agreement; provided, however, that in no event will the term of the Retention Agreement expire prior to the present one-year term of the Retention Agreement. This letter agreement shall become effective on the Effective Date (as defined in the Management Agreement). This letter agreement (i) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and may not be modified or amended except pursuant to the terms of an instrument signed by the parties 2 Vornado Realty Trust -2- hereto; (ii) shall be binding upon and inure to the benefit of the parties hereto and their successors and assigns; and (iii) shall be governed by, and construed in accordance with, the laws of the State of New York. Very truly yours, Alexander's, Inc. By: /s/ Stephen Mann ------------------------- Name: Stephen Mann Title: Chairman Accepted and Agreed as of this 6th day of February, 1995. Vornado Realty Trust By: /s/ Joseph Macnow ------------------------------ Name: Joseph Macnow Title: Vice President, Chief Financial Officer EX-10.IIA4 8 AMENDMENT TO LEASE 1 EXHIBIT 10(ii)(A)(4) FIRST AMENDMENT TO LEASE THIS FIRST AMENDMENT TO LEASE (hereinafter "First Amendment") is made as of this 29th day of March, 1995, between ALEXANDER'S, INC., a Delaware corporation ("Landlord"), and SEARS, ROEBUCK AND CO., a New York corporation ("Tenant"). RECITALS: A. Landlord and Tenant entered into a Lease dated March 24, 1994 ("Lease") for the lease by Tenant of certain property in the neighborhood of Rego Park, Borough of Queens, City of New York, State of New York, which property is more specifically described in the Lease (the "Demised Premises"). B. Landlord and Tenant desire to amend the Lease as provided herein. NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, the parties agree as follows: 1. As of the date of this First Amendment the Landlord is not yet obligated to provide to Tenant the Completion Letter of Credit and has not provided to Tenant the Completion Letter of Credit. This First Amendment is applicable in its entirety until Landlord provides to Tenant the Completion Letter of Credit. Once Landlord provides to Tenant the Completion Letter of Credit this First Amendment shall terminate with the exceptions of Sections 1, 2, 5, 8, 9, 10, 11, 12, 13 and 14 of this First Amendment which shall continue in full force and effect. 2. The second sentence of Subsection 3(a) of the Lease is deleted and the following inserted in lieu thereof: "The Commencement Date shall be the earlier of: (i) the later of (A) the date which is two hundred seventy (270) days after substantial completion of the Leasehold Improvements and the delivery to Tenant by Landlord of the Completion Letter of Credit; or (B) the date on which the On/Off Site Improvements are Substantially Complete; or (ii) the date Tenant opens for business to the public in the Demised Premises. Notwithstanding anything to the contrary contained herein, unless Tenant does in fact open for business to the public in the Demised Premises between November 1 and January 31, the Commencement Date shall not 2 occur during the period from November 1 to January 31 but shall occur on the next February 1." 3. Notwithstanding anything to the contrary contained herein, in the event each and every Completion Outside Date in Exhibit "A-3" is met by Landlord, then the Commencement Date shall occur on November 20, 1995, subject to Uncontrollable Events beyond Tenant's control which do not allow Tenant to open for business in the Demised Premises by November 20, 1995. 4. Landlord shall perform the construction work set forth in Exhibit "A-3" by the Completion Outside Dates set forth in Exhibit "A-3" (such documents attached hereto as Exhibit "A-3" shall be referred to as "Minimum On/Off Site Improvement Documents" and Work completed in accordance with these Minimum On/Off Site Improvement Documents shall be referred to as "Minimum On/Off Site Improvements"; provided that upon Tenant's approval of modified plans and specifications for Minimum On/Off Site Improvements in accordance with this Section 4, such plans and specifications shall be substituted for Exhibit "A-3" and shall thereafter constitute the Minimum On/Off Site Improvement Documents). Any material deviation from the Minimum On/Off Site Improvement Documents is subject to Tenant's approval, which approval shall not be unreasonably withheld. Tenant hereby approves the Minimum On/Off Site Improvement Documents. Landlord shall promptly prepare its construction documents in accordance with the Minimum On/Off Site Improvement Documents and submit them to Tenant for comment or written approval. Landlord shall promptly correct and resubmit documents until it receives Tenant's written approval; provided that Tenant shall have the right to withhold its approval to such construction documents only if the scope of work set forth therein is inconsistent with the scope of work set forth in Exhibits "A-3", "A-4", "A-5", and "A-6" or if the materials specified therein to be used in construction of Minimum On/Off Site Improvements are of a grade lower than the grade typically used in commercial shopping centers in the Northeast. 5. Unless the On/Off Site Improvements are Substantially Complete on or before the Commencement Date, Landlord hereby leases ("Parking Lot Lease") to Tenant the existing surface parking lot consisting of approximately 800 parking spaces ("Parking Lot") shown on the plan attached hereto and made a part hereof as Exhibit "A-4". The Parking Lot Lease, if any, shall be for a term commencing on July 1, 1995 and continuing to the date the On/Off Site Improvements are Substantially Complete. From July 1, 1995 through the Commencement Date, Landlord may perform work on the Parking Lot from time to time and make some of the parking spaces unavailable for Tenant's use, provided that at least 400 spaces will be available for Tenant's use at all time. No 2 3 rent shall be paid by Tenant for the Parking Lot Lease. While the Parking Lot may be paid parking, the parties agree that the schedule of parking rates set forth in Exhibit "I" of the Lease apply and all other provisions in the Lease (except Subsection 6(b)(v)) which applied to the parking deck contemplated by the On/Off Site Improvement Documents are applicable to the Parking Lot. Landlord represents and warrants that: (i) the Landlord is the owner of the Parking Lot; (ii) the Landlord has the right to lease such Parking Lot to Tenant; and (iii) the Parking Lot Lease does not violate any other agreement to which Landlord is subject to or a party to, including, but not limited to, any management or other agreement with any governmental or transportation authority relating to the Parking Lot. The Parking Lot Lease will automatically terminate once the Parking Easement Agreement attached hereto and made a part hereof as Exhibit "L" is fully executed and properly recorded. Prior to the execution and recording of the Parking Easement Agreement, Landlord will convey the Parking Lot to Alexander's of Rego Park II, Inc. ("Rego Park II"), a wholly owned subsidiary of Landlord. Landlord represents and warrants that upon such conveyance and thereafter: (i) while parking in the Parking Lot may be paid parking, the schedule of parking rates set forth in Exhibit "I" of the Lease shall apply, except that before the Commencement Date, the parking rates will not be increased above the rates in effect on the date hereof; (ii) all other provisions of the Lease (except Subsection 6(b)(v)) which apply to the parking deck contemplated by the On/Off Site Improvements shall be applicable to the Parking Lot; (iii) Rego Park II will be the owner of the Parking Lot; (iv) Landlord and Rego Park II will have the right to enter into the Parking Easement Agreement; and (v) the Parking Easement Agreement will not violate any other agreement to which Landlord or Rego Park II is subject to or a party to, including, but not limited to, any management or other agreement with any governmental or transportation authority relating to the Parking Lot. Notwithstanding anything to the contrary contained herein or in the Lease, Landlord agrees not to open, nor shall it permit Rego Park II to open, the Parking Lot for public parking prior to the time one hour prior to the scheduled opening time of the Tenant's store, unless instructed otherwise by Tenant. The parties desire to clarify Section 6(b)(v)(C) of the Lease to specify that the twenty (20) parking passes are intended to provide twenty (20) spaces per day per month. Landlord will provide Tenant with passes giving access to the spaces, Tenant shall distribute the passes as Tenant desires. Also, the twenty (20) spaces will be available as of July 1, 1995. Until the parking deck is opened the twenty (20) spaces will be in the Parking Lot. 6. In the event that all of the Minimum On/Off Site Improvements are not substantially complete (as defined in 3 4 the Lease) by the Commencement Date, then until the Minimum On/Off Site Improvements are substantially complete, Landlord and Tenant agree that the Fixed Rent and Percentage Rent due under the Lease from and after the Commencement Date shall be as follows: (a) First 6 months Zero Fixed Rent; Zero Percentage Rent; (b) Next 18 months Zero Fixed Rent and Percentage Rent are as follows: 3.0% of Net Sales to Forty Million Dollars ($40,000,000.00) in any Lease Year, plus 5.0% of Net Sales for all Net Sales in excess of Forty Million Dollars ($40,000,000.00) in any Lease Year; and Remaining term of the Lease Fixed Rent and Percentage Rent per the Lease From and after the date of the substantial completion of Minimum On/Off Site Improvements, Tenant shall pay Fixed Rent and Percentage Rent in the manner provided in the Lease as if the provisions of this Section 6 had not been effective. Notwithstanding the provisions of Section 7 of this First Amendment to Lease, in no event shall the abatement of Fixed Rent and Percentage Rent provided for in Sections 6 (a) and 7 (a) of this First Amendment to Lease be effective for more than six (6) months in total and in no event shall the abatement of Fixed Rent and Percentage Rent provided for in Sections 6 (b) and 7 (b) of this First Amendment to Lease be effective for more than eighteen (18) months in total. As used in this First Amendment, the term "substantially complete" has the same definition as in the Lease. 7. In the event that all of the On/Off Site Improvements are not substantially complete within 180 days after the Commencement Date, then until the On/Off Site Improvements are substantially complete, Landlord and Tenant agree that the rent due under the Lease from and after the Commencement Date shall be as follows: (a) First 6 months Zero Fixed Rent; Zero Percentage Rent; (b) Next 18 months Zero Fixed Rent and Percentage Rent are as follows: 3.0% of Net Sales to Forty Million 4 5 Dollars ($40,000,000.00) in any Lease Year, plus 5.0% of Net Sales for all Net Sales in excess of Forty Million Dollars ($40,000,000.00) in any Lease Year; and Remaining term of the Lease Fixed Rent and Percentage Rent per the Lease From and after the date of the substantial completion of On/Off Site Improvement, Tenant shall pay Fixed Rent and Percentage Rent in the manner provided in the Lease as if the provisions of this Section 7 had not been effective. Notwithstanding the provisions of Section 6 of this First Amendment to Lease, in no event shall the abatement of Fixed Rent and Percentage Rent provided for in Sections 6 (a) and 7 (a) of this First Amendment to Lease be effective for more than six (6) months in total and in no event shall the abatement of Fixed Rent and Percentage Rent provided for in Section 6 (b) and 7 (b) of this First Amendment to Lease be effective for more than eighteen (18) months in total. 8. In the event that the Minimum On/Off Site Improvements and the On/Off Site Improvements are not substantially complete on December 31, 1996 ("Required Deck Completion Date"), then Tenant has the one time right to terminate the Lease by giving Landlord written notice ("Termination Notice") within thirty (30) days of such Required Deck Completion Date. In the event Tenant gives Landlord a Termination Notice, then the Lease shall terminate on the date ninety (90) days from the date of such Termination Notice and Landlord shall pay to Tenant the amount of Tenant's expense incurred by Tenant that relate to Tenant's Improvements, Minimum On/Off Site Improvements, and On/Off Site Improvements, with interest at the Interest Rate from the date Tenant incurred the expense ("Reimbursement Amount"). Notwithstanding anything to the contrary contained herein, the Reimbursement Amount is subject to a cap of $14,000,000.00. 9. Notwithstanding anything to the contrary contained herein or contained in the Lease, in the event that: (i) any portion of the Minimum On/Off Site Improvements is not complete by the applicable Completion Outside Date set forth on Exhibit "A-3"; or (ii) the On/Off Site Improvements are not substantially complete within one hundred eighty (180) days after the Commencement Date, then: (a) Tenant shall have the right to give Landlord a notice (a "Self-Help Notice") specifying the particular respects in which Landlord shall have failed to so construct or complete the 5 6 such portion of the Minimum On/Off Site Improvements or the On/Off Site Improvements, as the case may be. (b) If, within three (3) days of a Self-Help Notice, Landlord shall fail to complete such portion of the Minimum On/Off Site Improvements or the On/Off Site Improvements, as the case may be, Tenant shall have the right to construct and complete such portion of the Minimum On/Off Site Improvements or the On/Off Site Improvements, as the case may be. (c) If Tenant exercises its rights under this Section 9, all such construction and completion shall be done in accordance with the plans and specifications adopted by Landlord and Tenant as provided in the Lease or this First Amendment for such portion of the Minimum On/Off Site Improvements or the On/Off Site Improvements, as the case may be, and in compliance with all insurance and legal requirements. During its performance of such portion of the Minimum On/Off Site Improvements or the On/Off Site Improvements, as the case may be, Tenant shall maintain worker's compensation, liability and property insurance in such amounts as a prudent landlord engaging in such construction would maintain. Payment of bills rendered in connection with the construction and completion of such portion of the Minimum On/Off Site Improvements or the On/Off Site Improvements, as the case may be, shall be made in accordance with customary procedures for disbursement of construction funds, including without limitation a ten (10%) percent retention and payment only against presentation of title updates, lien waivers and architect's certificates and otherwise in accordance with the requirements of any mortgagee. Upon Tenant's exercise of its right to pay and set off in this Section 9, Tenant shall promptly discharge all mechanic's liens which may be filed against the Entire Tract or any part thereof in connection with the construction and completion of such portion of the Minimum On/Off Site Improvements or the On/Off Site Improvements, as the case may be. (d) Tenant may deduct the cost of completion and construction of such portion of the Minimum On/Off Site Improvements or the On/Off Site Improvements, as the case may be, plus a supervision fee equal to ten percent (10%) of 6 7 such bills, from Rent payable under the Lease until fully reimbursed, with interest at the Interest Rate. Neither party shall have any rights against the other on account of Landlord's failure to complete the On/Off Site Improvements or Minimum On/Off Site Improvements by any date except as provided in the Lease and pursuant to the terms of this First Amendment. 10. The words "either party" in the second line of Subsection 5(e) are deleted and the word "Tenant" is substituted in lieu thereof. 11. Landlord hereby waives its right to terminate the Lease set forth in Subsection 5(f)(i) of the Lease. 12. The Lease, except as amended herein, is in all other respects fully ratified and confirmed. 13. Except as defined herein, all capitalized items used in this First Amendment to Lease shall have the meanings ascribed to such terms in the Lease. 14. Each party executing this First Amendment to Lease represents and warrants that he/she has the power and authority to execute this document on behalf of his/her respective party. 7 8 IN WITNESS WHEREOF, the parties have executed this First Amendment to Lease as of the day and year first above written. ATTEST OR WITNESS: LANDLORD: ALEXANDER'S INC. By: /s/ Steven Santora By: /s/ Brian Kurtz ------------------- ---------------------- Print Name: Steven Santora Brian Kurtz Print Title: Vice-President Executive Vice President ATTEST: TENANT: SEARS, ROEBUCK AND CO. By: /s/ Robert C. Bramlette, Jr. By: /s/ Barry D. Kaufman ----------------------------- ----------------------- Assistant Secretary Barry D. Kaufman Vice President Real Estate The undersigned being the holders of the mortgages on the Entire Tract hereby consent to the foregoing First Amendment to Lease. Dated: March 29, 1995 First Fidelity Bank, National Association By: /s/ Robert Dowdy ---------------------------- Its: Vice President Dated: March 29, 1995 Vornado Lending Corp. By: /s/ Joseph Macnow --------------------------- Its: Vice President 8 9 STATE OF NEW YORK ) )ss: COUNTY OF NEW YORK ) THE undersigned, a Notary Public, in and for the County and State aforesaid, does hereby certify, that Brian Kurtz and Steven Santana personally known to me to be the Executive Vice President and Vice President and personally known to me to be the same persons whose names are subscribed to the foregoing instrument, appeared before me this day in person and acknowledged under oath that as such Executive Vice President and Vice President they signed and delivered the said instrument pursuant to authority duly given to them by said corporation. GIVEN under my hand and seal this 29th day of March, 1995. Mary R. Hoets -------------------------------- Mary R. Hoets Notary Public My Commission Expires: August 19, 1995. [SEAL] 9 10 STATE OF ILLINOIS ) ) SS: COUNTY OF DU PAGE ) THE undersigned, a Notary Public, in and for the County and State aforesaid, does hereby certify, that Robert C. Bramlette, Jr. and Barry D. Kaufman personally known to me to be the Assistant Secretary and Vice President Real Estate of SEARS, ROEBUCK AND CO., a New York corporation, and subscribed to the foregoing instrument, appeared before me this day in person and acknowledged under oath that as such Assistant Secretary and Vice President Real Estate they signed and delivered the said instrument pursuant to authority duly given to them by said corporation. GIVEN under my hand and seal this 21st day of March, 199_. /s/ THOMAS B. CAHILL [SEAL] ----------------------------- Notary Public My Commission Expires: November 13, 199_. 10 EX-10.IIA7B 9 FIRST AMENDMENT TO THE LEASE FOR FORDHAM ROAD 1 Exhibit 10(ii)(A)(7)(b) FORDHAM ROAD FIRST AMENDMENT TO LEASE FIRST AMENDMENT TO LEASE ("Amendment") dated as of February 22, 1995, between ALEXANDER'S, INC., a New York corporation having an office at 31 West 34th Street, New York, New York ("Landlord"), and THE CALDOR CORPORATION, a Delaware corporation, successor in interest to Caldor, Inc., having an office at 20 Glover Avenue, Norwalk, Connecticut ("Tenant"). WITNESSETH WHEREAS, Landlord and Caldor, Inc., Tenant's predecessor in interest, entered into a lease dated as of December 1, 1992 (the "Lease") in connection with premises on Fordham Road, Bronx, New York, which premises is more particularly described in the Lease; and WHEREAS, Landlord and Tenant have agreed to amend the Lease to clarify the terms under which Tenant may sublet the Demised Premises (as said term is defined in the Lease). NOW, THEREFORE, in consideration of TEN DOLLARS ($10.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Landlord and Tenant hereby agree as follows: 1. Section 9.6 of the Lease is hereby amended to include the following provision: Section 9.6(b)(i). Notwithstanding any other provision of the Lease, Tenant may not enter into any lease, sublease, license, concession or other agreement for use, occupancy or utilization of space in the Demised Premises which provides for a rental or other payment for such use, occupancy or utilization based in whole or in part on the net income or profits derived by any person from the property leased, occupied or utilized, or would require the payment of any consideration which would not fall within the definition of "rents from real property," as that term is defined in Section 856(d) of the Internal Revenue Code of 1986, as amended. Except as modified herein, the terms of the Lease remain unchanged and in full force and effect and unmodified. 2 IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first written above. LANDLORD: ALEXANDER'S, INC., By: /s/ Steven Santora --------------------------- Name: Steven Santora Title: Vice President-Controller TENANT: THE CALDOR CORPORATION By: /s/ Alan Kuller --------------------------- Name: Alan Kuller Title: Sr. Vice President -2- 3 STATE OF NEW YORK ) ss. : COUNTY OF NEW YORK ) On this 22nd day of February, 1995, before me personally came, Steven Santora, who, being duly sworn, did depose and say that he resides at Manalapan, New Jersey; that he is the Controller of ALEXANDER'S, INC., the corporation described in and which executed the within instrument; and that he signed his name thereto by authority of the Board of Directors of said corporation. /s/ Cynthia A. Artist ------------------------------ Notary Public STATE OF CONNECTICUT ) ss. : NORWALK COUNTY OF FAIRFIELD ) On this 15th day of Feb., 1995, before me personally came Alan Kuller, who, being duly sworn, did depose and say that he resides at 60 Banksville Rd., Armonk NY that he is a Sr. Vice President of THE CALDOR CORPORATION, the corporation described in and which executed the within instrument; and that he signed his name thereto by authority of the Board of Directors of said corporation. /s/ Janet M. Hames ------------------------------ Notary Public My commission expires 4/30/98. -3- EX-10.IIA8B 10 FIRST AMENDMENT TO SUBLEASE FOR ROOSEVELT AVENUE 1 Exhibit 10(ii)(A)(8)(b) FLUSHING FIRST AMENDMENT TO SUBLEASE FIRST AMENDMENT TO SUBLEASE ("Amendment") dated as of February 22, 1995 between ALEXANDER'S, INC., a New York corporation having an office at 31 West 34th Street, New York, New York ("Sublandlord"), and THE CALDOR CORPORATION, a Delaware corporation, successor by merger to Caldor, Inc., having an office at 20 Glover Avenue, Norwalk, Connecticut ("Subtenant"). WITNESSETH WHEREAS, Sublandlord and Caldor, Inc., Subtenant's predecessor in interest, entered into a sublease dated as of December 1, 1992 (the "Sublease") in connection with premises on Main Street and Roosevelt Avenue, Flushing, New York, which premises is more particularly described in the Sublease; and WHEREAS, Sublandlord and Subtenant have agreed to amend the Sublease to clarify the terms under which Subtenant may sublet the Store Premises (as said term is defined in the Sublease). NOW, THEREFORE, in consideration of TEN DOLLARS ($10.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Sublandlord and Subtenant hereby agree as follows: 1. Section 1.8 of the Sublease is hereby amended to include the following provision: Section 1.8(b)(i). Notwithstanding any other provision of the Sublease, Subtenant may not enter into any lease, sublease, license, concession or other agreement for use, occupancy or utilization of space in the Store Premises which provides for a rental or other payment for such use, occupancy or utilization based in whole or in part on the net income or profits derived by any person from the property leased, occupied or utilized, or would require the payment of any consideration which would not fall within the definition of "rents from real property," as that term is defined in Section 856(d) of the Internal Revenue Code of 1986, as amended. Except as modified herein, the terms of the Sublease remain unchanged and in full force and effect and unmodified. 2 IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first written above. SUBLANDLORD: ALEXANDER'S, INC., By: /s/ Steven Santora --------------------------- Name: Steven Santora Title: Vice President Controller SUBTENANT: THE CALDOR CORPORATION By: /s/ Alan Kuller --------------------------- Name: Alan Kuller Title: Sr. Vice President -2- 3 STATE OF NEW YORK ) ss. : COUNTY OF NEW YORK ) On this 22nd day of February, 1995, before me personally came, Steven Santora, who, being duly sworn, did depose and say that he resides at Manalapan, New Jersey; that he is the Vice President Controller of ALEXANDER'S, INC., the corporation described in and which executed the within instrument; and that he signed his name thereto by authority of the Board of Directors of said corporation. /s/ Cynthia A. Artist ------------------------------ Notary Public STATE OF CONNECTICUT ) ss. : NORWALK COUNTY OF FAIRFIELD ) On this 15th day of Feb., 1995, before me personally came Alan Kuller, who, being duly sworn, did depose and say that he resides at 60 Banksville, Rd., Armonk, NY that he is a Sr. Vice President of THE CALDOR CORPORATION, the corporation described in and which executed the within instrument; and that he signed his name thereto by authority of the Board of Directors of said corporation. /s/ Janet M. Hames ------------------------------ Notary Public My commission expires 4/30/98. -3- EX-10.IIA12A 11 AGREEMENT OF LEASE, COMPANY AND MARSHALLS 1 Exhibit 10(ii)(A)(12)(a) LEASE AGREEMENT BETWEEN ALEXANDER'S, INC. LANDLORD AND MARSHALLS OF RICHFIELD, MN., INC. TENANT REGO PARK NEW YORK 2 TABLE OF CONTENTS
Page ARTICLE I. Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1. Demise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II. Term of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. Commencement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 3. Extension Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE III. Minimum Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 1. Annual Minimum Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 2. Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 ARTICLE IV. Percentage Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 1. Percentage Rent Calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 2. Lease Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 3. Tenant's Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 4. Non-Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 5. Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 6. Conduct of Business - Landlord's Recapture Rights . . . . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE V. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 1. Taxes Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 2. Right to Contest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 3. Tenant's Tax Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 4. Betterment Assessments - Last 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 5. Tax on Rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 ARTICLE VI. Maintenance of Common Areas and Common Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 1. Maintenance by Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 2. Non-Exclusive Rights of Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 3. Changes to Shopping Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 4. Tenant's Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 5. Enclosed Parking Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE VII. Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE VIII. Initial Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 1. Landlord's Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 2. Tenant's Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE IX. Use Clause and Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 1. Permitted Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 2. Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 3. Hours of Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 4. Assignment and Subletting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 5. Outdoor Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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Page ARTICLE X. Maintenance of Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 1. HVAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 2. Tenant's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 3. Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 4. Construction Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 5. Tenant's Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 6. Surrender of Demised Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 ARTICLE XI. Liability and Property Damage Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 1. Landlord's Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 2. Tenant's Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 ARTICLE XII. Mutual Self-Help . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 1. Self-Help by Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 2. Self-Help by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 ARTICLE XIII. Hazard Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 1. Landlord's Insurance - Tenant's Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 2. Tenant's Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Section 3. Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 4. Increased Insurance Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 ARTICLE XIV. Damage Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 1. Partial Damage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 2. Substantial Damage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 3. Substantial Damage - Last 3 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 4. Rent Abatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 5. Substantial Damage Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 6. Casualty to Shopping Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 7. Commencement of Restoration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 ARTICLE XV. Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 2. Total or Partial Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 3. Restoration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 4. Taking for Temporary Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 5. Disposition of Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 6. Other Portions of Shopping Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 7. Rent Abatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 ARTICLE XVI. Landlord's Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 1. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 2. Landlord's Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 3. Lawful Retail Use Prohibited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 ARTICLE XVII. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 1. Tenant's Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 2. Landlord's Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ii 4 TABLE OF CONTENTS (continued)
Page ARTICLE XVIII. Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 1. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 2. Covenant of Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 3. Status Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 4. Notice to Mortgagee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 5. Mechanic's Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 6. Invalidity of Particular Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 7. Provisions Binding, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 8. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 9. Recording . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 10. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Section 11. Paragraph Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Section 12. Size of Demised Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Section 13. Landlord and Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 14. Signs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 15. Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 16. Transmittal of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 17. Investment Tax Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 18. Merchants' Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 19. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 20. Subordination and Attornment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Section 21. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Section 22. Tenant's Brokerage Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 23. Consequential Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 24. Mutual Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 25. Transfer of Landlord's Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 26. Mortgagee's Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 27. Satellite Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 ARTICLE XIX Real Estate Investment Trust Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 1. Special Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 2. Management of the Shopping Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 3. Common Area Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 4. Real Estate Investment Trust Tax Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 ARTICLE XX Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 1. Landlord's Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 2. Landlord's Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 3. Tenant's Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 4. Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 5. Tenant's Right To Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 6. Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 7. Landlord's Acts - Tenant's Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 8. Environmental Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SCHEDULES SCHEDULE "A-1" SITE PLAN SCHEDULE "A-2" METES AND BOUNDS DESCRIPTION OF THE SHOPPING CENTER iii 5 TABLE OF CONTENTS (continued)
Page SCHEDULE "A3" FLOOR PLAN OF THE DEMISED PREMISES SCHEDULE "B" LANDLORD'S WORK AND DETERMINATION OF COMMENCEMENT DATE SCHEDULE "B-1" WORK LETTER SCHEDULE "B-2" PLANS PREPARED BY DAL POS ARCHITECTS, P.C. SCHEDULE "C" DEFINITION OF GROSS SALES SCHEDULE "D" LIST OF USE RESTRICTIONS SCHEDULE "E" SHORT FORM LEASE FOR RECORDING SCHEDULE "F" TENANT'S SIGNS SCHEDULE "G" TAX CONTEST RIGHTS - SEARS AND CALDOR SCHEDULE "H" ENCLOSED PARKING STRUCTURE SCHEDULE "I" SCHEDULE OF ENCUMBRANCES SCHEDULE "J" NEW YORK CITY ASBESTOS REPORT - ACP5
iv 6 INDENTURE OF LEASE THIS INDENTURE OF LEASE, made as of the 1st day of March, 1995, by and between ALEXANDER'S, INC., a Delaware corporation, having a mailing address c/o Vornado Realty Trust, Park 80 West Plaza II, Saddle Brook, NJ 07662 ("Landlord"), of the one part; and MARSHALLS OF RICHFIELD, MN., INC., a Minnesota corporation, having a mailing address at 200 Brickstone Square, Box 9030, Andover, Massachusetts 01810 ("Tenant"), of the other part. W I T N E S S E T H: ARTICLE I. Premises Section 1. Demise. Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, upon and subject to the terms and provisions of this lease, the portion of the building hereinafter more particularly described, which building is a part of the shopping center consisting of the former Alexander's department store building located on the Southeast side of the Long Island Expressway between Queens boulevard and 97th Street (hereinafter referred to as the "Building") and the adjoining enclosed parking structure (hereinafter referred to as the "Enclosed Parking Structure") (hereinafter collectively referred to as the "Shopping Center"), together with (a) the non-exclusive easement, right and privilege for Tenant and its customers, employees and invitees and the customers, employees and invitees of any assignee, sublessee, concessionaire or licensee of Tenant, to use the common areas of the Shopping Center in common with Landlord and the other tenants and occupants of floor area within the Shopping Center and their respective customers, employees and invitees; and (b) such other easements, rights and privileges as may be granted to Tenant pursuant to the terms hereof. The boundaries of the Shopping Center are shown on the Site Plan annexed hereto and made a part hereof as Schedule "A-1" (hereinafter referred to as the "Site Plan") and a metes and bounds description thereof is annexed hereto and made a part hereof as Schedule "A-2". The premises demised pursuant to this lease consist of approximately 36,100 square feet of floor area designated on the Site Plan. Unless otherwise indicated, as used in this lease (i) the "floor area" of the demised premises (or any subdivided portion thereof) or of the premises of any other tenant in the Shopping Center shall be exclusive of non-selling mezzanines and basements, and (ii) the "floor area" of the Shopping Center shall be exclusive of non-selling mezzanines and basements and the Enclosed Parking Structure and other common areas. Annexed hereto and made a part hereof as Schedule "A-3" is a floor plan of the premises demised by this lease (hereinafter referred to as the "demised premises"). -1- 7 ARTICLE II. Term of Lease Section 1. Term. TO HAVE AND TO HOLD the demised premises unto Tenant for the original term commencing on the Commencement Date (as hereinafter defined) and continuing until the expiration of twelve (12) years and six (6) months after the Commencement Date, but if the Commencement Date shall not be the first day of a month, then the term shall continue until the last day of that month which is twelve (12) years and six (6) months after the Commencement Date, unless said term shall be earlier terminated or extended, as provided in this lease. Section 2. Commencement Date. The term of this lease shall commence on the date determined in accordance with the provisions of Schedule "B" annexed hereto (such date to be hereinafter referred to as the "Commencement Date"). All of the provisions of said Schedule "B" are hereby incorporated herein in full by this reference as though fully set forth in the body of this lease. As soon as the Commencement Date has been determined, the parties hereto agree to execute a supplemental instrument memorializing said date. Section 3. Extension Period. If this lease is still in full force and effect without default on the part of Tenant beyond any applicable grace periods for which Landlord has the right to terminate this lease, Tenant shall have one (1) twelve and one-half (12 1/2) year option of extension, provided written notice of the election of such option shall be sent by Tenant to Landlord not less than twelve (12) months prior to the expiration of the initial term. If said option is duly exercised, the term of this lease shall be automatically extended for a period of twelve and one-half (12 1/2) years (subject to adjustment up to one (1) year as set forth below) without the requirement of any further instrument, upon all of the same terms, provisions and conditions set forth in this lease, except that the minimum rent during the option period shall be as set forth in Section 1 of ARTICLE III hereof. Notwithstanding the foregoing, if Tenant exercises said option then Landlord shall have the right to accelerate or extend, as the case may be, the expiration date of this lease up to one year in order that the term of this lease shall end simultaneously with the end of the twenty-five (25) year lease (the "Sears Lease") entered into by Landlord with Sears, Roebuck and Co. ("Sears") for premises in the Shopping Center. To exercise said right Landlord shall give Tenant notice thereof within thirty (30) days after Landlord's receipt of Tenant's notice exercising said extension option and Landlord shall specify therein the expiration date of this lease, which date shall be co-terminus with the expiration date of the Sears Lease, except that (i) in no event shall the date so specified by Landlord be more than one (1) year prior or subsequent to the date which is twelve and one-half (12 1/2) years from the end of the initial twelve and one-half year (12 1/2) term of this lease, and (ii) if for any reason the Sears Lease shall terminate before the end of its twenty five (25) year term then the extension period of this lease shall be the full twelve and one-half (12 1/2) years. Landlord agrees, upon Tenant's request after the commencement of the Sears Lease, to advise Tenant of the expiration date of the twenty five (25) year term of the Sears Lease. -2- 8 In the event that the aforesaid option to extend is duly exercised, all references contained in this lease to the term hereof, whether by number of years or number of months, shall be construed to refer to the initial term hereof, as extended as aforesaid, whether or not specific reference thereto is made in this lease. ARTICLE III. Minimum Rent Section 1. Annual Minimum Rent. Tenant covenants and agrees to pay to Landlord, at the address set forth on the first page of this lease or at such other place as Landlord shall from time to time designate in writing, minimum rent for the demised premises at the following rates without offset or deduction, except as in this lease specifically permitted: (i) for and with respect to the first fifty four (54) calendar months of the term hereof, including the partial month, if any, immediately following the Commencement Date, at the rate of $1,534,250.00 per annum, payable in equal monthly installments of $127,854.17 (computed on the basis of $42.50 per square foot per annum of the 36,100 square feet of floor area comprising the demised premises); (ii) for and with respect the next forty-eight (48) calendar months of the term hereof, at the rate of $1,624,500.00 per annum, payable in equal monthly installments of $135,375.00 (computed on the basis of $45.00 per square foot per annum of the 36,100 square feet of floor area comprising the demised premises); (iii) for and with respect to the remainder of the initial term hereof, at the rate of $1,714,750.00 per annum, payable in equal monthly installments of $142,895.83 (computed on the basis of $47.50 per square foot per annum of the 36,100 square feet of floor area comprising the demised premises); (iv) for and with respect to the first sixty (60) months of the option period, at the rate of $1,895,250.00 per annum, payable in equal monthly installments of $157,937.50 (computed on the basis of $52.50 per square foot per annum of the 36,100 square feet of floor area comprising the demised premises); (v) for and with respect to the second sixty (60) months of the option period, at the rate of $1,985,500.00 per annum, payable in equal monthly installments of $165,458.33 (computed on the basis of $55.00 per square foot per annum of the 36,100 square feet of floor area comprising the demised premises); and (vi) For and with respect to the remainder of the option period, at the rate of $2,075,750.00 per annum, payable in equal monthly installments of $172,979.17 (computed on the basis of $57.50 per square foot per annum of the 36,100 square feet of floor area comprising the demised premises). (See Section 12 of Article XVIII hereof.) -3- 9 Section 2. Method of Payment. Monthly installments of annual minimum rent shall be payable on the first day of each and every calendar month, in advance, during the term hereof, the first such payment to be due on the Commencement Date. In the event Tenant is obligated to pay minimum rent for a period which is less than a calendar month, the minimum rent stated as payable pursuant to Section 1 of this ARTICLE III shall be prorated based upon the ratio which the number of days in such partial month bears to the total number of days in the month in which such partial month occurs. ARTICLE IV. Percentage Rent Section 1. Percentage Rent Calculation. In addition to the minimum rent specified in ARTICLE III above, and as part of the total rent to be paid by Tenant to Landlord, Tenant covenants and agrees to pay to Landlord, as aforesaid, as percentage rent for each lease-year (as hereinafter defined) of the term hereof, a sum equal to the amount, if any, by which two percent (2%) of the gross sales, as defined in Schedule "C" annexed hereto and made a part hereof, shall exceed the "Breakpoint" (hereinbelow defined) for such lease-year. For purposes hereof, for each lease-year the "Breakpoint" shall be equal to: (i) For and with respect to each of the lease-years during the period described in clause (i) of Section 1 of ARTICLE III hereof -- Thirty Six Million Dollars ($36,000,000); (ii) For and with respect to each of the lease-years during the period described in clause (ii) of Section 1 of ARTICLE III hereof --Thirty Eight Million Dollars ($38,000,000); (iii) For and with respect to each of the lease-years in the remainder of the initial term -- Forty Million Dollars ($40,000,000); (iv) For and with respect to each of the lease-years during the period described in clause (iv) of Section 1 ARTICLE III hereof -- Forty Four Million Dollars ($44,000,000); (v) For and with respect to each of the lease-years during the period described in clause (v) of Section 1 ARTICLE III hereof -- Forty Six Million Dollars ($46,000,000); and (vi) For and with respect to each of the lease-years during the remainder of the option -- Forty Nine Million Dollars ($49,000,000). Notwithstanding the foregoing, for any lease-year during which the minimum rent increases pursuant to Article III hereof, the breakpoint shall also increase in proportion to the increase in minimum rent. Section 2. Lease Year. The first lease-year of the term hereof shall commence on the Commencement Date (as determined in accordance with the provisions of Schedule "B"), and shall end twelve (12) calendar months (plus any partial month in the event the term hereof commences on any day other -4- 10 than the first day of a month) thereafter. Each lease-year thereafter shall run from the termination of the preceding lease-year, and shall terminate twelve calendar months after the termination of the preceding lease-year, except that the last lease-year shall end on the date this lease shall expire, or otherwise terminate. In the event that the last lease-year of the term hereof shall be less than twelve (12) calendar months, gross sales for such last lease-year shall be determined by multiplying gross sales for the last twelve (12) months of the term hereof by a fraction, the numerator of which is the number of days in such last lease-year and the denominator of which is 365. Section 3. Tenant's Records. Tenant shall utilize, or cause to be utilized, an accounting system in accordance with good retail practice which will accurately record all gross sales, and Tenant shall keep on the demised premises, or in Tenant's principal office, for at least thirty (30) months after the expiration of each lease-year, records conforming to such accounting system showing all gross sales for such lease-year. Tenant, upon fifteen (15) days prior written request of Landlord, shall furnish to Landlord a statement of gross sales during the three (3) full calendar month period immediately preceding any such request (hereinafter referred to as a "quarterly report"). It is understood and agreed that with respect to any such quarterly report (a) the same may be made by telephone, (b) the same shall be estimated by Tenant based upon information available in the ordinary course of business as of the time of Landlord's request and, (c) Tenant shall have no liability for any error in such quarterly report. Within sixty (60) days after the end of each lease-year, Tenant shall furnish to Landlord a statement of gross sales attained by Tenant during the then preceding lease-year, certified by an officer of Tenant, which statement shall be accompanied by a check for payment of percentage rent, if any, due. Within thirty (30) months after the expiration of any lease-year, Landlord shall have the right, by its accountants or representatives, upon at least thirty (30) days prior notice, to audit and inspect Tenant's records of gross sales made in such lease-year provided (i) no such audit shall be conducted between December 15 and April 15, between June 15 and July 15 or between September 15 and October 15, and (ii) no more than one such audit may be conducted in any calendar year. Any information obtained by Landlord pursuant to the provisions of this Section 3 shall be treated as confidential and may be disclosed only to prospective purchasers and lenders. Appropriate adjustment will be made for errors in the amount of percentage rent paid by Tenant revealed by such audit or inspection. If any such audit or inspection by Landlord shows a deficiency in the amount of gross sales reported by more than three percent (3%) of the amount of gross sales reported by Tenant for the period of the audit, then the reasonable cost of such audit or inspection shall be paid on demand to Landlord by Tenant; otherwise, the expenses of Landlord's audit or inspection shall be borne by Landlord. Section 4. Non-Cumulative. Computation of the percentage rent specified herein shall be made separately with regard to each lease-year of the term hereof; it being understood and agreed that the gross sales of any lease-year and the percentage rent due thereon shall have no bearing on, or connection with, the gross sales of any other lease-year of the term hereof. Section 5. Intentionally Omitted. -5- 11 Section 6. Conduct of Business - Landlord's Recapture Rights. Subject to Landlord's performance of its obligations pursuant to ARTICLE VIII hereof, Tenant shall apply for and diligently pursue any and all necessary permits for Tenant's initial construction work and signs and for the conduct of its business in the demised premises, and, subject to Tenant's obtaining any and all necessary permits for Tenant's initial construction work and signs and for the conduct of its business in the demised premises, Tenant agrees to (a) perform its initial construction work pursuant to ARTICLE VIII hereof, (b) fixture and stock its operation in the demised premises, and (c) open for business as a so-called "Marshalls" store. It is an essential element of this lease that, notwithstanding the amount of the minimum rent specified in ARTICLE III hereof, and notwithstanding the provisions of ARTICLE IV hereof relating to percentage rent or any other provisions of this lease, Tenant reserves the right to operate its business, whether on the demised premises or elsewhere, as it sees fit, and Landlord shall have no express or implied right to interfere in the operation of Tenant's business or to complain about or hold Tenant liable for the manner in which Tenant's business is operated. Without limiting the generality of said reservation, Tenant shall have the right to determine how any store on the demised premises is to be operated, and to discontinue the operation of any such store, and to operate stores in other locations which are in competition with any such store. Should Tenant at any time discontinue the operation of business in at least fifteen thousand (15,000) square feet of floor area in the demised premises for a period of time in excess of one hundred eighty (180) consecutive days, Landlord shall have the option at any time thereafter for so long as business is not being conducted in at least fifteen thousand (15,000) square feet of floor area in the demised premises, upon thirty (30) days written notice to Tenant, to cancel and terminate this lease, provided, however, Landlord shall not have the option to so cancel and terminate this lease in the event that Tenant within thirty (30) days of receipt of Landlord's termination notice gives Landlord notice of Tenant's intention (i) to reopen for business in at least fifteen thousand (15,000) square feet of floor area in the demised premises within six (6) months of the date of Tenant's notice provided Tenant so reopens, or (ii) to assign this lease or sublet all or a portion of the demised premises to an entity identified in Section 4.E. of ARTICLE IX hereof who intends to open for business in at least fifteen thousand (15,000) square feet of floor area in the demised premises within six (6) months of the date of Tenant's notice provided such entity so reopens. In the event Landlord's exercise of this option to cancel and terminate this lease is not vitiated by Tenant's subsequent notice and opening, this lease shall terminate upon the expiration of the thirtieth (30th) day following the date of receipt of Landlord's termination notice, all as if such date were the date originally set forth herein as the expiration date of the term of this lease, and the Tenant shall upon such termination be released from any further liability under this lease. Should the Landlord fail to exercise its option to terminate by such time as business shall not have been conducted in at least fifteen thousand (15,000) square feet of floor area in the demised premises for a period of two hundred ten (210) consecutive days, then, and in any such event, anything in Section 4.B.(ii) of ARTICLE IX of this lease to the contrary notwithstanding, the time within which Landlord's Notice (as therein defined) must be given, if at all, shall be within thirty (30) days of Landlord's receipt of the Proposed Tenant Notice (as therein defined). During such period of time as business is not being conducted in the demised premises, then, no percentage rent shall be due -6- 12 Landlord. During such period of time as business is not being conducted in the demised premises, all of the covenants and provisions relating to the payment of percentage rent contained in the preceding sections of this ARTICLE IV shall be of no force and effect. Nothing contained in this paragraph, however, shall derogate from any obligation on the part of Tenant to make payments to Landlord as specifically set forth in this lease other than in this ARTICLE IV. From and after such time as Tenant or any party claiming by, through or under Tenant reopens for business in the demised premises and for such periods of time as Tenant, and those claiming by, through and under Tenant continue to operate in the demised premises, the aforesaid covenants and provisions contained in this ARTICLE IV relative to the payment of percentage rent shall once again become operative. Should Tenant or any subtenant of Tenant at any time discontinue the operation of business in a theretofore subdivided portion of the demised premises consisting of less than fifteen thousand (15,000) square feet of floor area (the "Subdivided Premises") for a period of time in excess of one (1) year, Landlord shall have the right at any time thereafter for so long as business is not being conducted in the Subdivided Premises, upon forty-five (45) days written notice to Tenant, to cancel and terminate this lease for and with respect to the Subdivided Premises. In the event Landlord so exercises its option to cancel and terminate this lease, (a) this lease shall terminate upon the expiration of the forty-fifth (45th) day following the date of receipt of Landlord's termination notice, all as if such date were the date originally set forth herein as the expiration date of the term of this lease for and with respect to the Subdivided Premises, (b) Tenant shall, upon such termination, be released from any further liability under this lease for or with respect to the Subdivided Premises, and (c) this lease shall be deemed modified to reflect the reduced floor area of the demised premises and the corresponding reductions in the payment of rent and all other charges hereunder. Within twenty (20) days of receipt of Landlord's termination notice, Tenant shall deliver to Landlord a statement certified by an officer of Tenant setting forth the unamortized costs incurred by Tenant in separating the Subdivided Premises from the balance of the demised premises into an independent premises, said costs to have been amortized in accordance with generally accepted accounting principles (the "Unamortized Costs"). It shall be a condition of the effectiveness of Landlord's exercise of this option that on or before the twentieth (20th) day following the date of receipt of Tenant's statement of Unamortized Costs, Landlord shall have paid to Tenant the Unamortized Costs. Should Landlord fail to exercise its option to terminate this lease as to the Subdivided Premises within thirty (30) days of the expiration of the aforesaid one (1) year period, then, and in any such event, anything in Section 4.B.(ii) of ARTICLE IX of this lease to the contrary notwithstanding, the time within which Landlord's notice (as therein defined) must be given, if at all, shall be within thirty (30) days of Landlord's receipt of the Proposed Tenant Notice (as therein defined). Landlord acknowledges that Tenant has notified Landlord that Tenant would not enter into this lease except for the reservation contained in this section. -7- 13 For purposes hereof, Tenant and those claiming under Tenant shall not be deemed to have ceased operating a business in the demised premises if such business is closed temporarily for remodeling or for purposes of assignment or subletting or due to fire, casualty or eminent domain, or due to strike, lockout or other cause beyond the reasonable control of Tenant. ARTICLE V. Taxes Section 1. Taxes Defined. For the purposes hereof, the term "real estate taxes" is hereby defined to mean all real estate taxes payable on account of the Building, the Enclosed Parking Structure and other improvements located within the Shopping Center ("Building Taxes") and any and all ad valorem real estate taxes payable on account of the land within the Shopping Center shall be situated ("Land Taxes"). The term "real estate taxes" shall also include, subject to the provisions of Section 5 of this ARTICLE V, such taxes as may be imposed in lieu of ad valorem real estate taxes, provided, however, that in no event shall Tenant be responsible to pay any inheritance, estate, succession, transfer or gift tax imposed on Landlord or any income tax or any other like tax which is measured in any manner by the income or profit of Landlord. Section 2. Right to Contest. The initial responsibility for the payment of such real estate taxes shall be upon Landlord, and Landlord agrees to pay the same as required by law, but in any event, so as to assure that Tenant's right to occupy the demised premises and use the common areas of the Shopping Center shall not be disturbed or threatened. Further, in light of the fact that Tenant is required, as set out below, to participate in the payment of such real estate taxes, within ten (10) days of request of Tenant, Landlord shall furnish to Tenant copies of all real estate tax bills. Landlord shall, at the time Landlord supplies Tenant with notice of the amount of such taxes, notify Tenant in writing of whether Landlord intends to contest such taxes. If Landlord indicates that it does not intend to contest such taxes, and if Sears and Caldor, Inc. ("Caldor") indicate that they do not intend to contest such taxes pursuant to their rights to do so under their respective leases as set forth in Schedule "G" hereto and thereafter Tenant elects to contest such taxes, Tenant shall have the right, (in the name of or on behalf of Landlord if applicable law so requires), by appropriate proceedings, to contest in good faith the amount of such taxes. In the event Tenant so contests, Landlord shall furnish Tenant promptly with receipted copies of such tax bills to enable Tenant to commence proceedings. Landlord agrees to cooperate reasonably with Tenant in such contest. The cost and expense of the proceeding shall be borne by the party initiating the proceeding; provided that in the event of any abatement of such taxes, the reasonable cost and expense of the proceedings shall be a first charge against any recovery. In any event, Tenant shall be entitled to Tenant's Tax Percentage (as hereinafter defined) of any refund or rebate of taxes which shall be applicable to any real estate taxes as to which Tenant shall have contributed Tenant's Tax Percentage (as hereinafter defined), after deducting the reasonable cost and expense of the proceeding, if any, as certified by the party initiating the proceeding. -8- 14 Section 3. Tenant's Tax Percentage. Tenant shall pay to Landlord, as additional rent, nine and seventy nine one- hundredths percent (9.79%) ("Tenant's Tax Percentage") of the real estate taxes assessed on the Shopping Center for and with respect to the term hereof. Tenant's Tax Percentage is computed on the basis of the demised premises containing 36,100 square feet of floor area, as compared to a total of 368,744 square feet of floor area in the Shopping Center. Tenant's Tax Percentage shall be adjusted in the event of any increase or decrease in the total square footage of floor area contained within the Shopping Center based upon the square footage of floor area contained within the demised premises, as compared to the total square footage of floor area contained within the Shopping Center, as thus increased or decreased. Tenant's Tax Percentage shall only be increased in the event of a future reduction in square footage of floor area in the Shopping Center. The real estate taxes for which Tenant is, in part, responsible hereunder shall be the real estate taxes, as the same may be reduced by any reduction in the amount as originally assessed, whether by reason of abatement or otherwise. Such tax payments from Tenant to Landlord shall be due and payable not later than the last to occur of (i) twenty (20) days prior to the due date of the real estate taxes to which such payments relate, and (ii) thirty (30) days after Landlord shall have submitted to Tenant a statement setting forth the computation of Tenant's share thereof. Upon request of Tenant, Landlord shall furnish to Tenant copies of receipted tax bills showing payment in full of any real estate taxes in which Tenant is required to share pursuant to the terms hereof. A fair and equitable adjustment shall be made with respect to any tax payments due from Tenant to Landlord in connection with the first and last periods of the term of this lease, since the same may not coincide with the tax years involved. Section 4. Betterment Assessments - Last 5 years. In the event that any betterment assessments shall be imposed on the Shopping Center during the last five (5) years of the term of this lease, then in light of the fact that the same will require a substantial expenditure by Tenant and will result in a benefit to the Landlord following the expiration of the term of this lease, Landlord and Tenant agree that Tenant's percentage share of the increase in real estate taxes resulting from such betterment assessments shall be limited to the percentage of such betterment assessments equal to a fraction the numerator of which is the number of years remaining in the term hereof following the imposition of such betterment assessments and the denominator of which is the number of years contained in the longest period permitted under applicable law for the payment of such betterment assessment(s) in installments. To the extent any such betterment assessment(s) is (are) payable in installments, Tenant's percentage share shall be paid in equal installments over the balance of the term hereof at the times such installments would be due and payable to the applicable taxing authority. Tenant's percentage share of such installments shall include Tenant's Tax Percentage of any and all interest charged Landlord by the applicable taxing authority resulting from the payment of such betterment assessment(s) in installments. In the event Landlord pays any such betterment assessment(s) in one lump sum payment, Tenant's percentage share of the foregoing installments shall include Tenant's Tax Percentage of interest on the -9- 15 balance due from Tenant to Landlord computed at the Interest Rate (hereinafter defined). In no event shall Tenant be required to continue to pay any such increase from and after such time as Tenant's percentage share of any such betterment assessment is paid in full. In the event subsequent to the imposition of such a betterment assessment Tenant exercises an option to extend the term hereof, Tenant's percentage share of such betterment assessment shall be recalculated in accordance with the foregoing provisions of this Section 4 on the basis of the extended term hereof and Tenant shall pay to Landlord any additional amounts due to Landlord as a result of the foregoing recalculation. Section 5. Tax on Rents. If at any time during the term of this Lease, the laws of real property taxation prevailing at the Commencement Date are changed so that a tax or excise on rents or any other such tax, however described, is levied or assessed against Landlord as a direct substitution in whole or in part for any real property taxes, Tenant shall pay Landlord in the manner and at the times otherwise provided in this ARTICLE V (but only to the extent that it can be ascertained that there has been a substitution and that as a result Tenant has been relieved from the payment of real property taxes it would otherwise have been obligated to pay) a share of the substitute tax or excise on rents. Tenant's share of any substitute tax or excise on rents shall be the same as, and a substitute for, Tenant's share of real property taxes as provided in Section 3 of this ARTICLE V. ARTICLE VI. Maintenance of Common Areas and Common Facilities and Tenant's Contribution Section 1. Maintenance by Landlord. Landlord agrees to maintain, manage, operate, replace, repair and refurbish all common areas (as hereinafter defined) and all common facilities (as hereinafter defined) of the Shopping Center in accordance with good and accepted shopping center practices in order to maintain the same in good order, condition and repair and in a safe, clean, sightly and sanitary condition. The term "common areas" is hereby defined to mean those portions of the Shopping Center made available for the general, nonexclusive use, convenience and benefit of all occupants of the Shopping Center and their respective customers, employees and invitees, including, without limitation, the Enclosed Parking Structure and, to the extent applicable, driveways, truckways, delivery passages, access and egress entrances and roads, walkways, sidewalks, aisles, exterior malls, landscaped and planted areas, bus stops, fire and service corridors and public restrooms. Reference herein to the "common areas of the Shopping Center" means those portions of the Shopping Center designated for common use as initially shown on the Site Plan and as the same may be changed or designated from time to time by Landlord subject, however, to the provisions and limitations set forth in this ARTICLE VI. The term "common facilities" is hereby defined to mean the Building, improvements, equipment, systems, pipes, ducts, conduits and the like in the Shopping Center including the roof, foundation, and structural portions of the Building, but excluding (a) plumbing and utility lines within or beneath the premises which are served exclusively by said plumbing and utility lines, (b) interior, nonstructural improvements for the exclusive benefit of a -10- 16 particular tenant and its premises, and (c) as defined within the term "common areas" above. The obligations of Landlord shall include, without limitation, the prompt re-striping of parking areas when required (but in any event not less often than once every twenty four (24) months), prompt cleaning and removal of ice and snow, prompt repairing of common areas and common facilities, and adequate lighting of all exterior common areas during all hours of darkness between 8:30 a.m. and 10:30 p.m. Notwithstanding the foregoing, Landlord agrees to maintain adequate lighting after 10:30 p.m. at the written request of Tenant and Tenant agrees to pay a percentage share of the cost of such late lighting which percentage shall be equal to a fraction the numerator of which shall be the square footage of floor area of the demised premises and the denominator of which shall be the square footage of floor area on all floors of the Building open during the period of such late lighting. Landlord agrees to keep in good order, condition and repair all plumbing and utility lines serving the demised premises located in the common areas or beneath or within other premises in the Shopping Center which are not the obligation of a utility company to maintain and repair, unless the need for such repair shall result from: (i) Tenant's failure to perform its obligations hereunder; or (ii) the act or neglect of Tenant or those claiming by, through or under Tenant to the extent the resulting damage is not covered by the insurance which Landlord is required to carry pursuant to ARTICLE XIII hereof. Section 2. Non-Exclusive Rights of Tenant. Landlord agrees that Tenant shall have the nonexclusive right (in common with all other occupants from time to time of the Shopping Center and their employees, customers and invitees) to use the parking facilities and all other common areas of the Shopping Center for the accommodation and parking of automobiles of Tenant and those claiming under Tenant, including Tenant's employees, customers and invitees. It is understood and agreed that Tenant's use of the common areas of the Shopping Center shall be subject to Landlord's reasonable rules and regulations provided (a) Tenant shall have received notice of such rules and regulations prior to their application to Tenant, (b) such rules and regulations shall be uniformly applicable to all of the tenants and occupants of the Shopping Center, and (c) such rules and regulations shall be consistently applied and enforced by Landlord in a non-discriminatory manner against all of the tenants and occupants of the Shopping Center. Subject to the provisions of this Section 2 and Section 3 of this ARTICLE VI below, it is understood and agreed that Landlord may (i) close all or any portion of the common areas of the Shopping Center, including the parking facilities, but only to the extent required by applicable law to prevent a dedication thereof or the accrual of any rights of any person or the public therein; (ii) prohibit parking or the passage of motor vehicles in areas which are no longer part of the common areas of the Shopping Center; and (iii) expand, change, decrease or alter the size, layout or configuration of the Shopping Center or any part thereof (including, without limitation, the common areas, the Building, the Enclosed Parking Structure and the means of ingress and egress). The operation of the Enclosed Parking Structure shall be subject to the provisions of Schedule "H". -11- 17 Section 3. Changes to Shopping Center. Notwithstanding anything to the contrary contained in Section 2 above of this ARTICLE VI or elsewhere in this lease, Landlord agrees as follows: A. Landlord will not erect or maintain any building or structure which (i) will cause the ratio of parking spaces per one thousand (1,000) square feet of floor area in the Shopping Center to be less than 2.7 to 1 or the number of parking spaces in the Enclosed Parking Structure to be less than one thousand (1,000) located on the levels as initially constructed, or (ii) will cut off or materially obstruct direct access between the demised premises and (x) the entrance thereto at Queens Boulevard and 63rd Road, or (y) the Enclosed Parking Structure, or (iii) will cut off or materially obstruct direct access to the loading area at the demised premises. Landlord also agrees that there will be maintained front and rear entrances to the Enclosed Parking Structure from 63rd Road and 62nd Drive, respectively. B. Landlord agrees that no additional land shall ever be incorporated within the Shopping Center unless (i) the ratio of parking spaces per one thousand (1,000) square feet of floor area in the Shopping Center as thus expanded shall remain at least 2.7 to 1, (ii) the number of parking spaces in the Shopping Center is at least one thousand (1,000) located on the levels as initially constructed, and (iii) such land is used for retail purposes. In the event that another parking structure is physically connected to the Enclosed Parking Structure it shall satisfy all zoning requirements and other legal requirements for the premises it serves independent of the Enclosed Parking Structure and the premises it serves shall be used for retail purposes, and if each parking facility is not operated independent of the other then the revenues and expenses of operating both parking structures shall be combined as if they were one parking facility, and Tenant's share shall be determined on an equitable basis as reasonably determined by Landlord. Tenant shall not be required to pay any other expenses in connection with said additional parking structure unless it is incorporated within the Shopping Center together with additional floor area which reduces Tenant's Tax Percentage and CAM Percentage. C. In the event any construction is to be conducted during such time as the demised premises shall be open for business to the public, (i) Landlord agrees to erect, or cause to be erected, adequate, painted construction barricades substantially enclosing the areas of such construction, such barricades to be maintained until such construction has been substantially completed, (ii) all construction materials and debris shall be cleared daily from the common areas, except those portions of the common areas that are located within the construction barricades, and (iii) all such construction shall be conducted in a manner which will not materially interfere with the operation of business in the Shopping Center. D. Landlord agrees to use reasonable efforts to cause all employees of occupants of the Shopping Center to utilize any employee parking area. Tenant agrees to use reasonable efforts to cause its employees to utilize any employee parking area. If any change prohibited by this section shall be required by applicable law, and such change shall have any material adverse effect whatsoever on Tenant, or on the operation of Tenant's business in the demised premises, then -12- 18 Tenant shall have the right to terminate this lease by giving written notice thereof to Landlord, unless Landlord and Tenant come to prompt agreement concerning adjustment in the rent and other provisions of this lease. Such termination election shall constitute Tenant's sole remedy under this paragraph. Section 4. Tenant's Contribution. Tenant agrees to pay to Landlord, without offset or deduction, except as in this lease specifically permitted, as Tenant's agreed-upon share of the reasonable cost to Landlord of performing the obligations set forth in (a) Section 1 of this ARTICLE VI provided, however, that parking revenue (after New York City parking taxes) received from the operation of the Enclosed Parking Structure shall be applied in reduction of the cost of operating the Enclosed Parking Structure, which shall include costs of compliance with laws pursuant to Section 3 of Article X if such costs had been included in a budget for the operation of the Enclosed Parking Structure prior to the enactment of such laws, (b) ARTICLE XI, (c) ARTICLE XIII and (d) Section 3 of ARTICLE X, during the term hereof an annual charge, as additional rent, equal to nine and seventy nine one- hundredths percent (9.79%) ("Tenant's CAM Percentage") of such costs. The costs in which Tenant is to share pursuant to this Section 4 shall not include the following: (i) the cost of maintaining, repairing or replacing buildings or interior malls, corridors, elevators, escalators, lobbies and atriums in the Shopping Center other than common facilities as defined in Section 1 hereof, provided they do not serve the demised premises which shall be amortized over the period of amortization for said improvements; (ii) management fees or administrative charges (or other like fees, however denominated) in excess of ten percent (10%) of Landlord's out-of-pocket costs of performing the obligations set forth in Section 1 above, exclusive of any insurance costs for the common areas and common facilities and any real estate taxes payable with respect to the common areas and common facilities, provided, however, that said percentage shall be five percent (5%) for Landlord's out-of-pocket costs for performing repairs, maintenance and replacements to the roof, foundations or structural elements of the Building or any other capital expenditures which shall be amortized over the period of amortization for said improvements; (iii) the cost of removing any trash created by the operation of any tenant or occupant of the Shopping Center; (iv) any expense incurred by Landlord in complying with Landlord's obligations under this lease other than the provisions of ARTICLES VI, XI, XIII and Section 3 of ARTICLE X as aforesaid; (v) the cost of items which inure only to the benefit of any particular tenant or class of tenants in the Shopping Center and not to all or substantially all of the Shopping Center tenants other than the common facilities; and (vi) the cost of items which Landlord is to be reimbursed as a separate charge or expense by another tenant in the Shopping Center. Tenant's CAM Percentage is computed on the basis of the demised premises containing 36,100 square feet of floor area as compared to a total of 368,744 square feet of floor area in the Shopping Center. (See Section 12 of ARTICLE XVIII hereof.) Tenant's CAM Percentage shall be adjusted in the event of any increase or decrease in the total square footage of floor area in the Shopping Center, based upon the square footage of floor area contained within the demised premises as compared to the square footage of floor area contained in the Shopping Center, as thus increased or decreased. Tenant's CAM Percentage shall only be increased in the event of a future reduction in square footage of floor area in the Shopping Center. -13- 19 For the period beginning on the Commencement Date and ending on the last day of the calendar month immediately preceding the delivery by Landlord to Tenant of the first annual statement described in the next paragraph hereof, the foregoing charge (including Tenant's estimated share of liability and hazard insurance premiums) shall be based upon Two Dollars ($2.00) per square foot of floor area of the demised premises per annum (subject to adjustment as provided in the next following paragraph). For subsequent periods the foregoing charge shall be based upon Landlord's actual charges for the most recent calendar year for which such charges have been determined, exclusive of any extraordinary charges applicable to such calendar year. The foregoing charges shall be payable monthly together with minimum rent. In the event that common area operating costs include the costs expended for the installation, construction, reconstruction and/or replacement of a capital item (a "Capital Expense", e.g. repaving the parking area as compared to patch-paving or other small area repaving, replacement of light standards as compared to repair, etc.), there shall only be included in the common area operating costs in which Tenant is to share for any lease year of the term the amount computed as follows: A. The Capital Expense shall be multiplied by Tenant's pro-rata share in order to determine Tenant's proportionate share of the Capital Expense. B. Tenant's proportionate share so determined shall thereafter be divided by the useful life (based upon the actual useful life for income tax purposes of the Capital Expense) to determine Tenant's annual amortized proportionate share of the Capital Expense. C. Tenant's annual amortized proportionate share of the Capital Expense plus Tenant's CAM Percentage of the interest on the unamortized amount of the Capital Expense calculated at the annual rate of 1/2 percent over the prime lending rate of Citibank, N.A., in New York City, from time-to-time (the "Interest Rate") shall be paid in twelve equal monthly installments, on the date minimum rent shall be due, until the earlier to occur of: (i) the expiration or earlier termination of the term of this lease; or (ii) payment by Tenant of an amount equal to Tenant's proportionate share of the Capital Expense. Within one hundred eighty (180) days after the end of each calendar year during the term hereof, Landlord shall furnish to Tenant a statement in reasonable detail setting forth the computation of the foregoing total costs and expenses, and setting forth Tenant's share thereof. Upon request of Tenant, Landlord shall also furnish to Tenant with its statement back-up invoices, receipts and such other data as shall be necessary in order for Tenant to verify the amount of any costs and expenses which (a) have increased by fifteen percent (15%) or more when compared with the computation of the same for the immediately preceding calendar year, or (b) were not included in statements for the two preceding years. Tenant shall, within thirty (30) days after receipt of Landlord's statement, pay to Landlord or Landlord shall reimburse Tenant, as applicable, the amount of any adjustment, to the end that Landlord shall be entitled to receive Tenant's said share and no more. A fair and equitable adjustment shall be made with respect to any such payments due from Tenant to Landlord in connection with the last period of the term of this lease, since the same may not coincide with the payment periods involved. -14- 20 Within thirty (30) months after the expiration of any calendar year, Tenant, upon at least thirty (30) days prior notice, shall have the right to audit and inspect all of Landlord's records relating to the costs and expenses in which Tenant is required to share pursuant to this Section 4 as well as the real estate taxes in which Tenant is required to share pursuant to Section 3 of ARTICLE V hereof, provided that in no event may Tenant conduct more than one such audit in any calendar year. Appropriate adjustments shall be made for errors in the amount of such computations revealed by any such audit or inspection. If any such audit or inspection by Tenant indicates an overcharge in the amount of Tenant's share of such costs and expenses or such real estate taxes by more than ten percent (10%), the reasonable costs of such audit or inspection shall be paid on demand to Tenant by Landlord; otherwise, the expenses of Tenant's audit or inspection shall be borne by Tenant. If there has been an overcharge and a resulting overpayment by Tenant, such amount shall promptly be reimbursed by Landlord to Tenant; and if such reimbursement does not occur within thirty (30) days after Landlord has been given notice of the overcharge established by such audit or inspection, then Tenant shall have the right to offset the amount of such overcharge from rent and other charges thereafter accruing until, in such fashion, such overcharge shall have been recovered in full. Section 5. Enclosed Parking Structure. The Enclosed Parking Structure may be operated (directly or by a manager, independent operator, licensee or lessee) as a paid public parking facility and may be independently owned or operated provided that Tenant and those having business with Tenant shall have the non-exclusive right to use the Enclosed Parking Structure. ARTICLE VII. Utilities Tenant shall contract with the utility companies for the installation of separate metering for all utilities serving the demised premises, and Tenant shall pay all costs and expenses in connection therewith. Tenant shall pay for all utilities consumed within the demised premises during the term hereof and, if any, prior to the commencement to the term hereof during which Tenant shall be in possession of the demised premises. ARTICLE VIII. Initial Construction Section 1. Landlord's Work. Set forth on Schedule "B" hereto annexed and hereby made a part hereof are the various items of Landlord's Work (which term when used in this lease shall have the meaning set forth in said Schedule "B") to be performed within the time limits set forth therein, and Landlord agrees to do all of the same in accordance with the provisions of said Schedule "B". Section 2. Tenant's Work. Except for Landlord's Work as provided in Section 1 hereof, Tenant shall do any and all work which Tenant desires to -15- 21 adapt the demised premises to Tenant's use ("Tenant's Work") subject, however, to the provisions of ARTICLE X, Section 5 and the following: (a) Tenant shall apply for all approvals and permits legally required in connection with the performance of Tenant's Work, and prior approval of the plans for Tenant's Work by Landlord shall not be required unless otherwise provided in this Lease. If necessary, Landlord shall join in the execution of the applications. At Tenant's request, Landlord shall cooperate with the prosecution of the application. Tenant shall bear all expenses in connection with the applications, including any reasonable out-of-pocket expenses incurred by Landlord. Tenant shall prosecute the applications diligently and shall use reasonable efforts to seek the approvals and permits applied for. Tenant shall advise Landlord of its progress from time to time and upon request by Landlord. If Tenant is unable to obtain said approvals and permits within ninety (90) days after making application therefor for any cause beyond its control, Tenant shall notify Landlord and Landlord shall have sixty (60) days in which to try to obtain said approvals and permits. If Landlord is unable to obtain them within said sixty (60) day period, then Tenant may terminate this lease at any time within ninety (90) days thereafter and prior to the issuance of said approvals and permits upon notice to the other party. If Tenant does not exercise said right of termination within said ninety (90) day period Tenant shall be deemed to have waived same. (b) Promptly after all requisite approvals have been granted and all appeal periods have expired without any appeal having been taken, Tenant, provided Landlord shall have completed Landlord's Work in accordance with Schedule "B" and shall have delivered possession of the demised premises to Tenant in accordance with said Schedule "B", shall commence the performance of Tenant's Work and shall diligently prosecute Tenant's Work to completion; (c) Tenant shall perform all Tenant's Work in accordance with applicable law, in good and workmanlike manner and in accordance with all insurance requirements of which Tenant shall have received notice under the policies covering the Shopping Center provided such requirements are commercially reasonable in the context of similar coverage for like properties; and (d) If any governmental authority requires that a certificate of occupancy be issued with respect to the demised premises, Landlord and Tenant shall jointly apply for (if Landlord and Tenant are required to jointly apply or Landlord and Tenant shall each obtain a separate certificate of occupancy if required by law), and diligently attempt to obtain the certificate of occupancy. In connection with any such certificate of occupancy, Tenant shall bear all responsibility with respect to Tenant's Work performed by Tenant and Tenant's use and occupancy of the demised premises, and Landlord shall bear all responsibility with respect to Landlord's Work and the portion of Tenant's Work, if any, performed by Landlord. If a Certificate of Occupancy will not issue by reason of work done, or failed to be done, by Landlord (and not because of the manner in which Tenant shall have done its work), or by reason of any condition of the Shopping Center or the building of which the demised premises are a part, then it shall be the responsibility of Landlord to remedy the situation so as to enable it to secure an -16- 22 unconditional Certificate of Occupancy for Tenant. Similarly, if the Certificate will not issue by reason of work done or failed to be done by Tenant (and not because of the manner in which Landlord shall have done its work), then it shall be the responsibility of the Tenant to remedy the situation so as to enable Landlord to secure such a Certificate of Occupancy for Tenant. ARTICLE IX. Use Clause and Restrictions Section 1. Permitted Use. Tenant agrees to open the demised premises as a typical "Marshalls" store for the sale of clothing, shoes, giftware, jewelry, luggage and domestics and the incidental sale of gourmet foods (which use is understood and agreed to be a Lawful Retail Use, as hereinafter defined) within a reasonable period of time after the Commencement Date pursuant to Section 6 of ARTICLE IV hereof, but such obligation shall not be deemed to impose and shall not impose any obligation on Tenant to operate the demised premises for such purpose or any purpose for any period of time thereafter. Notwithstanding the foregoing, Tenant shall not be required to open for business in the demised premises until Sears shall initially open for business in the Shopping Center. If Tenant shall elect to open for business in the demised premises notwithstanding that Sears shall not have initially opened for business in the Shopping Center, Tenant shall be required to make all rent payments hereunder as if Sears had initially opened for business (including without limitation minimum rent, percentage rent and Tenant's percentage of real estate taxes and CAM). In the event that Tenant shall so open for business notwithstanding that Sears shall not have initially opened for business and in the further event that Sears shall still not have initially opened for business after Tenant shall have been open for business for a period of one (1) year, then Tenant shall have the right (as its sole remedy) to terminate this lease prior to the time that Sears shall have initially opened for business by giving Landlord notice thereof within thirty (30) days after the end of said one (1) year period, in which event this lease will terminate and come to an end upon Landlord's receipt of said notice and Tenant shall vacate and surrender the demised premises pursuant to Section 6 of ARTICLE X hereof. If Tenant does not exercise the said right of termination within said thirty (30) day period, Tenant shall be deemed to have waived said right of termination. (See Schedule B for Tenant's right to defer the Commencement Date until Sears shall initially open for business.) After Tenant opens for business in the demised premises, as aforesaid, Tenant, so long as Tenant is an Affiliate (as hereinafter defined), and any other Affiliate may change the use of the demised premises to any "Lawful Retail Use" (as hereinafter defined) provided that: (i) there are never more than two (2) separate premises or subleases in operation within the demised premises; (ii) such principal use(s) shall not conflict with the restrictions set forth in Schedule "D" as referenced below; (iii) the demised premises are not used as an "Off-Track Betting" or similar establishment; and -17- 23 (iv) Tenant, so long as Tenant is an Affiliate, or any other Affiliate is operating in at least fifteen thousand (15,000) square feet of floor area of the demised premises. Provided the foregoing four conditions are satisfied, Tenant, so long as Tenant is an Affiliate, or any other Affiliate may change the use of the balance of the demised premises to any "Lawful Retail Use" (as hereinafter defined) notwithstanding the fact that the area contained within the balance of the demised premises consists of less than fifteen thousand (15,000) square feet of floor area. Furthermore, in the event of an assignment of this lease or a sublet of all or at least 15,000 square feet of ground floor area of the demised premises to a party which is not an Affiliate in accordance with the provisions of Section 4 of this ARTICLE IX, any such non-Affiliate assignee or sublessee may change the use of the demised premises to any "Lawful Retail Use" provided such non-Affiliate shall satisfy the conditions set forth in clauses (i) - (iii) above and, provided further in the case of such a non-Affiliate, that its principal use is not a use which (1) is the same as or substantially similar to the principal business or use of any other then existing tenant or occupant of the Shopping Center occupying more than seven thousand five hundred (7,500) square feet of floor area, or (2) conflicts with any then existing exclusive or restrictive covenant benefitting a tenant or occupant occupying in excess of seven thousand five hundred (7,500) square feet of floor area in the Shopping Center. Whether or not an Affiliate is operating in at least fifteen thousand (15,000) square feet of floor area of the demised premises, any non-Affiliate sublessee of the demised premises permitted pursuant to Section 4 of this ARTICLE IX occupying less than fifteen thousand (15,000) square feet of floor area may change the use of its portion of the demised premises to any "Lawful Retail Use" (as hereinafter defined) provided that it satisfies all of the preceding conditions for non-Affiliates and, provided further, that its principal use (1) is not the same as or substantially similar to the principal business or use of any other then existing tenant or occupant of the Shopping Center, and (2) does not conflict with any then existing exclusive or restrictive covenant regarding the use of the Shopping Center. In the event no Affiliate is operating in at least fifteen thousand (15,000) square feet of floor area of the demised premises, any Affiliate operating in less than fifteen thousand (15,000) square feet of floor area of the demised premises may not change the use of its portion of the demised premises to any "Lawful Retail Use" (as hereinafter defined) unless it satisfies all of the preceding conditions for non-Affiliates occupying less than fifteen thousand (15,000) square feet of floor area. The term "Lawful Retail Use" as used in this lease shall be construed broadly to mean any lawful sales of merchandise or services, whether at retail, wholesale or discount. Upon request, Landlord shall promptly furnish Tenant with a copy of the "use" clauses contained in the lease(s) of the tenant(s) of the Shopping Center and any "exclusive" or restrictive covenant(s) in the Shopping Center and Tenant may rely on the contents of such notice from Landlord for purposes of compliance with this Section 1 for a period of nine (9) months after receipt of said notice unless Landlord thereafter (during or after said nine (9) -18- 24 month period) notifies Tenant of a new "use" clause or "exclusive" or restrictive covenant. Notwithstanding the foregoing, if, following receipt of Landlord's initial response to Tenant's request and prior to any updated notice from Landlord to Tenant, Tenant notifies Landlord of a new proposed principal use of the demised premises, or a portion thereof, and a permitted non-Affiliate opens for business in the applicable portion of the demised premises for such principal use within six (6) months of the date of such notice, such use shall be deemed to be permitted hereunder notwithstanding the fact that subsequent to the date of the notice to Landlord setting forth the proposed principal use of the demised premises a tenant or occupant of the Shopping Center opens for business with the same or substantially similar use or Landlord enters into an exclusive or restrictive covenant in conflict with such use. The term "Affiliate" as used in this Section 1 shall mean Melville Corporation, Marshall's, Inc. and any affiliate or subsidiary of Melville Corporation or Marshall's, Inc. (including Marshalls of Richfield MN., Inc.) and any corporation which is a successor to Melville Corporation or Marshall's, Inc. by way of merger, consolidation or corporate reorganization, or by the purchase of substantially all of the assets of Melville Corporation or Marshall's, Inc. and such successor corporation's affiliates and subsidiaries. Set forth on Schedule "D" hereto annexed and hereby made a part hereof is a list of use restrictions which affect the use which may be made of the demised premises; and Landlord warrants and represents that except for the matters set forth in said Schedule, there are no other use restrictions in any leases or occupancy agreements of any tenant or occupant of the Shopping Center which would in any manner restrict Tenant's right to use the demised premises for retail purposes; and Landlord agrees not to enter into any future agreements which would contain provisions which may restrict the uses to which the demised premises may be put under this lease except as set forth in Schedule "D". For such period of time as the restrictions set forth in Schedule "D" shall be outstanding, and shall be valid and enforceable in accordance with applicable law, Tenant agrees that (a) its operations in the demised premises shall not violate said restrictions, and (b) it will not enter into a sublease or assignment which permits the demised premises to be used in violation of said restrictions. Section 2. Restrictions. Landlord and Tenant specifically agree as follows: A. In recognition of the fact that the following types of operations would unduly burden the parking areas serving the demised premises and would hamper the use of said parking areas by customers of Tenant, Landlord will not lease, sell, or otherwise permit any structure within the Shopping Center to be used in whole or in part, and Tenant will not use, or permit the demised premises to be used in whole or in part, as a bowling alley, skating rink, amusement park, carnival, meeting hall, "disco" or other dance hall, sporting event or other sports facility, auditorium or any other like place of public assembly. Notwithstanding the foregoing, portions of the Shopping Center outside of the demised premises may be used for (1) a theater, provided it does not feature pornographic material (as determined by community standards for the area in which the Shopping Center is located) and provided further that it is not located on the same level as the demised premises, (2) a gymnasium, sport -19- 25 or health club or spa, provided it is comparable to Jack La Lanne Health Spa, New York Health & Racquet Club, The Vertical Club or TSI Racquet & Fitness Club, and (3) a restaurant serving alcoholic beverages in conjunction with food. B. Landlord agrees during the term of this lease that it will not lease, sell or otherwise permit any structure within the Shopping Center to be used in whole or in part, and Tenant will not use, or permit the demised premises to be used in whole or in part, for any manufacturing operation; as a factory; for any industrial usage; as a warehouse, processing or rendering plant; for any establishment selling cars (new or used), trailers or mobile homes; for the operation of a billiard parlor, amusement center, flea market, massage parlor or carnival; for a so-called "off-track betting" operation; for the sale or display of pornographic materials; or for any other purpose which would be inconsistent with the use of the Shopping Center as a community oriented retail shopping center. Section 3. Hours of Operation. It is specifically understood and agreed that Tenant may keep open for business beyond the closing hours of others, and may also, if not prohibited by law, keep open for business on other than regular business days; however, Tenant agrees to pay a percentage share of the increased costs of lighting and maintaining the common areas of the Shopping Center during such periods, which percentage shall be equal to a fraction the numerator of which shall be the square footage of floor area of the demised premises and the denominator of which shall be the square footage of floor area on all floors of the Building open during such period. Section 4. Assignment and Subletting. With regard to assignment and subletting: A. Tenant shall not sublet the demised premises or any part thereof, or assign this lease nor grant concessions or licenses for the occupancy of the demised premises or any part thereof, without Landlord's prior written consent except as set forth below in this Section 4. Any attempted assignment or subletting not in accordance with the provisions of this Section 4 shall be void and confer no rights upon any third person. No assignment or subletting shall relieve Tenant of any obligations herein. The consent by Landlord to any assignment or subletting shall not be deemed to be a waiver on the part of Landlord of any prohibition against any future assignment or subletting. No assignment or subletting shall be effective unless and until (x) Tenant gives notice thereof to Landlord, and (y) the assignee or sublessee shall deliver to Landlord (1) in the case of an assignment only, a written agreement in form and substance reasonably satisfactory to Landlord pursuant to which the assignee assumes all of the obligations and liabilities of Tenant under this lease, and (2) a copy of the assignment agreement or sublease. B. (i) In the event that Tenant shall desire Landlord's consent to the subletting of all or a portion of the demised premises or the assignment of this lease, Tenant shall give Landlord twelve (12) months prior written notice thereof. Such notice shall be deemed to be an offer by Tenant to assign this lease to Landlord in the event Tenant shall desire Landlord's consent to a sublet of all of the demised premises or to an assignment of this lease and shall be deemed to be an offer to surrender the portion of the demised premises in -20- 26 question if Tenant desires Landlord's consent to a sublet of a portion of the demised premises. In the event Landlord wishes to accept said offer, Landlord shall give Tenant notice thereof within said twelve (12) months ("Landlord's Notice"), in which event the assignment or surrender of a portion of the demised premises to Landlord shall become effective on the date specified in Landlord's Notice, which date shall be not less than thirty (30) nor more than sixty (60) days after the date of Landlord's Notice, and Tenant shall vacate the demised premises or portion thereof in accordance with Section 6 of ARTICLE X hereof by such date. In the event of an assignment of this lease to Landlord, on the effective date of such assignment, this lease shall terminate and Landlord and Tenant shall be released from all liability occurring thereafter under this lease subject to the provisions of Section 4.B.(ii) below. In the event of a surrender of a portion of the demised premises, on the effective date of such surrender, this lease shall be modified to reflect the reduced floor area of the demised premises and the corresponding reductions in the payment of rent and all other charges hereunder and Landlord and Tenant shall be released from all liability occurring thereafter under this lease with respect to such portion of the demised premises, subject to the provisions of Section 4.B.(ii) below. The sending of Landlord's Notice shall, ipso facto, and without the necessity of any further act or instrument, be sufficient to effectuate said assignment or modification. However, if either party shall request, the other shall execute such document as may be reasonably requested in confirmation thereof. In the event that Landlord does not accept said offer within the twelve (12) months, as aforesaid, Landlord's said right to recapture the demised premises or portion thereof shall be deemed to be waived (as to the particular assignment or subletting in question) and Tenant may, without Landlord's consent, assign this lease or sublet all or a portion of the demised premises pursuant to Section 4.C. below, but nothing herein contained shall be deemed to be a consent by Landlord to any other subletting or assignment unless Landlord delivers to Tenant its written consent thereto. Notwithstanding Landlord's failure to recapture on any one occasion, the right to recapture as aforesaid shall apply to any further subletting or assignment. (ii) Notwithstanding the provisions of Section 4.B.(i) to the contrary, if following the receipt of a Tenant's Notice, Landlord receives a "Proposed Tenant Notice" (as hereinafter defined), then Landlord's Notice must be given, if at all, within ninety (90) days of Landlord's receipt of the Proposed Tenant Notice and in all other respects the provisions of this Section 4 shall remain in full force and effect (it being understood that a Proposed Tenant's Notice may be served at any time after Landlord's receipt of a Tenant's Notice). "Proposed Tenant Notice" means a notice regarding the demised premises which contains all of the following information, and Landlord shall have the right without any liability to Tenant to negotiate directly with the proposed assignee or subtenant: (1) the proposed sublease or assignment is a bona fide transaction and that Tenant and the proposed assignee or sublessee are ready, willing and able to enter into such sublease or assignment agreement; (2) the legal name of the proposed assignee or sublessee, and the name under which such assignee or sublessee proposed to conduct business; (3) the rent and other proposed business terms of the proposed assignment or subletting; -21- 27 (4) the proposed business to be conducted by such assignee or subtenant; and (5) the name, address and telephone number of an officer of the assignee or subtenant in question. (iii) If Landlord elects to exercise its right to recapture in connection with a portion of the demised premises (the "Sublet Premises") then Landlord and Tenant shall promptly thereupon commence to subdivide the Sublet Premises into a separate entity (the "Subletting Work") in accordance with plans and specifications approved by Landlord, which approval shall not be unreasonably withheld or delayed, and which plans and specifications will make provision for necessary separate utilities, demising wall(s) and all other work necessary to make the balance of the demised premises and the Sublet Premises into separate premises independent of each other. Landlord and Tenant shall cooperate in obtaining all permits and certificates of occupancy as may be required in connection therewith. Tenant shall erect the demising wall and perform that portion of the Subletting Work to be done within the balance of the demised premises (exclusive of the Sublet Premises) and Landlord shall perform that portion of the Subletting Work to be done within the Sublet Premises. All Subletting Work shall be done in a good and workmanlike manner in compliance with applicable law. Landlord and Tenant shall share the cost of erecting the demising wall on a fifty/fifty basis. In addition, the cost of any portion of the Subletting Work performed by a party within its respective premises, which benefits both premises (e.g., separating the utilities) shall be shared by the other party on a fair and equitable basis. (iv) In the event of an assignment of this lease or surrender of a portion of the demised premises to Landlord pursuant to Section 4.B.(i), Landlord shall pay to Tenant the unamortized cost of Tenant's Permanent Improvements (as determined pursuant to Section 5 of Article XV) less Landlord's contribution pursuant to Schedule "B" out of any "excess rent" received by Landlord upon the next reletting of the demised premises, or portion thereof surrendered, as the case may be. Excess rent is defined as the amount (if any) by which the rent and additional charges and all other consideration received by Landlord from such reletting exceeds the rent and other charges that would have been payable by Tenant under this lease with respect to the demised premises, or portion thereof surrendered, as the case may be, if Landlord had not exercised said right of recapture. Landlord shall make said excess rent payments to Tenant upon receipt thereof by Landlord. Landlord may deduct from such payments to Tenant Landlord's alteration costs and brokerage fees and other reasonable out-of-pocket costs and expenses incurred with respect to such reletting. In the event of (i) surrender of a portion of the premises as aforesaid, and (ii) Landlord's failure to make any such excess rent payment received by Landlord within thirty (30) days after notice from Tenant that such payment is due, then Tenant may deduct such payment from the next installment(s) of rent due hereunder in accordance with the provisions of Article XII hereof. Landlord's obligation to make such excess rent payments shall survive the termination of this lease. C. In the event that Tenant requests Landlord's consent to assign this lease or sublet all or a portion of the demised premises and Landlord does not exercise the right of recapture as set forth in the preceding Section 4.B., then -22- 28 Tenant may, without Landlord's consent, assign this lease or sublet all or a portion of the demised premises (x) at any time within twelve (12) months after Landlord fails to recapture pursuant to subsection 4.B.(i), or (y) in accordance with the Proposed Tenant Notice within twelve (12) months after Landlord fails to recapture pursuant to subsection 4.B.(ii), provided the following terms and conditions are fully complied with: (i) Tenant shall not be in material default beyond any applicable grace periods under this lease at the time Landlord's consent is requested or at the effective date of the assignment or subletting; (ii) the demised premises shall be used by the assignee or subtenant consistent with the requirements and conditions of Section 1 above; (iii) Tenant shall pay to Landlord a sum equal to (1) fifty (50%) percent of any rent or other consideration paid to Tenant by any assignee or subtenant which is in excess of the rent and other charges then being paid by Tenant to Landlord pursuant to the terms of this lease, and (2) fifty (50%) percent of any other profit or gain (that is, other than those described in clause (1) of this sentence) realized by Tenant, as additional rent immediately upon receipt thereof by Tenant. Tenant may deduct from such payments to Landlord fifty (50%) percent of Tenant's alteration costs and brokerage fees, and other reasonable out-of-pocket costs and expenses incurred with respect to any such assignment or subletting. Tenant may also deduct from such payments to Landlord the unamortized cost of Tenant's Permanent Improvements (as determined pursuant to Section 5 of Article XV) less Landlord's contribution pursuant to Schedule B as follows: (i) any cash consideration received by Tenant may be applied by Tenant in payment of said unamortized cost, and (ii) the balance (if any) of said unamortized cost shall be deducted from said payments to Landlord each month over the balance of the original term of this lease in the case of an assignment or over the portion of the term of the sublease falling within the original term in the case of a sublease. (iv) in the case of an assignment, it shall provide for the assignment of Tenant's entire interest of this lease and the acceptance by the assignee of said assignment and its assumption and agreement to perform directly for the benefit of Landlord all of the terms and provisions of this lease on Tenant's part to be performed; (v) in the case of a subletting, it shall be expressly subject to all of the obligations of Tenant under this lease and the further condition and restriction that the sublease shall not be assigned, encumbered or otherwise transferred or the subleased premises further sublet by the sublessee in whole or in part, or any part thereof suffered or permitted by the sublessee to be used or occupied by others, without the prior written consent of Landlord in each instance; and (vi) there shall not be more than two (2) subleases in effect covering the demised premises nor more than two (2) subleased premises within the demised premises at any time during the term. -23- 29 D. Landlord shall be furnished with a duplicate original of the assignment or sublease within (i) thirty (30) days after its execution, or (ii) prior to its effective date, whichever is earlier. E. Anything contained in this Article IX to the contrary notwithstanding, Tenant shall have the right to assign this lease or sublet all or a portion of the demised premises (i) to a corporation which is a parent, affiliate or subsidiary of Tenant, Marshalls, Inc. or Melville Corporation; or (ii) to a corporation which is a successor to Tenant, Marshalls, Inc. or Melville Corporation and its subsidiaries and parent, by way of merger, consolidation or corporate reorganization, or by the purchase of substantially all of the assets of Tenant, Marshalls, Inc. or Melville Corporation, provided that such transaction includes the demised premises and at least four store locations operated similarly to the demised premises in the Metropolitan New York City area; or to an entity which purchases all of the stores operated by Tenant provided that such transaction includes the demised premises and at least four store locations operated similarly to the demised premises in the Metropolitan New York City area, without obtaining Landlord's prior written consent thereto; provided: (a) Tenant is not then in material default beyond any applicable grace period under the terms of this lease; (b) within five (5) days prior to the effective date of any such assignment or subletting, a fully executed and acknowledged assignment or sublease agreement is delivered to Landlord, which assignment shall contain an assumption agreement by the assignee in favor of Landlord of the terms and provisions of this lease; (c) Tenant shall remain liable under this lease; and (d) there shall not be more than two (2) subleases in effect covering the demised premises nor more than two (2) subleased premises within the demised premises at any time during the term. In the event of any such assignment or subletting as set forth in the preceding sentence, Landlord shall not have the right to recapture the demised premises as elsewhere provided in this Article IX and Landlord shall not be entitled to any profits realized in connection with any such transaction. F. If Tenant is a corporation or partnership, and if at any time during the term the person or persons who owns or own a majority of such corporation's voting stock or such partnership's interest, as the case may be, ceases or cease to own a majority of such stock (whether such sale occurs at one time or at intervals so that, in the aggregate, such a transfer shall have occurred), or interest, as the case may be (except as a result of transfer by gift or inheritance), then in any such event Tenant shall so notify Landlord and Landlord shall have the right, at its option, to terminate this lease by notice to Tenant given within thirty (30) days thereafter or within ninety (90) days after Landlord shall have received other notice thereof, except that this Section shall not be applicable to any corporation, the majority of the outstanding voting stock of which is listed on a national securities exchange (as defined in the Securities Exchange Act of 1934, as amended). For the purposes of this Section 4.F., stock ownership shall be determined in accordance with the principles set forth in Section 544 of the Internal Revenue Code of 1954, and the term "voting stock" shall refer to shares of stock regularly entitled to vote for the election of directors of the corporation. The foregoing provisions of this Section 4.F. shall not apply to the transfer of corporate shares or partnership interests to any assignee or sublessee permitted under Section 4.E. above. -24- 30 G. Tenant may, without Landlord's consent, grant licenses or concessions for the operation of departments in the demised premises, provided such licenses and concessions operate as an integral part of Tenant's business at the demised premises, and further provided that such licenses and concessions do not exceed, in the aggregate more than fifteen (15%) percent of the floor area of the demised premises. H. Tenant may not enter into any sublease, license, concession or other agreement for use, occupancy or utilization of space in the demised premises which provides for a rental or other payment for such use, occupancy or utilization based in whole or in part on the net income or profits derived by any person from the property leased, occupied or utilized, or would require the payment of any consideration which would not fall within the definition of "rents from real property," as that term is defined in Section 856(d) of the Internal Revenue Code of 1986, as amended, Landlord acknowledging that "percentage rents" are within said definition of "rents from real property". Section 5. Outdoor Sales. Landlord agrees not to permit any outdoor selling of merchandise in the Shopping Center and Tenant agrees not to conduct any outdoor selling of merchandise in the Shopping Center. ARTICLE X. Maintenance of Buildings Section 1. HVAC. With regard to HVAC equipment installed by Tenant in the demised premises or on the roof or elsewhere in the Shopping Center that services the demised premises, the maintenance of such equipment shall be the responsibility of Tenant. Section 2. Tenant's Obligations. Tenant shall be responsible for all non-structural repairs to the interior of the demised premises and to the storefront and exterior doors and windows unless the need for such repairs shall result from: (i) Landlord's failure to perform its obligations hereunder; (ii) the act or neglect of Landlord or those claiming by, through or under Landlord; or (iii) damage by fire or other casualty encompassed in Landlord's obligation of repair and restoration, or (iv) movement or setting of the Building and/or the common areas -- and in any of such events, Landlord shall be responsible for such repairs. Tenant shall observe and comply with all present and future requirements of applicable law including the performance of any repairs, modifications, alterations, cleanup or other required actions relating to or affecting the demised premises, or any sign of Tenant, or the use or occupancy thereof, or any appurtenances thereto, subject, however, to the provisions of Section 3 below of this ARTICLE X. Section 3. Compliance With Laws. Should any repairs, modifications, alterations, cleanup or other actions be required to (i) portions of the Shopping Center (other than the demised premises or other floor area of the Shopping Center) affecting Tenant's operations in the demised premises or Tenant's use -25- 31 of the common areas and the common facilities, or (ii) the structural or other portions of the demised premises or other floor area of the Shopping Center, by reason of applicable law and not resulting from a specific tenant's use of premises, same shall be made by Landlord and shall be included within the costs in which Tenant is to share pursuant to ARTICLE VI unless such compliance shall have been required by the applicable governmental authority for a violation(s) attributable to the acts or neglect of Landlord, its employees, agents or contractors in which event the same shall be made by Landlord without contribution from Tenant. If the need for such repairs, modifications, alterations, cleanup or other action shall result from the acts or neglect, use or manner of use of the demised premises by Tenant, its employees, servants, agents or contractors, same may be made by Landlord at Tenant's cost and expense but, in no such event, shall Landlord be required to make or perform any such repairs, modifications, alterations, cleanup or other action to any portion of the demised premises and if not performed by Landlord at Tenant's cost as aforesaid the same shall be performed by Tenant at its sole cost and expense. If the need for such repairs, modifications, alterations, cleanup or other action shall result from the acts or neglect of any other occupant of the Shopping Center, its employees, servants, agents or contractors, Landlord agrees to cause such occupant to perform the same and Tenant shall not have any responsibility for sharing in the costs arising out of or relating to such compliance. Insofar as the demised premises, the common areas and the common facilities may be affected, Landlord shall cause the Shopping Center, throughout the term of the lease, to comply with all environmental laws and regulations applicable to the Shopping Center and the uses made thereof, including, without limitation, laws and regulations relating to hazardous substances. Unless such non-compliance is due to the act or neglect of Landlord, its employees, agents or contractors, or the act or neglect of any other occupant of the Shopping Center, or its employees, agents or contractors, the cost incurred by Landlord in complying with the provisions of this paragraph shall be included within those costs in which Tenant is to share pursuant to ARTICLE VI hereof. Otherwise Tenant shall not have any responsibility for sharing in the costs arising out of or related to such compliance. Notwithstanding anything to the contrary contained hereinabove, if such noncompliance is due to the act or neglect of Tenant, its employees, agents or contractors, Tenant shall be solely responsible for remedying such noncompliance at its sole cost and expense. Section 4. Construction Warranties. Landlord shall be responsible for any repairs, alterations or replacements that shall be required at any time during the term of this lease as a result of Landlord's failure to perform Landlord's Work as required by Schedule "B" annexed hereto provided notice thereof is sent to Landlord within twelve (12) months of the completion of Landlord's Work as to all defects other than latent defects. Landlord further agrees, without contribution from Tenant, to keep, or cause to be kept, in a safe, secure and attractive condition all buildings in the Shopping Center. Further, Landlord shall grant to Tenant the benefit of any and all guaranties and warranties received by Landlord from its contractors or materialmen, and Tenant shall have the right to enforce such guaranties and warranties either in its own name or in the name of Landlord. -26- 32 Section 5. Tenant's Alterations. Tenant may make repairs and alterations to the demised premises, subject to the following provisions: (a) Tenant shall give Landlord prompt notice [except in emergencies where reasonable notice under the circumstances (before or after the repair is made) shall be sufficient] of any repair or alteration to be performed by Tenant if the reasonable cost of the repair or alteration exceeds One Hundred Thousand Dollars ($100,000); (b) such alterations or repairs shall be effected with due diligence and in a good and workmanlike manner in accordance with all applicable legal requirements and in accordance with all insurance requirements of which Tenant shall have received notice under the policies covering the Shopping Center, provided such requirements are commercially reasonable in the context of similar coverage for like properties; (c) such alterations or repairs shall be promptly and fully paid for by Tenant; (d) any alterations or repairs to the plumbing, mechanical, electrical, sewerage, sprinkler or HVAC system which affect other premises in the Shopping Center, or which materially reduce the capacity of any such system, shall be done in accordance with plans and specifications approved by Landlord, which approval shall not be unreasonably withheld or delayed; (e) Tenant shall not make any structural alteration without obtaining Landlord's prior written consent, which consent shall not be unreasonably withheld or delayed provided such alteration does not (i) increase the height of the Building, (ii) impair the structural integrity of the Building, (iii) reduce the fair market value of the Building, (iv) increase the floor area of the demised premises or (v) result in exterior work. Tenant shall not make any exterior alteration without Landlord's consent, which consent may be withheld in Landlord's sole and absolute discretion; provided, however, that Tenant may (i) in the event of a permitted sublease install another storefront door which is architecturally consistent in Landlord's reasonable judgment with the existing storefront door, and (ii) after Tenant shall open for business in the demised premises make changes to the storefront which are architecturally consistent in Landlord's reasonable judgment with the exterior of the Shopping Center. (f) Tenant may perform any other non-structural interior repairs or alterations within the demised premises without obtaining Landlord's consent; (g) within one hundred eighty (180) days after completion of any alteration or repair which required the preparation of plans and specifications and Landlord's approval, Tenant shall furnish Landlord with a set of "as built" plans and specifications therefor; (h) notwithstanding anything to the contrary contained herein, Tenant may construct a mezzanine in the demised premises not to exceed ten thousand (10,000) square feet of floor area in the aggregate provided -27- 33 Tenant obtains Landlord's prior written consent, which consent shall not be unreasonably withheld or delayed provided: (i) Tenant furnishes Landlord with the plans and specifications therefor; (ii) the structural integrity of the Building shall not be adversely affected; (iii) there shall be no affect upon the number of required parking spaces at the Shopping Center or upon any other parking requirements of any governmental authority having jurisdiction; (iv) there shall be no affect upon the floor to area ratio or upon the maximum building area in the Shopping Center available to Landlord; and (v) there shall be no cost or expense to Landlord. Any mezzanine constructed by Tenant in the demised premises must be used for non-selling purposes; and (i) if Landlord shall give notice to Tenant that it desires to approve specifications and working drawings with respect to any proposed repair or alteration, as to which Landlord has the right of approval, as aforesaid, then Tenant shall not commence the repair or alteration until Tenant has submitted specifications and working drawings of the proposed repair or alteration and Landlord has approved them, and Landlord agrees that such approval shall be forthcoming as expeditiously as reasonably feasible so as not to delay Tenant in the prosecution of such work. Tenant shall perform all work in accordance with the approved specifications and working drawings in cases where Landlord has the right of approval. Any work performed by Tenant pursuant to plans and specifications approved by Landlord shall be subject to Landlord's inspection after completion to confirm that the work complies with the requirements of this lease and is materially in accordance with the approved plans and specifications. Section 6. Surrender of Demised Premises. Upon the expiration or termination of this lease, Tenant shall quit and surrender the demised premises broom clean and in good condition and repair, building systems in working order, reasonable wear and tear and damage caused by casualty, condemnation or by Landlord or Landlord's agents' negligence or misconduct excepted, together with all alterations, fixtures, installations, additions and improvements which may have been made in or attached on or to the demised premises. However, any trade fixtures, furniture, and equipment which may be installed by Tenant in the demised premises prior to or during the term hereof, at Tenant's cost and expense may be removed by Tenant from the demised premises provided Tenant repairs any material damage to the demised premises caused by such removal. Any personal property of Tenant or any subtenant or occupant which shall remain in or on the demised premises after the termination of this lease and the removal of Tenant or said subtenant from the demised premises may, at the option of Landlord without notice, be deemed to have been abandoned by Tenant or such subtenant or occupant and may either be retained by Landlord as its property or be disposed of, without accountability, in such manner as Landlord may see fit. -28- 34 ARTICLE XI. Liability and Property Damage Insurance Section 1. Landlord's Insurance. A. Beginning with the commencement of Landlord's Work and thereafter throughout the term of this lease, Landlord shall purchase and keep in force, or cause to be purchased and kept in force, Workers' Compensation Insurance conforming to the applicable Workers' Compensation laws and including Employer's Liability Insurance with limits of liability of not less than $5,000,000, which coverage may be provided by supplementing the Workers' Compensation Policy with an Umbrella Liability Policy. B. Beginning with the commencement of Landlord's Work and thereafter throughout the term of this lease, Landlord shall purchase and keep in force, or cause to be purchased and kept in force, Comprehensive General Liability Insurance, written on an occurrence and not on a claims-made basis, containing provisions adequate to protect both Landlord and Tenant from and against claims for bodily injury, including death and personal injury (and with the Employee Exclusion deleted as to all such claims for personal injury), and claims for property damage occurring upon the Shopping Center, such insurance having bodily injury and property damage combined limits of liability of not less than $5,000,000.00 per occurrence, which coverage may be provided by supplementing the Comprehensive General Liability Policy with an Umbrella Liability Policy. Nothing contained in this ARTICLE XI shall prohibit Landlord from obtaining a policy or policies of blanket insurance which may cover other property of Landlord provided that such blanket policy does not diminish the obligations of Landlord so that the coverage from such policies shall not be less than that which would have been available if Landlord had obtained the required insurance under policies separately insuring the Shopping Center. C. The policy of insurance required by subsection B of this Section 1 shall include Contractual Liability Insurance, Non-Owned Automobile Liability Insurance and, if applicable, Owned Automobile Liability Insurance, subject to the same limits of liability provided in said subsection B. D. The policy of insurance required by subsection B of this Section 1 shall designate Tenant as an additional insured (provided that if an additional charge is levied by Landlord's insurance carrier for so naming Tenant, Tenant shall pay the same promptly upon demand) and shall provide that it shall not be canceled without at least ten (10) days prior written notice to Tenant. Throughout the term, not less than ten (10) days prior to the expiration dates of policies to be furnished hereunder, certificates of initial or renewal policies, as the case may be, shall be delivered to Tenant by Landlord. E. All insurance required of Landlord by this ARTICLE XI shall be effected under valid and enforceable policies issued by insurers of recognized responsibility. -29- 35 Section 2. Tenant's Insurance. A. Beginning with the delivery of possession of the demised premises to Tenant and thereafter throughout the term of this lease, Tenant shall purchase and keep in force, or cause to be purchased and kept in force, Workers' Compensation Insurance conforming to the applicable Workers' Compensation laws and including Employer's Liability Insurance with limits of liability of not less than $5,000,000, which coverage may be provided by supplementing the Workers' Compensation Policy with an Umbrella Liability Policy. B. Beginning with the delivery of possession of the demised premises to Tenant and thereafter throughout the term of this lease, Tenant shall purchase and keep in force, or cause to be purchased and kept in force, Comprehensive General Liability Insurance, written on an occurrence and not on a claims-made basis, containing provisions adequate to protect both Landlord and Tenant from and against claims for bodily injury, including death and personal injury (and with the Employee Exclusion deleted as to all such claims for personal injury), and claims for property damage occurring on the demised premises (and/or occurring upon the Shopping Center outside of the demised premises due to the acts, omissions or negligence of Tenant, or its employees, independent contractors, architects or engineers or due to Tenant's failure to comply with, or default or other breach of, the provisions of this lease), such insurance having bodily injury and property damage combined limits of liability of not less than $5,000,000.00 per occurrence, which coverage may be provided by supplementing the Comprehensive General Liability Policy with an Umbrella Liability Policy. Nothing contained in this ARTICLE XI shall prohibit Tenant from obtaining a policy or policies of blanket insurance which may cover other property of Tenant provided that such blanket policy does not diminish the obligations of Tenant so that the coverage from such policies shall not be less than that which would have been available if Tenant had obtained the required insurance under policies separately insuring the demised premises. C. The policy of insurance required by subsection B of this Section 2 shall include Contractual Liability Insurance, Non-Owned Automobile Liability Insurance and, if applicable, Owned Automobile Liability Insurance, subject to the same limits of liability provided in said subsection B. D. The policy of insurance required by subsection B of this Section 2 shall designate Landlord as an additional insured (provided that if an additional charge is levied by Tenant's insurance carrier for so naming Landlord, Landlord shall pay the same promptly upon demand) and shall provide that it shall not be canceled without at least ten (10) days prior written notice to Landlord. Throughout the term, not less than ten (10) days prior to the expiration dates of policies to be furnished hereunder, certificates of initial or renewal policies, as the case may be, shall be delivered to Landlord by Tenant. E. All insurance required of Tenant by this ARTICLE XI shall be effected under valid and enforceable policies issued by insurers of recognized responsibility. -30- 36 ARTICLE XII. Mutual Self-Help Section 1. Self-Help by Landlord. Landlord and its designees shall have the right to enter upon the demised premises at all reasonable hours for the purpose of inspecting or making repairs to the same. If Tenant fails to make any repairs required to be made by Tenant pursuant to the terms hereof, then, after the expiration of thirty (30) days after written notice shall be given from Landlord to Tenant provided, however, that in an emergency or in other situations where thirty (30) days is not appropriate given the circumstances, only such notice, if any, as shall be reasonable under the circumstances need be given, if Tenant still has failed to make such repairs (except if the repairs reasonably cannot be made within said period, then only if Tenant has failed to commence the repair within the applicable period of time and has not proceeded with due diligence toward completion), Landlord shall have the right (but not the obligation) to make or cause such repairs to be made. If Landlord makes or causes such repairs to be made, Tenant agrees that it will pay to Landlord the reasonable cost thereof within ten (10) days after receipt of copies of paid bills and a statement from Landlord. Landlord agrees that any such repairs shall be made at such times and in such manner as will minimize interference with the business being conducted in the demised premises. Section 2. Self-Help by Tenant. A. If Landlord fails to perform any of its obligations with respect to the common areas or common facilities as required pursuant to this lease (other than its obligations under Section 2(A) of ARTICLE XX hereof), the failure of which materially adversely affects Tenant's business operations at the demised premises, or if Landlord fails to perform any of its obligations with respect to the demised premises as required pursuant to this lease, then after the expiration of thirty (30) days after written notice shall be given from Tenant to Landlord provided, however, that in an emergency or in other situations where thirty (30) days is not appropriate given the circumstances, only such notice, if any, as shall be reasonable under the circumstances need be given, if Landlord still has failed to make such repair or replacement (except if the repair or replacement reasonably cannot be made within said period, then only if Landlord has failed to commence the repair or replacement within the applicable period of time and is not proceeding with due diligence toward completion), Tenant shall have the right (but not the obligation) to make the repair or replacement, subject, however, to Tenant coordinating the exercise of its self-help rights with the exercise of the self-help rights of the tenants under the Sears Lease and the Caldor Lease, and after completion by Tenant, Landlord shall, within ten (10) days after receipt of copies of paid bills and a statement from Tenant, reimburse Tenant for the reasonable amount so expended by Tenant minus Tenant's CAM Percentage thereof if, pursuant to this lease, Tenant shall be required to contribute Tenant's CAM Percentage of such expenditure, as determined pursuant to the applicable provisions of this lease, subject, however, to the provisions of Subsection B hereof. If Landlord fails to reimburse Tenant, as aforesaid, and if no dispute exists in connection therewith in accordance with Subsection B hereof, Tenant -31- 37 may deduct the amount owed to it by Landlord from the next installment(s) of rent due hereunder, subject, however, to the provisions of Subsection B hereof. B. If after Tenant exercises self-help, Landlord disputes the exercise of self-help by Tenant or if Landlord disputes the amount due to Tenant in connection therewith, such dispute shall be resolved by an action brought in a court having jurisdiction. If after such dispute is determined by the court Landlord does not reimburse Tenant for the amount owed to it by Landlord, as finally determined, within ten (10) days following the final determination, Tenant may deduct such amount from the next installment(s) of rent due hereunder. If it is finally determined by the court that Tenant was not entitled to exercise self-help, Tenant shall not be entitled to any reimbursement for such work, and same shall have been performed at Tenant's sole cost and expense. C. If pursuant to this Section, Landlord is obligated to reimburse Tenant for the cost of any such work, Tenant shall be entitled to interest on such reimbursable amount at the Interest Rate from the day of outlay until reimbursement or full satisfaction by credit. ARTICLE XIII. Hazard Insurance Section 1. Landlord's Insurance - Tenant's Contribution. (i) Beginning with the commencement of Landlord's Work and thereafter throughout the term of this lease, Landlord shall purchase and keep in force, or cause to be purchased and kept in force, insurance upon the Shopping Center against loss or damage by a hazard insured under a so-called All Risk policy and such additional insurance as would customarily be carried by owners of shopping centers in the same locale as the Shopping Center, and in all events including collapse, vandalism, water damage and sprinkler leakage, comprehensive boiler and machinery insurance (if premises contain the same), and flood insurance, in amounts sufficient to prevent Landlord or Tenant from becoming a co-insurer within the terms of the applicable policies and in an amount equal to the actual replacement cost of the improvements upon the Shopping Center, including the value of all additions, alterations, replacements and repairs thereto, by whomever made, as well as the machinery, equipment and their systems forming a part thereof. Said insurance shall not extend to plate glass whether in the form of windows or in doors or otherwise forming a part of the improvements upon the demised premises. The phrase "actual replacement cost" shall mean the actual replacement cost (excluding cost of excavations, foundations, footings, underground pipes, conduits, flues and drains) without diminution of such cost for depreciation or obsolescence. The foregoing policy shall contain, to the extent applicable, endorsements providing coverage for demolition costs, increased cost of construction, and contingent liability from operation of building laws. -32- 38 (ii) Landlord shall also purchase and keep in force throughout the term rental value insurance in an amount equal to one hundred percent (100%) of the total amount of minimum rent and other charges payable hereunder. (iii) Each policy of insurance described in this ARTICLE XIII shall provide that it shall not be cancelable without at least ten (10) days prior written notice to Tenant. Throughout the term, not less than ten (10) days prior to the expiration dates of policies to be furnished hereunder, certificates of initial or renewal policies, as the case may be, shall be delivered to Tenant by Landlord. All insurance required of Landlord by this ARTICLE XIII shall be effected under valid and enforceable policies issued by insurers of recognized responsibility. (iv) Nothing contained in this ARTICLE XIII shall prohibit Landlord from obtaining a policy or policies of blanket insurance which may cover other property of Landlord provided that such blanket policy shall not diminish the obligations of Landlord so that the proceeds from such policies shall be an amount no less than the amount of the proceeds that would be available if Landlord obtained the required insurance under policies separately insuring the risks which this lease requires Landlord to insure. (v) From and after the Commencement Date, Tenant agrees to pay its pro-rata share of the reasonable annual costs incurred by Landlord in maintaining the foregoing hazard insurance and rental value insurance during the term hereof (but in no event shall Tenant be required to pay any portion of the premiums relating to any hazardous use of premises within the Shopping Center causing higher premium charges than those generally applicable to general merchandise retail stores). The foregoing pro-rata share is computed on the same basis as Tenant's CAM Percentage set forth in Section 4 of ARTICLE VI of this lease. Section 2. Tenant's Insurance. A. Beginning with the delivery of the demised premises to Tenant by Landlord and thereafter throughout the term of this lease, Tenant shall purchase and keep in force, or cause to be purchased and kept in force, insurance upon its personal property and trade fixtures installed in the demised premises or elsewhere in the Shopping Center by Tenant against loss or damage by a hazard insured under a so-called All Risk policy and such additional insurance as would customarily be carried by operators of similar retail operations in the same locale as the Shopping Center, and in all events including collapse, vandalism, water damage and sprinkler leakage, comprehensive boiler and machinery insurance (if premises contain the same), and flood insurance, in amounts sufficient to prevent Landlord or Tenant from becoming a co-insurer within the terms of the applicable policies and in an amount equal to the actual replacement cost of its personal property and trade fixtures installed in the demised premises by Tenant, including the value of all additions, alterations, replacements and repairs thereto, by whomever made, as well as the machinery, equipment and other systems forming a part thereof. Said insurance shall extend to plate glass whether in the form of windows or in doors or otherwise forming a part of the improvements upon the demised premises. The phrase "actual replacement cost" shall mean the actual replacement cost without diminution of such cost for depreciation or obsolescence. The foregoing policy -33- 39 shall contain, to the extent applicable, endorsements providing coverage for demolition costs, increased cost of construction, and contingent liability from operation of building laws. B. [Intentionally Omitted] C. Tenant may self-insure with respect to any insurance Tenant is obligated to carry pursuant to this Section 2 provided that and so long as Tenant or any guarantor of Tenant's obligations hereunder has a net worth (computed in accordance with generally accepted accounting principles) in excess of Fifty Million Dollars ($50,000,000.00). D. Each policy of insurance described in this Section 2 shall provide that it shall not be cancelable without at least ten (10) days prior written notice to Landlord. Throughout the term, not less than ten (10) days prior to the expiration dates of policies to be furnished hereunder, certificates of initial or renewal policies, as the case may be, shall be delivered to Landlord by Tenant. All insurance required of Tenant by this Section 2 shall be effected under valid and enforceable policies issued by insurers of recognized responsibility. E. Nothing contained in this Section 2 shall prohibit Tenant from obtaining a policy or policies of blanket insurance which may cover other property of Tenant or any Affiliate provided that such blanket policy shall not diminish the obligations of Tenant so that the proceeds from such policies shall be an amount no less than the amount of the proceeds that would be available if Tenant obtained the required insurance under policies separately insuring the risks which this lease requires Tenant to insure. Section 3. Waiver of Subrogation. Landlord and Tenant each hereby releases the other, its officers, directors, employees and agents, from liability or responsibility to the other or anyone claiming through or under them by way of subrogation or otherwise for any loss or damage to property covered by or which could have been covered by valid and collectible fire insurance with standard "All Risk" coverage and such release shall not be negated or diminished if Landlord or Tenant self insure with respect to such coverage, even if such fire or other casualty shall have been caused by the fault or negligence of the other party, or anyone for whom such party may be responsible. However, if the releasor does not elect to self insure, this release shall apply only to loss or damage occurring during such time as the releasor's fire or All Risk coverage insurance policies shall contain a clause or endorsement to the effect that any such release shall not adversely affect or impair such policies or prejudice the right of the releasor to recover thereunder. Landlord and Tenant each agrees that any fire and All Risk coverage insurance policies carried by each of them respectively and covering the demised premises or their contents will include such a clause or endorsement as long as the same shall be obtainable without extra cost, or, if extra cost shall be charged therefor, so long as the other party pays such extra cost. If an extra cost shall be chargeable therefor, each party shall advise the other of the amount of the extra cost. If Landlord or Tenant are unable to obtain such waiver of subrogation, then, if obtainable, Landlord and Tenant each agree that their respective fire and All Risk coverage policies (pertaining to the demised premises and the Shopping Center) shall name the other party as a "non-payee" additional insured as long as the same shall be obtainable without extra cost, or -34- 40 if extra cost shall be charged therefor, so long as the other party pays such extra cost. If an extra cost shall be chargeable therefor, each party shall advise the other of the amount of the extra cost. Section 4. Increased Insurance Rates. Tenant covenants and agrees that it will not do or permit anything to be done in or upon the demised premises or bring in anything or keep anything therein, which shall increase the rate of insurance on the demised premises or the Building above the standard rate thereon for a general merchandise store located in the demised premises, but this covenant shall not prevent Tenant from ceasing to operate a business in the demised premises; and Tenant further agrees that in the event it shall do any of the foregoing, it will promptly pay to Landlord on demand any such increase resulting therefrom, which shall be due and payable as additional rent hereunder, until such time as Tenant shall have remedied the matter causing such increased insurance (but Tenant shall nevertheless have no obligation to re-commence business operations in the demised premises). ARTICLE XIV. Damage Clause Section 1. Partial Damage. In case during the term hereof the demised premises shall be partially damaged (as distinguished from "substantially damaged," as that term is hereinafter defined) by fire or other casualty, Landlord shall forthwith proceed to repair such damage and restore the demised premises to substantially their condition at the time of such damage. Provided Landlord shall have repaired such damage and restored the demised premises as herein required, Tenant shall thereafter do any and all work which Tenant desires to adapt the demised premises to Tenant's use subject, however, to the provisions of ARTICLE X, Section 5 and ARTICLE VIII hereof. Section 2. Substantial Damage. In case during the term hereof the demised premises shall be substantially damaged or destroyed by fire or other casualty, this lease shall, except as hereinafter provided, remain in full force and effect, and Landlord shall, proceeding with all reasonable dispatch, repair such damage and restore the demised premises to substantially their condition at the time of such damage or destruction. Provided Landlord shall have repaired such damage and restored the demised premises as herein required, Tenant shall thereafter do any and all work which Tenant desires to adapt the demised premises to Tenant's use subject, however, to the provisions of ARTICLE X, Section 5 and ARTICLE VIII hereof. Section 3. Substantial Damage - Last 3 years. However, if the demised premises shall be substantially damaged or destroyed by fire, windstorm, or otherwise, within the last three (3) years of the term of this lease, either party shall have the right to terminate this lease, provided that notice thereof is given to the other party not later than sixty (60) days after such damage or destruction. If said right of termination is exercised, this lease and the term hereof shall cease and come to an end as of the date of such damage or destruction. However, if Landlord shall exercise said right of termination and at that time Tenant shall have the right to extend the term of this lease, Tenant may render Landlord's notice of termination nugatory, -35- 41 provided that Tenant, within fifteen (15) days of receipt of the notice, shall elect to extend the term of this lease. Section 4. Rent Abatement. If the whole or any portion of the demised premises is damaged by fire or other casualty, the rent and all other charges payable hereunder shall abate until the first to occur of (i) the date on which Tenant shall reopen for business to the public in the demised premises, or (ii) the expiration of a period of one hundred eighty (180) days after Landlord shall have completed such restoration work as Landlord is obligated to perform hereunder and the interference with the operation of business in the demised premises has ceased. Nothing in this section shall be construed to abate or reduce percentage rent. In the event of the termination of this lease pursuant to this ARTICLE XIV, this lease, and the term hereof, shall cease and come to an end as of the date of such damage or destruction. Any rent or other charges paid in advance by Tenant shall be promptly refunded by Landlord. Section 5. Substantial Damage Defined. The terms "substantially damaged" and "substantial damage" as used in this ARTICLE, shall have reference to damage of such a character as cannot reasonably be expected to be repaired or such that the premises cannot be restored within ninety (90) days following the date on which restoration work is commenced. Section 6. Casualty to Shopping Center. In the event that any other portion of the Shopping Center is either partially or substantially damaged (irrespective of whether the demised premises shall have been damaged or destroyed), Landlord shall proceed promptly either to rebuild the same or to restore the damaged area to a sightly condition. Notwithstanding anything to the contrary contained herein, in the event that all or at least forty percent (40%) of the floor area of the balance of the Building shall be substantially damaged or destroyed by fire or other casualty, notwithstanding that the demised premises may be unaffected by such fire or other cause and if as a result thereof: (i) Landlord shall demolish or substantially rebuild the balance of the Building; and (ii) all of the other leases covering the Shopping Center are terminated, Landlord shall have the right, to be exercised by Notice to Tenant within ninety (90) days from and after said occurrence, to cancel and terminate this lease. Upon the giving of such notice to Tenant, this lease shall expire by lapse of time upon the thirtieth (30th) day after such notice is given and Tenant shall vacate the demised premises and surrender the same to Landlord and thereupon this lease shall terminate and be null and void as if such date with the date originally set forth herein for the expiration of the term hereof and, except for accrued liabilities, neither Landlord nor Tenant shall have any further obligations to each other pursuant to this lease. During any period of time that by reason of such damage or destruction there is any substantial or material interference with full access to the demised premises, there shall be a fair and equitable abatement of the rent and other charges payable hereunder, taking into account the extent of such interference; and if Tenant exercises its reasonable business judgment to discontinue the operation of business in the demised premises until such damage or destruction has been repaired, then there shall be a full abatement of rent and other charges payable hereunder until the first to occur of (i) the date on which Tenant shall reopen for business to the public in the demised premises, or (ii) the date Landlord shall have completed such restoration work as Landlord is obligated to -36- 42 perform hereunder and the interference with the operation of business in the demised premises has ceased. Section 7. Commencement of Restoration. In any event, if Landlord shall not commence, in good faith, repair and restoration work: (i) with respect to "partial damage" forthwith, or (ii) with respect to "substantial damage" as soon as reasonably feasible after any damage which Landlord is required to repair pursuant to the terms hereof, or if Landlord shall fail with all due diligence to continue with such repair and restoration work to completion, then Tenant shall have the right, in addition to all other rights and remedies available under this lease or available at law or in equity, to terminate this lease by giving written notice of its election so to do to Landlord. In the event Tenant elects to terminate this lease pursuant to this Section 7, said termination shall constitute Tenant's sole remedy for Landlord's breach hereunder. ARTICLE XV. Eminent Domain Section 1. Definitions. Within the meaning of this ARTICLE XV, the following words have the following meanings: (1) Taking: means a taking of title to the whole or any part of the Shopping Center by the exercise of the right of condemnation or eminent domain. (2) Award: means the award for or proceeds of any Taking, less all reasonable expenses in connection therewith, including reasonable attorney's fees. (3) Taking Date: means, with respect to any Taking, the date on which the condemning authority shall have the right to possession of the demised premises or the Shopping Center or any portion thereof, as the case may be. Section 2. Total or Partial Taking. In the event of a Taking of all or substantially all of the demised premises, other than a Taking for temporary use, this lease shall automatically terminate as of the Taking Date. In the event of a Taking of any substantial portion of the Shopping Center, Landlord may, at its option, if Landlord determines, exercising sound business judgment, that it is no longer economically prudent to operate the subject property as a retail shopping center, terminate this lease by giving notice to Tenant within 180 days of the date of such Taking, effective as of the Taking Date provided Landlord has terminated all other leases in the Shopping Center. In the event of a Taking of any portion of the demised premises or in the event of a Taking of any substantial portion of the common area as a result of which Tenant determines, exercising sound business judgment, that it is no longer economically prudent to operate the demised premises as a retail store, Tenant may, at its option, terminate this lease by giving notice to Landlord within 180 days of the date of such Taking, effective as of the Taking Date. Examples of a Taking of a "substantial portion" of the common area include (i) a Taking resulting in fewer than 2.7 parking spaces for each 1,000 square feet of floor area in the Shopping Center remaining in the Enclosed Parking Structure; (ii) a Taking resulting in -37- 43 the cut off or material obstruction of direct access between the demised premises and (x) the entrance thereto at Queens Boulevard and 63rd Road, and (y) the Enclosed Parking Structure; (iii) a Taking resulting in loss of direct access to the loading area at the demised premises; and (iv) a Taking resulting in loss of direct access to the Enclosed Parking Structure from either 63rd Road or 62nd Drive. Section 3. Restoration. In the event of a Taking of a portion of the demised premises if this lease shall not terminate or be terminated under the provisions of Section 2 hereof, commencing on the Taking Date, rent and all other charges payable hereunder shall be reduced in the proportion that the area so Taken bears to the entire area contained within the demised premises and Landlord shall restore or cause to be restored the remainder of the demised premises and the common areas to their condition immediately preceding such Taking to the extent practical. The provisions of Section 7 of ARTICLE XIV regarding Tenant's right to terminate this lease, in the event Landlord fails to restore within twelve (12) months (after the Taking Date in the event of a Taking) and either parties' right to terminate in the last three (3) years of the term, shall be applicable with respect to Landlord's obligation to restore, as provided in the preceding sentence. Section 4. Taking for Temporary Use. If there is a Taking of the demised premises for temporary use, this lease shall continue in full force and effect, and Tenant shall continue to comply with all of the provisions thereof, except as such compliance shall be rendered impossible or impracticable by reason of such Taking and rent shall be abated during the course of such Taking. Notwithstanding the foregoing, if any such temporary Taking lasts longer than six (6) months, Tenant may at any time after the expiration of such six (6) month period and so long as such temporary taking exists, terminate this lease. Section 5. Disposition of Awards. All awards arising from a total or partial Taking of the demised premises, the Building, or of Tenant's leasehold interest, shall belong to Landlord without any participation by Tenant. Tenant hereby assigns to Landlord any share of such Award which may be awarded to Tenant. Nothing contained herein shall be construed to preclude Tenant, at its sole cost and expense, from independently prosecuting any claim directly against the condemning authority in such condemnation proceedings for loss of business, relocation expenses, depreciation to, damage to, cost of removal of and for the value of stock, trade fixtures, furniture and other personal property belonging to Tenant, and any Award therefor shall belong solely to Tenant. In the event of a Taking and as a result thereof this lease is terminated, Landlord shall pay Tenant out of any award paid by the Taking authority the unamortized cost of any permanent leasehold improvements made by Landlord or Tenant which are paid for by Tenant that are affixed to and become part of the realty ("Tenant's Permanent Improvements"), less Landlord's contribution pursuant to Schedule B. Within thirty (30) days after request by Landlord, Tenant shall certify to Landlord the cost of Tenant's Permanent Improvements and shall furnish Landlord with such substantiating verification as Landlord may reasonably request. Tenant's Permanent Improvements shall not include Tenant's trade fixtures, furnishings, decorations and inventory. In the event of a Taking which does not result in the termination of this lease, Landlord shall -38- 44 pay Tenant out of the proceeds received in any award the unamortized cost of Tenant's Permanent Improvements which do not remain after Landlord's restoration of the demised premises, less Landlord's contribution pursuant to Schedule B. The amount of amortization shall be the amount calculated on a straight-line basis using a useful life of twelve and one-half (12 1/2) years. Section 6. Other Portions of Shopping Center. In the event of the Taking of any other portion of the Shopping Center (irrespective of whether any portion of the demised premises shall have been so taken), Landlord shall proceed promptly: (i) to restore that which may remain of any buildings or other improvements affected by the Taking reasonably required for the normal operation of Tenant's business, and (ii) to restore the remaining property to a sightly condition. Section 7. Rent Abatement. In the event of a termination of this lease following such Taking, all rent and other charges shall be pro-rated up to the date of such termination, and Landlord shall promptly repay to Tenant any rent or other charges paid in advance. In the event of a Taking of the common areas or common facilities (irrespective of whether any portion of the demised premises shall have been so taken) which does not result in the termination of this lease, the rent and all other charges payable hereunder shall not be abated or reduced proportionately during any period in which, by reason of the performance of restoration work, there is material interference with the operation of business in the demised premises. Notwithstanding the foregoing, if this lease has not been terminated in accordance with this ARTICLE XV and if Landlord has not eliminated the foregoing interference with the operation of business in the demised premises within twelve (12) months following the date of the Taking, thereafter the rent and all other charges payable hereunder shall be abated or reduced proportionately, taking into account the extent of such interference; and if Tenant exercises its reasonable business judgment to discontinue the operation of business in the demised premises, there shall be a full abatement of rent and all other charges payable hereunder until the first to occur of (i) the date on which Tenant shall reopen for business to the public in the demised premises, or (ii) the date on which Landlord shall have completed such restoration work as Landlord is obligated to perform hereunder and the interference with the operation of the business of Tenant in the demised premises has ceased. ARTICLE XVI. Landlord's Assurances Section 1. Representations and Warranties. To induce Tenant to execute this lease, and in consideration thereof, Landlord warrants, represents, covenants and agrees as follows: A. Landlord has the full power and authority to execute and deliver this lease and to perform its obligations under this lease. This lease has been executed pursuant to authority granted to Landlord in and in accordance with the First Amended and Restated Joint Plan of Reorganization dated -39- 45 July 21, 1993, as approved by United States Bankruptcy Order recorded in Reel 3814, Page 1158 (Paragraph 8 of Schedule "I"). B. Landlord holds fee title to the Shopping Center free and clear of all encumbrances other than those listed in Schedule I. C. There are no restrictions or other legal impediments (other than those matters which have been recorded at the applicable land registry for the jurisdiction in which the Shopping Center is located) either imposed by law (including applicable zoning and building ordinances) or by any instrument which would prevent the use of the Shopping Center, including the demised premises, for retail purposes. D. The Shopping Center will have at the commencement of the term of this lease (i) a parking ratio of at least 2.7 parking spaces for each 1,000 square feet of floor area in the Shopping Center, and (ii) no fewer than one thousand (1,000) parking spaces within the Enclosed Parking Structure located no higher than the fourth level thereof and not lower than the level of 62nd Drive. E. This lease does not violate the provisions of any instrument not of public record heretofore executed by Landlord; and the execution of this lease has been duly and validly authorized on behalf of Landlord. F. Landlord warrants and represents that Landlord has not dealt with any broker in connection with the consummation of this lease, and in the event any claims are made against Tenant by any person or entity claiming a brokerage commission or other payment by reason of the execution of this lease based on Landlord's actions, Landlord shall defend the claim against Tenant with counsel of Tenant's selection and shall save harmless and indemnify Tenant on account of any loss, cost or damage which may arise by reason of any such claim. G. Nothing contained in the Caldor Lease or the Sears Lease prevents Tenant from conducting its business or exercising any of its rights pursuant to the terms of this lease or violates any covenants or agreements set forth in this lease. H. The project which is the subject matter of the Declaration of Covenants and Restrictions recorded in Reel 926, Page 1291, as amended by Agreement in Reel 2341, Page 1794 (Paragraph 3.1 of Schedule I) was not developed and is not the same as the project for the development of the Shopping Center pursuant to this lease. Section 2. Landlord's Breach. In the event that Landlord shall fail to comply with the requirements of Section 1 of this ARTICLE XVI, or in the event Landlord shall breach any of the warranties, representations, covenants or agreements set forth in Section 1 of this ARTICLE XVI, then after the expiration of thirty (30) days after written notice thereof shall be given from Tenant to Landlord, if Landlord still has failed to comply or remedy such breach(es), as the case may be (except if such requirements cannot be reasonably satisfied or such breach cannot be reasonably remedied within said period, then only if Landlord has failed to commence the same within the -40- 46 applicable period of time and is not proceeding with due diligence toward completion), Tenant shall have the right, in addition to all other remedies, to terminate this lease at any time by giving Landlord notice thereof prior to the full compliance by Landlord with such requirements, warranties, representations, covenants and agreements. And in the event Tenant so elects to terminate this lease, such termination shall be Tenant's sole remedy for Landlord's breach of this ARTICLE XVI. Section 3. Lawful Retail Use Prohibited. If at any time during the term of this lease applicable law shall not permit the use of the demised premises for Lawful Retail Uses under this lease, then Tenant may terminate this lease by giving Landlord notice thereof, said termination right constituting Tenant's sole remedy under this Section 3. ARTICLE XVII. Remedies Section 1. Tenant's Default. It is covenanted and agreed that if Tenant shall neglect or fail to perform or observe any of the covenants, terms, provisions or conditions contained in this lease on its part to be performed or observed within thirty (30) days after notice of default, or such additional time as is reasonably required to correct any such default (except for payment of minimum rent or other charges, in which case, said period of notice shall be ten (10) days), or if the estate hereby created shall be taken on execution or by other process of law, or if Tenant shall be judicially declared bankrupt or insolvent according to law, or if any assignment shall be made of the property of Tenant for the benefit of creditors, or if a receiver, guardian, conservator, trustee in voluntary bankruptcy or other similar officer shall be appointed to take charge of all or any substantial part of Tenant's property by a court of competent jurisdiction, or if a petition shall be filed for the reorganization of Tenant under any provisions of the Bankruptcy Code now or hereafter enacted, and such proceeding is not dismissed within ninety (90) days after it is begun, or if Tenant shall file a petition for such reorganization, or for arrangements under any provisions of the Bankruptcy Code now or hereafter enacted and providing a plan for a debtor to settle, satisfy or extend the time for the payment of debts - then, and in any of said cases (notwithstanding any license of any former breach of covenant or waiver of the benefit hereof or consent in a former instance), Landlord lawfully may, immediately or at any time thereafter, upon prior written notice, enter into and upon the demised premises, or any part thereof in the name of the whole, and repossess the same as of its former estate, and expel Tenant, and those claiming through or under it, and remove its or their effects (forcibly, if necessary) without being deemed guilty of any manner of trespass, and without prejudice to any remedies which might otherwise be used for arrears of rent or preceding breach of covenant, and upon entry as aforesaid, this lease shall terminate. Tenant covenants and agrees, notwithstanding any entry or re-entry by Landlord, whether by summary proceedings, termination, or otherwise, to pay and be liable for on the days originally fixed herein for the payment thereof, amounts equal to the several installments of rent and other charges reserved as they would, under the terms of this lease, become due if this lease had not been terminated, or if Landlord -41- 47 had not entered or re-entered, as aforesaid, and whether the demised premises be relet or remain vacant, in whole or in part, or for the remainder of the term or a period less than the remainder of the term, and for the whole thereof; but in the event the demised premises be relet by Landlord, Tenant shall be entitled to a credit in the net amount of rent received by Landlord in reletting the demised premises, after deduction of all reasonable expenses (including, without limitation, reasonable brokerage fees, and the like), and in collecting the rent in connection therewith. In the event of termination by Landlord as aforesaid, Landlord agrees to use reasonable efforts to relet the demised premises so as to minimize the damages suffered by Landlord and payable by Tenant. Section 2. Landlord's Default. If the Landlord's interest in the Shopping Center is not held by any one of the following: (i) Alexander's, Inc. or any entity which controls, is controlled by, or is under common control with, Alexander's, Inc. or any real estate investment trust to which all or substantially all of the assets of Alexander's Inc. are transferred, provided that (x) Alexander's, Inc. and such entities or real estate investment trust continue to own at least four (4) buildings in which rental operations are conducted, and (y) the shares of Alexander's, Inc. or such real estate investment trust are traded on a nationally recognized stock exchange, or (ii) Vornado Realty Trust or any entity which controls, is controlled by, or is under common control with, Vornado Realty Trust, provided that Vornado Realty Trust and such entities continue to own at least four (4) shopping centers; then it is understood and agreed that in the event Landlord is in default in the performance of any of its obligations under this lease, which default materially and adversely affects Tenant's quiet enjoyment and use of any portion of the demised premises, and such default continues for a period of more than thirty (30) days after written notice from Tenant specifying such default, or if such default requires more than thirty (30) days to remedy and it continues, after such notice, beyond the time reasonably necessary to cure, Tenant shall have the right, in addition to all other remedies available hereunder or available at law or in equity, to terminate this lease upon written notice to Landlord. ARTICLE XVIII. Miscellaneous Provisions Section 1. Waiver. Failure on the part of either party to complain of any action or non-action on the part of the other, no matter how long the same may continue, shall never be deemed to be a waiver by such party of any of its rights hereunder. Further, it is covenanted and agreed that no waiver at any time of any of the provisions hereof by either party shall be construed as a waiver of any of the other provisions hereof, and that a waiver at any time of any of the provisions hereof shall not be construed as a waiver at any subsequent time of the same provisions. The consent or approval to or of any action by either party requiring such consent or approval shall not be deemed to waive or render unnecessary such consent or approval to or of any subsequent -42- 48 similar act by such party. Notwithstanding the foregoing, Landlord shall be deemed to have waived any right to be paid by Tenant for amounts which would otherwise be due from Tenant to Landlord upon billing of Tenant by Landlord if such bill is not rendered to Tenant within nine (9) months of the end of the year with respect to which Landlord's right to payment accrues. If at any time a dispute shall arise as to any amount or sum of money to be paid by one party to the other party under the provisions hereof, the party against whom the obligation to pay the money is asserted shall have the right to make payment "under protest," which payment shall not be regarded as a voluntary payment, and there shall survive the right on the part of such party to institute suit for recovery of such sum. If it shall be adjudged that there was no legal obligation on the part of such party to pay such sum or any part thereof, such party shall be entitled to recover from the other party such sum or so much thereof as it was not legally required to pay under the provisions of this lease. If at any time a dispute shall arise between the parties hereto as to any work to be performed by either of them under the provisions hereof, the party against whom the obligation to perform the work is asserted may perform such work and pay the cost thereof "under protest," performance of such work in no event to be regarded as a voluntary performance, and there shall survive the right on the part of such party to institute suit for recovery of the cost of such work. If it shall be adjudged that there was no legal obligation on the part of such party to perform such work or any part thereof, such party shall be entitled to recover from the other party the cost of such work or the cost of so much thereof as such party was not legally required to perform under this lease. Section 2. Covenant of Quiet Enjoyment. Tenant, subject to the terms and provisions of this lease and those matters of public record as of the date of this lease, on payment of the rent and observing, keeping and performing all of the terms and provisions of this lease on its part to be observed, kept and performed, shall lawfully, peaceably and quietly have, hold, occupy, and enjoy the demised premises during the term hereof without hindrance or ejection by any person. Section 3. Status Report. Recognizing that both parties may find it necessary to establish to third parties, such as accountants, banks, mortgagees, or the like, the then current status of performance hereunder, either party, on the written request of the other made from time to time, will promptly furnish a written statement on the status of any matter pertaining to this lease. Without limiting the foregoing, each of Landlord and Tenant agrees that within ten (10) days after request by the other, it will execute, acknowledge and deliver to the requesting party a certificate stating (i) that this lease is in full force and effect and has not been modified (or if modified, setting forth all modifications), or if this lease is not in full force and effect, the certificate shall so specify the reasons therefor; (ii) the Commencement Date; (iii) whether or not to the certifying party's knowledge there exists any default by either Landlord or Tenant in the performance of any term or provision contained in this lease and, if so, specifying any such default; (iv) the date to which rent and other charges have been paid; (v) that there is no action pending against the certifying party under any bankruptcy or insolvency law (or stating any such action that does exist); and (vi) such other matters reasonably requested by any mortgagee or -43- 49 prospective mortgagee or purchaser or prospective purchaser of the Shopping Center or by any other third party for whom such certificate has been requested. Section 4. Notice to Mortgagee. After receiving written notice from any person, firm, or other entity, that it holds a mortgage (which term shall include a deed of trust) which includes as part of the mortgaged premises the demised premises, Tenant shall, so long as such mortgage is outstanding, be required to give to such holder the same notice as is required to be given to Landlord under the terms of this lease, but such notice may be given by Tenant to Landlord and such holder concurrently. It is further agreed that such holder shall have the same opportunity to cure any default, and the same time within which to effect such curing, as is available to Landlord, and if necessary, to cure such a default, such holder shall have access to the demised premises. Section 5. Mechanic's Liens. Within fifteen (15) days of receipt of Notice of such lien, Tenant agrees to discharge (either by payment or by filing of the necessary bond, or otherwise) any mechanic's, materialmen's, or other lien against the demised premises and/or Landlord's interest therein, which liens may arise out of any payment due for, or purported to be due for, any labor, services, materials, supplies, or equipment alleged to have been furnished to or for Tenant in, upon or about the demised premises. In the event Tenant fails to so discharge any such lien, Landlord may discharge the same by filing the necessary bond and Tenant agrees to reimburse Landlord for the cost of such bond promptly upon demand therefor. Section 6. Invalidity of Particular Provisions. If any term or provision of this lease, or the application thereof to any person or circumstance, shall, to any extent, be invalid or unenforceable, the remainder of this lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this lease shall be valid and be enforced to the fullest extent permitted by law. Section 7. Provisions Binding, Etc. Except as herein otherwise expressly provided, the terms hereof shall be binding upon and shall inure to the benefit of the successors and assigns, respectively, of Landlord and Tenant. It is understood that each of the covenants, promises and agreements made by Landlord in this lease, whether affirmative or negative in nature, shall run with the land of the Shopping Center for the benefit of the demised premises and shall be binding upon Landlord and each successive owner during its ownership of any portion of the balance of the Shopping Center and upon each person having any interest therein derived through the owner thereof. Section 8. Governing Law. This lease shall be governed exclusively by the provisions hereof, and by the substantive laws of New York as the same may from time to time exist. Section 9. Recording. Tenant agrees not to record this lease, but Landlord hereto agrees to execute a recordable short form lease in the form annexed hereto and made a part hereof as Schedule "E" and complying with applicable New York laws, and reasonably satisfactory to the attorneys for -44- 50 Landlord and Tenant. In no event shall such document set forth the rental or other charges payable by Tenant under this lease; and any such document shall expressly state that it is executed pursuant to the provisions contained in this lease, and is not intended to vary the terms and conditions of this lease. All recording fees shall be paid for by the party seeking to record the short form lease. Section 10. Notices. Whenever by the terms of this lease notice, demand, or other communication shall or may be given, either to Landlord or to Tenant, the same shall be in writing, and shall be sent by registered or certified mail, postage prepaid, or shall be delivered by private prepaid express carrier: If intended for Landlord, addressed to it at the address set forth on the first page of this lease (or to such other address or addresses as may from time to time hereafter be designated by Landlord by like notice), Attention: Vice President Real Estate; With a copy to Landlord at the same address as set forth above, Attention: Chief Financial Officer; If intended for Tenant, addressed to it at the address set forth on the first page of this lease, Attention: Legal Services c/o Real Estate (or to such other address or addresses as may from time to time hereafter be designated by Tenant by like notice); with a copy to Melville Corporation, One Theall Road, Rye, New York 10580, Attention: Legal Department. Except as otherwise specifically provided herein, all such notices shall be effective when deposited in the United States mail or delivered to a private express carrier within the Continental United States, provided that the same are received in the ordinary course at the address to which the same were sent. Notice from an attorney acting or purporting to act on behalf of a party shall be deemed to be notice from such party provided that such attorney is authorized to act on behalf of such party, Section 11. Paragraph Headings. The paragraph headings throughout this instrument are for convenience and reference only, and the words contained therein shall in no way be held to explain, modify, amplify, or aid in the interpretation, construction, or meaning of the provisions of this lease. Section 12. Size of Demised Premises. With regard to rental payable during the original term and the option periods, and with regard to Tenant's Tax Percentage and Tenant's CAM Percentage, the amounts set forth in this lease are predicated upon the square footage figures for the demised premises and the Shopping Center recited herein. Promptly upon delivery of full possession of the demised premises by Landlord to Tenant, an exact measurement of the square footage of floor area of the demised premises and the Shopping Center shall be made, and if said measurement shall indicate square footage figures different from those recited in this lease, the parties hereto shall promptly execute a supplemental instrument adjusting, as applicable, the rental figures, as well as Tenant's Tax Percentage and Tenant's -45- 51 CAM Percentage, to conform to the exact measurement. If Tenant shall have made any payments to Landlord prior to the determination of such exact measurement, a prompt adjustment shall be made in said payments to reflect the accurate figures. In the determination of such square footage figures, the same shall be computed on the basis of the exterior of exterior walls and the center of interior or dividing walls. Section 13. Landlord and Tenant. It is understood and agreed that Landlord shall, in no event, be construed or held to be a partner or associate of Tenant in the conduct of Tenant's business; but it is understood and agreed that the relationship is, and at all times shall remain, that of landlord and tenant. Section 14. Signs. (a) Subject to obtaining all required licenses and permits, Tenant shall have the right to install and maintain signs affixed to the exterior of the demised premises at the locations and having the dimensions described in Schedule "F" annexed hereto and made a part hereof and which otherwise conform to the requirements of Schedule "F". Landlord further grants to Tenant the right, at Tenant's sole cost and expense, subject to applicable laws and regulations of governmental authorities, to install, maintain, repair and replace on the exterior of the demised premises other signs of Tenant or signs of any permitted subtenant, provided the same are located in substantially the same places and are substantially the same size as or smaller than the signs described in Schedule "F" and otherwise conform to the requirements of Schedule "F" and the aggregate area of said signs does not exceed the aggregate area of the signs permitted pursuant to Schedule "F". Tenant may also at its expense install its chain-wide pre-opening and banner type signs subject to Landlord's prior written approval which shall not be unreasonably withheld or delayed, but Tenant shall remove or relocate such sign if its continued maintenance unreasonably interferes with the conduct of Landlord's Work or the performance by Landlord of its obligations under the Sears Lease or the Caldor Lease. Tenant shall obtain and pay for all required permits and licenses relating to such signs. Copies of all such permits and licenses shall be delivered to Landlord within a reasonable time after they are issued. (b) Except as set forth in (d) below, Tenant shall not have the right to maintain or install any other signs in or at the Shopping Center outside of the demised premises, and in no event may Tenant place any sign on the third floor of the Building which is within one hundred (100) feet of the entrance on the third floor to Caldor. (c) Tenant may not install signs, lamps or other illumination devices in or upon the demised premises if the lamps, signs or devices flash or go on and off intermittently and Landlord agrees not to permit the installation of any such signs, lamps or other illumination devices in the balance of the Shopping Center, subject to the rights of the tenant under the Sears Lease. (d) Landlord does not presently intend to install a pylon in the Shopping Center. However, Tenant shall have the right to install its sign on any pylon -46- 52 that Landlord may install in the Shopping Center in accordance with the following: (i) The top position shall, at Landlord's option, be either the name of the Shopping Center or the tenant occupying the largest floor area in the Shopping Center. Positioning thereafter on the pylon shall be in order of tenants' floor area. (ii) The relative size and position of Tenant's sign panel shall be in proportion to the floor area of the demised premises in relation to the floor area of the premises of the other tenant(s) utilizing the pylon. If Tenant should enter into a permitted sublease, the subtenant may place a sign panel on the pylon; provided, however, that the size and position of Tenant's sign panel and the subtenant's sign panel shall be determined on the basis of their respective floor areas and the floor areas of the other tenants utilizing the pylon. Notwithstanding the foregoing, Tenant's position on the pylon or size of its panel shall not be adversely affected by reason of the incorporation of additional land within the Shopping Center pursuant to Article VI, Section 3.B. (iii) If a tenant occupying premises larger than the demised premises desires to place its sign panel above Tenant's sign panel (after Tenant's sign panel has been installed), Landlord shall, at Landlord's expense, relocate (but not reduce the size of) Tenant's sign panel on the pylon in accordance with the provisions of subdivisions (i) and (ii) of this Subsection. If additional floor area, however, is added to the Shopping Center as described in Schedule A-2, the size of Tenant's sign panel may be reduced on a proportional basis with the reduction in the sign panels of the other tenants. (iv) Tenant's sign panel shall be subject to (i) applicable legal requirements, and (ii) insurance requirements. Tenant shall obtain and pay for all required permits and licenses relating to such sign panel. Copies of all such permits and licenses shall be delivered to Landlord within a reasonable time after they are issued. (v) If Tenant installs a sign panel on a pylon, Tenant shall reimburse Landlord for a fraction of the cost of repairing, maintaining, replacing, altering and furnishing electric current to the pylon. The numerator of the fraction shall be the area of the face of the sign panel installed by Tenant, and the denominator shall be the combined area of the face of the sign panel installed by Tenant and any other sign panels installed on the pylon. The reimbursement shall be paid promptly after Landlord renders bills with respect thereto. (vi) Tenant shall, at its sole cost and expense, keep its sign panel located on the pylon in good order and repair. (vii) Landlord agrees that no tenant occupying premises consisting of less than 20,000 square feet of floor area in the Shopping Center shall be permitted to have a sign on any pylon in the Shopping Center. It is understood and agreed that neither Tenant or any subtenant of Tenant shall be permitted to maintain a sign on any pylon in the -47- 53 Shopping Center unless Tenant or said subtenant is conducting business in at least 20,000 square feet of floor area in the demised premises. (viii) Notwithstanding the foregoing, it is understood and agreed that any tenant occupying the premises demised under the Sears Lease consisting of 190,000 or more square feet of floor area in the Shopping Center may have exclusive use of a pylon in the Shopping Center. (ix) In the event Tenant and any other tenant of the Shopping Center occupy the same amount of square footage of floor area in the Shopping Center, Landlord agrees that Tenant's sign panel on any pylon shall be located above the sign of such other tenant. Section 15. Intentionally Omitted. Section 16. Transmittal of Lease. This lease is transmitted for examination only and does not constitute an offer to lease, and this lease shall become effective only upon the execution and unconditional delivery thereof by both parties hereto. Section 17. Investment Tax Credit. Landlord hereby agrees to elect under the applicable provisions of the Internal Revenue Code of 1986, as amended (hereinafter referred to as the "Code"), to pass through to Tenant all investment tax credits which may be available from time to time in respect of the demised premises under Section 38 or other applicable provisions of the Code to the extent such investment tax credits may not be available to Landlord pursuant to Section 46(e) of the Code. Landlord agrees to execute and to deliver to Tenant in a timely fashion all documents required by the Code and the regulations issued thereunder, including, without limitation, a written election thereunder, to enable Tenant to obtain such investment tax credits. Landlord further agrees (i) to maintain adequate records so that the qualifying property can be identified and the cost thereof can be determined, (ii) to provide such records to Tenant upon written request, and (iii) otherwise to cooperate with Tenant in said matter. Landlord agrees not to destroy or otherwise dispose of such records until written consent to such destruction or disposal has been obtained from Tenant. Section 18. Merchants' Association. In no event shall Tenant be required to join, participate in or contribute to any promotional fund, marketing fund or merchants' association. Section 19. Force Majeure. Any prevention, delay or stoppage due to strikes, lockouts, labor disputes, acts of God, inability to obtain labor or materials or reasonable substitutes therefor, enemy or hostile governmental action, riot, civil commotion, fire or other casualty, and other causes beyond the reasonable control of the party obligated to perform, excluding the financial inability of such party to perform (any such causes or events to be referred to herein as a "Force Majeure"), shall excuse the performance by such party for a period equal to any such prevention, delay or stoppage; provided, however, the foregoing shall not be applicable to (i) Tenant's obligation to pay rent, additional rent and any other sums or charges pursuant to this lease (except as -48- 54 otherwise provided in ARTICLES XIV and XV hereof), and (ii) Landlord's restoration and repair obligations set forth in ARTICLES XIV and XV hereof. Section 20. Subordination and Attornment. This lease and all rights of Tenant hereunder are, and shall be subject and subordinate to the liens of any mortgages, deeds of trust (including blanket mortgages or deeds of trust covering the demised premises and/or the Shopping Center and/or other properties) or any other security interest which has been or which hereinafter may affect the demised premises, and to any ground or underlying leases of all or a part of the Shopping Center, and to any renewals, modifications, consolidations, replacements and extensions thereof. The provisions of this Section 20 shall be self-operative, but Tenant covenants and agrees that it shall, within twenty (20) days following request, at any time or times, execute, acknowledge and deliver to Landlord an instrument in order to subordinate this lease and Tenant's rights thereunder, as aforesaid, provided, however, that before any such subordination pursuant to this Section 20 shall be effective, Landlord shall cause any mortgagee, holder of any deed of trust or security interest, any ground or underlying lessor (collectively the "mortgagee") to deliver to Tenant an agreement properly executed in form reasonably satisfactory to Tenant and acceptable for recording, whereby such mortgagee agrees that no action taken in foreclosure with respect thereto by the mortgagee (or, in the case of a ground lease, whereby the ground lessor agrees that no action taken in respect to termination of the ground lease by the ground lessor) shall have the effect of disturbing the possession of Tenant under this lease so long as Tenant is not in default under the terms of this lease beyond any applicable grace period, and that the mortgagee will recognize the validity and continuance of this lease, and will not disturb the possession of Tenant, but will permit it to occupy the premises in accordance therewith, if Tenant is not in default in the performance of its obligations under this lease beyond any applicable grace period, and that the mortgagee or ground lessor, as the case may be, will permit insurance proceeds and eminent domain awards to be used for any restoration and repairs required by the provisions of this lease and will permit Tenant to share in any eminent domain awards and to make claims for awards to the extent Tenant is entitled so to do by the provisions of this lease, and, if such mortgagee requires, Tenant will attorn to said mortgagee, provided said mortgagee will accept Tenant as a tenant under the terms of this lease. Within forty five (45) days from the execution of this lease, Landlord shall deliver a non-disturbance agreement in accordance with the preceding paragraph from Chemical Bank, as holder of the existing mortgage described in Paragraph 11 of Schedule "I"; otherwise, Tenant may terminate this lease by notice to Landlord prior to delivery of such non-disturbance agreement to Tenant. Section 21. Exculpation. Landlord shall have absolutely no personal liability with respect to any provisions of this lease. In case Landlord shall be a corporation, joint venture, partnership, tenancy in common, association or other type of joint ownership, such corporation or the members of the venture, partnership, association or other form of joint ownership shall have absolutely no personal liability with respect to any provision of this lease. If Tenant shall contend that Landlord shall have any liability to Tenant, Tenant shall look solely to the equity in the Shopping Center of the owner of the demised -49- 55 premises at the time the liability arose, for the satisfaction of any remedies of Tenant. Furthermore, it is understood and agreed that from and after the date of transfer of Landlord's interest in the Shopping Center, the transferor shall have no further obligations hereunder, other than any liability which may have arisen through the acts or omissions of Landlord during the period the transferor owned Landlord's interest hereunder, provided the transferee(s) shall have delivered to Tenant, in a form reasonably satisfactory to Tenant, an instrument pursuant to which said transferee(s) agrees to assume all of Landlord's obligations hereunder from and after the date of said transfer. If Landlord's interest is a leasehold interest Tenant shall look solely to the leasehold interest for the satisfaction of any remedies. This exculpation of liability shall be absolute and without exception. Section 22. Tenant's Brokerage Indemnity. Tenant warrants and represents that Tenant has not dealt with any broker in connection with the consummation of this lease, and in the event any claim is made against the Landlord by any person or entity claiming a brokerage commission or other payment by reason of the execution of this lease based on Tenant's actions, Tenant shall defend the claim against Landlord with counsel of Landlord's selection and save harmless and indemnify Landlord on account of any loss, cost or damage which may arise by reason of any such claim. Section 23. Consequential Damages. Landlord and Tenant agree that as to the other, Landlord and Tenant shall never have any liability or responsibility whatsoever for any consequential or indirect damages whether proximately or remotely related to any default of the other under this lease, and Landlord and Tenant hereby waive any and all such rights. Section 24. Mutual Indemnity. (a) Within the meaning of this Section, "Claims" means any claims, suits, proceedings, actions, causes of action, responsibility, liability, demands, judgments and executions. (b) Tenant hereby indemnifies and agrees to save harmless Landlord and Mortgagee from and against any and all Claims, which either (i) arise from or are in connection with the possession, use, occupation, management, repair, maintenance or control of the demised premises, or any portion thereof by Tenant and/or Tenant's agents; (ii) arise from or are in connection with any act or omission of Tenant, or Tenant's agents, employees, contractors, sublessees, concessionaires or licensees; (iii) result from any default, breach, violation or non-performance of this lease or any provision therein by Tenant; or (iv) result in injury to person or property or loss of life sustained in or about the demised premises, except if caused by the negligence, acts or omissions of Landlord, its agents, contractors or employees. Tenant shall defend any actions, suits and proceedings which may be brought against Landlord or mortgagee with respect to the foregoing or in which they may be impleaded. Tenant shall pay, satisfy and discharge any judgments, orders and decrees which may be recovered against Landlord or mortgagee in connection with the foregoing. -50- 56 (c) Landlord hereby indemnifies and agrees to save harmless Tenant, and any guarantor hereunder, from and against any and all Claims, which either (i) arise from or are in connection with the possession, use, occupation, management, repair, maintenance or control of the Shopping Center, or any portion thereof by Landlord, its agents, contractors or employees; (ii) arise from or are in connection with any act or omission of Landlord, its agents, contractors or employees; (iii) result from any default, breach, violation or non-performance of this lease or any provision therein by Landlord; or (iv) arise from an injury to person or property or loss of life sustained in the common areas, unless caused by the negligence, acts or omissions of Tenant or Tenant's agents. Landlord shall defend any actions, suits and proceedings which may be brought against Tenant or any guarantor hereunder with respect to the foregoing or in which Tenant or any guarantor hereunder may be impleaded. Landlord shall pay, satisfy and discharge any judgments, orders and decrees which may be recovered against Tenant or any guarantor hereunder in connection with the foregoing. Section 25. Transfer of Landlord's Interest. The term "Landlord" as used in this lease means only the owner for the time being or the mortgagee in possession for the time being of the demised premises. In the event of any sale of the demised premises, or in the event the demised premises are leased to any person (subject to this lease), said Landlord shall be and hereby is entirely freed and relieved of all of its covenants, obligations and liability hereunder from and after the date of the transfer, except for accrued liabilities, provided that the transferee assumes all obligations of Landlord under this lease from and after the date of the transfer in the manner described in Section 18.21. This Section shall be applicable to each owner of the demised premises, from time to time, and shall not be limited to the first owner of the demised premises. Section 26. Mortgagee's Rights. If Landlord shall notify Tenant that the demised premises or the Shopping Center are encumbered by a mortgage and in such notice set forth the name and address of the mortgagee thereof; then, notwithstanding anything to the contrary, no default notice intended for Landlord shall be deemed properly given unless a copy thereof is simultaneously sent to such mortgagee by certified or registered mail, return receipt requested. If any mortgagee shall perform any obligation that Landlord is required to perform hereunder within the period required of Landlord for such performance, such performance by mortgagee, insofar as Tenant is concerned, shall be deemed performance on behalf of Landlord and shall be accepted by Tenant as if performed by Landlord. Section 27. Satellite Communications. Tenant shall have the right to install on the Building at a location subject to Landlord's approval, which approval shall not be unreasonably withheld, delayed or conditioned, or in the demised premises, a satellite communications dish and related equipment. If Tenant shall install such equipment, Tenant shall do so at its own cost and expense and in accordance with all applicable laws, rules and regulations. Additionally, Tenant shall defend, indemnify and hold Landlord harmless from and against any claims, costs or expenses incurred by Landlord as a result of such installation by Tenant. If Tenant shall install such equipment, Tenant shall be responsible for the maintenance and repair thereof, at Tenant's sole cost. At the expiration or other termination of this Lease, any such equipment shall -51- 57 remain the property of Tenant and shall be removed by Tenant, and Tenant shall repair any and all damage caused by such removal. ARTICLE XIX Real Estate Investment Trust Provisions Section 1. Special Provisions. During the term, should a real estate investment trust become Landlord hereunder, all provisions of this lease shall remain in full force and effect except as modified by this Article XIX. Section 2. Management of the Shopping Center. Landlord need not itself directly manage or otherwise service the Shopping Center but may cause such management and service to be performed by Landlord's agent (the "Shopping Center Manager"). Landlord shall notify Tenant in writing of the name of the Shopping Center Manager but shall have the absolute right to designate from time to time another person, association, or corporation as Shopping Center Manager upon ten (10) days' notice to Tenant and other tenants of the Shopping Center. Section 3. Common Area Maintenance. Notwithstanding anything to the contrary contained in Article VI, the following provisions shall apply: (a) Landlord shall cause the Shopping Center Manager to render to Tenant, other tenants and occupants of the Shopping Center the services required or permitted to be performed by Landlord pursuant to Article VI in connection with the maintenance, repair, management and operation of the common areas and common facilities and the Shopping Center Manager shall be reimbursed by Tenant therefor in the manner hereinbelow provided. (b) Tenant shall pay to the order of Landlord the additional rent due under Article VI concurrently with payment of all other rent and other charges under this lease, but Landlord may disburse such portion to and for the benefit of the Shopping Center Manager. Section 4. Real Estate Investment Trust Tax Provisions. If Landlord in good faith determines that its status as a real estate investment trust under the provisions of the Internal Revenue Code of 1986, as amended, will be jeopardized because of any provision of this lease, Landlord may request reasonable amendments to this lease and Tenant will not unreasonably withhold, delay or defer its consent thereto, provided that such amendments do not (a) increase the obligations or decrease the rights of Tenant pursuant to this lease, or (b) in any other manner adversely affect Tenant's interest in the demised premises or the conduct of business in the demised premises. ARTICLE XX Environmental Matters Section 1. Landlord's Representations. Landlord represents that on or before the completion of Landlord's Work (and excluding Tenant's Work), -52- 58 there will be no asbestos-containing materials in the demised premises. Except as set forth in the preceding sentence, Landlord represents that to the best of its knowledge no "Hazardous Materials" (as defined below) are located on or in the Building or the soil and ground water under the Shopping Center. Section 2. Landlord's Covenants. Landlord covenants as follows: A. Landlord shall be responsible for all costs incurred in complying with any order, ruling or other requirement of any court or governmental body or agency having jurisdiction over the Shopping Center requiring Landlord to comply with any laws which relate to Hazardous Materials created, handled, placed, stored, used, transported or disposed of by Landlord, including without limitation, the cost of any required or necessary repair, cleanup or detoxification and the preparation of any closure or other required plans, and Landlord shall diligently pursue to completion all such work required in connection therewith. Landlord shall similarly be responsible for such costs in connection with any Hazardous Materials which are now located upon the Shopping Center but are discovered (i) at the demised premises after Landlord delivers possession thereof to Tenant, or (ii) at the remainder of the Shopping Center if the existence thereof shall materially interfere with the Tenant's use of the demised premises or the common areas of the Shopping Center, notwithstanding that Landlord did not have knowledge thereof. B. Subject to the provisions of Section 23 of Article XVIII, Landlord shall indemnify, defend and hold Tenant, Melville Corporation, and their respective directors, officers, employees and agents harmless from and against any claims, judgments, damages, penalties, fines, costs, liabilities or losses (including without limitation sums paid in settlement of claims, attorneys' fees, consultant fees and expert fees) which are caused by or arise out of the breach of Landlord's representations and covenants contained in Sections 1 and 2 of this Article. Section 3. Tenant's Covenants. Tenant covenants as follows: A. Tenant shall be responsible for all costs incurred in complying with any order, ruling or other requirement of any court or governmental body or agency having jurisdiction over the Shopping Center requiring Tenant to comply with any laws which relate to "Tenant's Hazardous Materials" (as defined below) including without limitation the cost of any required or necessary repair, cleanup or detoxification and the preparation of any closure or other required plans, and Tenant shall diligently pursue to completion all such work required in connection therewith, excluding however any such costs relating to Hazardous Materials brought onto the Shopping Center by Landlord or Landlord's acts or omissions relating to the demised premises or the Shopping Center. B. Subject to the provisions of Section 23 of Article XVIII, Tenant shall indemnify, defend and hold Landlord, its directors, officers, employees and agents and any successor to Landlord's interest in the demised premises harmless from and against any claims, judgments, damages, penalties, fines, costs, liabilities or losses (including, without limitation, sums paid in settlement of claims, attorneys' fees, consultant fees and expert fees) which are caused by or arise out of the breach of Tenant's covenants contained in this Section 3. -53- 59 Section 4. Definitions. "Hazardous Materials" shall include but not be limited to substances defined as "hazardous substances", "hazardous materials" or "toxic substances" in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq.; the Hazardous Materials Transportation Act, as amended, 49 U.S.C. Section 1801 et seq.; the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 et seq. and any applicable state laws; and the regulations adopted and publications promulgated pursuant to said laws. "Tenant's Hazardous Materials" are defined as Hazardous Materials that are brought onto the demised premises or the Shopping Center by, at the request of, or on behalf of, Tenant or its employees, agents or contractors. Section 5. Tenant's Right To Test. Prior to delivery of possession of the demised premises to Tenant, Tenant shall have the right, at its expense, upon ten (10) days prior notice to Landlord, to conduct tests to determine whether there are any Hazardous Materials on the demised premises and Tenant shall furnish Landlord with a copy of the test results. If said tests indicate the presence of any Hazardous Materials, Landlord shall at its expense remove or otherwise comply with all laws relating thereto prior to delivery of possession of the demised premises to Tenant. Section 6. Third Parties. If Hazardous Materials are created, handled, placed, stored, used, transported or disposed of at the Shopping Center by any one other than Landlord or Tenant and as a result thereof there is material interference with Tenant's business, then, as Tenant's sole remedy against Landlord (except as provided in the next sentence), rent payments under this lease shall abate commensurate with said interference until said interference shall be eliminated. If such interference continues for twelve (12) months, Tenant, as its sole remedy against Landlord, shall have the right to terminate this Lease at any time prior to the time such interference has been eliminated upon notice to Landlord. Nothing contained in this Section is intended to limit Tenants remedies against third parties. Section 7. Landlord's Acts - Tenant's Remedies. If Hazardous Materials are created, handled, placed, stored, used, transported or disposed of at the Shopping Center by Landlord and as a result thereof there is material interference with Tenant's business, then in addition to any other remedies Tenant may have (i) rent payments under this lease shall abate commensurate with said interference until said interference shall be eliminated, and (ii) if such interference continues for twelve (12) months Tenant shall have the right to terminate this lease at any time prior to the time such interference has been eliminated upon notice to Landlord. Section 8. Environmental Reports. Landlord has delivered to Tenant New York City Asbestos Report ACP5 dated April 26, 1994, a copy of which is attached hereto as Schedule "J". Landlord agrees upon request of Tenant to furnish Tenant with a copy of the project monitoring and inspection report during asbestos removal performed at the Shopping Center dated October 1994 (Spicer Hayes Project No 4032015) and any other asbestos or other environmental report prepared for Landlord with respect to the Shopping Center. -54- 60 WITNESS THE EXECUTION HEREOF, under seal, in any number of counterpart copies, each of which counterpart copies shall be deemed an original for all purposes, as of the day and year first above written. LANDLORD: ALEXANDER'S, INC. By: /s/ Brian Kurtz ------------------------ Its Vice President Hereunto duly authorized (Corporate Seal) Attest: /s/ Steven Santora ------------------ Secretary TENANT: MARSHALLS OF RICHFIELD, MN., INC. By: /s/ Donald F. Yost ------------------------------------- Its Vice President Hereunto duly authorized (Corporate Seal) Attest: /s/ Maureen Richards --------------------- Secretary -55- 61 ACKNOWLEDGMENT PAGE STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of March, 1995 before me, personally appeared _____________________, who being by me duly sworn, did say that he resides at ________________; that he is the Vice President of ALEXANDER'S, INC., the corporation described in and which executed the foregoing Lease; that he knows the seal of said corporation, and that the seal affixed to said instrument is the corporate seal of the corporation; and that said instrument was signed and sealed on behalf of the corporation by authority of its Board of Directors; and that he signed his name thereto by like order. _______________________ Notary Public (Notarial Seal) STATE OF NEW YORK ) ) ss.: COUNTY OF WESTCHESTER ) On this 13th day of March, 1995 before me, personally appeared Donald F. Yost, who being by me duly sworn, did say that he is the Vice President of MARSHALLS OF RICHFIELD, MN., INC., the corporation described in and which executed the foregoing Lease; that he knows the seal of said corporation, and that the seal affixed to said instrument is the corporate seal of the corporation; and that said instrument was signed and sealed on behalf of the corporation by authority of its Board of Directors; and that he signed his name thereto by like order. /s/ Catherine Comerford ----------------------- Notary Public (Notarial Seal) -56- 62 SCHEDULE "A-1" SITE PLAN [MAP] SCHEDULE A-1 63 SCHEDULE A-2 METES AND BOUNDS DESCRIPTION OF THE SHOPPING CENTER All that certain plot, piece or parcel of land, situate, lying and being in the Borough and County of Queens, City and State of New York, bounded and described as follows: BEGINNING at the corner formed by the intersection of the easterly side of Junction Boulevard (80 feet wide) and the southerly side of 62nd Drive, formerly Urguhart Street, as said Boulevard and Drive are shown on the Topographical Map of the City of New York for the Borough of Queens; RUNNING THENCE easterly along the southerly side of 62nd Drive, 456.35 feet to the corner formed by the intersection of the said 62nd Drive and the westerly side of 97th Street (60 feet wide), as said 97th Street was shown on the Topographical Map of the City of New York for the Borough of Queens, prior to the adoption on December 20, 1951 of Alteration Map No. 3530; THENCE southerly along the westerly side of said 97th Street, 529.99 feet to the northwesterly side of 63rd Road (80 feet wide) as said 63rd Road is shown on the Topographical Map of the City of New York for the Borough of Queens; THENCE southwesterly along the northwesterly side of 63rd Road, 406.22 feet to the corner formed by the intersection of the said northwesterly side of 63rd Road and the northeasterly side of Queens Boulevard (200 feet wide) as shown on the Final Topographical Map of the City of New York; THENCE northwesterly along the northeasterly side of Queens Boulevard, 86 feet to the corner formed by the intersection of the said northeasterly side of Queens Boulevard and the easterly side of said Junction Boulevard; THENCE northerly along the easterly side of Junction Boulevard, 549.82 feet to the corner at the point or place of BEGINNING. SCHEDULE A-2 64 SCHEDULE A-3 FLOOR PLAN [MAP] 65 SCHEDULE "B" LANDLORD'S WORK AND DETERMINATION OF COMMENCEMENT DATE A. Landlord agrees to the following terms and provisions, and Landlord shall perform all work necessary to comply therewith ("Landlord's Work"): 1. The Demised Premises shall be delivered to Tenant by Landlord free of all tenants and occupants, and free of all store fixtures. In addition, all work to be performed by Landlord pursuant to the work letter attached hereto and made a part hereof as Schedule "B-1" (hereinafter called the "Work Letter") shall be completed within the time periods set forth in the Work Letter. 2. The Demised Premises shall be delivered in a structurally sound condition and with the Building having a watertight roof. 3. All of the buildings and improvements shown on the Site Plan (including without limitation the Enclosed Parking Structure) shall be constructed (including finish work) and ready for occupancy. 4. All common areas of the Shopping Center shall be appropriately refurbished (including patch-paving and re-striping of paved areas, repairing of light standards, landscaping, etc.) all to the end that the common areas of the Shopping Center will be in a first-class condition. 5. Landlord shall have provided to Tenant, at least sixty (60) days prior to delivery, a notice of the date as of which, pursuant to paragraph D, below, Landlord will deliver the Demised Premises. 6. When possession of the Demised Premises is delivered to Tenant, possession of the premises under the Sears Lease shall have been tendered to Sears, Sears shall have begun performance of its Tenant's Improvements and Landlord shall advise Tenant of Landlord's good faith estimate of the date that Sears will open for business. B. All permits required for Landlord's Work shall be obtained by Landlord, and all permits required for Tenant's Work shall be obtained by Tenant, Landlord agreeing to cooperate with Tenant, at no cost to Landlord, with respect to obtaining any permits required for Tenant's Work. C. All of Landlord's Work and Tenant's Work shall be done in a good and first-class workmanlike manner in accordance with all applicable laws, ordinance, codes and insurance requirements. D. Landlord shall substantially complete (as defined below) Landlord's Work in accordance with Paragraphs A, B and C above and deliver possession Schedule B -1- 66 of the Demised Premises to Tenant between the period July 1, 1995 and April 30, 1996. If Landlord has not substantially completed Landlord's Work and delivered possession of the Demised Premises to Tenant by April 30, 1996, then Tenant shall have the right, in addition to all other remedies, to terminate this Lease by giving written notice thereof to Landlord at any time prior to April 30, 1997, provided that delivery of the Demised Premises shall not have been made to Tenant with Landlord's Work substantially completed prior thereto. If possession of the Demised Premises has not been delivered to Tenant prior to April 30, 1997 and Tenant shall not have theretofore terminated this Lease, then this Lease shall automatically terminate on April 30, 1997. Notwithstanding anything to the contrary contained herein, it is expressly understood and agreed that possession of the Demised Premises may be delivered to Tenant without Landlord having fully completed the Enclosed Parking Structure and/or any other elements of Landlord's Work with respect to portions of the Shopping Center located outside the Demised Premises (other than any portions of Landlord's Work necessary in order that the Demised Premises shall have all utilities required for the operation of Tenant's business), but only if Tenant, in its reasonable judgment, determines that such incomplete portions of Landlord's Work have been commenced, are being prosecuted to completion with due diligence, and will be substantially completed within one hundred fifty (150) days following the delivery of possession. In the event that any such incomplete work is not completed within one hundred fifty (150) days following such delivery of possession, in addition to all other remedies which may be available to Tenant by virtue thereof, Tenant shall have the immediate right to exercise its self-help remedies set forth in ARTICLE XII hereof with respect to said incomplete work. Landlord represents that each of Sears and Caldor have executed leases for premises in the Building (which premises shall include all of the first three floors of the Building, exclusive only of the Demised Premises) for original terms which are due to expire after the original term of this lease. It is Landlord's intent that the opening of the Shopping Center will take place in March 1996, but is understood and agreed that Landlord shall incur no liability in the event that the Shopping Center does not open in March 1996. In the event that Tenant should open for business prior to the completion of Landlord's Work, it is understood and agreed that Landlord shall nevertheless be obligated to complete Landlord's Work promptly. Landlord's Work shall be deemed substantially completed when all applicable work has been completed to the extent required to obtain an "Occupancy Permit" as defined below and only minor "punch list" items remain to be performed such as touch-ups and adjustments. E. Subject to ARTICLE XVI of this Lease and to the foregoing provisions hereof, the Commencement Date shall be the earlier of (i) the expiration of one hundred eighty (180) days after Landlord shall have delivered possession of the Demised Premises to Tenant (pursuant to Paragraph D above), provided that if the last day of said 180-day period shall fall Schedule B -2- 67 within a Slack Season (as hereinafter defined), said 180-day period shall be extended to the first day not falling within a Slack Season, or (ii) the date that Tenant shall first open for business to the public. The term "Slack Season" is hereby defined to mean the following periods: (i) the period beginning on November 1 of any year and ending on March 5 of the following year; and (ii) the period beginning on May 15 of any year and ending on August 1 of such year. Notwithstanding the foregoing, in the event that an "Occupancy Permit" (as hereinafter defined) will not issue by the Commencement Date otherwise determined in accordance with the foregoing due to work done or failed to be done by Landlord pursuant to the provisions of this Schedule "B", or by reason of any condition of the Shopping Center or the Building, then, at Tenant's option, the Commencement Date shall be extended until the earlier to occur of the following: (i) the date that Tenant shall first open for business to the public; or (ii) the date that an Occupancy Permit shall have been obtained. Furthermore, in addition to any other remedies available to Tenant as a result thereof, Tenant may immediately exercise its self-help remedies pursuant to ARTICLE XII in order to complete any such work necessary so that an Occupancy Permit will issue. For purposes hereof, "Occupancy Permit" shall mean either (x) a temporary or permanent certificate of occupancy for the Demised Premises in no way restricting the rights which Tenant otherwise has under this lease with respect to the Demised Premises, the common areas or access to common areas and which may not be revoked by reason of any act or omission of Landlord or a third party, provided, however, that if a temporary certificate of occupancy is issued Landlord will perform all work and take any other action required of Landlord in order to obtain a permanent certificate of occupancy; or (y) other evidence of right of Tenant to occupy the Demised Premises, providing Tenant with equivalent rights and protection, which other evidence is acceptable to Tenant in its sole discretion. Notwithstanding the foregoing, if Sears shall not have initially opened for business on the Commencement Date, (1) Tenant may elect not to initially open for business in which event the Commencement Date shall be deferred until the date Sears shall initially open for business, except that if the Commencement Date shall be so deferred for a period of one (1) year, this lease shall terminate after the end of said one (1) year period, or (ii) Tenant may nevertheless elect to initially open for business, in which event the Commencement Date shall be the date that Tenant initially opens for business, and if Sears shall not have initially opened for business within one (1) year from the Commencement Date, Tenant may terminate this lease within thirty (30) days thereafter as provided in Section 1 of Article IX of this lease. F. Tenant shall have the right to come onto the Demised Premises in order to take measurements and in order to commence its work including fixturing, even while Landlord is completing Landlord's Work, but such entry by Tenant shall be at Tenant's sole risk and shall not be deemed a Schedule B -3- 68 waiver of Landlord's obligation fully to complete Landlord's Work. Tenant agrees that any of its work conducted as aforesaid shall not unduly interfere with the completion of Landlord's Work. Landlord will, in addition, cooperate with Tenant with respect to any permits Tenant must secure, and Landlord will remedy any failure to fulfill its obligations resulting in Tenant's inability to secure its permits. (See Article VIII, Section 2 of the lease regarding the obtaining of permits). G. As a contribution to Tenant by reason of Tenant's performing Tenant's Work, Landlord shall pay to Tenant Seventy-Five Thousand Dollars ($75,000), such payment to be made upon the fifteenth day following the first to occur of (i) the opening of the Demised Premises for business with customers, or (ii) the termination of this Lease by Tenant pursuant to the provisions of this Schedule "B" under circumstances in which Tenant shall have actually performed Tenant's Work. In addition to any other remedies available to Tenant for Landlord's failure to make such payment to Tenant in a timely manner, Tenant may off-set said amount against any rent or other payment required of Tenant by the provisions of this Lease (including without limitation, any amount payable to Landlord pursuant to the provisions of the Work Letter). H. Pursuant to Article XV, Section 5 of the lease, Tenant shall certify to Landlord the cost of "Tenant's Permanent Improvements" (as defined therein). I. Notwithstanding anything to the contrary contained in this lease, if the completion of Landlord's Work or Tenant's Work shall be delayed by reason of the acts of the other party which are not remedied within three (3) days after such party's receipt of notice thereof from the other party, then the time period for completing said work (and, in Tenant's case, the aforesaid 180 day period) shall be extended by the number of days equal to the aggregate duration of all such delays encountered by the party responsible for performing such work. Schedule B -4- 69 SCHEDULE B-1 WORK LETTER The Demised Premises shall be accepted by the Tenant "As Is" with the exception of the following work by Landlord. The following describes work to be performed by the Landlord in and around the Demised Premises. The work described in this Work Letter is in addition to the work to be performed by Landlord with respect to the entire project, including but not limited to construction of the enclosed parking structure, replacing portions of the exterior of the existing building and the construction of other improvements, as further described in plans drawn by Dal Pos Architects in the attached as Schedule B-2, pages 1-3. A. "Landlord's Work" performed at its sole cost and expense shall include the following: * 1. Construction of demising walls (to be constructed of 6" steel studs, 16" on the center with 2 layers of 5/8" sheetrock on each side) creating the Demised Premises as per plans (see note B.4 for modification). * 2. Removal of all moveable store fixtures from Demised Premises. 3. Install exterior Loading Door and move any pipes that are in the way of Tenant's loading dock entrance. * 4. Reinforce Tenant's loading dock as detailed on plans. 5. Provide common utility room as shown on plans. 6. Provide point of entry and 1200 amp 120/208 3 phase main disconnect ready for Tenant to contract for service and meter from utility company. (Refer to item B.1 for additional electric distribution at Tenant's expense). 7. Provide access to Gas Meter Room for Tenant to provide/arrange for entire service (Gas to manifold to be provided by Landlord). * 8. Sanitary sewer service (fully coordinated with Tenant re: placement of pipe within demised premises to obtain proper pitch to Tenant facilities) sprinkler riser and domestic water services shown on plans (sprinkler layout and installation of system inside Demised Premises Tenant's responsibility). * 9. Removal of any elevators and/or escalators from Demised Premises and installation of level infill floor slab in these areas. 10. Install exterior fire exit doors (to meet Landlord's exterior criteria). *11. Build cement block chase for installation of HVAC ducts (by Tenant) from roof to demised premises. *12. Provide construction access to Demised Premises on Delivery. 13. Provide availability to an area which will be reasonably accessible to Tenant within the site for Tenant's construction dumpster. Tenant understands it may have to relocate dumpster from time to time subject to construction requirements at the site. B. Landlord's Additional Work at Tenant's Expense shall include: 1. Empty conduit(s) sized for Tenant's distribution of main service through adjacent Tenant spaces to Demised Premises with dragline ready for Tenant's installation of conductors. 2. Install Tenant's store front on Queens Boulevard and 63rd Road and in parking garage (excluding vestibules but including automatic doors). 3. Installation of steel roof supports (within 90 days after receipt of specification from Tenant's Architect) for Tenant's HVAC units and associated bracing of structure, roof penetrations and flashing. 4. Modify Landlord's demising partition specification in A.1 to the extent necessary to meet specifications shown on Tenant's drawing MA 7, last revised 11/12/93; and the insertion of 2 by 4 wood blocking (fireproof as required, or if permissible by N.Y.C. code) at each metal stud, as described in Tenant's drawing MA 9E, (last revised 3/10/94). (The draw- ings and specifications are incorporated by reference and are not herewith attached). 5. Provide availability to temporary electric and water. Schedule B-1 -1- 70 C. General Notes 1. All other work to be performed by Landlord in the Demised Premises to be "substantially completed" (as defined in Schedule "B") by Landlord within 60 days after delivery of possession; otherwise, Tenant shall have the self-help remedies set forth in Schedule "B". 2. Asterisk * indicates items to be completed by Landlord by delivery of possession. -2- 71 SCHEDULE B-2 PAGE 1 OF 3 SCHEDULE OF PLANS PREPARED BY DAL POS ARCHITECTS P.C. PARKING STRUCTURE
DWG # ORIGINAL ISSUE DATE LAST REV # LAST REVISION DATE ----- --------------------- ---------- --------------------- A0-1 8/8/94 1 9/23/94 A0-2 8/8/94 4 11/11/94 A0-3 8/8/94 4 11/23/94 A0-4 8/8/94 3 11/11/94 A0-5 8/8/94 3 11/2/94 A1-1 8/8/94 1 9/23/94 A1-2 8/8/94 3 9/23/94 A2-1 8/8/94 3 11/2/94 A2-2 8/8/94 3 11/2/94 A2-3 8/8/94 3 11/2/94 A2-4 8/8/94 3 11/2/94 A2-5 8/8/94 3 11/2/94 A3-1 8/8/94 2 11/2/94 A3-2 8/8/94 2 11/2/94 A3-3 8/8/94 2 11/2/94 A3-4 8/8/94 2 11/2/94 A3-5 8/8/94 2 11/2/94 A4-1 8/8/94 2 11/2/94 A6-1 8/8/94 1 9/23/94 A6-2 8/8/94 1 9/23/94 A6-3 8/8/94 1 9/23/94 A7-1 8/8/94 2 11/2/94 A7-2 8/8/94 2 11/2/94 A7-3 8/8/94 2 11/2/94 A7-4 8/8/94 2 11/2/94 A7-5 8/8/94 2 11/2/94 A7-6 8/8/94 2 11/2/94 A8-1 8/8/94 2 11/2/94 A8-1 8/8/94 2 11/2/94 A9-1 8/8/94 2 11/2/94 A9-2 8/8/94 2 11/2/94 S1-1 8/8/94 2 11/11/94 S1-2 8/8/94 2 11/11/94 S1-3 8/8/94 2 11/11/94 S1-4 8/8/94 2 11/11/94 S1-5 11/11/94 2 11/11/94 S1-6 8/8/94 2 11/11/94 S2-1 8/8/94 2 11/11/94 S2-2 8/8/94 2 11/11/94 S2-3 8/8/94 2 11/11/94 S2-4 8/8/94 2 11/11/94 S3-1 8/8/94 2 11/11/94 S4-1 8/8/94 2 11/11/94 S5-1 11/11/94 2 11/11/94 S5-1 8/8/94 2 11/11/94 S5-2 8/8/94 2 11/11/94 POS
SCHEDULE B-2 -1- 72 SCHEDULE B-2 PAGE 2 of 3 SCHEDULE OF PLANS PREPARED BY DAL POS ARCHITECTS P.C. RETAIL BUILDING
DWG # ORIGINAL ISSUE DATE LAST REV # LAST REVISION DATE ----- ------------------- ---------- ------------------ A0.1 8/8/94 1 9/23/94 A0.2 8/8/94 2 11/4/94 A0.3 8/8/94 5 11/23/94 A0.4 8/8/94 5 11/28/94 A0.5 8/8/94 5 11/22/94 A0.6 8/8/94 4 11/11/94 A1.1 8/8/94 5 12/12/94 A1.2 8/8/94 4 12/12/94 A1.3 8/8/94 4 12/12/94 A1.4 8/8/94 3 12/16/94 A1.5 8/8/94 3 12/9/94 A2.1.1 11/18/94 1 12/2/94 A2.1 8/8/94 6 1/11/95 A2.2 8/8/94 7 12/22/94 A2.3 8/8/94 4 12/22/94 A2.4 8/8/94 4 12/22/94 A2.5 8/8/94 3 12/22/94 A2.6 8/8/94 4 12/22/94 A2.7 8/8/94 5 1/11/95 A2.8 8/8/94 3 12/22/94 A2.9 8/8/94 3 12/22/94 A3.1 8/8/94 6 1/9/94 A3.2 8/8/94 2 11/4/94 A3.3 8/8/94 3 1/11/94 A3.4 8/8/94 3 12/22/94 A3.5 8/8/94 3 12/22/94 A3.6 8/8/94 3 12/22/94 A3.7 8/8/94 4 12/22/94 A3.8 8/8/94 3 12/22/94 A3.9 8/8/94 3 12/22/94 A3.10 8/8/94 3 12/22/94 A3.11 8/8/94 3 12/22/94 A3.12 11/4/94 2 12/22/94 A4.1 8/8/94 4 1/11/95 A4.2 8/8/94 3 12/22/94 A4.3 8/8/94 3 12/22/94 A4.4 8/8/94 3 12/22/94 A4.5 4 1/11/94 A6.1 11/4/94 2 12/22/94 A7.1 8/8/94 3 12/22/94 A7.2 9/8/94 2 11/4/94 A7.3 8/8/94 3 12/22/94 A7.4 8/8/94 3 12/22/94 A7.5 8/8/94 2 11/4/94 A7.6 8/8/94 2 11/4/94 A8.1 2 11/4/94 A9.1 8/8/94 2 11/4/94 A9.2 8/8/94 3 12/22/94 A9.3 8/8/94 2 11/4/94 A9.4 8/8/94 2 11/4/94 S1.1 8/8/94 3 1/18/95 S1.2 8/8/94 3 1/18/95 S1.3 8/8/94 S1.4 8/8/94 S2.1 8/8/94 3 1/18/95
SCHEDULE B-2 -2- 73 SCHEDULE B-2 PAGE 3 of 3 SCHEDULE OF PLANS PREPARED BY DAL POS ARCHITECTS P.C. RETAIL BUILDING
[DWG # ORIGINAL ISSUE DATE LAST REV # LAST REVISION DATE] ----- ------------------- ---------- ------------------- S2.2 8/8/94 3 1/18/95 S2.3 8/8/94 3 1/18/94 S3.1 8/8/94 3 1/18/95 S3.2 8/8/94 3 1/18/95 S4.1 8/8/94 2 11/11/94 S4.2 8/8/94 3 1/18/95 SI.2A 1/18/94 P-1 8/5/94 1 9/23/94 P-2 8/5/94 1 9/23/94 P-3 8/5/94 1 9/23/94 P-4 8/5/94 1 9/23/94 P-5 8/5/94 1 9/23/94 P-6 8/5/94 1 9/23/94 P-7 8/5/94 1 9/23/94 P-8 8/5/94 1 9/23/94 P-6 8/5/94 1 9/23/94 P-7 8/5/94 1 9/23/94 P-8 8/5/94 1 9/23/94 P-9 8/5/94 1 9/23/94 P-10 8/8/94 1 9/23/94 P-11 8/5/94 1 9/23/94 P-12 8/5/94 1 9/23/94 P-13 8/8/94 1 9/23/94 P-14 8/8/94 1 9/23/94 P-15 8/8/94 1 9/23/94 P-16 8/5/94 1 9/23/94 P-17 8/5/94 1 9/23/94 SP-1 8/5/94 1 9/23/94 SP-2 8/5/94 1 9/23/94 SP-3 8/8/94 1 9/23/94 SP-4 8/8/94 1 9/23/94 SP-5 8/8/94 1 9/23/94 SP-6 8/5/94 1 9/23/94 SP-7 8/5/94 1 9/34/94 SP-8 8/5/94 1 9/23/94 SP-9 8/5/94 1 9/23/94 SP-10 8/5/94 1 9/23/94 SP-11 8/5/94 1 9/23/94 E-1 8/5/94 1 9/23/94 E-2 8/5/94 1 9/23/94 E-3 8/5/94 1 9/23/94 E-4 8/5/94 1 9/23/94 E-5 8/5/94 1 9/23/94 E-6 8/5/94 1 9/23/94 E-7 8/5/94 1 9/23/94 E-8 8/5/94 1 9/23/94 E-6 8/5/94 1 9/23/94 E-7 8/5/94 1 9/23/94 E-8 8/5/94 1 9/23/94 E-9 8/5/94 1 9/23/94 E-10 8/5/94 1 9/23/94 E-11 8/5/94 1 9/23/94 E-12 8/5/94 1 9/23/94 E-13 8/5/94 1 9/23/94 E-14 8/5/94 1 9/23/94 E-15 8/5/94 1 9/23/94 E-16 8/5/94 1 9/23/94 E-17 8/5/94 1 9/23/94 E-18 8/5/94 1 9/23/94
Schedule B-2 -3- 74 SCHEDULE "C" DEFINITION OF GROSS SALES The term "gross sales" is hereby defined to mean the entire amount of the actual sales price, whether wholly or partly in cash or for credit, of all merchandise sold and the charges for all services performed at, in, from or upon the demised premises, including, without limiting the foregoing, all sales by any sublessee, licensee or concessionaire at, in, from or upon the demised premises. There shall be excluded from gross sales or deducted therefrom, as applicable, (a) sums collected for any sales, use, luxury or excise tax, or any other governmental tax, collected from customers by Tenant or any subtenant, licensee or concessionaire, (b) the exchange or transfer of merchandise between stores or warehouses of Tenant, between stores or warehouses of any subtenant, licensee or concessionaire, or between stores or warehouses of Tenant or any subtenant, licensee or concessionaire and stores or warehouses of their respective affiliates (including any parent, subsidiary or controlling corporation), when such exchange is made solely for the convenient operation of the business of Tenant or such subtenant, licensee, concessionaire or affiliate and not for the purpose of consummating a sale at, in, from or upon the demised premises, (c) returns to shippers or manufacturers, wholesalers or distributors, for credit, (d) cash or credit refunds, but only to the extent that the merchandise sold was originally included in gross sales, (e) proceeds from sales of fixtures which are not a part of the stock in trade of Tenant or any subtenant, licensee or concessionaire, (f) proceeds from the sale of lottery tickets, admission tickets, stamps, money orders, express checks, bank checks and federal, state or municipal savings bonds; from the operation of a sub-post office (if any); from telephones, people weighing machines, lockers and public toilets; and SCHEDULE C Page 1 75 from delivery charges, wrapping charges and check cashing, (g) proceeds of sales made at a discount to employees of Tenant or its affiliates or any subtenant, licensee or concessionaire, up to an aggregate maximum of 5% of gross sales for any lease-year, (h) proceeds of vending machines, (i) interest or carrying charges, (j) so-called lay-away sales until Tenant delivers merchandise sold thereby to customer, (k) uncollectible credit accounts (provided the same are included in gross sales if subsequently collected) and (l) if and to the extent credit cards are honored in the demised premises, charges paid to all credit card companies by Tenant or any subtenant, licensee or concessionaire. SCHEDULE C Page 2 76 SCHEDULE D USE RESTRICTIONS SEARS LEASE (vi) Throughout the Term, Landlord shall operate and maintain the Entire Tract as a first class shopping center. In addition to the other prohibitions as to use set forth in this Lease, the specific uses listed in the next sentence shall also be prohibited, provided that such prohibitions shall not limit Landlord's right to enforce other prohibitions on use set forth in this Lease. Neither Tenant nor Landlord shall operate or lease (or permit to be operated or leased) any building or space in the Entire Tract for use as (A) a bar, pub, nightclub, music hall, social club or disco, (B) a bowling alley, (C) a billiard or bingo parlor, (D) a flea market of any size, (E) a massage parlor, (F) a church or funeral home, (G) a facility for the sale of paraphernalia for use with illicit drugs. (H) a facility for the use or display of pornographic material (as determined by community standards for the area in which the Entire Tract is located), (I) an off-track betting parlor, (J) a carnival, shooting gallery, amusement park, swimming facility or circus, (K) a gas station, car wash, or auto repair or body shop, (L) a facility for the sale of new or used motor vehicles, (M) any use which is illegal, (N) a skating or roller rink, (O) an arcade, pinball or computer gameroom, provided that a children's facility promoting on-site parental supervision shall be permitted, (P) a banquet hall, auditorium or other place of public assembly, (Q) a training or educational facility (including without limitation a beauty school, barber college, reading room, school or other facility catering primarily to students or trainees rather than customers) or (R) any use which creates a nuisance. In addition, no auction, fire or going-out-of business sale shall be conducted on the Entire Tract. Notwithstanding the provisions of this Subsection 6(b)(vi), portions of the Entire Tract outside of the Demised Premises may be used for (1) a theater, provided it does not feature pornographic material (as determined by community standards for the area in which the Entire Tract is located), (2) a gymnasium, sport or health club or spa, provided it is comparable to Jack La Lanne Health Spa, New York Health & Racquet Club, The Vertical Club or TSI Racquet & Fitness Club, and (3) a restaurant serving alcoholic beverages in conjunction with food. CALDOR LEASE Section 9.7. Restrictions On Other Premises. The following provisions of this Article IX contain certain restrictions and prohibitions against other types of businesses in the Shopping Center. Section 9.7(a). During such time as the Demised Premises shall be open to the public for conduct of a General Merchandising Business. Landlord shall not lease, use, or permit to be used any other portion of premises in the Shopping Center for a promotional department store (of the types presently operated by K-Mart, Target, Bradlees, and Wal-Mart; examples of retail tenants which do not violate the restrictions set forth in this paragraph are, Toys-R-Us, BJ, Sports Authority, Staples, Best Products, Marshalls, Sterns). SCHEDULE D Page 1 77 Section 9.7(b). In order to ensure that the parking areas of the Shopping Center shall not be overburdened and to preserve the character of the Shopping Center as an active center of retail trade offering a variety of goods and services capable of attracting the widest possible spectrum of shoppers, Landlord agrees that during such time as more than 80% of the Floor Area of the Demised Premises is used for the conduct of a single unit retail business and at least 80% of the Floor Area of the Demised Premises are kept open for business and/or used for a purpose related solely to the approved use of the Demised Premises, no other part of or other premises in the Shopping Center shall be used for any one or more of the following. In the event that the Demised Premises shall cease to be used as provided for in this Section 9.7(b), the provisions of this Section 9.7(b) shall thereafter be void and of no further force or effect with respect to any lease entered into or modified during the period that the Demised Premises were not used as provided in this Section 9.7(b): (i) for the conduct of a business operation which regularly or with significant frequency sells merchandise of the types or qualities now commonly known as "schlock", "junk", distressed", "bank- ruptcy", "fire sale" or "damaged", provided that the restrictions of this Section 9.7(b)(i) shall not apply to any such business having more than two (2) stores in shopping centers of the type in which Tenant's stores are located in the general region; or (ii) for any purpose or business which is noxious or unreasonably offensive because of the emission of noise, smoke, dust or odors; or (iii) for any purpose other than the conduct of a "retail business", so-called. "Retail business" shall mean and include mail-order catalog store operations of the Sears Roebuck and Montgomery Ward type, banks, finance company businesses, service and self-service dry cleaning and laundry business, shoe repair shops, barber shops, beauty shops, dance studios, health salons, and real estate brokerage, stock brokerage and insurance brokerage businesses selling merchandise or services; or (iv) a motel; or (v) for (A) a "car-hop" or "carry-out" restaurant business whose customers consume food items sold primarily while such customers are occupying vehicles parked on the Common Facilities of the Shopping Center, provided such business has no facilities for indoor food consumption, and (B) a banquet hall business which serves its guests on a special, catered basis as distinguished from a restaurant business open to the public at large on a random basis, and (C) a bar business which serves alcoholic beverages for on-premises consumption to customers but only if such business does not customarily serve meals for consumption on the premises; or (vi) for any off-track betting parlors, "discos" (so-called); so-called "strip shows", and live entertainment of any kind; or for a massage parlor, so-called, or the business of the sale of so-called "adult" material such as, without limitation, magazines, books and photographs; or SCHEDULE D Page 2 78 (vii) a premises, the primary use of which shall be for amusement games or devises (electronic or otherwise) except when the center line of the entrance to such premises is 200 feet or more from the center line of the entrance to the Demised Premises; or (viii) notwithstanding the foregoing, if Exhibit A shows any area(s) marked "Permitted Theater", one (and only one) indoor theater business may be conducted in the Shopping Center in a building located in (one of) the Permitted Theatre area(s), provided, however, that nothing in this Section 9.7(b)(viii) shall limit the number of screens being operated within a Permitted Theatre; or (ix) for any automobile or truck sales, storage, service, fueling, washing, or repair operation (other than tire/battery/accessories operations, which are permitted); or (x) for any business using a substantial amount of outdoor space in its regular operations, such as lumber yards, except outdoor areas in connection with normal retail usage, boat sales yards and the like; or (xi) for any office or storage operations except (A) office and storage operations which are a part of the conduct of a retail business in the Shopping Center; and (B) the use of a total of not more than 15% in the aggregate of the total floor area of the Shopping Center for professional offices and for business offices which are not included in the above definition of "retail business". SCHEDULE D Page 3 79 SCHEDULE "E" MEMORANDUM OF LEASE THIS MEMORANDUM OF LEASE ("Memorandum") made this _____ day of __________, 1995, by and between ALEXANDER'S, INC. ("Landlord") and MARSHALLS OF RICHFIELD, MN., INC. ("Tenant"). WITNESSETH: NAME AND ADDRESS OF LANDLORD: Alexander's, Inc. c/o Vornado Realty Trust Park 80 West, Plaza II Saddle Brook, NJ 07662 NAME AND ADDRESS OF TENANT: Marshalls of Richfield, MN., Inc. 200 Brickstone Square Box 9030 Andover, Massachusetts 01810 DATE OF LEASE: ________________, 1995 DESCRIPTION OF DEMISED PREMISES: Approximately ____ square feet of floor area on the second level as shown on the Schedule A-1 Site Plan annexed hereto, located in the shopping center legally described on Schedule A-2 annexed hereto. TERM OF LEASE: The initial term of the lease is twelve and one-half (12 1/2) years from the "Commencement Date". The "Commencement Date" is the earlier of (i) one hundred eighty (180) days after Landlord shall deliver possession of the Demised Premises to Tenant in accordance with the terms and conditions prescribed in the Lease, subject to extension for Tenant's Slack Seasons and force majeure delays, or (ii) the date that Tenant shall first open for business to the public. Tenant has the right to extend the term of the Lease for one period of twelve and one-half (12 1/2) years. TERMS OF LEASE GOVERN: The rights, obligations and remedies of Landlord and Tenant, respectively, with reference to each other and to the Schedule E -1- 80 demised premises shall be fixed, determined and governed solely by the terms of the Lease, this being a Memorandum of Lease intended to be recorded in the public records to avoid recording the Lease pursuant to the provisions of Section 291-c of the Real Property Law. IN WITNESS WHEREOF, the parties hereto have executed this Memorandum of Lease this ____ day of __________, 1995. ATTEST: ALEXANDER'S, INC. By:__________________________________ ----------------------------- Vice President Assistant Secretary ATTEST: MARSHALLS OF RICHFIELD, MN., INC. By:__________________________________ ----------------------------- Vice President Assistant Secretary Schedule E -2- 81 STATE OF ) : ss.: COUNTY OF ) On the _____ day of ____________, 1995 before me personally came _________________________, to be known, who, being by me duly sworn, did depose and say that he resides at _____________________ __________________________, that he is the President of Alexander's, Inc., the corporation described in and which executed the foregoing instrument, and that he signed his name thereto by order of the Board of Directors of said corporation. _____________________________ Notary Public STATE OF ) : ss.: COUNTY OF ) On the _____ day of ____________, 1995 before me personally came _________________________, to be known, who, being by me duly sworn, did depose and say that he resides at _____________________ __________________________, that he is the President of Marshalls of Richfield, MN., Inc., the corporation described in and which executed the foregoing instrument, and that he signed his name thereto by order of the Board of Directors of said corporation. _____________________________ Notary Public Schedule E -3- 82 SCHEDULE "F" TENANT'S SIGNS 83 SCHEDULE "G" TAX CONTEST RIGHTS - SEARS AND CALDOR SEARS (a) Provided Tenant shall have complied with the provisions of this Section 7, Tenant shall have the non-exclusive right at its own cost and expense to initiate and prosecute a "review" (which term shall mean all proceedings permitted by law, including appellate proceedings, to obtain any form of reduction of real estate taxes or of the assessment therefor) of real estate taxes assessed against the Demised Premises (or the Entire Tract, if the Demised Premises are not separately assessed) for any tax year included wholly or in part within the term of this Lease, either in Tenant's name or Landlord's, as permitted or required by law. Landlord, without charge to Tenant and without cost to Landlord for such cooperation, shall cooperate reasonably with Tenant in the prosecution of any review undertaken by Tenant. If, as the result of any review, the real estate taxes assessed against the Entire Tract (or against any part of it which is taken into account in determining Tenant's liability under this Section 7) shall be reduced for any tax year, Tenant's liability for that tax year under this Section 7 shall be recomputed so as to reflect the net amount of such reduction, after deducting from the amount by which Taxes have been reduced, the costs incurred by Landlord or Tenant in obtaining such reduction, including a reasonable amount of attorneys' fees. The recomputation by Landlord shall be made within ten (10) days after receipt of funds by Landlord, and after said receipt of funds, and said recomputation having been made, by Landlord, Tenant shall be entitled to credit in the amount of Tenant's Proportionate Share of the funds so received by Landlord, against Tenant's monetary obligations under this Lease. In the event that a review results in an increase in the real estate Taxes assessed against the Entire Tract or the Demised Premises (as applicable), Tenant shall promptly pay Landlord any deficiency in Tenant's prior payments. CALDOR Section 5.6. REVIEWS AND ABATEMENTS. Notwithstanding any provision of this Section 5.6 to the contrary, Tenant shall be required to pay all amounts payable by Tenant pursuant to this Article V in full, when due in accordance with the provisions of Section 5.3 hereof. Tenant shall have the non-exclusive right at its own cost and expense to initiate and prosecute a "review" (which term shall mean all proceedings permitted by law, including appellate proceed- ings, to obtain any form of reduction of real estate taxes or of the assessment thereof) of real estate taxes assessed against the Demised Premises (or the Shopping Center, if the Demised Premises are not separately assessed) for any tax year included wholly or in part within the term of this Lease, either in Tenant's name or Landlord's, as permitted or required by law. Landlord, without charge to Tenant and without cost to Landlord for such cooperation, shall cooperate reasonably with Tenant in the prosecution of any review undertaken by Tenant. If, as the result of any review, the real estate taxes assessed against the Shopping Center (or against any part of it which is taken into account in determining Tenant's liability under this Article) shall be reduced for any tax year, Tenant's liability for that tax year under this Article shall be recomputed so as to reflect the net amount of such reduction, after deducting from the amount by which taxes have been reduced, the costs incurred by Landlord in obtaining such reduction, including a reasonable amount of attorneys' fees. The recomputation by Landlord shall be made within ten (10) days after receipt of funds by Landlord, and after said receipt of funds, and said recomputation having been made, by Landlord, Tenant shall be entitled to credit in the amount of Tenant's prorata share of the funds so received by Landlord, against Tenant's monetary obligations under this Lease. In the event that a review results in an increase in the real estate taxes assessed against the Shopping Center or the Demised Premises (as applicable), Tenant shall promptly pay Landlord any deficiency in Tenant's prior payments. 84 SCHEDULE "H" ENCLOSED PARKING STRUCTURE 1. The parking rates that Landlord is planning to charge are as follows: $2.00 1 hour $2.25 2 hours $2.50 3 hours $3.00 4 hours $3.50 5 hours $5.50 6 hours $15.00 over 6 hours
However, it is understood that these rates are subject to change by Landlord. 2. The Enclosed Parking Structure shall be open at least the following times: Monday through Saturday - 10:00 A.M. to 9:30 P.M. Sunday: 12 noon to 6:00 P.M. 3. As a convenience to Tenant, parking tickets of Tenant's customers that have been validated by Tenant will be accepted by Landlord in lieu of payment, provided that Tenant promptly reimburses Landlord for the parking charges that would otherwise have been payable by said customers. Schedule H 85 SCHEDULE "I" PERMITTED ENCUMBRANCES 1. Water and sewer rents and real estate taxes not now due and payable. 2. A) Encroachments onto 62nd Drive by: Canopy - 14 feet more or less. B) Street easement along easterly side of premises being a 5 foot wide easement abutting the westerly side of 97th Street, the northerly side of 63rd Road and the southerly side of 62nd Drive, being 532.07 feet along the westerly side of 97th Street, 5.11 feet along the northerly side of 63rd Road and 5 feet along the southerly side of 62nd Drive and are shown on Map No. 4822 adopted by the Board of Estimate on March 2, 1987 on Cal No. 1 Junction Boulevard, 97th Street, 62nd Drive and 63rd Road are shown on Map No. 4822 adopted by the Board of Estimate on March 2, 1987 on Cal. No. 1. C) Building, booth, island and fences encroach onto street easement. D) Signs on Junction Boulevard and 63rd Road project beyond face of building up to 10 inches. E) Iron grating over area encroaches 3 feet 9-1/2 inches onto Junction Boulevard. F) Subway entrance in Queens Boulevard. All as shown on a survey made by Becker & Sica, P.C., dated 9-11-1985 and subject to any changes. 3. Covenants, conditions, easements, agreements of records, etc.: A) Covenants and Restrictions set forth in Liber 2664 Cp. 420; Liber 2689 Cp. 115; Liber 2666 Cp. 180 and Liber 2686 Cp. 284.; Liber 2664 Cp. 432; Liber 2664 Cp. 441; Liber 2664 Cp. 442; Liber 2664 Cp. 455; Liber 2664 Cp. 457; Liber 2664 Cp. 467; Liber 2664 Cp. 468; Liber 2666 Cp. 195; Liber 2668 Cp. 419; Liber 2668 Cp. 422; Liber 2668 Cp. 425 and Liber 2825 Cp. 5, as may be modified by Declaration recorded in Liber 3624 Cp 89. B) Consent and Authorization for the construction, maintenance and operation of a subway staircase set forth in Liber 3448 Cp 454. C) Easement to The Brooklyn Union Gas Company recorded in Liber 6805 Cp 1. D) Water Main Easement to The City of New York recorded in Liber 7442 Cp. 456. E) Water Main Easement to The City of New York recorded in Liber 7442 Cp. 460 SCHEDULE I -1- 86 F) Terms, Covenants and Conditions of The Indenture recorded in Liber 6297 Cp 149; as amended by agreements in Liber 6297 Cp 159 and Liber 6800 Cp 84. G) Declaration of Restrictions recorded in Liber 6696 Cp 40; as amended by Agreement recorded in Liber 7744 Cp 339. H) Agreement for Sewage Pumping Station recorded in Liber 6696 Cp 45. I) Terms, Covenants and Conditions of the Declaration of Covenants and Restrictions recorded in Reel 926 Page 1291; as amended by Agreement in Reel 2341 Page 1794. J) Terms, Covenants and Conditions of the Easement Agreement recorded in Reel 926 Page 1282. K) Terms, Covenants and Conditions of the Agreement recorded in Reel 932 Page 207. L) Terms, Covenants and Conditions of the Declaration by Alexander's, Inc. recorded in Reel 2341 Page 1794. M) Terms, Covenants and Conditions of the Subway Entrance Agreement recorded in Reel 2342 Page 2288. 4. Approximately 10 feet of the Shopping Center lies in the bed of 97th Street as the same is laid out on the official map of The City of New York. This portion of the premises is subject to the restricted use and limitations imposed by the provisions of Section 35 of the General City Law. 5. Terms, Covenants, Conditions, Provisions and Agreements of Lease, dated 12-1-92, made by and between Alexander's, Inc., Debtor and Debtor-In-Possession, as Landlord, and Caldor, Inc., as Tenant, a notice of which was recorded on 12-9-92 in Reel 3458 Page 680. 6. The following UCC-1 Financing Statement found of record as the same may be assigned or replaced: UCC #94PQ01651 Filed: 02-02-94 Debtor: Alexander's, Inc. Secured Party: Chemical Bank] 7. United States Bankruptcy Court Order recorded in Reel 3814 Page 1158. 8. United States Bankruptcy Court Order dated March 9, 1994 and recorded in Reel 3912 Page 134 9. Terms, Covenants, Conditions and Agreement of Lease made by and between Alexander's, Inc., as Landlord, and Sears Roebuck & Co., as SCHEDULE I -2- 87 Tenant, dated March 24, 1994, a notice of which was recorded on April 28, 1994 in Reel 3860 Page 638 10. Subordination, Attornment and Non-Disturbance Agreement among Chemical Bank, Sears, Roebuck & Co. and Alexander's, Inc. dated March 24, 1994 and recorded April 28, 1994 in Reel 3860 Page 643. 11. Mortgage dated October 4, 1993 between Alexander's, Inc., as Mortgagor, and Chemical Bank, as Mortgagee in the amount of $17,000,000 and recorded on March 11, 1994 in Reel 3814 Page 1193. SCHEDULE I -3- 88 SCHEDULE "J" NO INCOMPLETE APPLICATIONS WILL BE ACCEPTED NOT AN ASBESTOS PROJECT Page 1 of ____ ------------------------------------------------------------------------------ FOR OFFICE PURPOSES ONLY 1. NYC Building Dept. Application ACP5 Fee $ NYC Dept. of Environmental Protection ------------------------------------------------------------------------------ NOTE: THIS FORM IS TO BE COMPLETED IF THERE IS NO FRIABLE ASBESTOS CONTAINING MATERIAL PRESENT OR IF THE TOTAL AMOUNT OF FRIABLE ASBESTOS CONTAINING MATERIAL IS 10 SQUARE FEET OR LESS, OR 25 LINEAR FEET OR LESS, OR IF NORMALLY NONFRIABLE ACM (AS PER 40 CFR PART 61.141) IS PRESENT IN ANY AMOUNT. ------------------------------------------------------------------------------- 2. FACILITY ADDRESS 9605 Queens Blvd. BORO Queens ZIP CODE 11374 AKA Alexanders 3. BLOCK # 2084 4. LOT # 101 5. BUILDING OWNER Alexanders Inc. TEL # (212) 560-2136 6. ADDRESS 31 West 34th Street, New York STATE NY ZIP CODE 10001 7. CONTACT PERSON Ron Johnson 8. TEL # (212) 560-2136 9. DESCRIPTION OF ENTIRE SCOPE OF WORK Removal & disposal of non-friable ACM transite panels in various locations on Floors 1, 2, 3 & Roof cooling tower using non-mechanical methods in accordance with NYC DEP Asbestos Regulations. 10. ESTIMATED START DATE ESTIMATED COMPLETION DATE OF THE ENTIRE SCOPE OF WORK 11. I Gerald Nugent HAVE CONDUCTED AN ASBESTOS INVESTIGATION ON 4/26/94 IN ACCORDANCE WITH PROCEDURES REQUIRED BY THE NYC DEP ASBESTOS CONTROL PROGRAM REGULATIONS AND DECLARE THAT AT THE FACILITY ADDRESS, THE __ a. premises to be demolished are free of any asbestos containing material (ACM) __ b. premises to be demolished contain 10 square feet or less of 25 linear feet or less of friable ACM or of normally nonfriable ACM demolition forces may make friable: all ACM shall be removed according to the NYS DOL ICR 56 or the NYC DEP Asbestos Regulations __ c. cumulative surfaces of relevant structure(s) affected by an alteration or plumbing repair are free of any friable ACM and normally nonfriable ACM that alteration or plumbing repair forces may make friable __ d. cumulative surfaces of relevant structure(s) affected by an alteration or plumbing repair contain 10 square feet or less or 25 linear feet or less of friable ACM or of normally nonfriable ACM that alteration or plumbing repair forces may make friable: removal as in b. X_ e. normally nonfriable ACM shall be disturbed/removed in accordance with the NYS DOL ICR 56 or the NYC DEP Asbestos Regulations. Sq Ft. 108,000 SF. __ f. friable ACM and/or normally nonfriable ACM will NOT be disturbed during alteration/plumbing repair/modification/renovation: Friable ACM Sq Ft Lin Ft Nonfriable ACM Sq Ft 12. COMPLETE AND THOROUGH ASBESTOS INVESTIGATION PERFORMED OF
___________________________________________________________________________________________________________________________ STORY DESCRIBE SECTION OF FLOOR ALL FRIABLE SURFACING MATERIALS NUMBER ASBESTOS (Include cellar (e.g. entire, east wing, INCLUDING FRIABLE ACM AND OF PRESENT and basement) room # , boiler room, NORMALLY NONFRIABLE ACM SAMPLES YES NO lobby, etc.) ANALYZED ---------------------------------------------------------------------------------------------------------------------------- 1st Floor Shelving Transite Panels 0 X --------------------------------------------------------------------------------------------------------------------------- 2nd Floor Shelving " " 0 X --------------------------------------------------------------------------------------------------------------------------- 3rd Floor Shelving " " 0 X --------------------------------------------------------------------------------------------------------------------------- Roof Cooling Tower " " 0 X ___________________________________________________________________________________________________________________________
-------------------- | [SEAL OF THE | 13. NAME OF LABORATORY THAT ANALYZED SAMPLES N/A | CITY OF THE | | NYC DEP CERTIFIED | 14. ELAP # NYS DEPT OF HEALTH CERTIFICATION | ASBESTOS | NVLAP # US DEPT OF COMMERCE N.I.S.T. | INVESTIGATOR] | ------------------ 15. DATE(S) SAMPLES ANALYZED AND THAT THE INFORMATION PROVIDED HEREIN IS TRUE AND COMPLETE 16. /s/ Gerald Nugent SIGNATURE OF NYC DEP - CERTIFIED ASBESTOS INVESTIGATOR 4/26/94 DATE 17. #42926 NYC DEP ASBESTOS INVESTIGATOR CERTIFICATE NUMBER NOTE: STORAGE, TRANSPORTATION AND DISPOSAL OF ASBESTOS CONTAMINATED WASTES ARE REGULATED BY THE NYC DEPARTMENT OF SANITATION (LL70/85) -------------------------------------------------------------------------------- THE PIECEMEAL CARRYING OUT OF AN OPERATION TO AVOID COVERAGE BY A STANDARD THAT APPLIES ONLY TO OPERATIONS LARGER THAN A SPECIFIED SIZE IS A VIOLATION. -------------------------------------------------------------------------------- ACM = Asbestos Containing Material = Material Containing Greater than 1% Asbestos -------------------------------------------------------------------------------- ANY MODIFICATION OR VARIANCE FROM INFORMATION PROVIDED ON THIS FORM MUST BE REPORTED IMMEDIATELY IN WRITING DIRECTLY TO THE NYC DEPARTMENT OF ENVIRONMENTAL PROTECTION ASBESTOS CONTROL PROGRAM/NYC DEPT. OF ENVIRONMENTAL PROTECTION, 59-17 JUNCTION BLVD. - 8th FLOOR, ELMHURST, NEW YORK, 11373-5107 -------------------------------------------------------------------------------- 89 G U A R A N T Y In consideration of, and as an inducement for the granting, execution and delivery of the foregoing lease, dated March 1, 1995, ("Lease"), by ALEXANDER'S, INC., Landlord therein named ("Landlord", which term shall be deemed to include the named Landlord and its successors and assigns) to MARSHALLS OF RICHFIELD, MN., INC., Tenant therein named ("Tenant", which term shall be deemed to include the named Tenant and its successors and assigns), and in further consideration of the sum of One ($1.00) Dollar and other good and valuable consideration paid by Landlord to the undersigned, the receipt and sufficiency of which are hereby acknowledged, the undersigned, MELVILLE CORPORATION, whose address is One Theall Road, Rye, New York 10580 ("Guarantor", which term shall be deemed to include the named Guarantor and its successors and assigns), hereby guarantees, absolutely and unconditionally, to Landlord the full and prompt payment of rent and other charges and sums (including, without limitation, Landlord's legal expenses and reasonable attorneys' fees and disbursements) payable by Tenant under the Lease, and hereby further guarantees the full and timely performance and observance of all the covenants, terms, conditions and agreements therein provided to be performed and observed by Tenant; and Guarantor hereby covenants and agrees to and with Landlord that if default shall at any time be made by Tenant in the payment of any rent or other charges and sums, or if Tenant should default in the performance and observance of any of the terms, covenants and conditions contained in the Lease, Guarantor shall and will forthwith pay rent and all other charges and sums, to Landlord and any arrears thereof, and shall and will forthwith faithfully perform and fulfill all of such terms, covenants and conditions and will forthwith pay to Landlord all damages that may arise in consequence of any default by Tenant under the Lease, including, without limitation, all reasonable attorneys' fees and disbursements incurred by Landlord or caused by such default or the enforcement of this Guaranty. This Guaranty is an absolute and unconditional guaranty of payment (and not of collection) and of performance. The liability of Guarantor is co-extensive with that of Tenant and this Guaranty shall be enforceable against Guarantor without the necessity of any suit or proceeding on Landlord's part of any kind or nature whatsoever against Tenant and without the necessity of any notice of non-payment, non-performance or non-observance or of any notice of acceptance of this Guaranty or of any other notice or demand to which Guarantor might otherwise be entitled, all of which Guarantor hereby expressly waives. Guarantor hereby expressly agrees that the validity of this Guaranty and the obligations of Guarantor hereunder shall in no way be terminated, affected, diminished or impaired by reason of (a) the assertion or the failure to assert by Landlord against Tenant of any of the rights or remedies reserved to Landlord pursuant to the terms, covenants and conditions of the Lease, or (b) any non-liability of Tenant under the Lease, whether by insolvency, discharge in bankruptcy, or any other defect or defense which may now or hereafter exist in favor of Tenant. This Guaranty shall be a continuing guaranty, and the liability of Guarantor hereunder shall in no way be affected, modified or diminished by GUARANTY -1- 90 reason of (a) any assignment, renewal, modification, amendment or extension of the Lease, or (b) any modification or waiver of or change in any of the terms, covenants and conditions of the Lease by Landlord and Tenant, or (c) any extension of time that may be granted by Landlord to Tenant, or (d) any consent, release, indulgence or other action, inaction or omission under or in respect of the Lease, or (e) any dealings or transactions or matter or thing occurring between Landlord and Tenant, or (f) any bankruptcy, insolvency, reorganization, liquidation, arrangement, assignment for the benefit of creditors, receivership, trusteeship or similar proceeding affecting Tenant, whether or not notice thereof or of any thereof is given to Guarantor. Should Landlord be obligated by any bankruptcy or other law to repay to Tenant or to Guarantor, or to any trustee, receiver or other representative of either of them, any amounts previously paid, this Guaranty shall be reinstated in the amount of such repayments. Landlord shall not be required to litigate or otherwise dispute its obligations to make such repayments if it in good faith believes that such obligation exists. No delay on the part of Landlord in exercising any right, power or privilege under this Guaranty or failure to exercise the same shall operate as a waiver of or otherwise affect any such right, power or privilege, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. No waiver or modification of any provision of this Guaranty nor any termination of this Guaranty shall be effective unless in writing, signed by Landlord; nor shall any such waiver be applicable except in the specific instance for which given. All of Landlord's rights and remedies under the Lease and under this Guaranty, now or hereafter existing at law or in equity or by statute or otherwise, are intended to be distinct, separate and cumulative and no exercise or partial exercise of any such right or remedy therein or herein mentioned is intended to be in exclusion of or a waiver of any of the others. Guarantor agrees that whenever at any time or from time to time Guarantor shall make any payment to Landlord or perform or fulfill any term, covenant or condition hereunder on account of the liability of Guarantor hereunder, Guarantor will notify Landlord in writing that such payment or performance, as the case may be, is for such purpose. No such payment or performance by Guarantor pursuant to any provision hereof shall entitle Guarantor by subrogation or otherwise to the rights of Landlord to any payment by Tenant or out of the property of Tenant, except after payment of all sums or fulfillment of all covenants, terms, conditions or agreements to be paid or performed by Tenant. Guarantor agrees that it will, at any time and from time to time, within thirty (30) business days following written request by Landlord, execute, acknowledge and deliver to Landlord a statement certifying that this Guaranty is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified and stating such modification). Guarantor agrees that such certificate may be relied on by anyone holding or proposing to acquire any interest in the "Shopping Center" (as defined in the GUARANTY -2- 91 Lease) from or through Landlord or by any mortgagee or prospective mortgagee of the Shopping Center or of any interest therein. Without regard to principles of conflicts of laws, the validity, interpretation, performance and enforcement of this Guaranty shall be governed by and construed in accordance with the internal laws of the State in which the Shopping Center is located. Guarantor warrants and represents to Landlord that it has the legal right and capacity to execute this Guaranty. In the event that this Guaranty shall be held ineffective or unenforceable by any court of competent jurisdiction, then Guarantor shall be deemed to be a Tenant under the Lease with the same force and effect as if Guarantor were expressly named as a joint tenant therein. As used herein, the term "successors and assigns" shall be deemed to include the heirs and legal representatives of Tenant and Guarantor, as the case may be. If there is more than one Guarantor, the liability hereunder shall be joint and several. All terms and words used in this Guaranty, regardless of the number or gender in which they are used, shall be deemed to include any other number and any other gender as the context may require. If Guarantor fails to pay any amount payable under this Guaranty when due, interest on such amount shall accrue at the Interest Rate (as defined in the Lease). IN WITNESS WHEREOF, the undersigned has duly executed this Guaranty as of the 1st day of March, 1995. ATTEST: MELVILLE CORPORATION /s/ Maureen Richards By: /s/ Daniel B. Katz -------------------- ---------------------- Assistant Secretary Senior Vice President GUARANTY -3- 92 STATE OF NEW YORK ) ) ss.: COUNTY OF WESTCHESTER ) On this 1st day of March, 1995, before me personally came to me Daniel B. Katz known, who, being by me duly sworn, did depose and say that he is the Senior Vice President of MELVILLE CORPORATION, the corporation described in and which executed the foregoing Guaranty; that he knows the seal of said corporation, that the seal affixed to said instrument is such corporate seal, that it was so affixed by order of the board of directors of said corporation, and that he signed his name thereto by like order. In witness whereof I hereunto set my hand and official seal. /s/ Catherine Comerford ----------------------- Notary Public (Notarial Seal) GUARANTY -4- EX-10.IIA12B 12 GUARANTY, COMPANY AND MARSHALLS OF RICHFIELD 1 Exhibit 10 (ii)(A)(12)(b) G U A R A N T Y In consideration of, and as an inducement for the granting, execution and delivery of the foregoing lease, dated March 1, 1995 ("Lease"), by ALEXANDER'S, INC., Landlord therein named ("Landlord", which term shall be deemed to include the named Landlord and its successors and assigns) to MARSHALLS OF RICHFIELD, MN., INC., Tenant therein named ("Tenant", which term shall be deemed to include the named Tenant and its successors and assigns), and in further consideration of the sum of One ($1.00) Dollar and other good and valuable consideration paid by Landlord to the undersigned, the receipt and sufficiency of which are hereby acknowledged, the undersigned, MELVILLE CORPORATION, whose address is One Theall Road, Rye, New York 10580 ("Guarantor", which term shall be deemed to include the named Guarantor and its successors and assigns), hereby guarantees, absolutely and unconditionally, to Landlord the full and prompt payment of rent and other charges and sums (including, without limitation, Landlord's legal expenses and reasonable attorneys' fees and disbursements) payable by Tenant under the Lease, and hereby further guarantees the full and timely performance and observance of all the covenants, terms, conditions and agreements therein provided to be performed and observed by Tenant; and Guarantor hereby covenants and agrees to and with Landlord that if default shall at any time be made by Tenant in the payment of any rent or other charges and sums, or if Tenant should default in the performance and observance of any of the terms, covenants and conditions contained in the Lease, Guarantor shall and will forthwith pay rent and all other charges and sums, to Landlord and any arrears thereof, and shall and will forthwith faithfully perform and fulfill all of such terms, covenants and conditions and will forthwith pay to Landlord all damages that may arise in consequence of any default by Tenant under the Lease, including, without limitation, all reasonable attorneys' fees and disbursements incurred by Landlord or caused by such default or the enforcement of this Guaranty. This Guaranty is an absolute and unconditional guaranty of payment (and not of collection) and of performance. The liability of Guarantor is co-extensive with that of Tenant and this Guaranty shall be enforceable against Guarantor without the necessity of any suit or proceeding on Landlord's part of any kind or nature whatsoever against Tenant and without the necessity of any notice of non-payment, non-performance or non-observance or of any notice of acceptance of this Guaranty or of any other notice or demand to which Guarantor might otherwise be entitled, all of which Guarantor hereby expressly waives. Guarantor hereby expressly agrees that the validity of this Guaranty and the obligations of Guarantor hereunder shall in no way be terminated, affected, diminished or impaired by reason of (a) the assertion or the failure to assert by Landlord against Tenant of any of the rights or remedies reserved to Landlord pursuant to the terms, covenants and conditions of the Lease, or (b) any non-liability of Tenant under the Lease, whether by insolvency, discharge in bankruptcy, or any other defect or defense which may now or hereafter exist in favor of Tenant. This Guaranty shall be a continuing guaranty, and the liability of Guarantor hereunder shall in no way be affected, modified or diminished by GUARANTY -1- 2 reason of (a) any assignment, renewal, modification, amendment or extension of the Lease, or (b) any modification or waiver of or change in any of the terms, covenants and conditions of the Lease by Landlord and Tenant, or (c) any extension of time that may be granted by Landlord to Tenant, or (d) any consent, release, indulgence or other action, inaction or omission under or in respect of the Lease, or (e) any dealings or transactions or matter or thing occurring between Landlord and Tenant, or (f) any bankruptcy, insolvency, reorganization, liquidation, arrangement, assignment for the benefit of creditors, receivership, trusteeship or similar proceeding affecting Tenant, whether or not notice thereof or of any thereof is given to Guarantor. Should Landlord be obligated by any bankruptcy or other law to repay to Tenant or to Guarantor, or to any trustee, receiver or other representative of either of them, any amounts previously paid, this Guaranty shall be reinstated in the amount of such repayments. Landlord shall not be required to litigate or otherwise dispute its obligations to make such repayments if it in good faith believes that such obligation exists. No delay on the part of Landlord in exercising any right, power or privilege under this Guaranty or failure to exercise the same shall operate as a waiver of or otherwise affect any such right, power or privilege, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. No waiver or modification of any provision of this Guaranty nor any termination of this Guaranty shall be effective unless in writing, signed by Landlord; nor shall any such waiver be applicable except in the specific instance for which given. All of Landlord's rights and remedies under the Lease and under this Guaranty, now or hereafter existing at law or in equity or by statute or otherwise, are intended to be distinct, separate and cumulative and no exercise or partial exercise of any such right or remedy therein or herein mentioned is intended to be in exclusion of or a waiver of any of the others. Guarantor agrees that whenever at any time or from time to time Guarantor shall make any payment to Landlord or perform or fulfill any term, covenant or condition hereunder on account of the liability of Guarantor hereunder, Guarantor will notify Landlord in writing that such payment or performance, as the case may be, is for such purpose. No such payment or performance by Guarantor pursuant to any provision hereof shall entitle Guarantor by subrogation or otherwise to the rights of Landlord to any payment by Tenant or out of the property of Tenant, except after payment of all sums or fulfillment of all covenants, terms, conditions or agreements to be paid or performed by Tenant. Guarantor agrees that it will, at any time and from time to time, within thirty (30) business days following written request by Landlord, execute, acknowledge and deliver to Landlord a statement certifying that this Guaranty is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified and stating such modification). Guarantor agrees that such certificate may be relied on by anyone holding or proposing to acquire any interest in the "Shopping Center" (as defined in the GUARANTY -2- 3 Lease) from or through Landlord or by any mortgagee or prospective mortgagee of the Shopping Center or of any interest therein. Without regard to principles of conflicts of laws, the validity, interpretation, performance and enforcement of this Guaranty shall be governed by and construed in accordance with the internal laws of the State in which the Shopping Center is located. Guarantor warrants and represents to Landlord that it has the legal right and capacity to execute this Guaranty. In the event that this Guaranty shall be held ineffective or unenforceable by any court of competent jurisdiction, then Guarantor shall be deemed to be a Tenant under the Lease with the same force and effect as if Guarantor were expressly named as a joint tenant therein. As used herein, the term "successors and assigns" shall be deemed to include the heirs and legal representatives of Tenant and Guarantor, as the case may be. If there is more than one Guarantor, the liability hereunder shall be joint and several. All terms and words used in this Guaranty, regardless of the number or gender in which they are used, shall be deemed to include any other number and any other gender as the context may require. If Guarantor fails to pay any amount payable under this Guaranty when due, interest on such amount shall accrue at the Interest Rate (as defined in the Lease). IN WITNESS WHEREOF, the undersigned has duly executed this Guaranty as of the 1st day of March, 1995. ATTEST: MELVILLE CORPORATION /s/ Maureen Richards By: Daniel B. Katz ____________________________ _________________________ Assistant Secretary Senior Vice President GUARANTY -3- 4 STATE OF NEW YORK ) ) ss.: COUNTY OF WESTCHESTER ) On this 1st day of March, 1995, before me personally came to me Daniel B. Katz known, who, being by me duly sworn, did depose and say that he is the Senior Vice President of MELVILLE CORPORATION, the corporation described in and which executed the foregoing Guaranty; that he knows the seal of said corporation, that the seal affixed to said instrument is such corporate seal, that it was so affixed by order of the board of directors of said corporation, and that he signed his name thereto by like order. In witness whereof I hereunto set my hand and official seal. /s/ Catherine Comerford _______________________________ Notary Public (Notarial Seal) GUARANTY -4- EX-10.IIIA 13 EMPLOYMENT AGREEMENT, BRIAN M. KURTZ 1 Exhibit 10(iii)(A) CONFORMED COPY March 29, 1995 Brian M. Kurtz Alexander's, Inc. 31 West 34th Street New York, NY 10001 Employment Agreement Dear Brian: This letter sets forth our agreement regarding the terms of your employment with Alexander's, Inc. and any successor in interest thereto (the "Company") during the Term (as defined below). 1. Current Employment Agreement. You and the Company hereby acknowledge that you are parties to an Employment Agreement, dated as of July 13, 1993, as amended (the "Prior Agreement"), setting forth the current terms and conditions of your employment with the Company, and that, with effect from the date you acknowledge your agreement to the terms of this letter (the "Effective Date"), the Prior Agreement shall terminate and be of no further force and effect and shall be replaced by this Agreement. 2. Term. The term of your employment under this Agreement (the "Term") shall commence immediately following the Effective Date and shall expire immediately following December 31, 1996; provided, however, that commencing on January 1, 1997 and on each January 1 thereafter, the Term shall automatically be extended for an additional twelve-month period unless prior to October 1, 1996 (or succeeding October 1) either the Company or you has given written notice to the other party of an intention not to extend the Term. 3. Position; Duties; Compensation and Benefits. (a) Phase 1 Employment Terms. The following terms shall apply for the period from the Effective Date through July 31, 1995 ("Phase 1"). (i) Salary; Position. Your base salary will be at the rate of $250,000 per annum and shall be paid to you in accordance with the Company's payroll practices in effect on the Effective Date. You will be employed in the positions of Executive 2 2 Vice President and Chief Administrative Officer of the Company or in such other positions as you and the Company may agree to in writing. (ii) Duties. You will be responsible for attending to matters in connection with the bankruptcy and other matters related to the business of the Company as shall be assigned to you from time to time by the Board of Directors or the Chief Executive Officer of the Company. You shall be required to perform your duties on a full-time basis in the New York City metropolitan area, including at the principal business office of Vornado Realty Trust ("Vornado") at Park 80 West, Plaza II, Saddlebrook, NJ (or such other locations as shall be mutually agreed between you and the Company). (iii) Vacation. You will continue to accrue vacation leave, and will be eligible to take scheduled vacation leave, in accordance with the Company's vacation policy in effect on the Effective Date. In the event of your termination of employment, you will be eligible for payment of any unused vacation time accrued for the current year in accordance with the foregoing vacation policy. (iv) Prior Agreement Severance Payment. Provided that your employment has not terminated in the circumstances referred to in Section 4(a) below prior to July 31, 1995, the Company shall pay you a cash lump sum of $250,000 on July 31, 1995, or within five days thereafter. (v) Computer Equipment. On the expiry of Phase 1, you shall be the owner of your Company-provided personal computer and applicable peripherals. (b) Phase 2 Employment Terms. The following terms shall apply for the period from August 1, 1995 to the end of the Term ("Phase 2"). (i) Salary; Position. Your base salary will be at the rate of $160,000 per annum and shall be paid to you in accordance with the Company's payroll practices in effect on the Effective Date. You will be employed in the positions of Executive Vice President and Chief Administrative Officer of the Company or in such other positions as you and the Company may agree to in writing. (ii) Duties. You will be responsible for attending to matters in connection with the bankruptcy and other matters related to the business of the Company as shall be assigned to you from time to time by the Board of Directors or the Chief Executive Officer of the Company. You shall be required to perform your duties on a part-time basis for up to 13 days a month, at such times as shall be mutually agreed between you and the Company, in the New York City metropolitan area, including at the principal business office of Vornado at Park 80 West, Plaza II, Saddlebrook, NJ (or such other locations as shall be mutually agreed between you and the Company). 3 3 (iii) Vacation. You shall be entitled to four weeks of paid vacation during each year of employment in Phase 2. For each vacation week occurring in any month, the number of days you are required to work in that month shall be reduced by three. (c) General Employment Terms. The following terms shall apply at all times during the Term (which, for clarification, includes both Phase 1 and Phase 2). (i) Employee Benefits. You shall continue to participate in each of the Company's medical, life, disability or other insurance program, sick leave program or other employee benefit program (other than the Company's severance plan) in which you participate on the Effective Date; provided, however, that nothing herein shall prevent the Company from modifying or discontinuing any such program, if it so wishes (including, without limitation, discontinuing any program as a result of the Company no longer being able to obtain insurance coverage for you under such program). In the event that the Company does modify or discontinue any such program, the Company agrees to provide you with replacement benefits which have at least an equivalent value to the benefits enjoyed by you immediately prior to such modification or discontinuance; provided, however, that if the Company discontinues any program because it is no longer able to obtain insurance coverage for you at group or individual rates under such program, the Company shall pay you each month, in lieu of such replacement benefits, a cash sum equal to the monthly premium the Company had been paying in respect of insurance coverage for you under such program immediately prior to such discontinuance. (ii) Expenses. The Company will reimburse you for all business expenses reasonably incurred by you in connection with your performance of services for the Company (including reimbursement for travel mileage at the maximum permissible federal rates), subject to the receipt of such written documentation of these expenses as the Company may reasonably request. (iii) Outplacement Services. In the event that the Term expires, or your employment hereunder is terminated in the circumstances referred to in Section 4(b), the Company will make available to you outplacement services through an outplacement firm or consultant selected by the Company and reasonably satisfactory to you for this purpose for a total cost not to exceed $15,000 and for a duration not to exceed one year from the end of the Term or termination of employment, as appropriate. 4. Termination Provisions. (a) Termination for Cause; Resignation for Other Than Good Reason; Death; Disability. If, prior to the expiration of the then effective Term, your employment with the Company ends as a result of your death, Disability (as defined below) or a 4 4 termination of your employment by the Company for Cause (as defined below) or as a result of your resignation for other than Good Reason (as defined below), the Company shall pay you (or in the event of your death, your estate) your base salary through the date of your death or disability or the effective date of such termination or resignation, as appropriate. Thereafter, the Company shall have no further obligations to make any payments to you under this Agreement. In the event of your resignation other than for Good Reason, you shall give the Company at least 30 days written notice of such resignation. (b) Termination by the Company Other than For Cause; Resignation for Good Reason. If, prior to the expiration of the then effective Term, your employment with the Company ends as a result of the Company terminating your employment other than for Cause or as a result of your resignation for Good Reason, the Company shall pay you your base salary accrued through the date of such termination. In addition, within five days following the date of such termination or resignation, as the case may be, the Company shall pay you a cash lump sum amount equal to the aggregate amount of base salary that would have been payable to you under this Agreement had your employment continued from the date of such termination to the expiration of the Term (as in effect immediately prior to such termination). (c) Definitions. For purposes of this Paragraph 4, the following capitalized terms have the meanings set forth below: (i) "Cause" means (A) your willful and continued failure to follow the legitimate directions of the Company, provided that such directions are commensurate with your status as an Executive Vice President of the Company, (B) your conviction of a felony, (C) your habitual drug or alcohol abuse, or (D) any act or omission by you which is injurious in any material respect to the Company and which is the result of your willful misconduct or gross negligence. (ii) "Disability" means permanent disability as such term or a similar term is defined in the Company's long-term disability policy in effect for executives of the Company. (iii) "Good Reason" means (A) without your prior written consent, the relocation of your principal place of employment other than (i) at the principal business office of Vornado at Park 80 West, Plaza II, Saddlebrook, NJ, or (ii) within the New York City metropolitan area, (B) a material decrease in your base salary or aggregate employee benefits, and (C) the Company's failure to maintain directors' and officers' liability insurance coverage for you in substantially the same form and amount as in effect on January 1, 1995; provided, however, that an event described above shall not constitute Good Reason for purposes of this Agreement unless you resign as a result thereof within the 90-day period beginning on the date such event occurs (or the date you first know of such event, if later). 5 5 5. Secrecy. You recognize that the services to be performed by you hereunder are special, unique and extraordinary in that, by reason of your employment hereunder, you may acquire confidential information and trade secrets concerning the operation of the Company or its affiliates or subsidiaries, the use or disclosure of which could cause the Company or its affiliates or subsidiaries substantial loss and damages which could not be readily calculated and for which no remedy at law would be adequate. Accordingly, you covenant and agree with the Company that you will not at any time, except in performance of your obligations to the Company hereunder, with the prior written consent of the Board or as may be required by law, directly or indirectly, disclose any secret or confidential information that you may learn or have learned by reason of your association with the Company, or any of its subsidiaries and affiliates. The term "confidential information" includes, without limitation, information not previously disclosed to the public by the Company's management (including information that was disclosed by you or by your family in violation of this Section 5(a)) with respect to the Company's, or any of its affiliates' or subsidiaries' products, facilities, applications and methods, trade secrets and other intellectual property, systems, procedures, manuals, confidential reports, product price lists, customer lists, technical information, financial information (including the revenues, costs or profits associated with any of the Company's leases, rental agreements, management agreements and valuations), business plans, prospects or opportunities but shall exclude any information already in the public domain. 6. Release. Except for the obligations of the Company hereunder or for any rights that you may have under the By-Laws of the Company or applicable law to seek indemnification from the Company by reason of your services as an officer or employee of the Company, in consideration of the payments and benefits provided to you under this Agreement, you hereby release and forever discharge the Company, each of its subsidiaries and Vornado (collectively, the "Companies") and each of their respective officers, employees, agents and directors from any and all claims, actions and causes of action that you may have or may possess arising out of your employment relationship with any of the Companies and your service as an officer or employee of any of the Companies, including, without limitation, any claims arising under the Workers Adjustment and Retraining Notification Act, or other applicable federal, state or local law. 7. Miscellaneous. (a) Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties hereto with respect to the matters covered hereby and supersedes and replaces any prior agreement with respect to the terms of your employment and the termination thereof which you may have had with any of the Companies, including, without limitation, the Prior Agreement. As of the Effective Date, all understandings and agreements, whether formal or informal, written or oral, between you and any of the Companies regarding your employment or service as an employee or officer of the Companies (including, without limitation, the Prior Agreement) shall be terminated and of no further force and effect. 6 6 (b) Successors and Assigns. The rights and obligations of this Agreement shall bind and inure to the benefit of any successor of the Company by reorganization, merger, or consolidation, or any assignee of all or substantially all of the Company's business and properties. (c) Tax Withholding. All amounts paid to you hereunder shall be subject to applicable federal, state and local tax and other withholding. (d) Certain Expenses Incurred by You. The Company will reimburse you for the full amount of the legal fees and expenses reasonably incurred by you in enforcing your right to receive any of the payments or other amounts to which you are entitled under the terms and provisions of this Agreement. (e) Amendment. This Agreement may be amended only by a written document signed by the parties hereto. (f) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. * * * * Your signature on the line below constitutes your agreement with each provision contained herein. ALEXANDER'S, INC. By: /s/ Stephen Mann ------------------------ Title: Chairman ACKNOWLEDGED, AGREED AND UNDERSTOOD: /s/ Brian M. Kurtz ------------------------- Brian M. Kurtz Dated: March 29, 1995 ------------------- EX-10.IIIB 14 EMPLOYMENT AGREEMENT, STEPHEN MANN 1 Exhibit 10(iii)(B) Conformed Copy March, 1995 Mr. Stephen Mann Alexander's, Inc. 31 West 34th Street New York, NY 10001 Employment Agreement Dear Steve: This letter sets forth our agreement regarding the terms of your employment with Alexander's, Inc. and any successor in interest thereto (the "Company") during the Term (as defined below). 1. Term. Initial Term. The term of your employment under this Agreement (the "Term") shall commence on the date (the "Effective Date") on which the Management and Development Agreement between the Company and Vornado Realty Trust (the "Management Agreement") is executed and shall expire immediately following the third anniversary of the Effective Date, subject to earlier termination in accordance with Section 3 below. For the purposes of this Agreement, the twelve-month period commencing on the Effective Date and ending on the first anniversary, and each twelve-month period ending on each subsequent anniversary thereof during the Term, shall be referred to as a "Contract Year". 2. Position; Compensation and Benefits. (a) Position (i) During the Term, subject to sub-paragraphs (ii) and (iii) below, you will serve as Chairman of the Company and shall perform such duties as you may reasonably be directed to perform by the Board of Directors of the Company (the "Board") consistent with your position as Chairman. Such duties shall include, without limitation, monitoring the performance of Vornado Realty Trust under the Management Agreement and reviewing the monthly reports prepared by Vornado Realty Trust. (ii) To the extent elected or appointed, you agree to continue to serve the Company as a member of the Board and, if elected or appointed, you will also serve the Company as a director or officer of any of the Company's affiliates or subsidiaries, all without further compensation. 2 2 (iii) Your principal place of employment shall be the offices of The Clifford Companies in Manhattan, New York, NY, subject to such travel as is necessary to perform your duties hereunder. (b) Salary. Your base salary during the Term will be at the rate of $250,000 per annum and shall be paid to you in accordance with the Company's current payroll practices. (c) Employee Benefits. You shall not be eligible to participate in any medical, life, disability or other insurance program, sick leave program or other employee benefit program of the Company. (d) Expenses. The Company will reimburse you for all business expenses reasonably incurred by you in performance of your duties hereunder (including reimbursement for travel mileage at the maximum permissible federal rates), subject to the receipt of such written documentation of these expenses as the Company may reasonably request.* 3. Termination Provisions. (a) Termination for Cause, Death, Disability; Resignation other than for Good Reason. If, prior to the expiration of the Term, your employment with the Company ends as a result of your death, Disability (as defined below) or a termination of your employment by the Company for Cause (as defined below) or as a result of your resignation other than for Good Reason (as defined below), the Company shall pay you (or in the event of your death, your estate) your base salary through the last day of the month in which such termination occurs. Thereafter, the Company shall have no further obligations to make any payments to you under this Agreement. (b) Termination by the Company Other than For Cause; Resignation for Good Reason. If, prior to the expiration of the Term, your employment with the Company ends as a result of the Company terminating your employment other than for Cause, death or Disability, or as a result of your resignation for Good Reason, the Company shall pay you your base salary accrued through the date of such termination. In addition, the Company shall continue to pay you your base salary (at the rate in effect immediately prior to such termination, and in accordance with the Company's then current payroll practices) until the end of the Term. For the purposes of clarification, any payments made under this Section 3(b) shall not be subject to any obligation on your part to mitigate such payments by seeking alternative employment and shall not be offset or otherwise reduced by any compensation earned by you after the date of your termination or resignation. ------------ * office, secretary and overhead are not reimbursable 3 3 (c) Definitions. For purposes of this Paragraph 3, the following capitalized terms have the meanings set forth below: (i) "Cause" means (A) your willful and continued failure to follow the directions of the Company, (B) your conviction of a felony or (C) any act or omission by you which is injurious in any material respect to the Company and which is the result of your willful misconduct or gross negligence. (ii) "Disability" means permanent disability as such term or a similar term is defined in the Company's long-term disability policy in effect for executives of the Company. (iii) "Good Reason" means any material breach of the terms of this Agreement by the Company. 4. Secrecy. (a) Secrecy. You recognize that the services to be performed by you hereunder are special, unique and extraordinary in that, by reason of your employment hereunder, you may acquire confidential information and trade secrets concerning the operation of the Company or its affiliates or subsidiaries, the use or disclosure of which could cause the Company or its affiliates or subsidiaries substantial loss and damages which could not be readily calculated and for which no remedy at law would be adequate. Accordingly, you covenant and agree with the Company that you will not at any time, except in performance of your obligations to the Company hereunder or with the prior written consent of the Board, directly or indirectly, disclose any secret or confidential information that you may learn or have learned by reason of your association with the Company, or any of its subsidiaries and affiliates. The term "confidential information" includes, without limitation, information not previously disclosed to the public by the Company's management (including information that was disclosed by you or by your family in violation of this Section 4(a)) with respect to the Company's, or any of its affiliates' or subsidiaries' products, facilities, applications and methods, trade secrets and other intellectual property, systems, procedures, manuals, confidential reports, product price lists, customer lists, technical information, financial information (including the revenues, costs or profits associated with any of the Company's leases, rental agreements, management agreements and valuations), business plans, prospects or opportunities but shall exclude any information already in the public domain. (b) Exclusive Property. You confirm that all confidential information is and shall remain the exclusive property of the Company. In addition, all business records, papers, documents or other materials, including copies, thereof kept or made by you relating to the business of the Company shall be and remain the property of 4 4 the Company. Upon the termination of your employment, or upon the request of the Company at any time, you shall promptly deliver to the Company, and shall not without the consent of the Company, retain copies of, any such business records, papers, documents or other materials in your possession. 5. Conflicts. You hereby warrant and represent that you are not under any legal or contractual obligation that would conflict in any manner with the obligations and duties you are undertaking herein, and that your execution of this Agreement will not breach any agreement to which you are now a party. You further agree to reimburse and hold the Company and each of its affiliates and subsidiaries and any of their officers and directors harmless for any costs, damages or fees sustained or expended by any of them, as a result of the untruth of the representations or breach of warranties contained in this Section 5. 6. Miscellaneous. (a) Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties hereto with respect to the matters covered hereby and supersedes and replaces any prior agreement with respect to the terms of your employment and the termination thereof which you may have had with any of the Companies. As of the Effective Date hereof, all understandings and agreements, whether formal or informal, written or oral, between you and any of the Companies regarding your employment or service as an employee or officer of the Companies shall be terminated and of no further force and effect. (b) Tax Withholding. All amounts paid to you hereunder shall be subject to applicable federal, state and local taxes and other withholding. (c) Amendment. This Agreement may be amended only by a written document signed by the parties hereto. (d) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. * * * * 5 5 Your signature on the line below constitutes your agreement with each provision contained herein. ALEXANDER'S, INC. By: /s/ Brian Kurtz ------------------------------- Title: Executive Vice President ACKNOWLEDGED, AGREED AND UNDERSTOOD: /s/ Stephen Mann ------------------------------- Stephen Mann Dated: 2/9/95 --------------------- EX-21 15 SUBSIDIARIES OF REGISTRANT 1 EXHIBIT 21 Alexander's of Brooklyn, Inc. Alexander's of Fordham Road, Inc. Alexander's of Rego Park, Inc. Alexander's of Rego Park II, Inc. Alexander's of Rego Park III, Inc. Alexander's of Third Avenue, Inc. Alexander's of Flushing, Inc. Alexander's Department Stores of New Jersey, Inc. Alexander's Department Stores of Lexington Avenue, Inc. Alexander's Department Stores of Brooklyn, Inc. U & F Realty Corp. ADMO Realty Corp. Ownreal Inc. Sakraf Wine & Liquor Store, Inc. Alexander's Department Stores of Valley Stream, Inc. Alexander's Department Stores of Yonkers, Inc. Alexander's Department Stores of Bruckner Boulevard, Inc. A.D.S. Bruckner Operating Corporation Browning Avenue Realty Corp. ALS Liquors Alexander's Department Stores of Roosevelt Field, Inc. Alexander's Department Stores of Menlo Park, Inc. SKO Realty Corp. Narrow Corp. Queens Plaza Shopping Center, Inc. Harvey Weston Associates, Inc. Ideal Hanging Corp. Alexander's Department Stores Fur Vault, Inc. ZARCO Trading Corp. Alexander's Department Stores of Florida, Inc. EX-27 16 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE COMPANY'S AUDITED FINANCIAL STATEMENTS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1994 DEC-31-1994 2,363 0 0 0 0 10,558 113,524 36,365 109,419 78,150 52,842 5,174 0 0 (26,747) 109,419 0 11,572 0 0 3,908 0 3,331 4,333 300 4,033 0 0 0 4,033 0.81 0.81