<PAGE>
                                                               Exhibit 10(i)B(2)



                                CREDIT AGREEMENT


                            dated as of July 3, 2002


                                      among


                                ALEXANDER'S INC.,
                                   as Borrower


                                       and


                             VORNADO LENDING L.L.C.,

                                    as Lender
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
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<S>                                                                         <C>
ARTICLE I.        DEFINITIONS AND ACCOUNTING TERMS........................    1

        SECTION 1.01. Certain Defined Terms...............................    1

        SECTION 1.02. Computation of Time Periods.........................    7

        SECTION 1.03. Accounting Terms....................................    7

ARTICLE II.       AMOUNTS AND TERMS OF THE ADVANCES.......................    7

        SECTION 2.01. The Loan............................................    7

        SECTION 2.02. Repayment...........................................    7

        SECTION 2.03. Prepayments.........................................    7

        SECTION 2.04. Interest............................................    7

        SECTION 2.05. Increased Costs.....................................    8

        SECTION 2.06. Payments and Computations...........................    8

        SECTION 2.07. Taxes ..............................................    9

        SECTION 2.08. Payment of Certain Costs and Expenses...............   10

        SECTION 2.09. Use of Proceeds.....................................   10

ARTICLE III.      CONDITIONS OF LENDING...................................   11

        SECTION 3.01. Conditions Precedent to Funding Loan................   11

ARTICLE IV.       REPRESENTATIONS AND WARRANTIES..........................   11

        SECTION 4.01. Representations and Warranties of the Borrower......   11

ARTICLE V.        COVENANTS ..............................................   14

        SECTION 5.01. Affirmative Covenants of the Borrower...............   14

        SECTION 5.02. Negative Covenants..................................   17

        SECTION 5.03. Reporting Requirements..............................   20

        SECTION 5.04. Covenants of the Lender.............................   21

ARTICLE VI.       SPECIAL PROVISIONS......................................   22

        SECTION 6.01. Condemnation and Casualty...........................   22

        SECTION 6.02. Payment of REIT Dividends...........................   24

ARTICLE VII.      EVENTS OF DEFAULT.......................................   24

        SECTION 7.01. Events of Default...................................   24

ARTICLE VIII.     MISCELLANEOUS...........................................   26

        SECTION 8.01. Amendments, Etc.....................................   26
</TABLE>


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<TABLE>
<S>                                                                       <C>
        SECTION 8.02. Notices, Etc........................................   26

        SECTION 8.03. No Waiver; Remedies.................................   27

        SECTION 8.04. Costs, Expenses.....................................   27

        SECTION 8.05. Merger..............................................   28

        SECTION 8.06. Binding Effect......................................   28

        SECTION 8.07. Lender's Discretion.................................   29

        SECTION 8.08. Participations......................................   29

        SECTION 8.09. Governing Law.......................................   29

        SECTION 8.10. Execution in Counterparts...........................   29

        SECTION 8.11. Waiver of Jury Trial................................   29

        SECTION 8.12. Jurisdiction........................................   30

        SECTION 8.13. Continuing Enforcement..............................   30
</TABLE>


Schedule I        -    Properties
Schedule II            Conflicts under Loan Documents
Schedule III           Required Authorizations
Schedule IV            Disclosed Litigation
Schedule V(a)          Environmental Non-Compliance
Schedule V(b)          Environmental Reports
Schedule VI            Defaults under Material Agreements
Schedule VII           Non-compliance with Laws

Exhibit A         -    Form of Note
Exhibit B         -    Form of Guaranty
Exhibit C         -    Form of Non-Disturbance Agreement
Exhibit D         -    Form of Mortgage
Exhibit E         -    Form of Pledge Agreement



                                       ii
<PAGE>
      CREDIT AGREEMENT dated as of July 3, 2002 by and between Alexander's Inc.,
a Delaware corporation ("Alexander's" or the "Borrower"), as borrower, and
Vornado Lending L.L.C., a New Jersey limited liability company (the "Lender"),
as lender.

      WHEREAS, Borrower has requested that Lender make a loan in the amount and
for the purposes herein specified and Lender is willing to make such a loan on
the terms and conditions set forth herein;

      NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto hereby agree as follows:

                                   ARTICLE I.

                        DEFINITIONS AND ACCOUNTING TERMS

      SECTION 1.01. Certain Defined Terms. As used in this Credit Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):

      "Affiliate" means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person or is a director or officer of such Person. For purposes of this
definition, the term "control" (including the terms "controlling," "controlled
by" and "under common control with") of a Person means the possession, direct or
indirect, of the power to vote 20% or more of the Voting Stock of such Person or
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of Voting Stock, by contract or otherwise.

      "Borrower" has the meaning specified in the recital of parties to this
Credit Agreement.

      "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
on which banks are not required or authorized to close in New York City.

      "Capitalized Leases" has the meaning specified in clause (e) of the
definition of Debt.

      "Cash Collateral Account" has the meaning specified in Section 6.01.

      "Cash Collateral Agreement" has the meaning specified in Section 6.01.

      "CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as the same may be amended from time to time.

      "Closing Date" means July 3, 2002.

      "Code" means the Internal Revenue Code of 1986, as amended.

      "Collateral" means all "Collateral" referred to in the Collateral
Documents and all other property that is subject to any Lien in favor of the
Lender.

      "Collateral Documents" means collectively each Guaranty, Mortgage, and the
Pledge Agreement.
<PAGE>
      "Confidential Information" means information that the Borrower furnishes
to the Lender on a confidential basis, but does not include any such information
that is or becomes generally available to the public other than as a result of a
breach by the Lender of its obligations hereunder or that is or becomes
available to the Lender from a source other than the Borrower that is not, to
the best of the Lender's knowledge, acting in violation of a confidentiality
agreement with the Borrower.

      "Consolidated" refers to the consolidation of accounts in accordance with
GAAP.

      "Construction Loan" shall have the meaning given to such term in Section
5.01(m) hereof.

      "Debt" of any Person means, without duplication, (a) all indebtedness of
such Person for borrowed money, (b) all Obligations of such Person for the
deferred purchase price of property or services (other than trade payables not
overdue by more than 60 days incurred in the ordinary course of such Person's
business), (c) all Obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all Obligations of such Person
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (e) all Obligations of
such Person as lessee under leases that have been or should be, in accordance
with GAAP, recorded as capital leases ("Capitalized Leases"), (f) all
Obligations, contingent or otherwise, of such Person under acceptance, letter of
credit or similar facilities, (g) all Debt of others referred to in clauses (a)
through (f) above guaranteed directly or indirectly in any manner by such
Person, or in effect guaranteed directly or indirectly by such Person through an
agreement (i) to pay or purchase such Debt or to advance or supply funds for the
payment or purchase of such Debt, (ii) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Debt or to assure the holder of such
Debt against loss, (iii) to supply funds to or in any other manner invest in the
debtor (including any agreement to pay for property or services irrespective of
whether such property is received or such services are rendered) or (iv)
otherwise to assure a creditor against loss, and (h) all Debt referred to in
clauses (a) through (f) above secured by (or for which the holder of such Debt
has an existing right, contingent or otherwise, to be secured by) any Lien on
property (including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Debt.

      "Default" means any Event of Default or any event that would constitute an
Event of Default but for the requirement that notice be given or time elapse or
both.

      "Default Rate" means 4% per annum above the rate per annum required to be
paid on the Loan pursuant to Section 2.04(a).

      "Disclosed Litigation" means the matters described on Schedule IV hereto.

      "Environmental Action" means any administrative, regulatory or judicial
action, suit, demand, demand letter, claim, notice of non-compliance or
violation, investigation, proceeding, consent order or consent agreement
relating in any way to any Environmental Law or any Environmental Permit
including, without limitation, (a) any written claim by any governmental or
regulatory authority for enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any Environmental Law and (b) any written
claim by any third party


                                       2
<PAGE>
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.

      "Environmental Law" means any applicable federal, state or local law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award relating to the environment, health, safety or Hazardous Materials.

      "Environmental Permit" means any permit, approval, identification number,
license or other authorization required under any Environmental Law.

      "Events of Default" has the meaning specified in Section 7.01.

      "Existing Debt" means Debt of the Borrower outstanding immediately before
the time of execution of this Credit Agreement.

      "GAAP" has the meaning specified in Section 1.03.

      "Guarantor" means each of Alexander's of Rego Park II, Inc. and
Alexander's of Rego Park III, Inc. and subsequent assignees thereof and any
other Person who shall execute a Guaranty after the date hereof.

      "Guaranty" means the Guaranty substantially in the form of Exhibit B to
this Credit Agreement, as amended from time to time, duly executed as of the
Closing Date by each Guarantor.

      "Hazardous Materials" means (a) petroleum or petroleum products, natural
or synthetic gas, asbestos in any form that is friable, urea formaldehyde foam
insulation and radon gas, (b) any substances defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," "contaminants" or "pollutants," or words of similar import,
under any Environmental Law and (c) any other substance exposure to which is
regulated under any Environmental Law.

      "Indemnified Party" has the meaning specified in Section 8.04(b).

      "Interest Payment Date" has the meaning specified in Section 2.04(a).

      "Interest Rate" means a rate equal to the one-year treasury bill rate (the
"Base Rate") as of March 15, 2002 plus 9.48%, such rate to be reset quarterly
(i.e., on June 15, September 15, December 15 and March 15) to equal the Base
Rate as of the reset date plus 9.48%; provided, however, that if the one-year
treasury bill rate as of any reset date is less than 3%, the Base Rate for
purposes of such reset shall be 3%.

      "Leasing Agreement" means that certain Real Estate Retention Agreement
dated July, 1992 between Vornado, Inc., Alexander's and certain other parties as
amended by Amendment to Real Estate Retention Agreement dated as of the date
hereof.

      "Lender's Account" means an account of or specified by the Lender and,
until the Lender shall notify the Borrower of a change in such account, shall
mean the account of Vornado Lending L.L.C. maintained at Fleet Bank (Account No.
9403934589).

      "Lien" means any lien, security interest or other charge or encumbrance of
any kind, or any other type of preferential arrangement, including, without
limitation, the lien or retained


                                       3
<PAGE>
security title of a conditional vendor and any easement, right of way or other
encumbrance on title to real property and any easement, right of way or other
encumbrance on title to real property.

      "Loan" means the loan from Lender to Borrower in the amount of $20,000,000
evidenced by this Credit Agreement.

      "Loan Documents" means this Credit Agreement, the Note, the Collateral
Documents and the Guaranty and any other documents executed by any Loan Party in
connection with the Loan.

      "Loan Obligations" means all amounts due payable to the Lender under the
Loan Documents.

      "Loan Parties" means the Borrower, each Guarantor and each Mortgagor.

      "Major Lease" means any lease at Property (i) for an entire free-standing
building, including without limitation a building to be constructed, (ii) for
over 10,000 rentable square feet, or (iii) with an anchor tenant.

      "Management Agreement" means that certain Amended and Restated Management
and Development Agreement, dated as of the date hereof, between the Borrower and
Vornado Management Corp., as amended from time to time.

      "Material Adverse Change" means any material adverse change in the
business, financial condition, operations, performance or properties of the
Borrower and the Loan Parties taken as a whole.

      "Material Adverse Effect" means a material adverse effect on (a) the
business, financial condition, operations, performance or properties of the
Borrower and the Loan Parties taken as a whole, (b) the rights and remedies of
the Lender under any Loan Document or (c) the ability of any Loan Party to
perform its Obligations under any Loan Document to which it is or is to be a
party.

      "Maturity Date" means the earlier of (i) January 3, 2006 and (ii) the date
on which the Construction Loan is paid in full.

      "Mortgage" or "Mortgages" means one or more mortgages, in substantially
the form of Exhibit D to this Credit Agreement and covering all or any of the
Properties, as the same may be amended from time to time, duly executed by the
applicable Mortgagor in favor of Lender.

      "Mortgagor" means Alexander's of Rego Park II, Inc. and Alexander's of
Rego Park III, Inc. or other mortgagor under a Mortgage, provided that any
Mortgagor shall cease to be a Mortgagor upon the release or satisfaction of that
Mortgagor's mortgage.

      "Note" or "Notes" means, collectively, the promissory notes of the
Borrower payable to the order of the Lender, in substantially the form of
Exhibit A hereto, as amended from time to time, evidencing the indebtedness of
the Borrower to the Lender resulting from the Loan made by the Lender.

      "Obligation" means, with respect to any Person, any obligation of such
Person of any kind, including, without limitation, any liability of such Person
on any claim, whether or not the right of any creditor to payment in respect of
such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, disputed, undisputed, legal, equitable, secured or unsecured, and
whether or not such claim is discharged, stayed or otherwise affected by any


                                       4
<PAGE>
proceeding referred to in Section 7.01(f). Without limiting the generality of
the foregoing, the Obligations of the Loan Parties under the Loan Documents
include (a) the obligation to pay principal, interest, charges, expenses, fees,
reasonable attorneys' fees and disbursements, indemnities and other amounts
payable by any Loan Party under any Loan Document and (b) the obligation to
reimburse any amount in respect of any of the foregoing that the Lender, in
accordance with the terms of the applicable Loan Document, may elect to pay or
advance on behalf of such Loan Party.

      "Other Taxes" has the meaning specified in Section 2.07(b).

      "Other Vornado Loans" means, collectively (i) that certain loan in the
principal amount of $35,000,000 evidenced by a Credit Agreement dated as of even
date herewith from Lender, as lender to Alexander's, as borrower; (ii) that
certain loan in the principal amount of $40,000,000 evidenced by an Amended and
Restated Credit Agreement dated as of even date herewith from Lender, as lender,
to 59th Street Corporation, as borrower; (iii) that certain credit line in the
maximum principal amount of $50,000,000 evidenced by an Amended and Restated
Credit Line Agreement dated as of even date herewith, from Lender, as lender, to
Alexander's, as borrower; and (iv) the Reimbursement Facility.

      "Participant" has the meaning set forth in Section 8.08.

      "Permitted Encumbrances" has the meaning specified in the Mortgages.

      "Permitted Liens" means such of the following as to which no enforcement,
collection, execution, levy or foreclosure proceeding shall have been commenced:
(a) Liens for taxes, assessments and governmental charges or levies not yet due
and payable; (b) Permitted Encumbrances; (c) with respect to any real property
acquired by Borrower or any Subsidiary or Affiliate of Borrower after the date
hereof, liens to which such property is subject as of the date of such
acquisition, purchase money mortgages or other similar purchase liens and liens
in favor of lenders providing construction or development financing in
connection with such property provided, that all proceeds of such financings are
used for construction or development of such property or the retirement of
Existing Debt secured by one or more liens on such property; (d) Liens permitted
to be incurred by Borrower pursuant to the terms of this Credit Agreement; (e)
Liens in connection with taxes being contested in good faith in compliance with
this Credit Agreement; (f) Liens securing the Construction Loan; and (g) any
renewal or replacement of any Lien permitted pursuant to the foregoing clauses
(a) through (g), inclusive, provided that any such renewal or replacement Lien
secures Debt in an amount not in excess of the Debt secured by the Lien so
renewed or replaced, provided, however, that notwithstanding the foregoing, the
Lender shall not be required to subordinate to any Lien pursuant to this clause
except as otherwise provided in this Credit Agreement.

      "Permitted Related Owner" means any of (a) any Subsidiary now existing or
hereafter created all shares of issued and outstanding capital stock of which
are owned by the Borrower, (b) a corporation (x) 90% or more of the economic
interests of which shall be held by the Borrower through the ownership of shares
of preferred and/or common stock of such corporation and (y) 10% or less of the
economic interests of which shall be held by an entity reasonably satisfactory
to the Lender through the ownership of shares of common and/or preferred stock
of such corporation; provided that such Subsidiary or corporation enters into a
guaranty substantially in the form of the Guaranty pursuant to which it
guarantees the obligations of the Borrower under the Notes, or (c) 731
Commercial LLC, 731 Residential LLC, 731 Commercial


                                       5
<PAGE>
Holding LLC and 731 Residential Holding LLC. The conditions regarding share
ownership set forth in clauses (x) and (y) above may be varied to the extent
necessary for any income received by the Borrower to be described in Section
856(c)(2) of the Code or for the Borrower to continue to qualify as a REIT.

      "Person" means an individual, partnership, limited liability company,
corporation (including a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereof.

      "Pledge Agreement" means that certain Pledge Agreement substantially in
the form of Exhibit E hereto.

      "Prepayment Date" has the meaning specified in Section 2.03.

      "Properties" means the properties listed on Schedule I to this Credit
Agreement and any real property acquired by the Borrower or any Mortgagor after
the Closing Date.

      "Rego Park II Property" means the Property designated on Schedule I to
this Credit Agreement as the "Rego Park II Property".

      "Rego Park III Property" means the Property designated on Schedule I to
this Credit Agreement as the "Rego Park III Property".

      "Reimbursement Facility" means the credit facility evidenced by the
Reimbursement Agreement, dated the date hereof, by and among Alexander's, Inc.,
731 Commercial LLC and 731 Residential LLC, as Obligor, and Vornado Realty, L.P.

      "REIT" means an entity described in Section 856(a) of the Code and
entitled to the benefits of Section 857(a) of the Code.

      "Secured Debt" means any Debt of the Borrower incurred after the Closing
Date that is secured by any of the Properties and/or the Collateral and that
otherwise contains terms and conditions satisfactory to the Lender.

      "Subordinate Debt" means any Debt of the Borrower that is subordinated to
the Loan Obligations under the Loan Documents on, and that otherwise contains,
terms and conditions satisfactory to the Lender.

      "Subsidiary" means, with respect to the Borrower, (i) in any corporation
of which more than 50% of the issued and outstanding capital stock having
ordinary voting power to elect a majority of the Board of Directors of such
corporation (irrespective of whether at the time capital stock of any other
class or classes of such corporation shall or might have voting power upon the
occurrence of any contingency) is at the time directly or indirectly owned or
controlled by the Borrower, by the Borrower and one or more of its other
Subsidiaries or by one or more of the Borrower's other Subsidiaries and (ii) 731
Commercial LLC, 731 Residential LLC, 731 Commercial Holding LLC and 731
Residential Holding LLC

      "Taxes" has the meaning specified in Section 2.07(a).

      "Voting Stock" means capital stock issued by a corporation, or equivalent
interests in any other Person, the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of directors (or
persons performing similar functions) of such Person, even though the right so
to vote has been suspended by the happening of such a contingency.


                                       6
<PAGE>
      SECTION 1.02. Computation of Time Periods. In this Credit Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding".

      SECTION 1.03. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles consistent with those applied in the preparation of the
financial statements referred to in Section 4.01(f) ("GAAP").

                                  ARTICLE II.

                        AMOUNTS AND TERMS OF THE ADVANCES

      SECTION 2.01. The Loan. The Lender agrees, on the terms and conditions
hereinafter set forth, to make a single advance to the Borrower on the Closing
Date in an amount equal to Twenty Million and 00/100 Dollars ($20,000,000.00)
(such sum being hereinafter referred to as the "Loan"). Amounts borrower under
this Section 2.01 and repaid or prepaid may not be reborrowed.

      SECTION 2.02. Repayment. The Borrower shall repay to the Lender the
aggregate principal amount of the Loan and all other Loan Obligations on the
Maturity Date or on such earlier date as the Loan Obligations become due as
provided in the Loan Documents.

      SECTION 2.03. Prepayments. The Borrower may, upon at least two (2) days'
notice to the Lender prepay all or any portion of the outstanding principal
amount of the Loan, together with (i) accrued interest to the date of such
prepayment on the principal amount prepaid and (ii) if the entire outstanding
principal amount of the Loan is repaid, all other accrued and unpaid amounts due
hereunder or under any other Loan Document.

      SECTION 2.04. Interest. (a) Ordinary Interest. The Borrower shall pay
interest on the unpaid principal amount of the Loan owing to the Lender from the
Closing Date, until such principal amount shall be paid in full, payable in
arrears on the fifteenth day of each month (each an "Interest Payment Date") at
a rate per annum equal to the Interest Rate, but in no event shall the Loan be
repaid later than the Maturity Date.

      (b) Default Interest. From and after the Maturity Date and upon the
occurrence and during the continuance of an Event of Default specified in
Section 7.01 of this Credit Agreement, the Borrower shall pay interest on (i)
the unpaid principal amount of the Loan and (ii) the amount of any interest, fee
or other amount due and payable hereunder which is not paid when due, from the
date such amount shall be due until such amount shall be paid in full, in either
clause (i) or (ii) payable immediately on the Maturity Date or on demand after
such occurrence and during such continuance, at a rate per annum equal at all
times to the Default Rate.

      (c) Late Charges. In the event any payment of principal or any interest is
not made within five (5) days after the date on which such amount first becomes
due and payable, the Lender may, at its option, require the Borrower to make an
additional payment to the Lender as a late charge in an amount equal to 5% of
such overdue amount.


                                       7
<PAGE>
      SECTION 2.05. Increased Costs. If, with respect to any assignee of the
Lender or a Participant that is a bank (a "Bank Lender"), due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation (other than a law or regulation relating to taxes) or (ii) the
compliance with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law), there shall be
any increase in the amount of capital required by such Bank Lender or authority
to be maintained by such Bank Lender or any corporation controlling Bank Lender
as a result of or based upon the existence of Bank Lender's commitment to lend
hereunder then, upon demand by Bank Lender, the Borrower shall pay to Bank
Lender, from time to time as reasonably specified by Bank Lender, additional
amounts sufficient to compensate Bank Lender in the light of such circumstances,
to the extent that Bank Lender reasonably determines such increase in capital to
be allocable to the existence of the Loan.

      SECTION 2.06. Payments and Computations. (a) The Borrower shall make each
payment required to be made hereunder and under the Notes not later than 11:00
A.M., New York City time, on the day when due in U.S. dollars to the Lender at
the Lender's Account in immediately available (same day) funds.

      (b) All computations of interest and fees shall be made by the Lender on
the basis of a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest or fees are payable. Each determination by the Lender of an
interest rate or fee hereunder shall be conclusive and binding for all purposes,
absent manifest error.

      (c) Whenever any payment hereunder or under the Notes shall be stated to
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest.

      (d) The Borrower covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any usury or similar law wherever enacted,
now or at any time hereafter in force, that may affect the covenants or the
performance of this Credit Agreement, the Notes or the other Loan Documents; and
the Borrower (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Lender, but
will suffer and permit the execution of every such power as though no such law
had been enacted. It is the intent of the Lender and the Borrower in the
execution of the Notes, this Credit Agreement and all other instruments now or
hereafter securing the Notes or executed in connection therewith or under any
other written or oral agreement by the Borrower in favor of the Lender to
contract in strict compliance with applicable usury law. In furtherance thereof,
the Lender and the Borrower stipulate and agree that none of the terms and
provisions contained in the Notes, this Credit Agreement or any other instrument
securing the Notes or executed in connection herewith, or in any other written
or oral agreement by the Borrower in favor of the Lender, shall ever be
construed to create a contract to pay for the use, forbearance or detention of
money, interest at a rate in excess of the maximum interest rate permitted to be
charged by applicable law. Neither the Borrower nor any guarantors, endorsers or
other parties now or hereafter becoming liable for


                                       8
<PAGE>
payment of the Notes shall ever be required to pay interest on the Notes or on
indebtedness arising under any instrument securing the Notes or executed in
connection therewith, or in any other written or oral agreement by the Borrower
in favor of the Lender, at a rate in excess of the maximum interest that may be
lawfully charged under applicable law, and the provisions of this Section
2.06(d) shall control over all other provisions of the Notes, this Credit
Agreement and any other instruments now or hereafter securing the Notes or
executed in connection herewith or any other oral or written agreements that may
be in apparent conflict herewith. The Lender expressly disavows any intention to
charge or collect excessive unearned interest or finance charges in the event
the maturity of the Notes is accelerated. If the maturity of the Notes shall be
accelerated for any reason or if the principal of the Notes is paid prior to the
end of the term of the Notes, and as a result thereof the interest received for
the actual period of existence of the Loan exceeds the applicable maximum lawful
rate, the Lender shall, at its option, either refund to the Borrower the amount
of such excess or credit the amount of such excess against the principal balance
of the Notes then outstanding and thereby shall render inapplicable any and all
penalties of any kind provided by applicable law as a result of such excess
interest. In the event that the Lender shall collect monies and/or any other
thing of value that are then or at any time deemed to constitute interest that
would increase the effective interest rate on the Notes to a rate in excess of
that permitted to be charged by applicable law, an amount equal to interest in
excess of the lawful rate shall, upon such determination, at the option of the
Lender, be either immediately returned to the Borrower or credited against the
principal balance of the Notes then outstanding, in which event any and all
penalties of any kind under applicable law as a result of such excess interest
shall be inapplicable. By execution of this Credit Agreement, the Borrower
acknowledges that it believes the Loan to be non-usurious and agrees that if, at
any time, the Borrower should have reason to believe, that the Loan is in fact
usurious, it will give the Lender notice of such condition and the Borrower
agrees that the Lender shall have ninety (90) days after receipt of such notice
in which to make appropriate refund or other adjustment in order to correct such
condition if in fact such exists.

      SECTION 2.07. Taxes. (a) Any and all payments by the Borrower hereunder or
under the Notes shall be made, in accordance with this Section 2.07, free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings other than (i) net income taxes,
franchise taxes and similar taxes imposed on the Lender or a Participant, (ii)
any tax, assessment or other governmental charge that would not have been
imposed but for the failure of the Lender or a purchaser of all or a portion of
the Lender's or a Participant's rights and obligations under this Credit
Agreement to comply with any certification, identification or other reporting
requirements concerning the nationality, residence, identity or connection with
the United States of the Lender or a Participant, if compliance is required by
statute or by regulation of the United States Treasury Department as a
precondition to exemption from such tax, assessment or other governmental
charge, (iii) any tax, assessment or other governmental charge that would not
have been imposed but for either (a) a sale or other transfer of all or a
portion of the Lender's or a Participant's rights and obligations under this
Credit Agreement to a Person that is not an entity that is treated as a
corporation organized or created under the laws of the United States or of any
State for U.S. federal tax purposes or (b) Lender's merger or consolidation
with, or transfer of substantially all of its assets to, another entity, and
(iv) any tax, assessment or other governmental charge that would not have been
imposed but for any present or former connection between the Lender or a
Participant (or a shareholder of the Lender or a Participant) and the
jurisdiction imposing such tax, assessment or


                                       9
<PAGE>
other governmental charge, including, without limitation, the Lender or a
Participant's being or having been a citizen or resident of, present or engaged
in a trade or business in, such jurisdiction, but excluding a connection arising
solely as a result of the Lender's having entered into, received payments under
and enforced this Credit Agreement (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If the Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable hereunder or under the Notes to the
Lender, (i) the sum payable shall be increased as may be necessary so that after
making all required deductions for Taxes (including deductions ("Additional
Taxes") applicable to additional sums payable pursuant to this sentence), the
Lender receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law.

      (b) In addition, the Borrower shall pay any present or future stamp,
documentary, excise, property or similar taxes, charges or levies that arise
from any payment made hereunder or under the Notes or from the execution,
delivery or registration of, or otherwise with respect to, this Credit Agreement
or the Notes (hereinafter referred to as "Other Taxes").

      (c) The Borrower shall indemnify the Lender for the full amount of Taxes,
and Other Taxes, paid by the Lender and any liability (including penalties,
additions to tax, Additional Taxes, interest and expenses) arising therefrom or
with respect thereto except as may arise as a result of the Lender's gross
negligence or willful misconduct.

      (d) Within 30 days after the date of any payment of Taxes, the Borrower
shall furnish to the Lender, at its address referred to in Section 8.02, the
original receipt of payment thereof or a certified copy of such receipt.

      (e) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.07 shall survive the payment in full of principal and interest
hereunder and under the Note.

      SECTION 2.08. Payment of Certain Costs and Expenses. The Borrower shall
pay to the Lender within five (5) days after demand therefor all reasonable
costs and expenses (including reasonable attorneys' fees and disbursements)
incurred by the Lender in connection with (i) the approval of any lease, (ii)
the preparation, negotiation and execution of any non-disturbance agreement
requested for any lease, (iii) review and approval of any plans, construction
contracts or any other documents relating to construction or development of a
Property; and (iv) the assignment of any liens of the Mortgages pursuant to
Section 7.08.

      SECTION 2.09. Use of Proceeds. The proceeds of the Loan shall be available
(and the Borrower agrees that it shall use such proceeds) only to provide
working capital for the Borrower and its Subsidiaries.


                                       10
<PAGE>
                                  ARTICLE III.

                              CONDITIONS OF LENDING

      SECTION 3.01. Conditions Precedent to Funding Loan. The Loan shall be
advanced by the Lender on or about the date hereof, or such later date as the
Borrower and the Lender may otherwise agree, provided that the following
conditions shall be conditions precedent to the obligations of the Lender
hereunder to make the Loan:

      (1) the representations and warranties of the Borrower contained herein
shall be true and correct as of the Closing Date as if made on such date; and

      (2) all costs and fees of the Lender (including attorney's fees and
expenses) in connection with the Loan shall have been paid.

                                  ARTICLE IV.

                         REPRESENTATIONS AND WARRANTIES

      SECTION 4.01. Representations and Warranties of the Borrower. The Borrower
represents and warrants as follows:

      (a) Each Loan Party that is a corporation (i) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
its incorporation, (ii) is duly qualified and in good standing as a foreign
corporation in each other jurisdiction in which it owns or leases property or in
which the conduct of its business requires it to so qualify or be licensed
except where the failure to so qualify or be licensed is not reasonably likely
to have a Material Adverse Effect and (iii) has all requisite corporate power
and authority to own or lease and operate its properties and to carry on its
business as now conducted and as proposed to be conducted.

      (b) Each Loan Party that is a partnership or a limited liability company
(i) is a partnership or a limited liability company duly formed and validly
existing under the laws of the State of its formation, (ii) is duly qualified in
each other jurisdiction in which it owns or leases property or in which the
conduct of its business requires it to so qualify or be licensed except where
the failure to so qualify or be licensed is not reasonably likely to have a
Material Adverse Effect and (iii) has all requisite partnership or a limited
liability company power and authority to own or lease and operate its properties
and to carry on its business as now conducted and as proposed to be conducted.

      (c) The execution, delivery and performance by each Loan Party of this
Credit Agreement, the Notes, each other Loan Document to which it is or is to be
a party, and the consummation of the transactions contemplated herein and
therein, are within such Loan Party's corporate, partnership or limited
liability company powers, have been duly authorized by all necessary corporate,
partnership or limited liability company action, and, to each such Loan Party's
knowledge, do not (i) contravene such Loan Party's organizational documents,
(ii) violate any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award,


                                       11
<PAGE>
except where such violation is not reasonably likely to have a Material Adverse
Effect except as set forth on Schedule II hereof, (iii) except as set forth on
Schedule II hereof, conflict with or result in the breach of, or constitute a
default under, any contract, loan agreement, indenture, mortgage, deed of trust,
lease or other instrument binding on or affecting any Loan Party, any of its
Subsidiaries or any of their properties, except where such conflict, breach or
default is not reasonably likely to have a Material Adverse Effect or (iv)
except for the Liens created by the Collateral Documents result in or require
the creation or imposition of any Lien upon or with respect to any of the
properties of any Loan Party or any of its Subsidiaries.

      (d) Other than as set forth on Schedule III hereof, no authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or any other third party is required for (i) the
due execution, delivery, recordation, filing or performance by any Loan Party of
this Credit Agreement, the Notes, any other Loan Document to which it is or is
to be a party, or for the consummation of the transactions contemplated hereby,
(ii) the grant by any Loan Party of the Liens granted by it pursuant to the
Collateral Documents, (iii) the perfection or maintenance of the Liens created
by the Collateral Documents or (iv) the exercise by the Lender of its rights
under the Loan Documents or the remedies in respect of the Collateral pursuant
to the Collateral Documents.

      (e) This Credit Agreement has been, and the Notes, each other Loan
Document when delivered hereunder will have been, duly executed and delivered by
each Loan Party thereto. This Credit Agreement is, and the Notes, each other
Loan Document when delivered hereunder will be, the legal, valid and binding
obligation of each Loan Party thereto, enforceable against such Loan Party in
accordance with its terms.

      (f) The Consolidated balance sheet of the Borrower and its Subsidiaries as
of March 31, 2002, and the related Consolidated statement of income and cash
flows of the Borrower and its Subsidiaries for the fiscal year then ended, and
the Consolidated balance sheet of the Borrower and its Subsidiaries as at March
31, 2002, and the related Consolidated statement of income and cash flows of the
Borrower and its Subsidiaries for the nine months then ended, duly certified by
the Chairman of the Board of Borrower or any other officer of Borrower, copies
of which have been furnished to the Lender, fairly present, subject, in the case
of said balance sheet as at March 31, 2002, and said statement of income and
cash flows for the nine months then ended, to year-end audit adjustments, the
Consolidated financial condition of the Borrower and its Subsidiaries as at such
dates and the Consolidated results of the operations of the Borrower and its
Subsidiaries for the periods ended on such dates, all in accordance with
generally accepted accounting principles applied on a consistent basis. Since
March 31, 2002, there has been no Material Adverse Change.

      (g) All financial statements delivered by any Loan Party to the Lender,
are true, correct and complete in all material respects, fairly represent such
Loan Party's financial condition as of the date hereof and thereof, and no
information has been omitted that would make the information previously
furnished misleading or incorrect in any material respect.

      (h) To such Loan Party's knowledge, there is no action, suit,
investigation, litigation or proceeding affecting any Loan Party not covered by
insurance (subject to reasonable deductibles), including any Environmental
Action, pending before any court, governmental


                                       12
<PAGE>
agency or arbitrator that (i) would be reasonably likely to have a Material
Adverse Effect (other than the Disclosed Litigation) or (ii) purports to affect
the legality, validity or enforceability of this Credit Agreement, the Notes,
any other Loan Document or the consummation of the transactions contemplated
hereby, and there has been no adverse change in the status or financial effect
on any Loan Party of the Disclosed Litigation from that described on Schedule IV
hereof.

      (i) Except as set forth on Schedule V(a) hereof to such Loan Party's
knowledge, the operations and properties of each Loan Party and each of its
Subsidiaries comply in all material respects with all Environmental Laws, all
necessary Environmental Permits have been obtained and are in effect for the
operations and properties of each Loan Party and its Subsidiaries, each Loan
Party and its Subsidiaries are in compliance in all material respects with all
such Environmental Permits, and, no circumstances exist that would be reasonably
likely to (i) form the basis of an Environmental Action against any Loan Party
or any of its Subsidiaries or any properties described in the Mortgages or the
59th Street Property that could have a Material Adverse Effect or (ii) cause any
such property to be subject to any restrictions on ownership, occupancy, use or
transferability under any Environmental Law.

      (j) Except as set forth in the environmental reports heretofore delivered
to the Lender as set forth on Schedule V(b) hereof, none of the operations and
properties of each Loan Party is listed or, to the knowledge of any Loan Party,
proposed for listing on the National Priorities List under CERCLA or on the
Comprehensive Environmental Response, Compensation and Liability Information
System maintained by the Environmental Protection Agency or any analogous state
list of sites requiring investigation or cleanup or is adjacent to any such
property. Except as would not have a Material Adverse Effect, no underground
storage tanks, as such term is defined in 42 U.S.C.Section 6991, are located on
any property in violation of applicable Environmental Laws. Except as set forth
on the environmental reports heretofore provided to the Lender, the Borrower has
no knowledge of any underground storage tank located on any Property adjoining
any Property.

      (k) Each Loan Party and each of its Subsidiaries has filed or has caused
to be filed all income tax returns (Federal, state and local) required to be
filed and has paid all taxes shown thereon to be due, together with applicable
interest and penalties. The Borrower is not aware of any material unasserted
claims for prior taxes against it for which adequate reserves satisfactory to
the Lender have not been established.

      (l) Each Mortgagor has good, marketable and insurable fee simple title to
the real property described in the Mortgage executed and delivered by such
Mortgagor, as applicable, free and clear of all Liens, other than those
disclosed on such Schedule and Liens created or permitted by the Loan Documents.

      (m) Except as set forth on Schedule VI hereof, no Loan Party is in default
in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained herein or in any material agreement or
instrument to which it is a party or by which it or any of its properties is
bound.


                                       13
<PAGE>
      (n) As of the date hereof, there has been no Material Adverse Change since
the date of the most recent financial statements provided by the Borrower or
such Loan Party to the Lender.

      (o) No Loan Document or other document, certificate or statement furnished
to the Lender by or on behalf of the Borrower or any other Loan Party contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein and therein not
misleading. It is specifically understood by the Borrower that all such
statements, representations and warranties shall be deemed to have been relied
upon by the Lender as an inducement to make the Loan to the Borrower.

                                   ARTICLE V.

                                    COVENANTS

      SECTION 5.01. Affirmative Covenants of the Borrower. So long as any
portion of the Loan shall remain unpaid, the Borrower will, unless the Lender
shall otherwise consent in writing:

      (a) Compliance with Laws, Etc. Comply, and cause each Mortgagor to comply,
in all respects, with all applicable laws, rules, regulations and orders, except
as set forth on Schedule VII hereof, or except where such non-compliance is not
likely to have a Material Adverse Effect; and keep, and cause each Mortgagor to
keep, at all times in full force and effect all authorizations required for the
continued use and operation of the properties of the Borrower and of each
Mortgagor except as set forth on such Schedule.

      (b) Payment of Taxes, Etc. Prepare and timely file all federal, state and
local tax returns required to be filed by the Borrower and promptly pay and
discharge all taxes, assessments and other governmental charges, imposed upon
the Borrower or its income or any of its property, and cause each Subsidiary to
do so, with respect to real estate taxes, before interest and penalties commence
to accrue thereon and, with respect to all other taxes, before they become a
Lien upon such property, except for those taxes, assessments and other
governmental charges then being contested in good faith by appropriate
proceedings and for which the Borrower or such Subsidiary has maintained
adequate reserves and with respect to which (i) there is a not a reasonable
likelihood, in the judgment of the Lender, that the Borrower or the Lender shall
be subject to any risk of criminal or material civil liability and (ii) there is
not a reasonable likelihood, in the judgment of the Lender, that the Borrower's
or any of its Subsidiaries' properties shall be subject to the risk,
respectively, of forfeiture or impairment, provided, however, that all real
estate taxes must be paid when due. The Borrower shall submit to the Lender,
upon request, an affidavit signed by the Borrower certifying that all federal,
state and local income tax returns have been filed to date and all real property
taxes, assessments and other governmental charges with respect to the Borrower's
or any Subsidiary's properties have been paid to date.

      (c) Compliance with Environmental Laws. Except as set forth on Schedule
V(a) hereof, comply, and cause each of its Subsidiaries and all lessees and
other Persons occupying its properties to comply, in all material respects, with
all Environmental Laws and Environmental


                                       14
<PAGE>
Permits applicable to its operations and properties, except where the
non-compliance with such laws or the absence or non-renewal of such permits is
not likely to have a Material Adverse Effect; obtain and renew all Environmental
Permits necessary for its operations and properties, except where such
non-compliance is not likely to have a Material Adverse Effect; and to the
extent and in the timeframe required by applicable Environmental Law conduct,
and cause each of its Subsidiaries to conduct, any investigation, study,
sampling and testing, and undertake any cleanup, removal, remedial or other
action necessary to remove and clean up all Hazardous Materials from any of its
properties, in accordance with the requirements of all Environmental Laws;
provided, however, that neither the Borrower nor any of its Subsidiaries shall
be required to undertake any such cleanup, removal, remedial or other action to
the extent that its obligation to do so is being contested in good faith and by
proper proceedings and with respect to which (i) there is no reasonable
likelihood of any risk of criminal or material civil liability to the Lender,
(ii) there is no reasonable likelihood that the Borrower's or any of its
Subsidiaries' properties or the lien of the Mortgages shall be subject to the
risk, respectively, of forfeiture or impairment and (iii) appropriate reserves
are being maintained with respect to such circumstances.

      (d) Maintenance of Insurance. Maintain and cause each Mortgagor to
maintain, insurance with responsible and reputable insurance companies or
associations in such amounts (subject to reasonable deductibles) and covering
such risks as is usually carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the Borrower or
such Subsidiary operates and as otherwise required by the Mortgages, provided,
however, that Borrower shall cause the Mortgagors to maintain the insurance
required by the Mortgages.

      (e) Preservation of Corporate, Partnership or Limited Liability Company
Existence, Etc. Preserve and maintain, in full force and effect, and cause each
Mortgagor and each other Subsidiary, where applicable, to preserve and maintain
its corporate, partnership or limited liability company existence, rights
(charter and statutory) and franchises and all authorizations and rights
material to its business; provided, however, that neither the Borrower nor any
Mortgagor or other Subsidiary shall be required to preserve any right or
franchise if the Board of Directors or general partners of the Borrower or such
Mortgagor or other Subsidiary shall determine that the preservation thereof is
no longer desirable in the conduct of the business of the Borrower or such or
other Subsidiary, as the case may be, and that the loss thereof is not
disadvantageous in any material respect to the Borrower, such Mortgagor or other
Subsidiary or the Lender.

      (f) Inspection Rights. At any reasonable time and from time to time, in
each case upon reasonable prior notice, and at such times as shall not
unreasonably disrupt tenants, permit the Lender or any agents or representatives
thereof, to examine, audit and make copies of and abstracts from the records and
books of account of, and visit the properties of, the Borrower and the
Mortgagor, or other Subsidiary, and to discuss the affairs, finances and
accounts of, the Borrower and any Mortgagor, or other Subsidiary, with any of
their officers or directors and with their independent certified public
accountants.

      (g) Keeping of Books. Keep, and cause each Mortgagor and other Subsidiary
to keep proper books of record and account, in which full and correct entries
shall be made of all financial transactions and the assets and business of the
Borrower and each such Subsidiary in


                                       15
<PAGE>
accordance with generally accepted accounting principles in effect from time to
time consistently applied.

      (h) Compliance with Terms of Lease Agreements. Perform, and cause each
Subsidiary to perform, timely all of the obligations, covenants and agreements
of the landlord contained in any lease now or hereafter affecting any of the
Properties and require the timely performance by the tenant of all of the
obligations, covenants and agreements to be performed by such tenant.

      (i) Approval of Leases. The Borrower shall not, and shall cause each
Mortgagor and other Subsidiary not to, lease space at any of the Properties
without the Lender's consent, which consent shall not unreasonably be withheld,
provided, however, that no such consent of Lender shall be required for any
lease of 10,000 square feet or less unless (i) such lease requires the Lender to
provide a non-disturbance agreement to the lessee or (ii) such lease is not on
commercially reasonable terms. It is hereby expressly acknowledged and agreed by
the Lender that all leases at any Property identified on the certified rent roll
delivered to the Lender prior to the date hereof are and shall be deemed to be
approved.

      (j) Transactions with Affiliates. Conduct, and cause each of its
Subsidiaries to conduct, all transactions otherwise permitted under the Loan
Documents with any of their Affiliates or any Permitted Related Owners on terms
that are fair and reasonable and no less favorable to the Borrower or such
Subsidiary than it would obtain in a comparable arm's-length transaction with a
Person not an Affiliate. Transactions with the Lender, Vornado Realty Trust and
any of its Affiliates pursuant to agreements existing as of the date hereof
among Borrower or its Subsidiaries and Vornado Realty Trust and its Affiliates
are approved.

      (k) Maintenance of Properties. Maintain or cause to be maintained the
Properties and all other items constituting Collateral.

      (l) Compliance with Loan Documents. Comply and cause each Loan Party to
comply with all of its covenants set forth in each of the Loan Documents.

      (m) After Acquired Properties. Subject to the requirements of (i) liens
existing at the time of acquisition, (ii) purchase money mortgage liens and
(iii) liens in connection with construction or development financing which
construction or development financing is reasonably acceptable to the Lender,
grant to the Lender a valid mortgage lien on, or spread the lien of a Mortgage
to encumber, any real property acquired by Borrower or any Subsidiary after the
date hereof. Reference is made to that certain Building Loan Agreement, dated as
of July 3, 2002 (the "Building Loan Agreement"), by and among 731 Commercial LLC
and 731 Residential LLC and Bayerische Hypo-und Vereinsbank, AG (the "Bank"),
that certain Project Loan Agreement, dated as of July 3, 2002 (the "Project Loan
Agreement"), and that certain Supplemental Loan Agreement, dated as of July 3,
2002 (the "Supplemental Loan Agreement" and together with the Building Loan
Agreement and the Project Loan Agreement, the "Loan Agreements") pursuant to
which the Bank will lend to 731 Commercial LLC and 731 Residential LLC a maximum
of $_____ million (the "Construction Loan") for the purposes of funding the cost
of constructing a ___ square foot mixed residential/office/retail building at
the property known as 731 Lexington Avenue, New York, New York (the "Project").
It is understood and


                                       16
<PAGE>
agreed that so long as the Construction Loan (and any refinancing thereof that
has been approved by Lender and that does not permit a mortgage in favor of
Lender to be granted with respect to the Project) shall remain outstanding, no
such mortgage shall be required with respect to the Project.

      (n) Trust Fund. In compliance with Section 13 and Article 3-A of the Lien
Law of the State of New York, receive all proceeds of the Loan and hold the
right to receive all such proceeds as a trust fund to be used first for the
purpose of paying the cost of improvement, and apply all such proceeds first to
the payment of the cost of improvement before using any part of such proceeds
for any other purpose.

      SECTION 5.02. Negative Covenants. So long as any portion of the Loan
Obligations shall remain unpaid, the Borrower will not, or permit any other Loan
Party to, at any time, without the written consent of the Lender:

      (a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any
Loan Party or Subsidiary to create, incur, assume or suffer to exist, any Lien
on or with respect to any of its properties of any character (including, without
limitation, accounts) whether now owned or hereafter acquired, or sign or file,
or permit any Loan Party or Subsidiary to sign or file, under the Uniform
Commercial Code of any jurisdiction, a financing statement that names the
Borrower or any Mortgagor or any Subsidiary as debtor, or sign, or permit any
Loan Party or Subsidiary to sign, any security agreement authorizing any secured
party thereunder to file such financing statement, or assign or permit any
Mortgagor or Subsidiary to assign, any accounts or other right to receive
income, excluding, however, from the operation of the foregoing restrictions the
following:

            (i) Liens created by the Loan Documents or the Other Vornado Loan
Documents;

            (ii) Permitted Liens;

            (iii) Liens otherwise consented to by the Lender in writing; and

            (iv) Liens created by the Loan Agreements or the other documents
entered into in connection with the Loan Agreements (and any refinancings of the
Construction Loan approved by Lender or any workouts or additional financings by
the holders of the Construction Loan to 731 Residential LLC and/or 731
Commercial LLC).

Debt. Create, incur, assume or suffer to exist, or permit any Mortgagor or
Subsidiary to create, incur, assume or suffer to exist, any Debt other than:

            (i) Debt under the Loan Documents, or the Other Vornado Loan
Documents;

            (ii) Subordinate Debt or subordinated indebtedness approved by the
Lender;

            (iii) Debt secured by Permitted Liens; and


                                       17
<PAGE>
            (iv) The Construction Loan and any other Debt incurred pursuant to
the Loan Agreements (and any refinancings of the Construction Loan approved by
Lender or any workouts or additional financings by the holders of the
Construction Loan to 731 Residential LLC and/or 731 Commercial LLC).

      (b) Mergers, Etc. Merge into or consolidate with any Person or permit any
Person to merge into it, or permit any Loan Party or Subsidiary to do so, except
that (i) any Loan Party may merge into or consolidate with any other Loan Party;
provided that, in the case of any such consolidation, the Person formed by such
consolidation shall be a wholly owned Subsidiary of the Borrower; provided
further, that the Borrower shall pledge and grant to Lender a first priority
perfected lien in and security interest on the capital stock or other equity
interests of such Subsidiary owned by the Borrower to the Lender as further
collateral for the Loan Obligations, and (ii) any Subsidiary or Permitted
Related Owner that is not a Loan Party may merge into or consolidate with any
Subsidiary or Permitted Related Owner which is not a Loan Party.

      (c) Investments in Other Persons. Purchase or acquire the obligations or
stock of, or any other interest in, any Person (other than a Permitted Related
Owner), except such investments as are made with surplus cash and do not expose
the Borrower to any risk of loss in excess of the amount of cash invested.

      (d) Loans, etc. Make, or permit any Mortgagor or Subsidiary to make, loans
to any Person, other than to the Borrower, a wholly owned Subsidiary or a
Permitted Related Owner.

      (e) Dividends, Etc. Declare or pay any dividends, purchase, redeem,
retire, defease or otherwise acquire for value any of its capital stock or any
warrants, rights or options to acquire such capital stock, now or hereafter
outstanding (except that Permitted Related Owners may pay dividends to the
Borrower) return any capital to its stockholders as such, make any distribution
of assets, capital stock, warrants, rights, options, obligations or securities
to its stockholders as such or issue or sell any capital stock or any warrants,
rights or options to acquire such capital stock (except for capital stock issued
by Permitted Related Owners), or permit any of its Subsidiaries to purchase,
redeem, retire, defease or otherwise acquire for value any capital stock of the
Borrower or any warrants, rights or options to acquire such capital stock or to
issue or sell any capital stock or any warrants, rights or options to acquire
such capital stock; provided, however, that nothing contained in this Section
shall prohibit Borrower from (i) paying a dividend or making a distribution in
the form of, or from the proceeds of an issuance of, subordinated indebtedness
or otherwise (including, without limitation, payment in cash) as may reasonably
be required, based upon the advice of counsel, to enable the Borrower to qualify
as a REIT under the Code or (ii) paying a dividend or making a distribution from
the proceeds of the issuance by the Borrower of equity securities.

      (f) Change in Nature of Business. Make, or permit any Mortgagor to make,
any material change in the nature of its business as carried on at the date
hereof and will not, nor permit any Mortgagor or Subsidiary to, remove,
demolish, materially alter, discontinue the use of, sell, transfer, assign,
hypothecate, pledge or otherwise dispose of, except as permitted hereunder and
for sales, transfers, assignments and pledges to Subsidiaries or Permitted
Related Owners, any part of its assets necessary for the continuance of its
business, as presently


                                       18
<PAGE>
conducted and as presently contemplated, except in the normal course of
business. Notwithstanding the foregoing, no Mortgagor or Subsidiary shall
transfer any Property except to a Permitted Related Owner.

      (g) Charter Amendments. Amend, or permit any Mortgagor or Subsidiary to
amend, its certificate of incorporation or bylaws, partnership agreement,
certificate of limited partnership, operating agreement or certificate of
limited liability company.

      (h) Accounting Changes. Make, or permit any Mortgagor to make or permit,
any change in accounting policies or reporting practices, except as required by
generally accepted accounting principles.

      (i) Amendment, Etc. of Related Documents. Except as may be required in
order for the Borrower to qualify as a REIT under the Code, with respect to (i)
the Management Agreement, (ii) the Leasing Agreement, (iii) Major Leases, (iv)
the Architect's Contract (as defined in the Loan Agreements to be executed in
connection with the Construction Loan), (v) the Bloomberg Lease (as defined in
the Loan Agreements), (vi) the Construction Management Agreement (as defined in
the Loan Agreements), (vii) the Loan Agreements and other Loan Documents and
(ix) the Major Trade Contracts (as defined in the Loan Agreements), cancel or
terminate or consent to or accept any cancellation or termination thereof,
amend, modify or change in any material manner any term or condition thereof,
waive any material default under or any material breach of any material term or
condition thereof, agree in any manner to any other amendment, modification or
change of any material term or condition thereof or take any other action in
connection therewith that would impair the value of the interest or rights of
the Borrower or other Subsidiary thereunder or that would impair the rights or
interests of the Lender, or permit any Mortgagor or other Subsidiary to do any
of the foregoing.

      (j) Future Speculative Development. Develop, or permit any Mortgagor or
Subsidiary to develop, any undeveloped real property owned by the Borrower or
such Mortgagor or Subsidiary in the absence of executed leases approved by
Lender for more than 50% of the projected leasable space on such property;
provided, that development of the Project shall be permitted.

      (k) Negative Pledge. Except in connection with (i) Existing Debt, (ii)
Secured Debt permitted hereby, (iii) Subordinate Debt permitted hereby, and (iv)
Permitted Liens, but only to the extent expressly permitted herein, the Borrower
shall not enter into any covenant or other agreement that prevents it or could
prevent it in the future from pledging, granting a security interest in,
mortgaging, assigning, encumbering or otherwise creating a lien on any of its
property (whether real or personal, tangible or intangible, and now owned or
hereafter acquired) in favor of the Lender, or that would be breached if the
Borrower were to pledge, grant a security interest in, mortgage, assign,
encumber or otherwise create a lien on any of its property (whether real or
personal, tangible or intangible, and now owned or hereafter acquired) in favor
of the Lender.

      (l) Future Property Acquisition. Except as permitted in Section 6.01,
acquire, or permit any Mortgagor or Subsidiary to acquire, any real property
without the consent of the Lender and without executing and delivering or
causing such Mortgagor or Subsidiary to execute


                                       19
<PAGE>
and deliver any instrument the Lender may deem necessary or desirable to
effectuate such real property becoming additional security for the Loan.

      (m) Payments Under Subordinate Loan Documents. Make any payment in respect
of any Subordinate Debt (i) at any time while any amount shall be due and owing
under any of the Loan Documents or (ii) after the Loan shall have matured or the
Lender shall have accelerated payment of the Loan pursuant to Section 7.01 or
prepay any Subordinate Debt while at any time that any Loan Obligation remains
unpaid.

      (n) Transfer of Properties. Transfer title to any of the Properties except
to (i) any Mortgagor, (ii) any Person described in clause (a) of the definition
of Permitted Related Owner, (iii) any Person described in clause (b) of the
definition of Permitted Related Owner or (iv) with respect to the 59th Street
Property, 731 Commercial LLC and 731 Residential LLC, or to the holders of the
construction loan (or their nominee or nominees) as part of a deed in lien
transaction, provided that, (x) in the case of clause (iii), a receiver of a
Property sought to be transferred to such Permitted Related Owner has proposed
to enter into a lease at such Property or take any other action which would
materially adversely affect the Borrower's qualification as a REIT and the
Borrower has given ten (10) days' notice to the Lender of its intention to
transfer such Property to such Permitted Related Owner and (y) in the case of
the 59th Street Property, residential condominium units may be sold.

      (o) Issuance of Shares. Issue, or permit any Subsidiary (other than a
Permitted Related Owner) to issue any shares of stock that are not issued as of
the date hereof, except that notwithstanding this paragraph the Borrower shall
be permitted to issue shares of stock at any time so long as, taking into
account such issuance, Vornado Realty Trust and its Affiliates (including for
this purpose Interstate Properties) shall continue to own in the aggregate not
less than 20% of the outstanding shares of common stock of the Borrower, and,
provided further, with respect to Borrower only, that an automatic exchange
involving Excess Stock as defined in and pursuant to Borrower's Amended and
Restated Certificate of Incorporation shall not be treated as an issuance of
shares for the purposes of this Section.

      SECTION 5.03. Reporting Requirements. So long as any portion of the Loan
shall remain unpaid, the Borrower will, unless the Lender shall otherwise
consent in writing, furnish to the Lender:

      (a) Quarterly Financials. (i) As soon as available and in any event within
45 days after the end of each of the first three quarters of each fiscal year of
the Borrower, Borrower's Quarterly Report on Form 10-Q for the preceding quarter
as filed with the Securities and Exchange Commission (the "Commission"),
containing unaudited financial statements as required by law; and (ii) as soon
as available and in any event within 60 days after the end of each of the first
three quarters of each fiscal year, an unaudited consolidating balance sheet of
the Borrower and its Subsidiaries as of the end of such quarter and
consolidating statement of operations and cash flows of the Borrower and its
Subsidiaries for the period commencing at the end of the previous fiscal year
and ending with the end of such quarter, setting forth in each case in
comparative form the corresponding figures for the corresponding period of the
preceding fiscal year, all in reasonable detail and represented to be true and
correct (subject to year-end


                                       20
<PAGE>
audit adjustments) by the Chairman of the Board of the Borrower or other officer
of the Borrower.

      (b) Annual Financials. (i) As soon as available and in any event within 90
days after the end of each fiscal year of the Borrower, a copy of the Borrower's
Annual Report on Form 10-K for such fiscal year as filed with the Commission;
and (ii) as soon as available and in any event within 120 days after the end of
each fiscal year, an unaudited consolidating balance sheet of the Borrower and
its Subsidiaries as of the end of such fiscal year and an unaudited
consolidating statement of operations and cash flows of the Borrower and its
Subsidiaries for such fiscal year, represented to be true and correct by the
Chairman of the Board of the Borrower or other officer of the Borrower.

      (c) Litigation. Promptly after the commencement thereof, notice of all
actions, suits, investigations, litigation and proceedings before any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, affecting any Loan Party of the type described in Section
4.01(h), and promptly after the occurrence thereof, notice of any material
adverse change in the status of the Disclosed Litigation from that described on
Schedule IV hereof.

      (d) Environmental Conditions. Promptly after the occurrence thereof,
notice of any condition or occurrence that results in a material noncompliance
by any Loan Party or any of its Subsidiaries with any Environmental Law or
Environmental Permit or would be reasonably likely to (i) form the basis of an
Environmental Action against any Loan Party or any of its Subsidiaries or any
Property that could have a Material Adverse Effect or (ii) cause any
restrictions on ownership, occupancy, use or transferability under any
Environmental Law.

      (e) Financial Data for Each Property. Not later than 120 days after the
end of each fiscal year, and not later than sixty (60) days after the end of
each fiscal quarter, financial data in form reasonably satisfactory to the
Lender relating to the operation of each of the Properties, including, without
limitation, certified rent roll and summary of leases represented as true and
correct by the Chairman of the Board of the Borrower or other officer of the
Borrower.

      (f) Budget. To the extent required and received under the Management
Agreement, not less than 30 days prior to the commencement of each fiscal year,
an annual operating budget relating to the Properties for the upcoming fiscal
year including, without limitation, the projected gross rental income and
projected operating expenses on a line item basis, provided, however, nothing
herein contained shall be deemed to require the Borrower to comply with such
budgets.

      (g) Other Information. Such other information respecting the business,
financial condition, operations, performance or properties of any Loan Party as
the Lender may from time to time reasonably request.

      SECTION 5.04. Covenants of the Lender. (a) The Lender hereby covenants to
Borrower that it will not exercise any rights, including rights exercisable upon
the occurrence of an Event of Default, that it has arising from or as a result
of this Credit Agreement or any related agreement to cause Borrower or any
Subsidiary of Borrower or any Permitted Related Owner to (i) enter into a lease
or lease amendment that either (A) provides for payments that are based,


                                       21
<PAGE>
directly or indirectly (including through sub-leasing), upon the net "income or
profits" of any person (as defined in Section 856(d) (2) of the Code) or (B)
requires Borrower or any Subsidiary of Borrower or any Permitted Related Owner
to provide a service to a tenant, other than through an independent contractor
(as defined in Section 856(d)(2) of the Code), where the provision of such
service by Borrower or any of its Subsidiaries or any Permitted Related Owner
would cause rents received by the Borrower or any of its Subsidiaries to fail to
be "rents from real property" under Section 856(d)(2) of the Code, (ii) engage
in a new line of business which (A) is unrelated to the development or leasing
of real property and (B) would create a substantial risk, as a result of its
generation of income not described in Section 856(c)(2) or (c)(3) of the Code,
that Borrower would fail to qualify as a REIT under the Code or (iii) acquire an
asset that would cause Borrower to fail to satisfy the asset test of Section
856(c)(5) of the Code; provided, however, that the foregoing covenants of this
Section 5.04(a) shall not (x) preclude the Lender from collecting amounts due to
the Lender under this Credit Agreement or from foreclosing on any property
securing such indebtedness or (y) be deemed to have been breached or violated by
the Lender as a result of any act or action (including, without limitation, the
execution of a lease) made, done or taken by any receiver for any property of
any Loan Party (including a receiver appointed at the request of the Lender)
unless a motion to compel such act or action was made by the Lender to the court
which appointed such receiver.

      (b) The Lender agrees to use reasonable efforts to preserve the
confidentiality of any Confidential Information received by it from the Borrower
except as required by law or court order.

      (c) The Lender shall execute and deliver a non-disturbance agreement
substantially in the form of Exhibit C hereto (with such changes as the Lender
may reasonably request) in connection with any lease approved by the Lender
pursuant to Section 5.01(i) where the tenant is a nationally recognized
credit-worthy retail tenant, provided that the tenant under such Lease shall
require such non-disturbance agreement.

                                  ARTICLE VI.

                               SPECIAL PROVISIONS

      SECTION 6.01. Condemnation and Casualty. (a) In the event of any
condemnation or casualty of any Property in part or in the entirety, the
proceeds of such condemnation or casualty, to the extent not retained or
otherwise applied by the holder of any mortgage securing Senior Debt on such
Property, or by the holder of the Construction Loan, applied as required
pursuant to any Major Lease approved by the Lender at the Property or applied by
such mortgagee or in accordance with such Major Lease either to restore the
improvements on such Property or to reduce such Senior Debt or the Construction
Loan, as applicable, applied as required pursuant to any condominium declaration
and/or related by-laws affecting any Property that has previously been approved
by Lender to restore the improvements on such Property or applied in accordance
with the Loan Documents, shall be immediately deposited by Borrower in a cash
collateral account to be maintained by Borrower at a depository designated by
Lender and under the sole dominion and control of Lender (the "Cash Collateral
Account") pursuant to a cash collateral agreement to be entered into between
Borrower, Lender and such Depository (the "Cash Collateral Agreement"); (such
proceeds of condemnation so


                                       22
<PAGE>
deposited being herein called "Condemnation Proceeds"; such proceeds of casualty
so deposited being herein called "Casualty Proceeds"; and Condemnation Proceeds
and/or Casualty Proceeds being herein called "Proceeds") and shall constitute
additional collateral for the Loan Obligations.

      (b) Provided that no Default or Event of Default shall have occurred and
be continuing, the Borrower shall be entitled to withdraw any Condemnation
Proceeds from the Cash Collateral Account for the purpose of acquiring
additional real estate assets with the consent of the Lender, which consent
shall not be unreasonably withheld, provided that, subject to the Loan
Documents, the Loan Agreements and the Other Vornado Loans (i) Borrower shall
have delivered to Lender an appraisal for such real estate (x) for an amount at
least equal to the amount of the Condemnation Proceeds sought to be withdrawn by
the Borrower to purchase such real estate and (y) issued by an appraisal company
and in form and substance reasonably satisfactory to the Lender; (ii) the
Borrower shall have delivered to Lender environmental, engineering and such
other studies, reports, documents, title reports, violation searches and other
information relating to such real estate as would be generally required by the
Lender in accordance with good institutional lending practices, all of which
studies, reports, documents and other information shall be in form and substance
reasonably satisfactory to the Lender; (iii) the Lender shall be granted a
priority lien mortgage on said real estate to further secure the Guaranty (the
"Additional Mortgage"); (iv) the Borrower shall have delivered to Lender a
paid-up mortgage title insurance policy in favor of Lender, insuring the
Additional Mortgage as a second priority mortgage on such real estate, subject
to no encumbrances or other title exceptions except those title exceptions which
Lender reasonably determines are acceptable based on good institutional lending
practices; and (v) the Borrower shall have paid all reasonable costs and
expenses of the Lender (including reasonable attorneys' fees and expenses)
incurred by the Lender in connection with the review of any of the foregoing
conditions.

      (c) The Borrower shall also have the right to withdraw the Condemnation
Proceeds remaining in the Cash Collateral Account to pay for the cost of
constructing improvements on any Property covered by any Mortgage, and the
Borrower shall have the right to withdraw any Casualty Proceeds in the Cash
Collateral Account to pay for the repair and restoration of improvements whose
damage or destruction generated such Casualty Proceeds, provided that, in all
cases, subject to the Loan Documents, the Loan Agreements and any condominium
declaration and/or related by-laws affecting such Property that has previously
been approved by Lender and the Other Vornado Loans: (i) no Default or Event of
Default shall be continuing; (ii) the Lender shall have approved the plans and
specifications for the construction of such improvements as well as the general
contract and other major contracts to be entered into by the Borrower in
connection with such construction, which approval will not unreasonably be
withheld; (iii) the Lender shall have received such certification and assurances
as Lender shall reasonably request to assure it that the cost of constructing
the improvements as shown on the plans approved by Lender does not exceed the
amount of the Proceeds sought to be withdrawn by the Borrower to pay for such
improvements; and (iv) the Lender may impose such further conditions and
restrictions upon the disbursement of such Proceeds as the Lender deems
necessary or desirable, consistent with prudent institutional construction
lending practices, to assure the completion of the proposed improvements subject
to no liens or encumbrances (except Permitted Liens) and in accordance with the
aforesaid approved plans and all applicable laws.


                                       23
<PAGE>
      SECTION 6.02. Payment of REIT Dividends. In the event that the Borrower
shall determine, upon the advice of counsel then generally used by Borrower for
tax advice, that it shall be required to pay a dividend or make a distribution
to stockholders in order to preserve its qualification as a REIT, whether or not
the Proceeds shall have been applied as contemplated pursuant to Section 6.01
(b) or (c), then, anything herein to the contrary notwithstanding, the Borrower
may, with the consent of the Lender (i) incur unsecured subordinated
indebtedness for the purpose of paying such dividend or making such distribution
or to pay such dividend or make such distribution in the form of subordinated
indebtedness and/or (ii) withdraw Proceeds from the Cash Collateral Account to
pay such dividend or make such distribution.

                                  ARTICLE VII.

                                EVENTS OF DEFAULT

      SECTION 7.01. Events of Default. If any of the following events ("Events
of Default") shall occur and be continuing:

      (a) the Borrower shall fail to pay (i) any principal of the Loan, when the
same becomes due and payable or (ii) any other payment under any Loan Document,
in each case under this clause (ii) within five days after notice of the same
becoming due and payable; or

      (b) any representation or warranty made by any Loan Party (or any of its
officers) under or in connection with any Loan Document shall prove to have been
incorrect in any material respect when made; or

      (c) the Borrower shall fail to perform or observe, in any material
respect, any term, covenant or agreement contained in Section 5.02; or

      (d) except as otherwise specified in such Loan Document, any Loan Party
shall fail to perform any other term, covenant or agreement contained in any
Loan Document on its part to be performed or observed if such failure shall
remain unremedied for 30 days after written notice (or such longer period, if
any, as may be set forth in the applicable covenant or agreement) thereof shall
have been given to the Borrower by the Lender; or

      (e) any Loan Party or any of its Subsidiaries shall fail to pay any
principal of, premium or interest on or any other amount payable in respect of
or any Subordinated Debt of such Loan Party or such Subsidiary (as the case may
be), when the same becomes due and payable (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise), and such failure shall
continue after the applicable notice and grace period, if any, specified in the
agreement or instrument relating to such Subordinated Debt; or any other event
shall occur or condition shall exist under any agreement or instrument relating
to any such Subordinated Debt and shall continue after the applicable notice and
grace period, if any, specified in such agreement or instrument, if the effect
of such event or condition is to accelerate the maturity of such Subordinated
Debt or otherwise to cause such Subordinated Debt to mature; or any such
Subordinated Debt shall be declared to be due and payable or required to be
prepaid or redeemed (other than by a regularly scheduled required prepayment or
redemption), purchased


                                       24
<PAGE>
or defeased, or an offer to prepay, redeem, purchase or defease such
Subordinated Debt shall be required to be made, in each case prior to the stated
maturity thereof; or

      (f) any Loan Party shall generally not pay its debts as such debts become
due, or shall admit in writing its inability to pay its debts generally, or
shall make a general assignment for the benefit of creditors; or any proceeding
shall be instituted by or against any Loan Party seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, or other similar official for it or for any substantial part
of its property and, in the case of any such proceeding instituted against it
(but not instituted by it) that is being diligently contested by it in good
faith, either such proceeding shall remain undismissed or unstayed for a period
of 60 days or any of the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against, or the appointment of a
receiver, trustee, custodian or other similar official for, it or any
substantial part of its property) shall occur; or any Loan Party shall take any
corporate action to authorize any of the actions set forth above in this
subsection (f); or

      (g) any judgment or order for the payment of money in excess of $500,000
shall be rendered against any Loan Party, and either (i) enforcement proceedings
shall have been commenced and be continuing by any creditor upon such judgment
or order or (ii) there shall be any period of 20 consecutive days during which a
stay of enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or

      (h) any non-monetary judgment or order shall be rendered against any Loan
Party that is reasonably likely to have a Material Adverse Effect, and there
shall be any period of 20 consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall not be
in effect; or

      (i) any material provision of any Loan Document after delivery thereof
shall for any reason cease to be valid and binding on or enforceable against any
Loan Party to it, or any such Loan Party shall so state in writing; or

      (j) except as otherwise permitted under Section 5.02(a), any Collateral
Document after delivery thereof shall for any reason (other than pursuant to the
terms thereof) cease to create a valid and perfected Lien on the Collateral
purported to be covered thereby with the priority of liens set forth therein;

      (k) any Event of Default (as such term is defined in any Loan Document)
shall occur and be continuing;

      (l) any Event of Default (as such term is defined in any loan document of
the Other Vornado Loans) shall occur and be continuing; or

      (m) any Event of Default (as such term is defined in the Loan Agreements
of the Construction Loan) shall occur and be continuing;

then, and in any such event, the Lender may, by notice to the Borrower, declare
the Loan Obligations, together with all interest thereon and all other amounts
payable under this Credit


                                       25
<PAGE>
Agreement and the other Loan Documents, to be forthwith due and payable,
whereupon the Notes, all such interest and all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Borrower;
provided, however, that in the event of an actual or deemed entry of an order
for relief with respect to any Loan Party under the United States Bankruptcy
Code, the Notes, all such interest and all such amounts shall automatically
become and be due and payable, without presentment, demand, protest or any
notice of any kind, all of which are hereby expressly waived by the Borrower.

                                 ARTICLE VIII.

                                  MISCELLANEOUS

      SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision of
this Credit Agreement or the Note, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Borrower and the Lender, and then such amendment, waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.

      SECTION 8.02. Notices, Etc. All notices and communications under this
Credit Agreement shall be in writing and shall be given by either (a)
hand-delivery, (b) facsimile transmission, (c) first class mail (postage
prepaid), or (d) reliable overnight commercial courier (charges prepaid)

            (i)   if to the Borrower, to:

                  Alexander's Inc.
                  c/o Vornado Realty Trust
                  210 Route 4 East
                  Paramus, New Jersey  07652-0910
                  Attention: Chief Financial Officer
                  Facsimile No.: (201) 587-0600

                  with a copy to:

                  Winston & Strawn
                  200 Park Avenue
                  New York, New York 10166
                  Facsimile No.: (212) 294-4700
                  Attention:  Neil Underberg

        and       Vornado Realty Trust
                  888 Seventh Avenue
                  New York, New York 10019
                  Attention: President
                  Facsimile No.: (212) 894-7070


                                       26
<PAGE>
            (ii)  if to the Lender, to:

                  Vornado Lending L.L.C.
                  c/o Vornado Realty Trust
                  210 Route 4 East
                  Paramus, New Jersey 07652-0910
                  Attention: Chief Financial Officer
                  Facsimile No.: (201)587-0600

Notice shall be deemed to have been given and received: (i) if by hand delivery,
upon delivery; (ii) if by facsimile, upon transmission; (iii) if by mail, three
(3) calendar days after the date first deposited in the United States mail; and
(iv) if by overnight courier, on the date scheduled for delivery. A party may
change its address by giving written notice to the other party as specified
herein.

      SECTION 8.03. No Waiver; Remedies. No failure on the part of the Lender to
exercise, and no delay in exercising, any right hereunder or under the Notes
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law.

      SECTION 8.04. Costs, Expenses. (a) The Borrower agrees to pay on demand
(i) all reasonable costs and expenses of the Lender in connection with the
preparation, execution, delivery, administration, modification and amendment of
the Loan Documents (including, without limitation, the reasonable fees and
expenses of counsel for the Lender with respect thereto) and (ii) all reasonable
costs and expenses of the Lender in connection with the enforcement of the Loan
Documents, whether in any action, suit or litigation, any bankruptcy, insolvency
or other similar proceeding affecting creditors' rights generally or otherwise
(including, without limitation, the reasonable fees and expenses of counsel for
the Lender with respect thereto).

      (b) The Borrower agrees to indemnify and hold harmless the Lender and each
of their Affiliates and their officers, directors, employees, agents and
advisors (each, an "Indemnified Party") from and against any and all claims,
damages, losses, liabilities and expenses (including, without limitation,
reasonable fees and expenses of counsel) that may be incurred by or asserted or
awarded against any Indemnified Party, in each case arising out of or in
connection with or by reason of, or in connection with the preparation for a
defense of, any investigation, litigation or proceeding arising out of, related
to or in connection with (i) the transactions contemplated hereby, (ii) the
actual or alleged presence of Hazardous Materials on any property or any
Environmental Action relating in any way to any Loan Party or any of its
Subsidiaries, (iii) disputes with any architect, general contractor,
subcontractor, materialman or supplier, or on account of any act or omission to
act by the Lender in connection with any Property, (iv) any untrue statement of
a material fact contained in information submitted to the Lender by the Borrower
or the omission of any material fact necessary to be stated therein in order to
make such statement not misleading or incomplete, (v) the failure of the
Borrower or any Loan Party to perform any obligations required to be performed
by the Borrower or any Loan Party under any


                                       27
<PAGE>
Loan Document and (vi) the ownership, construction, occupancy, operation, use or
maintenance of any of the Properties, in each case whether or not the
transactions contemplated hereby are consummated, except (i) to the extent such
claim, damage, loss, liability or expense is found to have resulted from any
Indemnified Party's gross negligence or willful misconduct. Notwithstanding the
foregoing provisions of this Section 8.04(b), the Borrower shall have no
obligation to indemnify any Indemnified Party against, or hold it harmless from,
(i) any judgment rendered by a court of competent jurisdiction against any
Indemnified Party and in favor of the Borrower, or (ii) any legal fees and
expenses incurred by the Indemnified Party in defending the action brought by
the Borrower which resulted in such judgment in favor of the Borrower, but the
foregoing provisions of this sentence shall not diminish or otherwise affect the
Borrower's liability for payment of all legal fees and expenses incurred by the
Lender in enforcing the Lender's rights and remedies under any of the Loan
Documents.

      (c) In case any action shall be brought against the Lender or any other
Indemnified Party in respect of which indemnity may be sought against the
Borrower, the Lender or such other Indemnified Party shall promptly notify the
Borrower and the Borrower shall assume the defense thereof, including the
employment of counsel selected by the Borrower and reasonably satisfactory to
the Lender, the payment of all costs and expenses and the right to negotiate and
consent to settlement. The failure of the Lender to so notify the Borrower shall
not relieve the Borrower of any liability it may have under the foregoing
indemnification provisions or from any liability which it may otherwise have to
the Lender or any of the other Indemnified Parties except to the extent that the
Borrower incurs actual expenses or suffers actual monetary loss as a result of
such failure to give notice. The Lender shall have the right, at its sole
option, to employ separate counsel and as long as Borrower is complying with its
indemnification obligations hereunder, the fees and disbursements of such
separate counsel shall be paid by Lender. The Borrower shall not be liable for
any settlement of any such action effected without its consent, but if settled
with the Borrower's consent, or if there be a final judgment for the claimant in
any such action, the Borrower agrees to indemnify and save harmless the Lender
from and against any loss or liability by reason of such settlement or judgment.

      (d) If any Loan Party fails to pay when due any costs, expenses or other
amounts payable by it under any Loan Document, including, without limitation,
fees and expenses of counsel and indemnities, such amount may be paid on behalf
of such Loan Party by the Lender, in its sole discretion.

      (e) The provisions of this Section 8.04 shall survive the repayment or
other satisfaction of the Borrower's Obligations hereunder.

      SECTION 8.05. Merger. This Credit Agreement and the other Loan Documents
constitute the sole agreement of the parties with respect to the transactions
contemplated herein and therein and supersede all oral negotiations and prior
writings with respect thereto.

      SECTION 8.06. Binding Effect. This Credit Agreement shall become effective
when it shall have been executed by the Borrower and the Lender and thereafter
shall be binding upon and inure to the benefit of the Borrower, the Lender and
their respective successors and assigns, except that the Borrower shall not have
the right to assign its rights hereunder or any interest herein without the
prior written consent of the Lender.


                                       28
<PAGE>
      SECTION 8.07. Lender's Discretion. Except as otherwise specified in this
Credit Agreement, whenever this Credit Agreement provides that the Lender's
consent or approval is required, or that any action may be taken or not taken at
the Lender's option, such consent or approval may be given or not, and such
action may be taken or not, in the Lender's sole discretion. Any reference in
this Credit Agreement to Lender's consent or approval being required shall be
deemed to refer to Lender's prior consent or approval given in writing.

      SECTION 8.08. Participations. (a) The Lender may sell participations in up
to one-third of its rights and obligations under this Credit Agreement
(including, without limitation, of its Loan and the Notes held by it) (the
purchaser of any rights and obligations being referred to herein as a
"Participant"); provided, however, that (i) the obligations of the Borrower and
the Lender under this Credit Agreement and the other Loan Documents shall remain
unchanged, (ii) the Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) the Borrower shall
continue to deliver all notices, communications and payments solely to the
Lender and any such notice, communication or payment shall be valid and
effective for all purposes hereunder notwithstanding any such sale of
participations. Upon the sale of any participation permitted hereunder, the
Borrower shall cooperate with such reasonable requests of the Lender, at the
sole expense of the Lender, to sever and split the note issued hereunder among
the Lender and any Participants.

      (b) The Lender may, in connection with any participation or proposed
participation pursuant to this Section 8.08, disclose to the Participant or
proposed Participant, any information relating to the Borrower furnished to the
Lender by or on behalf of the Borrower; provided, however, that, prior to any
such disclosure, the Participant or proposed Participant shall agree to preserve
the confidentiality of any Confidential Information received by it from the
Lender.

      (c) Notwithstanding any other provision set forth in this Credit
Agreement, the Lender may at any time create a security interest in all or any
portion of its rights under this Credit Agreement (including, without
limitation, the Loan and the Notes held by it) in favor of any Federal Reserve
Bank in accordance with Regulation A of the Board of Governors of the Federal
Reserve System.

      SECTION 8.09. Governing Law. This Credit Agreement and the Note shall be
governed by, and construed in accordance with, the laws of the State of New
York.

      SECTION 8.10. Execution in Counterparts. This Credit Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Credit Agreement by telecopier shall be effective as delivery of a manually
executed counterpart of this Credit Agreement.

      SECTION 8.11. Waiver of Jury Trial. Each of the Borrower and the Lender
hereby irrevocably waives all right to trial by jury in any action, proceeding
or counterclaim (whether based on contract, tort or otherwise) arising out of or
relating to any of the Loan Documents, the Loan or the actions of the Lender in
the negotiation, administration, performance or enforcement thereof. The
Borrower acknowledges and agrees that this section is a specific and material


                                       29
<PAGE>
aspect of this Credit Agreement and that the Lender would not extend credit to
the Borrower if the waiver set forth in this section were not a part of this
Credit Agreement.

      SECTION 8.12. Jurisdiction. The Borrower irrevocably appoints each and
every owner, partner and/or officer of the Borrower as its attorneys upon whom
may be served, by regular or certified mail at the address set forth herein, any
notice, process or pleading in any action or proceeding against it arising out
of or in connection with this Credit Agreement or any other Loan Document; and
the Borrower hereby consents that any action or proceeding against it may be
commenced and maintained in any court within the State of New Jersey or the
State of New York or in the United States District Court for the District of New
Jersey or the United States District Court for the Southern District of New York
by service of process on any such owner, partner and/or officer; and the
Borrower agrees that the courts of the State of New Jersey and the courts for
the State of New York and the courts for the United States District Court for
the District of New Jersey and the courts for the United States District Court
for the Southern District of New York shall have jurisdiction with respect to
the subject matter hereof and the person of the Borrower and all collateral
securing the obligations of the Borrower. The Borrower agrees not to assert any
defense to any proceeding initiated by the Lender in such court based upon
improper venue or inconvenient forum. The foregoing shall not limit, restrict or
otherwise affect the right of the Borrower or the Lender to commence any action
on this Credit Agreement or any other Loan Document in any other courts having
jurisdiction.

      SECTION 8.13. Continuing Enforcement. If, after receipt of any payment of
all or any part of the Borrower's Obligations hereunder, the Lender is required
by law in connection with insolvency, fraudulent conveyance, bankruptcy or
similar proceedings to surrender such payment then this Credit Agreement and the
other Loan Documents shall continue in full force and effect, and the Borrower
shall be liable for, and shall indemnify defend and hold harmless the Lender
with respect to the full amount so surrendered. The provisions of this Section
8.13 shall survive the termination of this Credit Agreement and the other Loan
Documents and shall remain effective notwithstanding the payment of the
Borrower's Obligations hereunder, the cancellation of the Notes or any other
Loan Document, the release of any security interest, lien or encumbrance
securing the Borrower's Obligations hereunder or any other action which the
Lender may have taken in reliance upon its receipt of such payment. Any
cancellation, release or other such action by the Lender shall be deemed to have
been conditioned upon any payment of the Borrower's Obligations hereunder having
become final and irrevocable.

                                      * * *

                         [SIGNATURES ON FOLLOWING PAGE]


                                       30
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.


                                          ALEXANDER'S, INC.


                                          By:   /s/ Brian Kurtz
                                             -----------------------------------
                                             Name:  Brian Kurtz
                                             Title: Assistant Secretary



                                          VORNADO LENDING  L.L.C.


                                          By:   /s/ Joseph Macnow
                                             -----------------------------------
                                             Name:  Joseph Macnow
                                             Title: Executive Vice President


                                       31
<PAGE>
STATE OF        New York            )
                                    )       ss.:
COUNTY OF       New York            )


On the 2nd day of July, in the year 2002, before me, the undersigned, personally
appeared Brian Kurtz, personally known to me or proved to me on the basis of
satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed
to the within instrument and acknowledged to me that he/she/they executed the
same in his/her/their capacity(ies), and that by his/her/their signature(s) on
the instrument, the individual(s), or the person upon behalf of which the
individual(s) acted, executed the instrument.

                                         /s/ Leon T. Busteed
                                         --------------------------------------
                                            Notary Public Leon Busteed
                                            My commission expires: Nov. 30, 2002


STATE OF        New York            )
                                    )       ss.:
COUNTY OF       New York            )


On the 2nd day of July, in the year 2002, before me, the undersigned, personally
appeared Joseph Macnow, personally known to me or proved to me on the basis of
satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed
to the within instrument and acknowledged to me that he/she/they executed the
same in his/her/their capacity(ies), and that by his/her/their signature(s) on
the instrument, the individual(s), or the person upon behalf of which the
individual(s) acted, executed the instrument.

                                         /s/ Leon T. Busteed
                                         --------------------------------------
                                            Notary Public Leon Busteed
                                            My commission expires: Nov. 30, 2002


                                       32
<PAGE>
                                   SCHEDULE I
                                   PROPERTIES


REGO PARK II PROPERTY
Address:   Junction Boulevard
           Rego Park, New York

Tax Map Designation:
      Block: 2080       Lot: 101


REGO PARK III PROPERTY
Address:   Junction Boulevard
           Rego Park, New York

Tax Map Designation:
      Block: 2077       Lot: 90 and 98
      Block: 2076       Lot: 50 and 63


                                       33
<PAGE>
                                   SCHEDULE II
                         CONFLICTS UNDER LOAN DOCUMENTS


1.    Completing recordation and filing of the Mortgages and other documents.


                                       34
<PAGE>
                                  SCHEDULE III
                             REQUIRED AUTHORIZATIONS


1.    Recording Mortgages and making other security filings.


                                       35
<PAGE>
                                   SCHEDULE IV
                              DISCLOSED LITIGATION


1.    Claims in process in the Bankruptcy Proceeding as set forth in attached
      Schedule IV-A.


                                       36
<PAGE>
                                  SCHEDULE V(a)
                          ENVIRONMENTAL NON-COMPLIANCE


1.    Environmental matters disclosed in Alexander's, Inc. quarterly report on
      Form 10-Q for the quarter ended September 30, 1994, et. seq.


                                       37
<PAGE>
                                  SCHEDULE V(b)
                              ENVIRONMENTAL REPORTS


Phase I Environmental Site Assessment prepared for Alexander's, Inc., 31 West
34th Street, Seventh Floor, New York, NY 10001 and prepared by Certified
Engineering & Testing Company, Inc., 444 Park Avenue South, Suite 702, New York,
NY 10016 for:

1.    Alexander's Department Store, 96-05 Queens Boulevard, Rego Park, New York
      11374 (December 1, 1993)


                                       38
<PAGE>
                                   SCHEDULE VI
                       DEFAULTS UNDER MATERIAL AGREEMENTS


                                     (None)


                                       39
<PAGE>
                                  SCHEDULE VII
                            NON-COMPLIANCE WITH LAWS


                                     (None)


                                       40
<PAGE>
                                    EXHIBIT A
                                  FORM OF NOTE


                                       A-1
<PAGE>
                                    EXHIBIT B
                                FORM OF GUARANTY


                                       B-1
<PAGE>
                                    EXHIBIT C
                        FORM OF NON-DISTURBANCE AGREEMENT


                                       B-1
<PAGE>
                                    EXHIBIT D
                                FORM OF MORTGAGE
<PAGE>
                                    EXHIBIT E
                            FORM OF PLEDGE AGREEMENT


                                       2