LOAN PARTICIPATION AGREEMENT
LOAN PARTICIPATION AGREEMENT (this "Agreement") dated as of December 1,
1998 between MORGAN GUARANTY TRUST COMPANY OF NEW YORK (the "Bank") and
WELLSFORD CAPITAL (the "Participant").
Reference is made to the Revolving Credit Agreement dated as of March
"8, 1998 (the "Credit Agreement") between Safeguard Capital Fund, L.P., a
Delaware limited partnership (the "Borrower") and the Bank, a copy of which
has been furnished to the Participant. Capitalized terms used herein without
definition shall have the respective meanings ascribed thereto in the Credit
Agreement. Pursuant to the terms of the Credit Agreement, the Bank is
committed, subject to the terms and conditions thereof, to make a loan
(collectively, the "Loan") in advances (each an "Advance") to the Borrower
from time to time in an aggregate principal amount not to exceed $90,000,000
at any one time outstanding and with the aggregate principal amount of all
Advances made under the Credit Agreement not to exceed $100,000,000 (the
"Commitment").
On the following terms and conditions, the Bank hereby agrees to sell
and the Participant hereby agrees to purchase an undivided junior interest
(the "Junior Participation") in the Loan and each of the Advances, including,
without limitation, the initial Advances in the amount of $11,8"5,000.00
heretofore made by the Bank to the Borrower. The maximum aggregate
outstanding principal amount of the Junior Participation is $45,000,000, and
the relationship which the aggregate outstanding principal amount of (a) as
to the Participant, the Junior Participation, and (b) as to the Bank, the sum
of (i) the Senior Participation (as hereinafter defined) plus (ii) any
Default Senior Interest (as hereinafter defined) plus (iii) any Bank Junior
Participation (as hereinafter defined), as the case may be, bears to the
aggregate outstanding principal amount of the Loan made or to be made by the
Bank (determined at any given time after giving effect to any assignment by
the Bank of any of its right, title and interest under the Credit Agreement
but without giving effect to the sale of this or any other participation
therein) is hereinafter called the "Participation Percentage". The Junior
Participation will be payable in accordance with Section " below and shall
bear interest at an annual rate equal to 1.50% in excess of the interest rate
payable under the Note as in effect from time to time (the "Junior
Participation Rate"). The Bank will retain a senior interest in the Loan (the
"Senior Participation") payable in accordance with Section " below, which
Senior Participation shall bear interest at an annual rate equal to the
interest rate payable under the Note as in effect from time to time less
1.50% (the "Senior Participation Rate"). For purposes of this Agreement, the
term "Note" shall mean the promissory note executed by Borrower in favor of
the Bank in the maximum principal amount of $90,000,000 together with any
modification thereof made in accordance with Section 4(f) below.
1. ADVANCES; SERVICING ADVANCES
(a) Upon the Bank's receipt of a Preliminary Borrowing Request from the
Borrower and all documentation required by the Bank under the Credit
Agreement in support thereof, the Bank shall, provided it has approved such
Preliminary Borrowing Request, promptly furnish to the Participant a copy
thereof as well as all such documents and information furnished by or on
behalf of the Borrower in connection therewith. The Participant shall have
five (5) Business Days to review the Preliminary Borrowing Request. In the
event that upon receiving a Preliminary Borrowing Request the Participant
delivers a certification to the Bank (a "Dispute Notice"), which Dispute
Notice must be received by the Bank within five (5) Business Days following
Participant's receipt of the Preliminary Borrowing Request, certifying that
the Participant has determined in good faith that the Collateral Value
calculated by the Bank after giving effect to the new Advance is too high,
the Participant shall not be obligated to fund the Participant's Share (as
hereinafter defined) of the new Advance. In the event the Participant does
not deliver to the Bank a written revocation of the Dispute Notice within one
Business Day after delivering the Dispute Notice, the Participant shall be
deemed to have elected not to fund the Participant's Share of such new
Advance and shall also be deemed to have automatically waived its right to
fund any future Advance made pursuant to the Credit Agreement. In the event
that the Participant fails to deliver a Dispute Notice by the end of such
fifth (5th) Business Day, the Participant shall be deemed to have waived its
rights under this paragraph (a) and shall be obligated to fund the
Participant's Share of the new Advance in accordance with paragraph (c) of
this Section 1. Any Dispute Notice shall include reasonable back-up for such
determination.
(b) In the event the Participant timely delivers a Dispute Notice, the
Bank shall fund one hundred percent (100%) of the Advance and shall be deemed
to be the owner of a fifty percent (50%) Senior Participation in such Advance
and a new junior participation (a "Bank Junior Participation") evidencing the
remaining fifty percent (50%) interest in such Advance, which Bank Junior
Participation shall be pari passu with the Junior Participation held by the
Participant and shall bear interest at the Junior Participation Rate in
accordance with Section " below, provided, however, that all payments
received by the Bank on account of such Advance shall nonetheless be
aggregated with payments received by the Bank on account of the balance of
the Loan for purposes of distributions under Section ".
(c) Provided that the Preliminary Borrowing Request has been approved
by the Bank, and unless a Dispute Notice has been timely delivered in
accordance with paragraph (a) above and not revoked, upon the Bank's receipt
of a Borrowing Request, a copy of which the Bank shall promptly furnish to
the Participant, the Participant will by no later than 10:00 a.m. (New York
City time) on the date of the requested borrowing set forth in the Borrowing
Request, make available to the Bank at its office at 60 Wall Street, New
York, New York 10"60, funds immediately available in the amount of fifty
percent (50%) (the "Participant's Share") of the new Advance.
(d) The Note evidencing, and all other documents relating to, the Loan
(the "Loan File") will be retained by the Bank or a custodian on behalf of
the Bank, but copies thereof will be furnished to the Participant. The Loan
File shall contain, at a minimum, the documents listed on SCHEDULE A attached
hereto.
(e) Record title to the Loan shall initially be retained by the Bank in
its capacity as initial servicer (the Bank in such capacity as well as any
successor servicer appointed pursuant hereto and/or the Participant to the
extent it is performing servicing responsibilities with respect to the Loan
are each sometimes hereinafter referred to as the "Servicer"), in trust for
the Bank, the Participant and any other party who hereafter acquires a
participation or sub-participation interest in the Loan (collectively, the
"Participants") as the owners thereof, and possession of the Loan Files
shall be retained by the Bank or its document custodian or, in certain cases
by the Participant, in trust for the Participants as the owners thereof, for
the sole purpose of servicing the Loan. The beneficial ownership of the Loan,
including, without limitation, the Loan Files and all rights, benefits,
proceeds and obligations arising therefrom or in connection therewith, is
vested in the Participants.
(f) To evidence the Junior Participation the Bank has provided the
Participant with a loan participation certificate (the "Junior Certificate")
in the form annexed hereto and hereby authorizes the Participant to endorse
on the Junior Certificate the dates and the amount of each Advance in respect
of the Junior Participation and the amount of each payment of principal which
the Bank advises the Participant in writing has been credited to its account.
(g) In the event that the Participant fails to advance the
Participant's Share of any Advance when required, the Bank shall, to the
extent required to comply with its obligations under the Credit Agreement,
fund 100% of such Advance or obtain an alternative source of funding for such
portion of the Advance. If the Bank funds 100% of such Advance, the
Participant covenants and agrees that it shall, subject to the terms of the
penultimate sentence of this paragraph (g), reimburse the Bank in the amount
of the Participant's Share of such Advance together with interest on such
amount calculated at the interest rate of two percent in excess of the Junior
Participation Rate payable from the day such Advance was made by the Bank
through and including the day the Participant reimburses the Bank for funding
the Participant's Share of such Advance, which repayment obligation as to
both principal and interest shall be subject to a credit in the amount of any
principal or interest, respectively, received from time to time by the Bank
or the provider of any alternative financing as the holder of the applicable
Default Senior Interest (as defined below). Such reimbursement shall be made
by wire transfer to the account indicated by the Bank. Commencing with the
date the Bank or such alternative source of financing funds all or any
portion of the Participant's Share of an Advance and continuing for so long
as the Participant fails to reimburse the Bank or the alternative source of
financing, as the case may be, as provided in this paragraph to the account
designated by the Bank, the Bank or such alternative source of financing, as
the case may be, shall be deemed the owner of a new senior participation
interest (a "Default Senior Interest") evidencing a senior participation as
to the Participant's Share (or such portion thereof) of such Advance, payable
at the same senior priority as the Senior Participation in the balance of the
Loan in accordance with Section " below, provided, further, that any Default
Senior Interest shall bear interest at the Junior Participation Rate for so
long as it remains outstanding. At any time following the issuance of a
Default Senior Interest, the Participant, prior to reimbursing the holder of
the Default Senior Interest, shall provide ten (10) days prior written notice
of its intention to effect such reimbursement. The holder of the Default
Senior Interest shall notify the Participant within five (5) Business Days of
its receipt of such notice of its election to either (i) accept reimbursement
from the Participant in which case upon receipt of such full reimbursement of
principal and interest the Default Senior Interest shall be assigned to the
Participant and automatically immediately converted to a Junior Participation
or (ii) reject the reimbursement and retain the Default Senior Interest in
which case the reimbursement obligation of the Participant under this
paragraph (g) shall automatically terminate with respect to the subject
Advance. Nothing herein shall be deemed a waiver of any other rights or
remedies of the Bank provided hereunder, at law or in equity in connection
with any refusal by the Participant to fund the Participant's Share of any
Advance.
(h) The Bank reserves the right, but is not obligated, to make advances
of all amounts necessary for the payment of hazard insurance premiums, water
rates, real estate taxes, assessments or other public charges, or other items
necessary for the protection of the security of any mortgage or deed of trust
securing the Loan or the preservation of any mortgaged property, including,
without limitation, any property which has been foreclosed or acquired by a
deed-in-lieu of foreclosure by the Bank or any designee of the Bank (each, a
"Mortgaged Property") to the extent funds held in mortgage escrows are
insufficient to pay for such items. In the event that the Bank determines in
accordance with the terms of this Agreement that such an advance (a
"Servicing Advance") is necessary or appropriate in connection with the Loan
or any Mortgaged Property which has been converted to real estate owned
status following the exercise of any remedies, the Bank shall, in the absence
of an emergency, use reasonable efforts to consult with the Participant prior
to making a Servicing Advance. While the Bank shall use reasonable efforts
to consult with the Participant, other than in the case of an emergency, the
determination of the Bank shall be conclusive in the event that the parties
disagree. In the event, however, that the Participant is servicing the Loan
in accordance with Section 4(d) and 4(e) below, the Participant shall have
the right, after consulting with the Bank, to make a Servicing Advance with
respect to the Loan in the event that the Participant reasonably determines
that such an advance is necessary to protect the security of the collateral
or preserve the then existing condition of the Mortgaged Property. Servicing
Advances shall bear interest from the date advanced until repaid at the same
rate of interest payable by the Borrower under the Loan Documents (the
"Servicing Advance Rate") with respect to such advances and will be
reimbursed to the Bank and/or the Participant, as the case may be, together
with interest thereon, in accordance with Section " below.
(i) In the event that the Participant fails to fund the amount
requested in connection with the funding of any Advance required to be funded
by the Participant hereunder within the applicable time period, the
Participant shall reimburse the Bank for all reasonable and necessary out-of-
pocket costs and expenses actually incurred by the Bank, directly or
indirectly, as a result of the Participant's failure to fund within the
applicable time period, which reimbursement shall be made within 10 days
after receipt by the Participant of copies of invoices and/or statements from
the Bank itemizing such costs and expenses.
2. DISTRIBUTIONS
(a) With respect to payments of interest actually received by the Bank
in respect of the Loan, such payments will be promptly applied:
(i) First, to the Bank and the Participant on a pari passu basis
and pro rata, to repay any accrued and unpaid interest on any
Servicing Advances by such party at the Servicing Advance Rate;
(ii) Second, to the Bank to repay all accrued and unpaid interest
on the Senior Participation at the Senior Participation Rate and
any Default Senior Interest at the Junior Participation Rate; and
(iii) Third, to the Bank and the Participant on a pari passu
basis and pro rata, to repay all accrued and unpaid interest on any
Bank Junior Participation held by the Bank and the Junior
Participation held by the Participant, at the Junior Participation
Rate.
(b) With respect to prepayments of principal actually received by the
Bank in respect of the Loan, such prepayments shall be promptly applied:
(i) First, to the Bank and the Participant, on a pari passu basis
and pro rata based upon the respective amounts of unreimbursed
Servicing Advances and Asset Audit Expenses owing to the Bank and
the Participant, to reimburse the Bank and the Participant for any
unreimbursed Servicing Advances together with interest thereon at
the Servicing Advance Rate and to reimburse the Bank and the
Participant for any unreimbursed Asset Audit Expenses; and
(ii) Second, to the Bank and the Participant, on a pari passu
basis, to pay principal based upon their respective Participation
Percentages.
(c) With respect to all other payments of principal actually received
by the Bank in respect of the Loan (including, without limitation, insurance
proceeds, condemnation proceeds, liquidation proceeds and proceeds from the
operation of any Mortgaged Property), such payments shall be promptly
applied:
(i) First, to the Bank and the Participant on a pari passu basis
and pro rata based upon the respective amounts of unreimbursed
Servicing Advances and Asset Audit Expenses owing to the Bank and
the Participant, to reimburse the Bank and the Participant for any
unreimbursed Servicing Advances together with interest thereon at
the Servicing Advance Rate and to reimburse the Bank and the
Participant for any unreimbursed Asset Audit Expenses;
(ii) Second, to the Bank to repay all accrued and unpaid interest
on the Senior Participation at the Senior Participation Rate and
any Default Senior Interest at the Junior Participation Rate;
(iii) Third, to the Bank to repay all principal amounts due and
owing to the Bank as the holder of the Senior Participation and any
Default Senior Interest in the Loan;
(iv) Fourth, to the Bank and the Participant on a pari passu basis
and pro rata, to repay all accrued and unpaid interest on any Bank
Junior Participation held by the Bank and the Junior Participation
held by the Participant, at the Junior Participation Rate;
(v) Fifth, only to the extent of any remaining funds representing
such principal payments, to the Bank and the Participant on a pari
passu basis and pro rata, to the extent of the Junior Participation
held by the Participant and any Bank Junior Participation held by
the Bank, to repay all principal amounts due and owing; and
(vi) Sixth, to the Participant and the Bank on a pari passu basis,
based
upon their respective Participation Percentages.
(d) Notwithstanding anything herein to the contrary, the fees payable
under Section 3.01 of the Credit Agreement shall be solely for the account of
the Bank and shall be retained by the Bank for its own account. In addition,
any late fees and, notwithstanding anything to the contrary set forth in
Section "(a) above, any incremental increases in the interest rate under the
Loan paid by the Borrower on account of a default rate of interest being in
effect (but only to the extent of the incremental increase in the interest
rate as opposed to the base rate of interest which shall remain payable in
accordance with Section "(a) above) shall be divided between the Bank and the
Participant in accordance with their respective Participation Percentage at
the time of payment.
(e) In addition to the payments of debt service on the Loan to be
distributed as set forth above, payments received by the Bank under any
guaranty, reimbursement or indemnification provision under any Loan Document
shall (i) be distributed in accordance with paragraphs (a) through (c) above
of this Section " to the extent such payments relate to principal or interest
on the Loan and (ii) in the event such payment relates to obligations of the
Borrower other than payment of the Loan, including, without limitation,
indemnification obligations or reimbursement obligations for sums advanced on
account of the Borrower, such payment shall be distributed to the Bank and
the Participant based upon the actual losses or expenditures suffered or
incurred by each such party in connection with the event or obligation giving
rise to such payment.
3. RETURN OF FUNDS
If the Bank should for any reason make any payment to the Participant in
anticipation of the receipt of funds from the Borrower or any guarantor and
such funds are not received by the Bank from the Borrower or any guarantor on
the date payment is due, then the Participant shall, on demand of the Bank,
forthwith return to the Bank any such amounts transferred to the Participant
by the Bank in respect of the Junior Participation plus interest thereon from
the day such amounts were transferred by the Bank to the Participant to, but
not including, the day such amounts are returned by the Participant at a rate
per annum equal to the effective Federal Funds Rate. If the Bank is required
at any time to return to the Borrower or any guarantor or to a trustee,
receiver, liquidator, custodian or other similar official any portion of the
payments made by the Borrower or any guarantor to the Bank, then the
Participant shall, on demand of the Bank, forthwith return to the Bank any
such payments transferred to the Participant by the Bank in respect of the
Junior Participation, but without interest on such payments (unless the Bank
is required to pay interest on such amounts to the person recovering such
payments).
4. SERVICING
(a) The Loan will be serviced by the Bank pursuant to the terms of this
Agreement provided that in certain cases following a default under the Loan
the Participant will have certain responsibilities with respect to the
servicing of the Loan subject to and in accordance with the terms of this
Agreement. In addition, the Bank shall have the right at any time to
delegate any of its servicing responsibilities hereunder without obtaining
the consent of the Participant, provided, however, the Bank shall be and
remain primarily liable for such delegated activities subject to the
limitations on liability set forth in this Agreement. The Bank or the
Participant, as the case may be, shall diligently service and administer the
Loan in the best interests of and for the benefit of the Participants as a
whole (as determined by the Bank or the Participant, as the case may be, in
its good faith and reasonable judgment, without regard to any unique
circumstances surrounding any particular Participant) in accordance with
applicable law, the terms of this Agreement and the Loan and, to the extent
consistent with the foregoing, in the same manner as would prudent mortgage
lenders, loan servicers and asset managers servicing mortgage loans
comparable to the Loan in the jurisdiction where each Mortgaged Property is
located, but in no event shall the Loan be serviced by the Bank or the
Participant, as the case may be, with any lesser degree of care than the Bank
or the Participant, as the case may be, ordinarily exercises with respect to
comparable commercial loans in which no participation is granted, and with a
view to the timely collection of all scheduled payments of principal and
interest under the Note or, if the Loan comes into and continues in default
and no satisfactory arrangements can be made for the collection of the
delinquent payments, to the maximization of the recovery on the Loan to
Participants on a present value basis (the relevant discounting of
anticipated collections that will be distributable to Participants to be done
at the related Loan interest rate), but without regard to: (i) any
relationship that the Servicer or any affiliate thereof may have with the
Borrower; (ii) the ownership of any Participation Certificate by the Servicer
or any affiliate thereof; (iii) the Servicer's obligation to make Servicing
Advances or Advances; and (iv) the Servicer's right to receive compensation
for its services hereunder or with respect to any particular transaction.
All moneys received by the Bank under the Loan shall be held by the
Bank as trustee for the Participant to be disbursed in accordance with
Section " above. Disbursements pursuant to Section " above shall be made to
the Participant not later than the next Business Day following receipt
thereof, in any case by wire transfer of immediately available funds pursuant
to the wiring instructions set forth in Section 10 below. Except as
expressly provided herein, the Bank does not assume any other duties or
responsibilities.
(b) The Bank may make or cause to be made such inspections of the
Mortgaged Properties from time to time in accordance with its customary
practices. The Bank shall notify the Participant at least three Business
Days prior to any such inspection such that representatives of the
Participant may, at their own expense, accompany the Bank or its
representative on any such inspection. Any written report prepared by or on
behalf of the Bank in connection with an inspection shall be promptly
furnished to the Participant. In no event shall the Bank be obligated to take
any action to effect repairs and correct any deficient structural,
environmental or physical conditions on any of the Mortgaged Properties.
(c) The Bank shall promptly furnish to the Participant copies of all
quarterly and annual financial statements received from the Borrower. At any
time that the Bank recalculates the Collateral Value, the Bank shall promptly
furnish to the Participant the results of its determination. In the event
that the Participant requests that the Bank recalculate the Collateral Value,
the Bank shall perform such recalculation, provided, however, that the Bank
shall not be obligated to recalculate the Collateral Value more than once
every two months except in the case of Advances occurring more frequently.
In addition, upon the request of the Participant, the Bank shall also furnish
to the Participant such other information within the Bank's possession
relating to the Loan, any Advance or a Mortgaged Property as the Participant
may from time to time reasonably request.
(d) In the event there occurs an Event of Default under any Mortgage or
the Note, the Participant shall assume the servicing of the Loan and shall
complete an asset audit containing a discussion of the economics of the Loan
and the related Mortgaged Property(ies) and a recommended course of action
for the Loan within ten (10) days of receiving notice from the Bank that such
an Event of Default has occurred unless such Event of Default is cured prior
thereto. The results of any asset audit shall be put into a concise
memorandum format by the Participant and forwarded, together with a copy of
all documents prepared by or on behalf of the Participant in connection with
such asset audit, to the Bank. The cost of such asset audit (the "Asset Audit
Expense") will be borne by Participant, subject to reimbursement in
accordance with Section " above. To the extent that Participant is not fully
reimbursed for an Asset Audit Expense within thirty (30) days following the
incurrence of such expense pursuant to distributions under Section ", then
the Bank shall promptly reimburse the Participant for fifty percent (50%) of
the applicable Asset Audit Expense, subject to reimbursement in accordance
with Section ".
(e) In the event that the Bank agrees with the recommendations of the
Participant set forth in the asset audit, or in the event that the Bank does
not object to such recommendations within ten (10) days following receipt of
the asset audit, the Participant shall, in the name of the Bank, implement
the course of action set forth in the approved (or deemed approved) asset
audit. Prior to commencing the pursuit of such remedies, however, the
Participant shall instruct outside counsel acceptable to the Bank to review
the documents evidencing and securing the Loan for enforceability, the effect
of any laws affecting remedies (including, without limitation, election of
remedies doctrines, anti-deficiency rules and single action rules) and any
technical defaults, and, subject to outside counsel's recommendations and
findings regarding state laws affecting remedies, commence enforcing such
agreed upon remedies. In the event the Bank disagrees with the
recommendations of the Participant set forth in the asset audit and if the
Bank and the Participant are unable to reach an agreement as to the course of
action to be taken within thirty (30) days following delivery of the original
asset audit, the Participant shall have the right to accelerate the Loan and
commence foreclosure proceedings under any Mortgage or Mortgages, provided,
however, that no foreclosure or similar proceeding shall be completed and no
deed-in-lieu of foreclosure shall be accepted unless the Participant has
previously obtained an updated phase I environmental study (and phase II if
necessary) with respect to the Mortgaged Property or Mortgaged Properties
subject to such foreclosure action which is reasonably acceptable to the
Bank. In no event shall any other remedies be pursued without the written
consent of the Bank, which consent shall not be unreasonably withheld or
delayed. In connection with any foreclosure proceeding or any other action
taken by the Participant pursuant to the first sentence of this paragraph
(e), the Bank shall cooperate with the Participant so as to enable the
Participant to accelerate the Loan and legally commence foreclosure
proceedings or take such other agreed upon actions, whether through the
execution and delivery of a limited power of attorney or otherwise.
Notwithstanding anything herein to the contrary, in the event that the
Participant has defaulted in any of its obligations under this Agreement
beyond any applicable grace period, including, without limitation, failing to
deliver an asset audit in accordance with this Section, all decisions as to
the election and pursuit of remedies shall belong to the Bank.
(f) Except as otherwise provided in this Agreement, the Bank reserves
the sole right and responsibility to enforce the obligations of the Borrower
and any other entity obligated in respect of the Loan, and may, in its sole
discretion, and shall have the sole and exclusive right to (i) agree to any
modification of any of the terms of the Loan or the Note or any other
agreement or instrument evidencing, securing or otherwise relating to the
Loan, (ii) waive any of such terms or give or withhold consents or approvals
to any action or failure to act by the Borrower or any such other agreement
or instrument and (iii) exercise or refrain from exercising, or waive, any
rights or powers the Bank may have in respect thereof, provided that (x)
prior to agreeing to any such amendment or waiver or giving any consent or
approval (except as otherwise set forth in clause (y) below), the Bank shall
consult with the Participant, provided that in the event that the Bank and
the Participant disagree, the decision of the Bank shall be final and
conclusive and (y) no modification, amendment or waiver shall increase the
Junior Participation or subject the Participant to any additional obligation,
reduce the principal of the Junior Participation or the rate of interest on
the Note, increase the amount of the Commitment, modify the seventy-five
percent (75%) loan to value requirement set forth in the Credit Agreement,
postpone the date fixed for payment of principal of or interest on the Junior
Participation or the Note or otherwise modify or grant a waiver or give any
consent or approval with respect to the Loan or any document relating thereto
in a manner which would materially adversely affect the Participant's rights
thereunder or hereunder without in each case the prior written consent of the
Participant.
(g) In the event that the Participant is servicing the Loan as
contemplated by paragraphs (d) and (e) above of this Section 4, the
Participant will comply with the servicing standard set forth in Section 4(a)
above. All moneys received by the Participant under or in respect of the
Loan shall be held by the Participant as trustee for the Bank and shall be
remitted to the Bank no later than the next Business Day following receipt
thereof by the Participant, to be disbursed by the Bank in accordance with
Section " above. Except as expressly provided herein, the Participant does
not assume any other duties or responsibilities.
(h) The Bank shall maintain customary books and records in respect of
the Loan in accordance with the servicing standard set forth in Section 4(a)
above. Such books and records shall be made available for copying and
inspection by the Participant at the Participant's cost and expenses during
normal business hours upon not less than three Business Days' prior written
notice. The Bank and the Participant shall notify each other as to any
material default under the Loan which comes to such party's attention or any
other matter which in the Bank's or the Participant's respective judgment
might adversely affect the parties' respective interests hereunder or any
documents relating thereto.
5. LIMITATIONS ON LIABILITY
The Bank shall not, in the absence of gross negligence or willful
misconduct, be under any liability to the Participant with respect to
anything which it may do or refrain from doing which may seem to the Bank to
be necessary or desirable in connection with its obligations hereunder.
Without in any way limiting the foregoing, the Bank may rely upon the advice
of counsel concerning legal matters and upon any written communication or
telephone conversation which it believes to be genuine and correct or to have
been signed, sent or made by the proper person and shall not be required to
make an inquiry concerning the performance by the Borrower of its obligations
under the Credit Agreement or in respect of the Loan. Except for the Bank's
obligation to cooperate with the Participant under Section 4(e) above in
order to enable the Participant to accelerate the Loan and commence
foreclosure proceedings, the Bank shall have no obligation to make any claim
on, or assert any lien upon, or assert any setoff against, any property held
by it, and if it elects to do so with respect to any property other than
collateral for the Loan, the Bank may in its discretion apply the same
against indebtedness of the Borrower other than its indebtedness in respect
of the Loan. The Bank may accept deposits from, make loans or otherwise
extend credit to, and generally engage in any kind of Bank or trust business
with, the Borrower, any Affiliate of the Borrower or any other entity
obligated in respect of the Loan.
6. INDEMNIFICATION OF THE BANK
The Participant agrees to indemnify the Bank for its Participation
Percentage of any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature against it in any way relating to or arising out of the Loan,
the Note or the transactions contemplated thereby or the enforcement of any
of the terms thereof, provided that the Participant shall not be liable for
any of the foregoing to the extent they arise from the Bank's gross
negligence or willful misconduct. This indemnity shall survive termination
of this Agreement.
7. DISCLAIMERS BY THE BANK
The Bank makes no representation or warranty in connection with, and
shall have no responsibility with respect to, the solvency, financial
condition, or statements of the Borrower or any other party to the Loan
Documents, or the validity and enforceability of the obligations of the
Borrower or any other party in respect of the Loan, or otherwise in respect
of the Loan or any of the Mortgaged Properties. The Participant acknowledges
that it has, independently and without reliance on the Bank, and based on
such documents and information as it has deemed appropriate, made its own
credit analysis and decision to purchase the Junior Participation and will
continue to be responsible for making its own independent appraisal of the
Loan and the business, affairs and financial condition of the Borrower.
8. ASSIGNMENT AND TRANSFERS
This Agreement may not be assigned by one party without the prior
written consent of the other party, nor may the Participant transfer the
Junior Participation in whole or in part to any other person without the
prior written consent of the Bank, which consent in the case of a transfer by
the Participant of all or any portion of the Junior Participation shall not
be unreasonably withheld or delayed. The Bank may sell other participations
in the Loan including sub-participations in the Senior Participation provided
that the Bank shall not reduce its participation interest in the Loan to
below 10% without the prior written consent of the Participant. In the event
the Bank sells any sub-participation in the Senior Participation, the
Participant acknowledges and agrees that the holder of such sub-participation
may be granted, subject to the terms, covenants and limitations set forth in
the sub-participation agreement entered into between the Bank and such sub-
participant, certain rights otherwise exercisable by the Bank hereunder,
provided, however, that except as otherwise expressly agreed in writing by
the Participant, (i) as between the Bank and the Participant, the Bank shall
be remain primarily liable for such delegated rights subject to the
limitations on liability set forth in this Agreement and (ii) any sub-
participation agreement entered into between the Bank and any sub-participant
shall not be deemed to expand the rights otherwise exercisable by the Bank
hereunder. In addition, the Bank shall have the right at any time to
delegate any of its servicing responsibilities hereunder without obtaining
the consent of the Participant, provided, however, that as between the Bank
and the Participant, the Bank shall be remain primarily liable for such
delegated activities subject to the limitations set forth in this Agreement.
9. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
10. NOTICES
Any communications provided for or permitted hereunder shall be in
writing and, unless otherwise expressly provided herein, shall be sent as
follows to:
(i) in the case of the Bank:
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, New York 10"60
Attention: Larry Blume
Fax No.: ("1") 648-5138
with a copy to:
Swidler Berlin Shereff Friedman, LLP
3000 K Street, N.W.
Washington, D.C. "0007
Attention: Jeffrey S. Scharff, Esq
Fax No. "0"-4"4-7643
(ii) in the case of the Participant:
Wellsford Capital
610 Fifth Avenue
New York, New York 100"0
Attention: Gregory F. Hughes
Fax: ("1") 333-"3"3
Wiring Instructions:
Chase Manhattan Bank, N.A.
ABA No.: 0"10000"1
For the Account of: United States Trust Company of New York
Account No.: 9"0-1-073195
In favor of: Wellsford Capital RBA Account 69-811"-7
with a copy to:
Robinson Silverman Pearce Aronsohn & Berman LLP
1"90 Avenue of the Americas
New York, New York 10014
Attn: Alan S. Pearce, Esq.
Fax: ("1") 541-1411
or as to each such person such other address as may hereafter be furnished by
such person to the parties hereto in writing. Any communication required or
permitted to be delivered to any of the foregoing shall be deemed to have
been duly given when sent by electronic means to the facsimile number listed
above, with a copy mailed first class, postage prepaid, to the address of the
party.
11. SEVERAL NATURE
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions
of this Agreement.
12. SUCCESSORS AND ASSIGNS
The provisions of this Agreement shall be binding upon and, subject to
the limitations set forth in Section 8 above, inure to the benefit of the
respective successors and assigns of the parties hereto. No other person,
including, without limitation, the Borrower, shall be entitled to any benefit
or equitable right, remedy or claim under this Agreement.
13. HEADINGS; CONSTRUCTION OF AGREEMENT
The headings of various sections of this Agreement are for convenience
of reference only and are not to be construed as defining or limiting, in any
way, the scope or intent of the provisions hereof. The Participant
acknowledges that it was represented by competent counsel in connection with
the negotiation and drafting of this Agreement and that this Agreement shall
not be subject to the principle of construing the meaning against the Person
who drafted this Agreement.
14. NO PARTNERSHIP
Nothing herein is intended to create a joint venture, partnership,
tenancy-in-common, or joint tenancy relationship between the Bank and the
Participant.
15. COUNTERPARTS
This Agreement may be executed in any number of counterparts and by the
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, and all of which shall
together constitute one and the same agreement.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Bernard J. Costello
----------------------------------
Name: Bernard J. Costello
----------------------------------
Title: Vice President
----------------------------------
By: /s/ L. Blume
----------------------------------
Name: L. Blume
----------------------------------
Title: Vice President
----------------------------------
WELLSFORD CAPITAL
By: /s/ Gregory F. Hughes
----------------------------------
Name: Gregory F. Hughes
----------------------------------
Title: CFO
----------------------------------
LOAN PARTICIPATION CERTIFICATE
Morgan Guaranty Trust Company of New York (the "Bank") hereby certifies
that pursuant to the Loan Participation Agreement dated as of December 1,
1998 (the "Participation Agreement") between the Bank and Wellsford Capital
(the "Participant"), it has sold to the Participant a participation interest
in the Loan (the "Junior Participation") and has received from the
Participant funds in the aggregate amount endorsed on the grid attached
hereto shown at any time as outstanding and unpaid in respect of the Junior
Participation. The Junior Participation shall bear interest at an annual
rate equal to 1.50% in excess of the interest rate payable under the Note as
in effect from time to time.
This Loan Participation Certificate is issued pursuant to, and the
Junior Participation evidenced hereby is subject to, the terms of the
Participation Agreement and the Credit Agreement. Capitalized terms used
herein without definition shall have the respective meanings ascribed thereto
in the Participation Agreement.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Bernard J. Costello
----------------------------------
Name: Bernard J. Costello
----------------------------------
Title: Vice President
----------------------------------
By: /s/ L. Blume
----------------------------------
Name: L. Blume
----------------------------------
Title: Vice President
----------------------------------
SCHEDULE A
(i) the original Note payable to the order of the Bank;
(ii) each original or a copy of the Mortgage in favor of the Bank, in
each case with evidence of recording indicated thereon;
(iii) each original or a copy of the Assignment of Leases in favor
of the Bank, in each case with evidence of recording thereon;
(iv) originals or copies of all assumption, modification, written
assurance and substitution agreements, with evidence of recording
thereon where appropriate, in those instances where the terms or
provisions of the Mortgage, Note or any related security document
have been modified or the Loan has been assumed;
(v) the original or a copy of each lender's title insurance policy
issued in connection with the Loan, together with all endorsements
or riders that were issued with or subsequent to the issuance of
such policy, insuring the priority of each Mortgage as a first lien
on the related Mortgaged Property;
(vi) the original of any guaranty of the obligations of the Borrower
under the Loan;
(vii) file copies of any UCC Financing Statements and continuation
statements which were filed in order to perfect (and maintain
the perfection of) any security interest held by the Bank in
and to the personalty of the Borrower at the Mortgaged
Property (in each case with evidence of filing thereon); and
(viii) any additional documents required to be added to the Loan File
pursuant to this Agreement.