Exhibit 10.3

 

 

 

ENVIRONMENTAL INDEMNITY

 

made by

 

ARC NYC570SEVENTH, LLC,
as Borrower

 

and

 

NEW YORK CITY REIT, INC.,
as Guarantor,

 

in favor of

 

CAPITAL ONE, NATIONAL ASSOCIATION,
as Administrative Agent on behalf of certain Lenders

Dated as of April 26, 2019

 

   

 

 

ENVIRONMENTAL INDEMNITY

 

This ENVIRONMENTAL INDEMNITY (“Indemnity”), dated as of April 26, 2019, is made
jointly and severally by ARC NYC570SEVENTH, LLC, a Delaware limited liability
company, having an address at c/o AR Global, 405 Park Avenue, 14th Floor New
York, NY 10022, Attention: General Counsel (“Borrower”), and NEW YORK CITY REIT,
INC., a Maryland corporation, having an address at c/o AR Global, 405 Park
Avenue, New York, NY 10022, Attention: Michael Anderson, Esq. (“Guarantor”;
together with Borrower, individually and collectively, “Indemnitor”), in favor
of CAPITAL ONE, NATIONAL ASSOCIATION, as administrative agent on behalf of the
Lenders (as defined below) (together with its successors and assigns,
hereinafter referred to as “Administrative Agent”).

 

RECITALS:

 

A.          Pursuant to that certain Loan Agreement dated as of the date hereof
(as the same may be amended, modified, supplemented or replaced from time to
time, the “Loan Agreement”) by and among Borrower, Administrative Agent, and the
lenders party thereto (the “Lenders”), Lenders have agreed to make a loan (the
“Loan”) to Borrower in an aggregate principal amount of up to $55,000,000.00,
subject to the terms and conditions of the Loan Agreement;

 

B.          As a condition to the Lenders’ making the Loan, Administrative Agent
and the Lenders are requiring that Indemnitor execute and deliver to
Administrative Agent and the Lenders this Indemnity; and

 

C.          Guarantor hereby acknowledges that Guarantor will materially benefit
from the Lenders’ making the Loan;

 

NOW, THEREFORE, in consideration of the premises set forth herein and as an
inducement for and in consideration of the agreement of the Lenders to make the
Loan pursuant to the Loan Agreement, Indemnitor hereby agrees, covenants,
represents and warrants to Administrative Agent and the Lenders as follows:

 

1.          Definitions.

 

“Administrative Agent’s Belief of a Release or Violation” shall mean
Administrative Agent’s good faith judgment that (a) there has been or there is a
threatened Hazardous Substance Release on or from the Property or (b) Borrower
or the Property is in violation of any applicable Environmental Law.

 

“Environmental Activity” shall mean any treatment, manufacturing, refining,
storage, existence, release, generation, production, processing, abatement,
removal, disposal, handling or transportation of any Hazardous Substances from,
into or on the Property.

 

   

 

 

“Environmental Law(s)” shall mean all Legal Requirement pertaining to or
imposing liability or standards of conduct concerning environmental regulation,
contamination, pollution, or clean-up, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, the
Resource Conservation and Recovery Act, the Emergency Planning and Community
Right-to-Know Act of 1986, the Hazardous Substances Transportation Act, the
Solid Waste Disposal Act, the Clean Water Act, the Clean Air Act, the Toxic
Substance Control Act, the Safe Drinking Water Act, the Occupational Safety and
Health Act, any state super-lien and environmental clean-up statutes (including
with respect to Toxic Mold), any local law requiring related permits and
licenses and all amendments to and regulations in respect of the foregoing laws.

 

“Environmental Report” shall mean that certain Phase I Environmental Assessment
dated as of March 7, 2019, prepared by Nova Consulting Group, Inc.

 

“Hazardous Substances” shall mean any hazardous, toxic and/or dangerous
substances (including Toxic Mold), in each case which are regulated by
Environmental Laws, and any other substances or materials which are included
under or regulated by Environmental Laws.

 

“Hazardous Substances Release” shall mean any release, spill, leak, pumping,
pouring, emitting, emptying, discharge, injection, escaping, leaching, dumping
or disposing into the environment (air, land or water) of any Hazardous
Substances, including, without limitation, by means of any contamination,
leaking, corrosion or rupture of or from any Tank(s), which is in violation of
Environmental Laws.

 

“Indemnified Persons” or “Indemnified Parties” shall mean Administrative Agent,
the Lenders, and their respective parents, subsidiaries and Affiliates,
attorneys, participants and each of their officers, directors, members,
managers, partners, agents, employees, trustees, receivers, executors and
administrators, and the heirs, successors and assigns of all of the foregoing.

 

“Losses” shall mean any and all losses, liabilities, damages, obligations,
claims, actions, suits, proceedings, disbursements, settlement payments,
penalties, reasonable, out-of-pocket costs and expenses (including, without
limitation, reasonable attorneys’ fees, disbursements and costs and all other
reasonable fees and expenses of any other professionals or consultants actually
paid) (but excluding punitive, special, speculative, or consequential damages)
in connection with or arising out of or relating to (a) any Regulatory Actions,
whether or not any suit, action or proceeding is commenced or threatened, (b)
the preparation of all feasibility studies and the obtaining of all permits and
licenses required for the Property and required by, or undertaken in order to
comply with, the requirements of any Governmental Authority or
quasi-Governmental Authority, (c) the existence of a Hazardous Substance Release
from the Property and/or the Property’s violation of any applicable
Environmental Law, and (d) the removal, discharge and satisfaction of all liens,
encumbrances, restrictions on the Property relating to the foregoing.

 

“Regulatory Actions” shall mean any notice, summons, citation, directive,
investigation, litigation, proceeding, inquiry, lien, encumbrance or
restriction, settlement, remedial response, clean-up or closure arrangement or
any other remedial obligations by or with any Governmental Authority in relation
to Environmental Activity related to the Property.

 

 2 

 

 

“Tank(s)” shall mean any underground or above-ground storage tanks, pipes or
pipelines under or on the Property for the storage or transportation of
Hazardous Substances, including, without limitation, heating oil, fuel oil,
gasoline and/or other petroleum products, whether such tanks, pipes or pipelines
are in operation, not operational, closed or abandoned.

 

“Toxic Mold” shall mean toxic mold or fungus of a type that may pose a risk to
human health or the environment or would negatively impact the value of the
Property.

 

“Use” shall mean ownership, use, development, construction, maintenance,
management, operation or occupancy.

 

All capitalized terms used in this Indemnity and not otherwise defined herein
shall have the respective meanings ascribed thereto in the Loan Agreement.

 

2.          Representations of Indemnitor. Indemnitor represents and warrants to
Administrative Agent and the Lenders that as of the date hereof and , except as
may otherwise be disclosed in any Environmental Report: (a) to the best of
Indemnitor’s knowledge, Borrower has not used Hazardous Substances at or
affecting the Property in any manner which violates any Environmental Laws;
(b) to the best of Indemnitor’s knowledge, after due inquiry, no current owner,
tenant, subtenant, occupant or operator of the Property has engaged in any
Environmental Activity which violates any Environmental Laws; (c) to the best of
Indemnitor’s knowledge, the Use of the Property for its intended purpose will
not result in any Environmental Activity in violation of any Environmental Laws;
(d) to the best of Indemnitor’s knowledge, Borrower has not otherwise engaged
and does not intend to engage in any Environmental Activity in relation to the
Property in violation of Environmental Laws; and (e) (i) to the best of
Indemnitor’s knowledge, no Environmental Activity has occurred at any time in
relation to the Property, in violation of Environmental Laws, (ii) to the best
of Indemnitor’s knowledge, no notice, order, directive, complaint or other
communication has been made or issued by any governmental authority or any other
person to any person alleging the occurrence of any Environmental Activity in
violation of any Environmental Laws, and to the best of Indemnitor’s knowledge,
no investigations, inquiries, orders, hearings, actions or other proceedings by
or before any governmental authority are pending or threatened in writing in
connection with any Environmental Activity or alleged Environmental Activity,
and (iii) to the best of Indemnitor’s knowledge, there are no judgments and no
actions or proceedings pending by or against Borrower before any court or
administrative agency in connection with any Environmental Activity;
(f) intentionally omitted; (g) to the best of Indemnitor’s knowledge, no
Hazardous Substances are present in, on or under any nearby real property which
could migrate to or otherwise affect the Property and there has not been any
Hazardous Substances Release in violation of Environmental Laws on, from or
affecting the Property which has not heretofore been fully remediated to the
extent required by Environmental Laws; (h) to the best of Indemnitor’s
knowledge, neither the Property nor Borrower, with respect to the Property, is
subject to any past, existing, pending or, to the best of Indemnitor’s
knowledge, threatened in writing Regulatory Actions under, or in violation of,
any Environmental Laws or in connection with any Environmental Activity;
(i) intentionally omitted; (j) to the best of Indemnitor’s knowledge, the
Property does not contain any Tanks; (k) no Person has given any written notice
to Borrower or Indemnitor (or to the best of Indemnitor’s knowledge any of their
respective agents, contractors or representatives) or, to the best of
Indemnitor’s knowledge, asserted any claim, cause of action, penalty, cost or
demand for payment or compensation or Losses against Borrower, or Indemnitor
with respect to the Property, involving any injury or threatened injury to human
health, the environment or natural resources, or resulting or allegedly
resulting from any Environmental Activity and, to the best of Indemnitor’s
knowledge, no basis for such a claim exists; (l) intentionally omitted; (m) to
the best of Indemnitor’s knowledge, the Environmental Report does not contain
any untrue statements of a material fact or omit to state a material fact
necessary to make any statement contained therein or herein, in light of the
circumstances under which such statements were made, not misleading; (n) there
are no judgments and no actions or proceedings pending by or against Borrower
before any court or administrative agency, in connection with any Environmental
Activity; and (o) Indemnitor does not know of any facts or circumstances which
would make any of the representations and warranties contained herein (the
“Environmental Representations”) untrue or misleading in any material respect.

 

 3 

 

 

3.          Covenants of Indemnitor.

 

(a)          Indemnitor covenants and agrees that so long as Borrower owns the
Property: (i) Indemnitor shall use commercially reasonable efforts to keep or
cause the Property to be kept free of Hazardous Substances and not cause or
permit the Property to be used to generate, manufacture, refine, transport,
treat, store, handle, dispose, produce or process Hazardous Substances except,
in each case, in compliance with all Environmental Laws; (ii) Indemnitor shall
use commercially reasonable efforts to ensure compliance by all tenants, owners,
operators and occupants, if any, of the Property with all Environmental Laws and
will use commercially reasonable diligent efforts to ensure that all such
tenants, owners, operators and occupants obtain and comply with any and all
required approvals, registration or permits in connection with Environmental
Laws for the Property; (iii) Indemnitor shall not store, utilize, generate,
treat, transport or dispose (or acquiesce in the storage, utilization,
generation, transportation, treatment or disposal of) any Hazardous Substances
on, at, or from the Property except in accordance with all Environmental Laws;
(iv) Indemnitor shall within thirty (30) days, notify Administrative Agent in
writing of (A) the storage, presence, utilization, generation, transportation or
disposal of any Hazardous Substances in violation of Environmental Laws on,
under, or emanating from the Property other than in the ordinary course of
business of Borrower or tenants under the Leases and in accordance with all
applicable Environmental Laws, upon obtaining knowledge thereof,
(B) intentionally omitted and (C) the occurrence of any Hazardous Substances
Release, or any pending or threatened in writing Regulatory Actions, or any
written claims made by any Governmental Authority or third party, relating to
any Hazardous Substances or Hazardous Substances Release on or from the
Property; (v) upon Administrative Agent’s reasonable request, at any time and
from time to time (but not more than once per year), Indemnitor shall provide
Administrative Agent, without any liability on the part of Administrative Agent
or any Lender, with an environmental site inspection or environmental audit
report, or an update of such assessment or report, of the Property prepared by a
licensed hydrogeologist, licensed environmental engineer or qualified
environmental engineering firm reasonably approved by Administrative Agent at
Administrative Agent’s cost and expense, in scope, form and content reasonably
satisfactory to Administrative Agent, assessing the presence or absence of
Hazardous Substances on, in or near the Property and the potential cost in
connection with any Remediation (it being understood that such inspections may
include soil gas monitoring, if Indemnitor fails to provide any such inspection
or audit within thirty (30) days after such request, Administrative Agent (for
the account of the Lenders) may order same, and Borrower hereby grants to
Administrative Agent and its employees access to the Property and a license to
undertake such inspection or audit), and if the report or inspection determines
that a Release or Violation exists, such environmental inspection or audit, then
the cost and expense of such audit or inspection shall be paid by Indemnitor;
(vi) Indemnitor shall reasonably promptly furnish Administrative Agent with
copies of any correspondence or legal pleadings or documents in connection with
any matter referenced in subdivision (iv) above, and keep Administrative Agent
or cause Administrative Agent to be kept apprised of the status of, and any
material developments in connection with, such matters;; (vii) Indemnitor shall
not, without Administrative Agent’s prior written consent, which consent shall
not be unreasonably withheld, delayed or conditioned, enter into any settlement
agreement, consent decree or other compromise with respect to any Regulatory
Action or other claim, action or proceeding relating to Hazardous Substances in
relation to the Property for which Indemnitor does not have the funds available
to pay or which may adversely affect the lien of the Loan Documents on the
Property; and (viii) in the event of any storage, presence, utilization,
generation, transportation, treatment or disposal of Hazardous Substances on or
at the Property in a manner which violates any Environmental Laws, or in the
event of any Hazardous Substances Release on or from the Property, Indemnitor
shall take all reasonable actions to Remediate the Property (A) at the direction
of any Governmental Authority, (B) as required to cause the Property to be in
compliance with Environmental Laws, or (C) as shall otherwise be required by
Administrative Agent in response to the report of a licensed hydrogeologist,
licensed environmental engineer or other qualified environmental consulting firm
engaged by Administrative Agent confirming that there has been a Hazardous
Substances Release or violation of Environmental Law (any such party, the
“Administrative Agent’s Consultant”).

 

 4 

 

 

(b)          Upon becoming aware of the presence of mold or fungus at the
Property, Indemnitor shall (i) promptly undertake a commercially reasonable
investigation to identify the source(s) of such mold or fungus and shall develop
and implement an appropriate remediation plan to reduce or eliminate the
presence of any Toxic Mold, (ii) perform or cause to be performed all acts
reasonably necessary for the remediation of any Toxic Mold (including taking any
action necessary to clean and disinfect any portions of the Property affected by
Toxic Mold, including providing any necessary moisture control systems at the
Property), and (iii) provide evidence of the same to Administrative Agent of the
foregoing. Indemnitor shall permit Administrative Agent and the Lenders to join
and participate in, as a party if it so elects, any legal or administrative
proceedings or other actions initiated with respect to the Property in
connection with any violation of any Environmental Law or Hazardous Substances
Release, and Indemnitor shall pay all reasonable attorneys’ fees and
disbursements incurred by Administrative Agent and the Lenders in connection
therewith.

 

(c)          The terms “Remediate” and “Remediation”, as used herein, shall
include, without limitation, the investigation of the environmental condition of
the Property, the preparation of any feasibility studies, reports or remedial
plans, and the performance of any cleanup, abatement, removal, remediation,
containment, operation, maintenance, monitoring or restoration work relating to
the presence or suspected presence of Hazardous Substances on, under, or
emanating from the Property in violation of Environmental Laws. All such work
shall be performed by one or more contractors selected by Indemnitor and
approved in advance and in writing by Administrative Agent, which approval shall
not be unreasonably withheld, delayed or conditioned. Indemnitor shall proceed
with any required investigatory and remedial actions, in accordance with all
applicable requirements of all Environmental Laws. Any such actions shall be
performed in a good, safe and workmanlike manner and Indemnitor shall use
commercially reasonable efforts to minimize any impact on the business at the
Property. Indemnitor shall promptly provide to Administrative Agent copies of
testing results and reports that are generated in connection with the
Remediation. If Indemnitor shall fail to proceed with such Remediation in
accordance with any Environmental Laws or to otherwise comply with all
applicable Environmental Laws and the rules, regulations, orders and directives
promulgated or issued pursuant thereto within the applicable cure periods
(subject to additional period(s) of time within which to cure such failure to
complete such Remediation, if any, which are available pursuant to applicable
Environmental Laws, rules, regulations, orders or directions promulgated or
issued pursuant thereto) the same shall constitute an Event of Default hereunder
and under the Loan Agreement entitling Administrative Agent and the Lenders to
all rights and remedies under the Loan Documents. Without limiting the
foregoing, upon an Event of Default beyond notice and cure, Administrative Agent
may, but shall not be obligated to, do whatever is commercially reasonably
necessary to eliminate such Hazardous Substances from the Property, to the
extent required by Environmental Laws, or otherwise comply with applicable
Environmental Laws and the rules, regulations, orders and directives, acting
either in its own name or in the name of Indemnitor pursuant to this Section,
and the actual cost thereof shall be part of the indebtedness secured by the
Loan Documents and shall become immediately due and payable after ten (10)
Business Days’ written notice thereof. In addition to and without limiting
Administrative Agent’s and the Lenders’ rights pursuant to the Loan Documents,
Borrower shall give to Administrative Agent, the Lenders, and their respective
agents and employees reasonable access to the Property, on reasonable advance
notice, for such purposes and hereby specifically grants to Administrative Agent
a license to remove the Hazardous Substances to the extent required by
Environmental Laws and the rules, regulations, orders, and directives, acting
either in its own name or in the name of Borrower pursuant to this Section.

 

 5 

 

 

(d)          Borrower shall commence all Remediation required under this
Indemnity or the Loan Agreement within thirty (30) days after written demand by
Administrative Agent and thereafter diligently prosecute to completion all such
Remediation within such period of time as may be required under applicable Legal
Requirements. All Remediation shall be performed by licensed contractors
approved in advance by Administrative Agent, which approval shall not be
unreasonably withheld, delayed, or conditioned, and under the supervision of a
consulting engineer approved by Administrative Agent, which approval shall not
be unreasonably withheld, delayed, or conditioned. All costs of such Remediation
shall be paid by Indemnitor, including Administrative Agent’s reasonable
attorneys’ fees and disbursements incurred in connection with the monitoring or
review of such Remediation. If Borrower does not timely commence and diligently
prosecute to completion the Remediation, Administrative Agent may (but shall not
be obligated to) cause such Remediation to be performed at Indemnitor’s expense.
Notwithstanding the foregoing, Borrower shall not be required to commence such
Remediation within the above specified time period: (i) if prevented from doing
so by any Governmental Authority, (ii) if commencing such Remediation within
such time period would result in Indemnitor or such Remediation violating any
Environmental Law, or (iii) if Indemnitor, at its expense and after prior
written notice to Administrative Agent, is contesting by appropriate legal,
administrative or other proceedings, conducted in good faith and with due
diligence, the need to perform Remediation. Borrower shall have the right to
contest the need to perform such Remediation, provided that, (A) Borrower is
permitted by the applicable Environmental Laws to delay performance of the
Remediation pending such proceedings, (B) neither the Property nor any part
thereof or interest therein will be sold, forfeited or lost if Borrower fails to
promptly perform the Remediation being contested, and if Borrower fails to
prevail in contest, Borrower would thereafter have the opportunity to perform
such Remediation, and (C) Administrative Agent would not, by virtue of such
permitted contest, be exposed to any risk of any civil liability for which
Indemnitor has not furnished additional security, or to any risk of criminal
liability, and neither the Property nor any interest therein would be subject to
the imposition of any Lien for which Indemnitor has not furnished additional
security, as a result of the failure to perform such Remediation.

 

(e)          Indemnitor shall not install or permit to be installed on the
Property any Tank.

 

 6 

 

 

4.          Indemnity by Indemnitor. Indemnitor hereby jointly and severally
indemnifies, protects, defends (with counsel reasonably satisfactory to
Administrative Agent) and holds the Indemnified Persons harmless from and
against the full amount of any and all Losses actually suffered or incurred by
an Indemnified Person arising from, in respect of, as a consequence of (whether
foreseeable or unforeseeable) or in connection with any Environmental Activity
on the Property or with the presence, use, storage, disposal, generation,
transportation or treatment of any Hazardous Substance in violation of any
Environmental Laws at, on, under or related to the Property, whether or not
originating or emanating from the Property, including, without limitation, the
following: (a) the occurrence of any Environmental Activity or any failure of
Indemnitor to comply with all Environmental Laws relating to the Property;
(b) any failure of any Environmental Representation to be true and correct as of
the date of this Indemnity; (c) any failure of Indemnitor to perform any
covenant set forth in Section 3 hereof; (d) violation of any Environmental Law
in relation to the Property; and (e) claims asserted by any Person (including,
without limitation, any Governmental Authority or quasi-Governmental Authority,
board, bureau, commission, department, instrumentality or public body, court or
administrative tribunal), including, without limitation, claims under common law
causes of action, in connection with the presence of Hazardous Substances or
allegations of violation of Environmental Laws located at the Property.
Indemnitor shall not settle any claim or matter which is the subject of the
foregoing agreement of Indemnitor without Administrative Agent’s prior written
consent, which consent shall not be unreasonably withheld, delayed or
conditioned. The indemnifications set forth in this Indemnity shall not be
applicable to any Losses to the extent (i) occasioned by, arising from or caused
by the gross negligence or willful misconduct of such Indemnified Person, its
nominee or wholly owned subsidiary or their respective employees or agents and
irrespective of whether occurring prior to or subsequent to the date upon which
Administrative Agent, its nominee or wholly owned subsidiary acquires possession
of the Property by foreclosure of the Mortgage, a sale of the Property pursuant
to the provisions of the Mortgage, acceptance of one of more deeds or
assignments in lieu of foreclosure or sale or otherwise, or (ii) occasioned,
arising and/or caused solely as the result of any event or condition that first
arises on or after the date on which (A) Administrative Agent or a Lender (or
the transferee of Administrative or a Lender) acquires title or control of the
Property (whether at foreclosure, sale, conveyance in lieu of foreclosure or
similar transfer), (B) a receiver has been appointed for, and has taken
possession of, the Property, or (C) the Loan has been repaid in full.

 

 7 

 

 

5.          Costs and Expenses. Indemnitor shall pay all actual and reasonable
costs, expenses and charges (including reasonable attorneys’ fees and
disbursements) incurred by any Indemnified Person in connection with the
enforcement of the terms of this Indemnity. The terms of Section 5.29 of the
Loan Agreement are incorporated herein by reference and all references therein
to Borrower shall mean Indemnitor herein for purposes of this Indemnity.

 

6.          Defense of Indemnified Persons. Upon demand by Administrative Agent
or any assignee on behalf of any Indemnified Person, Indemnitor shall defend any
investigation, action or proceeding involving any Losses which is brought or
commenced against any Indemnified Person related to the Property, whether alone
or together with Indemnitor, all at Indemnitor’s own cost and by counsel to be
reasonably approved by the Indemnified Person. Subject to the professional and
ethical obligations of counsel, Indemnitor shall not be obligated to pay for
fees and disbursements of more than one counsel regardless of the number of
Indemnified Parties and regardless of the number of Indemnified Parties who may
elect to be represented by their own counsel unless such Indemnified Parties
have adversity or separate defenses that would be materially compromised if they
were to retain the same counsel.

 

7.          Site Visits, Observations and Testing. Subject to the limitations in
this Section 7, Administrative Agent, the Lenders and any assignee and their
respective agents and representatives shall have the right at any reasonable
time, on reasonable advance notice, to enter and visit the Property for the
purposes of observing the Property, taking and removing soil or groundwater
samples, and conducting non-invasive tests on any part of the Property upon
Administrative Agent’s Belief of a Release or Violation. Such parties shall have
no duty, however, to visit or observe the Property or to conduct tests, and no
site visit, observation or testing by any such party shall impose any liability
on any such party unless such party was grossly negligent in conducting such
observation or testing. In no event shall any site visit, observation or testing
by any such party be a representation that Hazardous Substances are or are not
present in, on or under the Property, or that there has been or shall be
compliance with any Environmental Laws. Neither Indemnitor nor any other Person
is entitled to rely on any site visit, observation or testing by any such party.
Any such party shall give Indemnitor reasonable notice before entering the
Property and such site visits, observations, testing shall be limited to once
per calendar year, subject to Administrative Agent’s Belief of a Release or
Violation. Any such party shall make reasonable efforts to avoid any
unreasonable interference with Borrower’s use or enjoyment of the Property in
exercising any rights provided in this Section.

 

8.          Survival of Indemnity. The provisions of this Indemnity shall
continue in effect and shall survive (among other events) any payment and
satisfaction of the Loan and the obligations under the Loan Documents, any
termination or discharge of the Mortgage, foreclosure, a deed-in-lieu
transaction, or release of any collateral for the Loan; provided, however, that
if Indemnitors have satisfied the obligations of the Loan and the obligations
under the Loan Documents (the date on which Indemnitors fully and finally
satisfy such obligations being referred to herein as the "Satisfaction Date")
and neither Lender nor any affiliate of Lender has ever taken actual or
constructive possession of the Property (or any portion thereof) through either:
(i) the appointment of a receiver, or (ii) any other exercise of Lender's rights
and remedies following an Event of Default, then the obligations and liabilities
of Indemnitors and the rights of Lender and the Indemnified Parties under this
Agreement shall terminate on (x) in respect of the Borrowers, on the
Satisfaction Date and (y) in respect of the Guarantor, on the third (3rd)
anniversary of the Satisfaction Date (the “Termination Date”); provided that, at
any time on or following the Satisfaction Date but prior to the Termination
Date, the Indemnitors shall have delivered to Administrative Agent a Phase I
environmental report prepared by a hydrogeologist or environmental engineer or
other appropriate consultant reasonably approved by Administrative Agent
confirming that there are no Hazardous Substances on, in, under or affecting all
or any portion of the Property or any surrounding areas related to the Property
requiring remediation or that constitute a violation of Environmental Laws.

 

 8 

 

 

9.          Report Updates. Administrative Agent reserves the right at any time
during the Term to conduct or require Indemnitor to conduct, at Indemnitor’s
reasonable cost and expense, such environmental inspections, audits and tests of
the Property as Administrative Agent shall deem reasonably necessary or
advisable from time to time, utilizing a company reasonably acceptable to
Administrative Agent; provided, however, that Indemnitor shall not be required
to pay for such environmental inspections, audits and tests so long as: (a) no
Event of Default exists under any Loan Document, and (b) such inspection, audit
or test is not required by applicable Environmental Laws and (c) Administrative
Agent has no cause to believe, in Administrative Agent’s sole but good faith
judgment, that there has been or there is threatened a Hazardous Substance
Release on or from the Property or that Borrower or the Property is in violation
of any applicable Environmental Law.

 

10.         Joint and Several Liability. The liability of the entities
comprising Indemnitor under this Indemnity shall be joint and several. In
addition, the obligations of Indemnitor shall be in addition to, and shall in no
manner whatsoever limit, the obligations and liabilities of Indemnitor, or any
of the parties comprising the Indemnitor, under any of the Loan Documents.

 

11.         Unconditional Character of Obligations of Indemnitor.

 

(a)          Subject to Section 8 hereof, the obligations of Indemnitor
hereunder shall be irrevocable, absolute and unconditional, irrespective of the
validity, regularity or enforceability, in whole or in part, of the other Loan
Documents or any provision thereof, or the absence of any action to enforce the
same, any waiver or consent with respect to any provision thereof, the recovery
of any judgment against Borrower or Indemnitor or any action to enforce the
same, any failure or delay in the enforcement of the obligations of Borrower
under the other Loan Documents or Indemnitor under this Indemnity, or any
setoff, counterclaim, and irrespective of any other circumstances which might
otherwise limit recourse against Indemnitor by Administrative Agent or the
Lenders or constitute a legal or equitable discharge or defense of a guarantor
or surety. After an Event of Default beyond notice and cure, Administrative
Agent may enforce the obligations of Indemnitor under this Indemnity by a
proceeding at law, in equity or otherwise, independent of any loan foreclosure
or similar proceeding or any deficiency action against Borrower at any time,
either before or after an action against the Property or any part thereof.

 

(b)          The obligations of Indemnitor under this Indemnity, and the rights
of Administrative Agent, the Lenders and the other Indemnified Persons to
enforce the same after an Event of Default beyond notice and cure by
proceedings, whether by action at law, suit in equity or otherwise, shall not be
in any way affected by any of the following:

 

 9 

 

 

(i)       any insolvency, bankruptcy, liquidation, reorganization, readjustment,
composition, dissolution, receivership, conservatorship, winding up or other
similar proceeding involving or affecting Borrower, the Property or any part
thereof, or Indemnitor;

 

(ii)       intentionally omitted;

 

(iii)       Subject to the terms of the Loan Documents, the sale, transfer or
conveyance of the Property or any interest therein to any Person, whether now or
hereafter having or acquiring an interest in the Property or any interest
therein and whether or not pursuant to any foreclosure, trustee sale or similar
proceeding against Borrower or the Property or any interest therein;

 

(iv)       the conveyance to Administrative Agent, any Lender, any Affiliate of
Administrative Agent or a Lender, or Administrative Agent or a Lender’s nominee
of the Property or any interest therein by a deed-in-lieu of foreclosure;

 

(v)        the release of Borrower or any other Person from the performance or
observance of any of the agreements, covenants, terms or conditions contained in
any of the Loan Documents by operation of law or otherwise; or

 

(vi)       the release in whole or in part of any collateral for any or all of
the obligations of Indemnitor hereunder or for the Loan or any portion thereof.

 

(c)          Except as otherwise specifically provided in this Indemnity,
Indemnitor hereby expressly and irrevocably waives all defenses in an action
brought by Administrative Agent to enforce this Indemnity based on claims of
waiver.

 

(d)          Administrative Agent may deal with Borrower and Affiliates of
Borrower in the same manner and as freely as if this Indemnity did not exist and
shall be entitled, among other things, to grant Borrower or any other Person
such extension or extensions of time to perform any act or acts as may be deemed
advisable by Administrative Agent, at any time and from time to time, without
terminating, affecting or impairing the validity of this Indemnity or the
obligations of Indemnitor hereunder.

 

(e)          No compromise, alteration, extension, renewal, release or other
change of, or waiver, consent, delay, omission, failure to act or other action
with respect to, any liability or obligation under or with respect to, or of any
of the terms, covenants or conditions of, the Loan Documents shall in any way
alter, impair or affect any of the obligations of Indemnitor hereunder unless
agreed to in writing by the Administrative Agent, and Indemnitor agrees that if
any Loan Document is modified with Administrative Agent’s consent the
obligations of Indemnitor hereunder shall automatically be deemed modified to
include such modifications.

 

(f)          Upon an Event of Default beyond notice and cure, Administrative
Agent may proceed to protect and enforce any or all of its and the Lenders’
rights under this Indemnity by suit in equity or action at law, whether for the
specific performance of any covenants or agreements contained in this Indemnity
or otherwise, or to take any action authorized or permitted under applicable
Legal Requirements, and shall be entitled to require and enforce the performance
of all acts and things required to be performed hereunder by Indemnitor. Each
and every remedy of Administrative Agent and the Lenders shall, to the extent
permitted by law, be cumulative and shall be in addition to any other remedy
given hereunder or now or hereafter existing at law or in equity.

 

 10 

 

 

(g)          No waiver shall be deemed to have been made by Administrative Agent
or any Lender of any rights hereunder unless the same shall be in writing and
signed by Lender and any such waiver shall be a waiver only with respect to the
specific matter involved and shall in no way impair the rights of Administrative
Agent or any Lender or the obligations of Indemnitor to Administrative Agent and
the Lenders in any other respect or at any other time. Without limiting the
generality of the foregoing sentence but subject to applicable laws and the
terms of the Loan Documents, Indemnitor hereby waives: (a) any defense based
upon any legal disability; (b) any defense based upon any lack of authority of
the officers, directors, partners or agents acting or purporting to act on
behalf of Borrower or any principal of Borrower or any defect in the formation
of Borrower or any principal of Borrower; (c) any defense based upon the
application by Borrower of the proceeds of the Loan for purposes other than the
purposes represented by Borrower to Administrative Agent or any Lender or
intended or understood by Administrative Agent or any Lender or Indemnitor;
(d) all rights and defenses that Indemnitor may have because the Debt is secured
by real property; this means, among other things: (1) that Administrative Agent
(on behalf of the Lenders) may collect from Indemnitor without first foreclosing
on any real or personal property collateral pledged by Borrower, (2) if
Administrative Agent (for the benefit of the Lenders) forecloses on any real
property collateral pledged by Borrower, (A) the amount of the debt may be
reduced only by the price for which that collateral is sold at the foreclosure
sale, even if the collateral is worth more than the sale price, and
(B) Administrative Agent (for the benefit of the Lenders) may collect from
Indemnitor even if Administrative Agent, by foreclosing on the real property
collateral, has destroyed any right Indemnitor may have to collect from
Borrower; this is an unconditional and irrevocable waiver of any rights and
defenses Indemnitor may have because Borrower’s debt is secured by real
property; these rights and defenses include, but are not limited to, any rights
or defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil
intentionally omitted; (e) any defense based upon Administrative Agent’s or any
Lender’s failure to disclose to Indemnitor any information concerning Borrower’s
financial condition or any other circumstances bearing on Borrower’s ability to
pay all sums payable under the Loan Documents; (f) any defense based upon any
statute or rule of law which provides that the obligation of a surety must be
neither larger in amount nor in any other respects more burdensome than that of
a principal; (g) any defense based upon Administrative Agent’s or any Lender’s
election, in any proceeding instituted under the Federal Bankruptcy Code, of the
application of Section 1111(b)(2) of the United States Federal Bankruptcy Code
or any successor statute; (h) any defense based upon any borrowing or any grant
of a security interest under Section 364 of the United States Federal Bankruptcy
Code or any successor statute; (i) any right of subrogation, indemnity,
contribution or reimbursement, or any right to enforce any remedy which
Administrative Agent or any Lender may have against Borrower and any right to
participate in, or benefit from, any security for the Loan Documents, now or
hereafter held by Administrative Agent or any Lender; (j) presentment, demand,
protest and notice of any kind; and (k) the benefit of any statute of
limitations affecting the liability of Indemnitor hereunder or the enforcement
hereof. Indemnitor agrees that the payment of all sums payable under the Loan
Documents or any part thereof or other act which tolls any statute of
limitations applicable to the Loan Documents shall similarly operate to toll the
statute of limitations applicable to Indemnitor’s liability hereunder.

 

 11 

 

 

(h)         Intentionally omitted.

 

(i)          Indemnitor agrees that this Indemnity shall continue to be
effective if at any time any payment is made by Borrower or Indemnitor to
Administrative Agent or any Lender and such payment is rescinded or must
otherwise be returned by Administrative Agent or any Lender (as determined by
Administrative Agent in its sole and absolute discretion) upon insolvency,
bankruptcy, liquidation, reorganization, readjustment, composition, dissolution,
receivership, conservatorship, winding up or other similar proceeding involving
or affecting Borrower or Indemnitor, all as though such payment had not been
made.

 

(j)          In the event that Indemnitor shall advance or become obligated to
pay any sums under this Indemnity or in connection with the obligations
hereunder or in the event that for any reason whatsoever Borrower or any
subsequent owner of the Property or any part thereof is now, or shall hereafter
become, indebted to Indemnitor, Indemnitor agrees that the amount of such sums
and of such indebtedness and all interest thereon shall at all times be
subordinate as to the lien, the time of payment and in all other respects to all
sums, including principal and interest and other amounts, at any time owed to
Administrative Agent or any Lender under the Loan Documents. Nothing herein
contained is intended or shall be construed to give Indemnitor any right of
subrogation in or under the Loan Documents or any right to participate in any
way therein, or in the right, title or interest of Administrative Agent or any
Lender in or to any collateral for the Loan, notwithstanding any payments made
by Indemnitor under this Indemnity, until the actual and irrevocable receipt by
Administrative Agent and the Lenders of payment in full of the Debt. If any
amount shall be paid to Indemnitor on account of such subrogation rights at any
time when any such sums due and owing to Administrative Agent or any Lender
shall not have been fully paid, upon an Event of Default beyond notice and cure,
such amount shall be paid by Indemnitor to Administrative Agent for credit and
application against such sums due and owing to Administrative Agent or any
Lender under the Loan Documents.

  

(k)         Indemnitor’s obligations hereunder shall survive a foreclosure,
deed-in-lieu of foreclosure or similar proceeding involving the Property and the
exercise by Administrative Agent and the Lenders of any of all of their remedies
pursuant to the Loan Documents.

 

(l)          Notwithstanding the foregoing, Indemnitors shall have no obligation
to the Indemnified Parties hereunder to the extent such Losses arise from the
gross negligence, illegal acts, fraud or willful misconduct of any of the
Indemnified Parties after (y) a foreclosure or acceptance by any of the
Indemnified Parties (or their designees or transferees) of a deed in lieu of
foreclosure, or (z) any of the Indemnified Parities (or their designees or
transferees) has taken possession of the Property.

 

12.         Entire Agreement/Amendments. This Indemnity represents the entire
agreement between the parties with respect to the subject matter hereof. The
terms of this Indemnity shall not be waived, altered, modified, amended,
supplemented or terminated in any manner whatsoever except by written instrument
signed by Administrative Agent and Indemnitor. Delivery of an executed signature
page of this Indemnity by electronic transmission (including facsimile or
electronic mail in “PDF” format) shall be effective as delivery of a manually
executed counterpart hereof.

 

 12 

 

 

13.           Successors and Assigns. Subject to the terms of the Loan
Agreement, this Indemnity shall be binding upon Indemnitor, and Indemnitor’s
estate, heirs, personal representatives, successors and assigns, may not be
assigned or delegated by Indemnitor and shall inure to the benefit of
Administrative Agent, each Lender, and their respective successors and assigns.

 

14.          Applicable Legal Requirements and Consent to Jurisdiction. This
Indemnity shall be governed by, and construed in accordance with, the
substantive laws of the State of New York. Indemnitor irrevocably (a) agrees
that any suit, action or other legal proceeding arising out of or relating to
this Indemnity may be brought in a court of record in the City and County of New
York or in the Courts of the United States of America located in the New York,
(b) consents to the jurisdiction of each such court in any such suit, action or
proceeding and (c) waives any objection which it may have to the laying of venue
of any such suit, action or proceeding in any of such courts and any claim that
any such suit, action or proceeding has been brought in an inconvenient forum.
Indemnitor irrevocably consents to the service of any and all process in any
such suit, action or proceeding by service of copies of such process to
Indemnitor at its address provided in Section 19 hereof. Nothing in this
Section 14, however, shall affect the right of Administrative Agent to serve
legal process in any other manner permitted by law.

 

15.          Section Headings. The headings of the sections and paragraphs of
this Indemnity have been inserted for convenience of reference only and shall in
no way define, modify, limit or amplify any of the terms or provisions hereof.

 

16.          Severability. Any provision of this Indemnity which may be
determined by any competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable Legal Requirements,
Indemnitor hereby waives any provision of law which renders any provision hereof
prohibited or unenforceable in any respect.

 

17.          WAIVER OF TRIAL BY JURY. INDEMNITOR (AND THE INDEMNIFIED PARTIES BY
ACCEPTANCE OF THIS INDEMNITY) HEREBY WAIVES THE RIGHT OF TRIAL BY JURY IN ANY
LITIGATION, ACTION OR PROCEEDING ARISING HEREUNDER OR IN CONNECTION THEREWITH.

 

18.          Independent Obligations. The obligations of the Indemnitor under
this Indemnity are separate and apart from, and in addition to, the other
obligations under the Loan Documents; provided that to the extent that the Loan
Agreement imposes any obligations in addition to those contained herein, the
Loan Agreement shall govern and take precedence. The liability of Indemnitor
under this Indemnity shall not be limited to or measured by the amount of the
other obligations under the Loan Documents or any part thereof or the value of
the Property. Indemnitor shall be liable for all obligations of Indemnitor under
this Indemnity and a separate action may be brought and prosecuted against the
Indemnitor or any of them under this Indemnity.

 

 13 

 

 

19.         Notices. All notices, consents, approvals and requests required or
permitted hereunder (a “Notice”) shall be given in writing and shall be
effective for all purposes if either hand delivered with receipt acknowledged,
or by a nationally recognized overnight delivery service (such as Federal
Express), or by certified or registered United States mail, return receipt
requested, postage prepaid, or by facsimile and confirmed by facsimile answer
back, in each case addressed as follows (or to such other address or Person as a
party shall designate from time to time by notice to the other party): If to
Administrative Agent or any Indemnified Person: Capital One, National
Association, 299 Park Avenue, 29th Floor, New York, New York 10019, Attention:
Michael Sleece, with a copy to: Morrison & Foerster LLP, 250 West 55th Street,
New York, New York 10019, Attention: Jeffery J. Temple, Esq., Telecopier
(212-468-7900); if to Indemnitor: New York City REIT, Inc., c/o AR Global, 405
Park Avenue, New York, NY 10022, Attention: Michael Anderson, Esq., with a copy
to: Loeb & Loeb LLP, 345 Park Avenue, New York, NY 10054, Attention: Chris
Barbaruolo, Esq. A notice shall be deemed to have been given: in the case of
hand delivery, at the time of delivery; in the case of registered or certified
mail, when delivered or the first attempted delivery on a Business Day; or in
the case of overnight delivery, upon the first attempted delivery on a Business
Day.

 

20.         Indemnitor’s Receipt of Loan Documents. Indemnitor by its execution
hereof acknowledges receipt of true copies of all of the Loan Documents, the
terms and conditions of which are hereby incorporated herein by reference.

 

21.         Interest; Expenses.

 

(a)       If Indemnitor fails to pay all or any sums due hereunder upon demand
(but subject to the notice provisions herein and in the Loan Agreement) by
Administrative Agent, the amount of such sums payable by Indemnitor shall bear
interest from the date of demand until paid at the Default Rate in effect from
time to time.

 

(b)       Indemnitor hereby agrees to pay all actual and reasonable costs,
charges and expenses, including reasonable attorneys’ fees and disbursements,
that may be incurred by Administrative Agent, any Lender or any other
Indemnified Person in enforcing the covenants, agreements, obligations and
liabilities of Indemnitor under this Indemnity.

 

22.         Joint and Several Obligations. If Indemnitor consists of more than
one Person, each such Person shall have joint and several liability for the
obligations of Indemnitor hereunder.

 

23.         Specific Limitation on Indemnity and Indemnity Obligations.
Indemnitor, Administrative Agent and the Lenders hereby confirm that it is the
intention of Indemnitor, Administrative Agent and the Lenders that this
Indemnity not constitute a fraudulent transfer or fraudulent conveyance (a
“Fraudulent Conveyance”) under the Bankruptcy Code, the Uniform Fraudulent
Conveyance Act or any other debtor relief law or insolvency law (whether
statutory, common law, case law or otherwise) or any jurisdiction whatsoever
(collectively, the “Bankruptcy Laws”). To give effect to the foregoing intention
of Indemnitor, Administrative Agent and the Lenders, each of such parties hereby
irrevocably agrees that the obligations hereunder shall be limited to (but shall
not be less than) such maximum amount as will, after giving effect to the
maximum amount of such obligations and all other liabilities (whether contingent
or otherwise) of Indemnitor that are relevant under such Bankruptcy Laws, result
in the obligations of Indemnitor hereunder not constituting a Fraudulent
Conveyance under the Bankruptcy Laws, as of the date of execution and delivery
of this Indemnity.

 

 14 

 

 

24.         Counterparts. This Indemnity may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. This
Indemnity shall become effective when it shall have been executed by
Administrative Agent and when Administrative Agent shall have received
counterparts hereof that, when taken together, bear the signatures of each of
the other parties hereto. Delivery of an executed counterpart of a signature
page of this Indemnity by facsimile or in electronic (i.e., “pdf” or “tif”)
format shall be effective as delivery of a manually executed counterpart of this
Indemnity.

 

25.         Exculpation. It is expressly agreed that recourse against Indemnitor
for failure to perform and observe its obligations contained in this Indemnity
shall be limited as and to the extent provided in Section 11.1 of the Loan
Agreement.

 

[No further text on this page. Signatures follow.]

 

 15 

 

 

IN WITNESS WHEREOF, Indemnitor has executed this Indemnity as of the date first
above written.

 

  ARC NYC570SEVENTH, LLC, a Delaware limited liability Company             By:
New York City Operating Partnership,     L.P., a Delaware limited partnership,  
  its sole member               By: New York City REIT, Inc., a Maryland
Corporation, its General Partner                 By: /s/ Michael R. Anderson    
    Name: Michael R. Anderson         Title: Authorized Signatory

 

[Signatures continue on following page.]

 

  NEW YORK CITY REIT, INC., a Maryland corporation         By: /s/ Michael R.
Anderson     Name: Michael R. Anderson     Title: Authorized Signatory