Third Amend To Limited Partnership

THIRD AMENDMENT TO
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP FOR
SEVEN THIRTY ONE LIMITED PARTNERSHIP,
A NEW YORK LIMITED PARTNERSHIP

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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)).


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"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.


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"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.


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"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)).


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"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)).


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"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.


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"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.


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"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


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(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


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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.


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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:


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(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.


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(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.


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(2) Losses shall be allocated among the Partners as
follows:
...