Environmental Indemnity Agreement

ENVIRONMENTAL INDEMNITY AGREEMENT


ENVIRONMENTAL INDEMNITY AGREEMENT (this "AGREEMENT") made as of the 3rd day of July 2002 by 731 COMMERCIAL LLC and 731 RESIDENTIAL LLC, each a Delaware limited liability company, having an office at c/o Alexander's, Inc., 888 Seventh Avenue, New York, New York 10019 (together, "BORROWER"), and ALEXANDER'S, INC., a Delaware corporation, having an office at 888 Seventh Avenue, New York, New York 10019 ("ALEXANDER'S", together with Borrower, "INDEMNITOR") in favor of BAYERISCHE HYPO-UND VEREINSBANK, AG, NEW YORK BRANCH ("HVB"), a bank organized under the laws of the Federal Republic of Germany, having an office at 150 East 42nd Street, New York, New York 10017, as agent ("AGENT") for itself and other co-lenders as may exist from time to time (collectively, "LENDER", and together with Agent, "INDEMNITEE") and other Indemnified Parties (defined below).


RECITALS:


A. Lender is prepared to make a building loan (the "BUILDING LOAN") to Borrower in the principal amount of $200,000,000.00 pursuant to a Loan Agreement of even date herewith between Borrower, Agent and Lender (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, the "BUILDING LOAN AGREEMENT"), which Building Loan is secured by, among other things, the Property (hereinafter defined). Capitalized terms not otherwise defined herein shall have the meaning set forth in the Building Loan Agreement.


B. Lender is also prepared to make a supplemental loan (the "SUPPLEMENTAL LOAN") to Borrower in the principal amount of $215,316,818 pursuant to a certain Supplemental Loan Agreement of even date herewith between Borrower, Agent and Lender (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, the "SUPPLEMENTAL LOAN AGREEMENT") which Supplemental Loan is also secured by, among other things, the Property.


C. Lender is also prepared to make a project loan (the "PROJECT LOAN") to Borrower in the principal amount of $74,683,182 pursuant to a certain Project Loan Agreement of even date herewith between Borrower, Agent and Lender (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, the "PROJECT LOAN AGREEMENT") which Project Loan is also secured by, among other things, the Property. The Building Loan Agreement, the Supplemental Loan Agreement and the Project Loan Agreement are hereinafter collectively called the "LOAN AGREEMENT" and the Building Loan, the Supplemental Loan and the Project Loan are hereinafter collectively called the "LOAN".


D. Lender is unwilling to make the Loan unless Indemnitor agrees to provide the indemnification, representations, warranties, covenants and other matters described in this Agreement for the benefit of the Indemnified Parties. E. Indemnitor is entering into this Agreement to induce Indemnitee to make the Loan.


AGREEMENT


NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Indemnitor hereby represents, warrants, covenants and agrees for the benefit of the Indemnified Parties as follows:


1. REPRESENTATIONS AND WARRANTIES. Except as otherwise disclosed on Schedule 1 hereto or as disclosed by that certain Phase I environmental report (or Phase II environmental report, if required) in respect of the Property delivered to Indemnitee (referred to below as the "ENVIRONMENTAL REPORT"), a copy of which has been provided to Indemnitee, (a) there are no Hazardous Substances (defined below) or underground storage tanks in, on, or under the Property, except those that are both (i) in compliance with all Environmental Laws (defined below) and with permits issued pursuant thereto and (ii) as of the date hereof, fully disclosed to Indemnitee in writing; (b) there are no past, present or threatened Releases (defined below) of Hazardous Substances in, on, under or from the Property which have not been fully remediated in accordance with Environmental Law; (c) there is no threat of any Release of Hazardous Substances migrating to the Property that would reasonably be expected to result in an adverse material effect; (d) there is no past or present non-compliance with Environmental Laws, or with permits issued pursuant thereto, in connection with the Property which has not been remediated in full in accordance with Environmental Law; (e) as of the date hereof, Indemnitor does not know of, and has not received, any written or oral notice or other communication from any Person (including but not limited to a governmental entity) relating to Hazardous Substances or Remediation (defined below) relating to the Property, or possible liability of any Person pursuant to any Environmental Law, other environmental conditions in connection with the Property, or any actual or potential administrative or judicial proceedings in connection with any of the foregoing; and (f) Indemnitor has truthfully provided to Indemnitee, in writing, any and all material written information relating to conditions in, on, under or from the Property that is known to Indemnitor and that is contained in files and records of Indemnitor, including but not limited to any reports relating to Hazardous Substances in, on, under or from the Property and/or to the environmental condition of the Property.


2. COVENANTS. During the term of the Loan, Indemnitor covenants and agrees that: (a) all uses and operations on or of the Property, whether by Indemnitor or any other Person, shall be in compliance with all Environmental Laws and permits issued pursuant thereto in all material respects; (b) there shall be no Releases of Hazardous Substances in, on, under or from the Property; (c) there shall be no Hazardous Substances in, on, or under the Property, except those that are both (i) in compliance with all Environmental Laws and with permits issued pursuant thereto and (ii) fully disclosed to Indemnitee in writing; (d) Indemnitor shall keep the Property free and clear of all liens and other encumbrances imposed pursuant to any Environmental Law, whether due to any act or omission of Indemnitor or any other Person (the "ENVIRONMENTAL LIENS"); (e) Indemnitor shall, at its sole cost and expense, fully and expeditiously cooperate in all activities pursuant to Paragraph 3 of this Agreement, including but not limited to providing all relevant information and making knowledgeable Persons under Indemnitor's control available for interviews; (f) in the event Indemnitee shall reasonably believe


-2- that a Release of Hazardous Substances has occurred on, under or at the Property, Indemnitor shall, at its sole cost and expense, perform any environmental site assessment or other investigation of environmental conditions in connection with the Property, pursuant to any reasonable written request of Indemnitee (including but not limited to sampling, testing and analysis of soil, water, air, building materials, and other materials and substances whether solid, liquid or gas), and share with Indemnitee the reports and other results thereof, and Indemnitee and the other Indemnified Parties shall be entitled to rely on such reports and other results thereof, provided, however, that unless an Event of Default exists or Indemnitee has a reasonable basis to believe a Release of Hazardous Substances exists or has occurred on, under, or at the Property, Indemnitor shall not be required to perform an environmental site assessment more often than once per twelve (12) month period; (g) Indemnitor shall, at its sole cost and expense, comply with all reasonable written requests of Indemnitee to (i) effectuate Remediation of any condition (including but not limited to a Release of a Hazardous Substance) in, on, under or from the Property but only to the extent required by applicable Environmental Law, (ii) materially comply with any Environmental Law; (iii) comply with any directive from any governmental authority; and (iv) take any other reasonable action necessary or appropriate for protection of human health or the environment; (h) Indemnitor shall not do or allow any tenant or other user of the Property to do any act that materially increases the dangers to human health or the environment, poses an unreasonable risk of harm to any Person (whether on or off the Property), impairs or is reasonably likely to impair the value of the Property in any material respect, is contrary to any requirement of any insurer, constitutes a public or private nuisance, constitutes waste, or violates any covenant, condition, agreement or easement applicable to the Property; and Indemnitor shall promptly notify Indemnitee in writing of (A) any presence or Releases or threatened Releases of Hazardous Substances of which Indemnitor has actual knowledge in, on, under, from or migrating towards the Property; (B) any non-compliance with any Environmental Laws in any way affecting the Property; (C) any actual Environmental Lien; (D) any required or proposed Remediation of environmental conditions relating to the Property; and (E) any written or oral notice or other communication received by any Indemnitor from any source whatsoever (including but not limited to a governmental entity) relating in any way to Hazardous Substances or Remediation thereof, possible liability of Indemnitor pursuant to any Environmental Law, other adverse environmental conditions in connection with the Property, or any actual administrative or judicial proceedings in connection with anything referred to in this Agreement provided, however, that as long as no Event of Default shall have occurred and be continuing, in all circumstances, Indemnitor shall have the right to defend against or challenge, using all lawful means, the imposition of any governmental directives or requirements or the imposition of any liability by any governmental authority or other Person, provided further that (i) as a condition to maintaining such challenge Indemnitor is required to deposit cash, a letter of credit or other reasonable security with Indemnitee in the amount of any such imposition; (ii) such challenge shall be permitted under and be conducted in accordance with all applicable statutes, laws and ordinances; and (iii) neither the Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, canceled or lost;


3. INDEMNIFIED RIGHTS/COOPERATION AND ACCESS. In the event the Indemnified Parties have a reasonable basis to believe that any Hazardous Substance exists on the Property that does not, in the reasonable discretion of the Indemnified Parties, endanger any tenants or other occupants of the Property or their guests or the general public or materially and adversely affects the value of the Property, upon reasonable notice from the Indemnitee,


-3- Indemnitor shall, at Indemnitor's expense, promptly cause an engineer or consultant reasonably satisfactory to the Indemnified Parties to conduct any environmental assessment or audit, subject to the rights of Tenants under Leases at the Property (the scope of which shall be reasonably satisfactory to the Indemnified Parties) and take any samples of soil, groundwater or other water, air, or building materials or any other invasive testing requested by Indemnitee and promptly deliver the results of any such assessment, audit, sampling or other testing; provided, however, if such results are not delivered to the Indemnified Parties within a reasonable period or if the Indemnified Parties have a reasonable basis to believe that any Hazardous Substance exists on the Property that, in the reasonable judgment of the Indemnified Parties, endangers any tenant or other occupant of the Property or their guests or the general public or may materially and adversely affect the value of the Property, upon reasonable notice to Indemnitor of not less than three (3) Business Days, the Indemnified Parties and any other Person designated by the Indemnified Parties, including but not limited to any receiver, any representative of a governmental entity, and any environmental consultant, shall have the right, subject to the rights of Tenants under Leases at the Property, but not the obligation, to enter upon the Property at all reasonable times to assess any and all aspects of the environmental condition of the Property and its use, including but not limited to conducting any environmental assessment or audit (the scope of which shall be determined in the reasonable discretion of the Indemnified Parties) and taking samples of soil, groundwater or other water, air, or building materials, and reasonably conducting other invasive testing using a nationally recognized environmental consultant reasonably acceptable to Indemnitor. Indemnitor shall cooperate with and provide the Indemnified Parties and any such Person designated by the Indemnified Parties with access to the Property.


4. INDEMNIFICATION. Indemnitor covenants and agrees, at its sole cost and expense, to protect, defend, indemnify, release and hold Indemnified Parties harmless from and against any and all Losses (defined below) imposed upon or incurred by or asserted against any Indemnified Parties and directly or indirectly arising out of or in any way relating to any one or more of the following but excluding with respect to a specific Indemnified Party, any Losses arising out of the negligence, willful misconduct, illegal acts or fraud of any such Indemnified Party: (a) any presence of any Hazardous Substances in, on, above, or under the Property in violation of any applicable Environmental Laws; (b) any past, present or threatened Release of Hazardous Substances in, on, above, under or from the Property in violation of any applicable Environmental Laws; (c) any activity by Indemnitor, any Person affiliated with Indemnitor, and any tenant or other user of the Property in connection with any actual, proposed or threatened use, treatment, storage, holding, existence, disposition or other Release, generation, production, manufacturing, processing, refining, control, management, abatement, removal, handling, transfer or transportation to or from the Property of any Hazardous Substances at any time located in, under, on or above the Property in violation of any applicable Environmental Laws; (d) any activity by Indemnitor, any Person affiliated with Indemnitor, and any tenant or other user of the Property in connection with any actual or proposed Remediation of any Hazardous Substances in violation of any applicable Environmental Laws at any time located in, under, on or above the Property, including but not limited to any removal, remedial or corrective action; (e) any past, present or threatened non-compliance or violations of any Environmental Laws (or permits issued pursuant to any Environmental Law) in connection with the Property or operations thereon, including but not limited to any failure by Indemnitor, any Person affiliated with Indemnitor, and any tenant or other user of the Property to comply with any order of any


-4- governmental authority in connection with any Environmental Laws; (f) the imposition, recording or filing or the threatened imposition, recording or filing of any Environmental Lien encumbering the Property; (g) any administrative processes or proceedings or judicial proceedings in any way connected with any environmental matter relating to the Property addressed in this Agreement; (h) any past, present or threatened injury to, destruction of or loss of natural resources in any way connected with the Property, including but not limited to costs to investigate and assess such injury, destruction or loss; (i) any acts of Indemnitor, any Person affiliated with Indemnitor, and any tenant or other user of the Property in arranging for disposal or treatment, or arranging with a transporter for transport for disposal or treatment, of Hazardous Substances at any facility or incineration vessel containing such or similar Hazardous Substances; (j) any acts of Indemnitor, any Person affiliated with any Indemnitor, and any tenant or other user of the Property in accepting any Hazardous Substances for transport to disposal or treatment facilities, incineration vessels or sites from which there is a Release, or a threatened Release of any Hazardous Substance which causes the incurrence of costs for Remediation; (k) any personal injury, wrongful death, or property or other damage arising under any statutory or common law or tort law theory with respect to any Hazardous Substances, including but not limited to damages assessed for private or public nuisance or for the conducting of an abnormally dangerous activity on or near the Property; and (l) any material misrepresentation or inaccuracy in any representation or warranty or material breach or failure to perform any covenants or other obligations pursuant to this Agreement.


5. DUTY TO DEFEND AND ATTORNEYS AND OTHER FEES AND EXPENSES. In case any Losses are imposed upon or incurred by or asserted against any Indemnified Parties in respect of which indemnification may be sought by such Indemnified Parties pursuant hereto, such Indemnified Parties shall give prompt written notice thereof to Indemnitor, which notice shall include all documents and information in the possession of or under the control of such Indemnified Parties relating to such Losses and shall specifically state that indemnification for such Losses is being sought pursuant this Agreement; provided, however, that the failure of such Indemnified Parties to so notify Indemnitor shall not limit or affect such Indemnified Parties' rights to be indemnified pursuant to this Agreement except to the extent Indemnitor is materially prejudiced by such failure. Upon receipt of such notice of Losses (together with such documents and information from such Indemnified Party), Indemnitor ...