-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P4j662OZuhxvtPnXA2MFNOOfvQdR6GYkQLGaXNd31tRj1oIS435+6NKqbgvQn5lk DdnD3d1ghn9YmRlDw8NjHg== 0000910643-99-000058.txt : 19990403 0000910643-99-000058.hdr.sgml : 19990403 ACCESSION NUMBER: 0000910643-99-000058 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 36 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WELLSFORD REAL PROPERTIES INC CENTRAL INDEX KEY: 0001038222 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 133926898 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-12917 FILM NUMBER: 99583993 BUSINESS ADDRESS: STREET 1: 610 FIFTH AVENUE SEVENTH FLOOR CITY: NEW YORK STATE: NY ZIP: 10020 BUSINESS PHONE: 2123332300 MAIL ADDRESS: STREET 1: 610 FIFTH AVENUE SEVENTH FLOOR CITY: NEW YORK STATE: NY ZIP: 10020 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 - -------------------------------------------------------------------------- FORM 10-K - -------------------------------------------------------------------------- [X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to _____________ Commission File Number 001-12917 WELLSFORD REAL PROPERTIES, INC. (Exact name of registrant as specified in its charter) Maryland 13-3926898 (State of organization) (I.R.S. employer identification number) 535 Madison Avenue, New York, NY 10022 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (212) 838-3400 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock $.01 par value American Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- ---- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting shares held by non-affiliates of the registrant was approximately $192.4 million based on the closing price on the American Stock Exchange for such shares on March 8, 1999. The number of the Registrant's shares of Common Stock outstanding was 20,750,411 as of March 8, 1999 (including 339,806 shares of Class A Common Stock). Documents Incorporated By Reference Portions of the Definitive Proxy Statement for the Annual Shareholders' Meeting to be held May 17, 1999 are incorporated by reference into Part III. - --------------------------------------------------------------------------- TABLE OF CONTENTS - --------------------------------------------------------------------------- Form 10-K Item Report No. Page - ---- ------ PART I 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . 3 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . .10 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . .11 4. Submission of Matters to a Vote of Security-Holders . . . .11 PART II 5. Market for Registrant's Common Equity and Related Shareholder Matters. . . . . . . . . . . .12 6. Selected Consolidated Financial Data. . . . . . . . . . . .13 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . .14 7a. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . ..20 8. Consolidated Financial Statements and Supplementary Data. .21 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. . . . . . . . . .21 PART III 10. Directors and Executive Officers of the Registrant. . . . .22 11. Executive Compensation. . . . . . . . . . . . . . . . . . .22 12. Security Ownership of Certain Beneficial Owners and Management. . . . . . . . . . . . . . . . . . . . . . . . .22 13. Certain Relationships and Related Transactions. . . . . . .22 PART IV 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . .23 FINANCIAL STATEMENTS Consolidated Balance Sheets as of December 31, 1998 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . F-3 Consolidated Statements of Income for the Years Ended December 31, 1998, 1997 and 1996 . . . . . . . . . . F-4 Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 1998, 1997 and 1996. . . . . . . . . . . . . . . . . . . . . . . . . F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996 . . . . . . . . . . F-6 Notes to Consolidated Financial Statements. . . . . . . . F-7 Wellsford/Whitehall Properties II, L.L.C. Consolidated Financial Statements and Notes . . . . . . . . . . . . .F-28 FINANCIAL STATEMENTS SCHEDULE III. Real Estate and Accumulated Depreciation. . . . . . . . . S-1 IV. Mortgage Loans on Real Estate . . . . . . . . . . . . . . S-2 All other schedules have been omitted because the required information for such other schedules is not present, is not present in amounts sufficient to require submission of the schedule or is included in the consolidated financial statements. PART I Item 1. Business Wellsford Real Properties, Inc. (and subsidiaries, collectively, the "Company") was formed on January 8, 1997, as a corporate subsidiary of Wellsford Residential Property Trust (the "Trust"). The Trust was formed in 1992 as the successor to Wellsford Group Inc. (and affiliates) which was formed in 1986. On May 30, 1997, the Trust merged (the "Merger") with Equity Residential Properties Trust ("EQR"). Immediately prior to the Merger, the Trust contributed certain of its assets to the Company and the Company assumed certain liabilities of the Trust. Immediately after the contribution of assets to the Company and immediately prior to the Merger, the Trust distributed to its common shareholders all of the outstanding shares of the Company owned by the Trust (the "Spin-off"). On June 2, 1997, the Company sold 12,000,000 shares of its common stock in a private placement (the "Private Placement") to a group of institutional investors at $10.30 per share, the Company's then book value per share. The Company is a real estate merchant banking firm headquartered in New York City which acquires, develops, finances and operates real properties and organizes and invests in private and public real estate companies. The Company has established three strategic business units ("SBUs") within which it executes its business plan: an SBU for commercial property operations which is held in its subsidiary, Wellsford/Whitehall Properties II, L.L.C., an SBU for debt and equity activities and an SBU for property development and land operations. The Company currently has approximately 35 employees and offices in New York, NY, Boston, MA, Chatham, NJ and Denver, CO. See the accompanying consolidated financial statements for certain financial information regarding the Company's industry segments. Commercial Property Operations - Wellsford/Whitehall - ---------------------------------------------------- The Company seeks to acquire commercial properties below replacement cost and operate and/or resell the properties after renovation, redevelopment and/or repositioning. The Company believes that appropriate well-located commercial properties which are currently underperforming can be acquired on advantageous terms and repositioned with the expectation of achieving returns which are greater than returns which could be achieved by acquiring a stabilized property. In August 1997 the Company, in a joint venture with WHWEL Real Estate Limited Partnership ("Whitehall"), an affiliate of Goldman, Sachs & Co., formed a private real estate operating company, now known as Wellsford/Whitehall Properties II, L.L.C. ("Wellsford/Whitehall"). Wellsford/Whitehall's initial target markets include New York, New Jersey, Connecticut and the Boston and Washington D.C. metropolitan areas. The Company manages Wellsford/Whitehall on a day-to-day basis, and certain major decisions require the consent of both partners. The Company had a 47.7% interest in Wellsford/Whitehall at December 31, 1998. Wellsford/Whitehall owned and operated 35 office buildings containing approximately 4.6 million square feet ("SF") of office space in its target markets as of December 31, 1998, including approximately 1.4 million SF under renovation, with an aggregate gross book value of approximately $501.7 million. In February 1998, Wellsford/Whitehall acquired a 65,000SF office building in Boston, MA for $5.5 million and 19 acres of undeveloped land in Somerset, NJ for $2.0 million, which is adjacent to four buildings currently owned by Wellsford/Whitehall. In March 1998, Wellsford/Whitehall purchased an 82,000SF property in Somerset, NJ for approximately $5.4 million. In May 1998, Wellsford/Whitehall completed the acquisition of a 977,000SF portfolio of 13 office buildings for $148.7 million (the "Boston Portfolio"). The Boston Portfolio was financed with (i) the assumption of $68.3 million of mortgage debt (the "Nomura Mortgage"), (ii) $35.8 million of borrowings on Wellsford/Whitehall's revolver/term loan, (iii) the issuance of $19.0 million of Wellsford/Whitehall 6% convertible preferred units, (iv) $18.0 million of capital contributions and (v) the issuance of $7.6 million of Wellsford/Whitehall common units. In May 1998, Wellsford/Whitehall acquired two warehouse buildings totaling approximately 470,000SF for $28.4 million in Needham, MA. Wellsford/Whitehall intends to convert the facilities into office buildings. The two buildings were concurrently leased to the Polaroid Corporation for a period of approximately 12 months. In June 1998, Wellsford/Whitehall acquired an approximately 63,000SF office building located in Andover, MA for approximately $7.4 million and two office buildings totaling 104,000SF located in Basking Ridge, NJ for approximately $15.0 million. In July 1998, Wellsford/Whitehall modified its existing $375 million revolver/term loan with BankBoston, N.A. ("BankBoston") and Goldman Sachs Mortgage Company (the "Wellsford/Whitehall Bank Facility"). Under the new terms, $300 million represents a senior secured credit facility bearing interest at LIBOR + 1.65% and $75 million represents a secured mezzanine facility bearing interest at LIBOR + 3.2%. Both facilities mature on December 15, 2000 and are extendable for one year by Wellsford/Whitehall. As of December 31, 1998, approximately $276.2 million was outstanding under the Wellsford/Whitehall Bank Facility ($207.3 million of which was under the senior facility). In September 1998, Wellsford/Whitehall purchased two office buildings totaling approximately 199,000SF in Franklin Township, NJ for approximately $22.8 million. In November 1998, Wellsford/Whitehall purchased a 38,000SF office building in Columbia, MD for approximately $2.6 million. In December 1998, Wellsford/Whitehall purchased a 147,000SF office building in Ridgefield Park, NJ for approximately $19.3 million. The 1998 Wellsford/Whitehall acquisitions described above, other than the Boston Portfolio, were funded primarily by capital contributions from the Company and Whitehall, and by borrowing on the Wellsford/Whitehall Bank Facility. The Company is entitled to incentive compensation equal to (a) 17.5% of available cash after a return of capital to the Company and Whitehall and a 17.5% return on equity to each of them, and (b) 22.5% of available cash after a 22.5% return on equity to the Company and Whitehall. The Company and Whitehall have committed to make additional equity contributions of $50 million each for new acquisitions, capital needs, and working capital, of which $13.6 million remained unfunded by each at December 31, 1998. Whitehall may exchange the membership units it receives in Wellsford/Whitehall relating to capital contributions in excess of an additional $25 million up to an additional $50 million, for shares of the Company's common stock or, in the Company's sole discretion, cash, based upon the price paid for such membership units and the current market value of the Company's common stock. In connection with the formation of Wellsford/Whitehall, the Company issued warrants (the "Whitehall Warrants") to Whitehall to purchase 4,132,230 shares of the Company's common stock at an exercise price of $12.10 per share. The Whitehall Warrants are exercisable for five years for either, at the Company's option, shares of the Company's common stock or cash. The exercise price for the Whitehall Warrants is payable in cash or, after August 28, 1999, either with cash or membership units in Wellsford/Whitehall. The Company has agreed with Whitehall to conduct its business and activities relating to office properties (but not other types of commercial properties) located in North America solely through its interest in Wellsford/Whitehall except, in certain circumstances, where Wellsford/Whitehall has declined the investment opportunity. Debt and Equity Activities - dba Wellsford Capital - -------------------------------------------------- The Company makes loans that constitute, or will invest in, real estate- related senior, junior or otherwise subordinated debt instruments, which may be unsecured or secured by liens on real estate, interests therein or the economic benefits thereof, and which have the potential for high yields or returns more characteristic of equity ownership. These investments may include debt that is acquired at a discount, mezzanine financing, commercial mortgage-backed securities ("CMBS"), secured and unsecured lines of credit, distressed loans, and loans previously made by foreign and other financial institutions. The Company believes that there are opportunities to acquire real estate debt, especially in the low or below investment grade tranches, at significant returns as a result of inefficiencies in pricing, while utilizing management's real estate expertise to analyze the underlying properties and thereby effectively minimizing risk. At December 31, 1998, the Company had $124.7 million of debt investments which bore interest at an average yield of approximately 4.6% over LIBOR and had an average remaining term to maturity of 4.1 years. 277 Park The Company and BankBoston have provided an $80 million loan (the "277 Park Loan") to entities which own substantially all of the equity interests (the "Equity Interests") in the entity which owns an approximately 1.75 million SF office building located in New York City (the "277 Park Property"). The Company has advanced $25 million pursuant to the 277 Park Loan. The 277 Park Loan is secured primarily by a pledge of the Equity Interests owned by the borrowers. The 277 Park Loan is subordinated to a 10-year $345 million first mortgage loan (the "REMIC Loan") on the 277 Park Property. The 277 Park Loan bears interest at the rate of approximately 12% per annum for the first nine years of its term and at a floating annual rate during the tenth year equal to LIBOR plus 5.15% or BankBoston base rate plus 5.15%, as elected by the borrowers. The principal amount of the 277 Park Loan and all accrued interest will be payable in May 2007; the REMIC Loan is also due in May 2007. The Abbey Company In August 1997, the Company and Morgan Guaranty Trust Company of New York ("MGT") originated a $70 million secured credit facility (the "Abbey Credit Facility") to affiliates of The Abbey Company, Inc. ("Abbey"). In May 1998, the Company and MGT expanded the Abbey Credit Facility to $120 million. In December 1998, Abbey repaid $20 million, thereby reducing the total available to $100 million. The Abbey Credit Facility will be made available to Abbey until September 2000. Advances under the facility can be made for up to 65% of the value of the borrowing base collateral which consisted of 24 properties, all cross- collateralized, totaling approximately 1.7 million SF at December 31, 1998. As of December 31, 1998, approximately $46.0 million had been advanced by the Company under the Abbey Credit Facility. Under the terms of its participation agreement with MGT, the Company will fund a 50% junior participation on all advances under the Abbey Credit Facility. The Company is entitled to receive interest on its advances under the Abbey Credit Facility at LIBOR plus 4%. IPH Mezzanine Facility In December 1997, Wellsford Ventures, Inc. ("Ventures"), a wholly-owned subsidiary of the Company, joined with Fleet Real Estate, Inc. ("FRE"), a subsidiary of Fleet Financial Group, to issue an approximately $32.5 million subordinated credit facility (the "IPH Mezzanine Facility") to Industrial Properties Holding, L.P. ("IPH"). Each of Ventures and FRE were committed to advance up to 50% of the IPH Mezzanine Facility. Ventures advanced approximately $9.8 million under the JPH Mezzanine Facility. The IPH Mezzanine Facility was repaid in February 1998, at which time the Company received a total of $0.8 million in interest and fees. Advances under the IPH Mezzanine Facility bore interest at an annual rate of LIBOR plus 5%. Woodlands In December 1997, BankBoston, Morgan Stanley Senior Funding, Inc. and certain other lenders made available to the owners and developers of a 25,000 acre master-planned residential community located north of Houston (the "Woodlands Property"), loans in the aggregate principal amount of $369 million (the "Woodlands Loan"). The Woodlands Loan consists of a revolving credit loan in the principal amount of $179 million (the "Revolving Loan"), a secured term loan in the principal amount of $130 million (the "Secured Loan"), and a second secured term loan in the principal amount of $60 million (the "Second Secured Loan"). The Company has advanced $15 million pursuant to the Second Secured Loan. The Second Secured Loan is subordinate to the Revolving Loan and the Secured Loan and bears interest equal to LIBOR plus 4.40%. Interest on the Second Secured Loan is payable monthly to the extent there is available cash after payment of interest on the Revolving Loan and the Secured Loan and provided no event of default has occurred under the Woodlands Loan. The principal amount of the Woodlands Loan and all accrued interest thereon will be payable on July 31, 2000, with two, one-year extension options available to the borrower. Park 80 In December 1997, the Company originated a $5.1 million loan bearing interest at LIBOR plus 3% which was repaid in August 1998 (the "Park 80 Loan"). The Park 80 Loan was secured by a mortgage on an 80,000SF mid-rise office building in Saddlebrook, New Jersey. Value Property Trust In February 1998, the Company completed the previously announced merger (the "VLP Merger") with Value Property Trust ("VLP") for total consideration of approximately $169 million. As of December 31, 1998, approximately $5.1 million was recorded as a net deferred tax asset reflecting the value of VLP's net operating loss carryforwards. Thirteen of the twenty VLP properties, which were under contract to an affiliate of Whitehall, were subsequently sold for an aggregate of approximately $64 million. The Company retained seven of the VLP properties containing an aggregate of approximately 0.6 million square feet located primarily in the northeastern U.S. In October 1998, the Company closed on $28 million of non-recourse mortgage financing (the "Wellsford Capital Mortgage") on the portfolio of seven commercial properties acquired in the VLP Merger. The loan bears interest at LIBOR + 2.75 % and has a term of three years. The proceeds were used to repay amounts outstanding on the Company's credit facility and for working capital purposes. Clairborne Investors In January 1998, the Company acquired a 49% interest in Creamer Realty Consultants, a real estate advisory and consulting firm, and formed Creamer Vitale Wellsford, L.L.C. ("Creamer Vitale Wellsford"). Creamer Realty Consultants and Creamer Vitale Wellsford, together with Prudential Real Estate Investors ("PREI"), a division of Prudential Investment Corporation, have established the Clairborne Investors Mortgage Investment Program to make opportunistic investments and to provide liquidity to participants in large syndicated mortgage loan transactions. The parties have agreed to contribute up to $150 million to fund acquisitions approved by the parties, of which a subsidiary of the Company will fund 10%. Creamer Vitale Wellsford will originate, co-invest, and manage the investments of the program. The Company's original investment in these entities was $1.3 million of cash and 148,000 five-year warrants to purchase the Company's common shares at $15.175 per share, valued at approximately $0.7 million. In November 1998, Creamer Vitale Wellsford acquired a $17 million participation in a $56 million mortgage, bearing interest at LIBOR + 1.75% and due in 3.5 years, at a significant discount to face value. The Company funded approximately $1.4 million of this participation. DeBartolo In July 1998, the Company purchased an $18 million participation in a $175 million loan (the "DeBartolo Loan"). The DeBartolo Loan is secured by partnership units in Simon DeBartolo Group, L.P., the operating partnership of a real estate investment trust which owns approximately 175 million square feet of mall space nationwide. The DeBartolo Loan bears interest at 8.547%, payable quarterly, pays principal based on a 20 year amortization schedule and is due in July 2008. REIT Bridge Loan In August 1998, the Company funded a $15 million participation in a $100 million unsecured loan (the "REIT Bridge Loan") to a publicly traded real estate investment trust which owns 22 regional malls, eight multifamily apartment properties and five office properties nationwide. This loan bore interest at 9.875% and was due in February 1999 with two three-month extensions available to the borrower. In January 1999, the REIT Bridge Loan was modified to extend the maturity date to August 1999 and increase the interest rate to 12%. The borrower paid a 1.5% loan fee at origination and a 1% loan fee upon modification. Liberty Hampshire In July and August 1998, the Company invested a total of $2.1 million in The Liberty Hampshire Company, L.L.C. ("Liberty Hampshire") which structures, establishes and provides management and services for special purpose finance companies ("SPFCs") formed to invest in financial assets. The Company also invested a total of $5.0 million in a joint venture SPFC with Liberty Hampshire. This SPFC has invested in a participation in the DeBartolo Loan and has acquired an interest in REIS Reports, Inc., a leading provider of real estate market information to institutional investors. Safeguard In December 1998, the Company and MGT originated a $90 million secured credit facility (the "Safeguard Credit Facility") to Safeguard Capital Fund, L.P. ("Safeguard"). The Safeguard Credit Facility will be made available to Safeguard until April 2001. Advances under the facility can be made for up to 75% of the value of the borrowing base collateral which consisted of 4 properties, all cross- collateralized, totaling approximately 0.3 million SF at December 31, 1998. As of December 31, 1998, approximately $5.9 million had been advanced by the Company under the Safeguard Credit Facility. Under the terms of its participation agreement with MGT, the Company will fund a 50% junior participation on all advances under the Safeguard Credit Facility. The Company is entitled to receive interest on its advances under the Safeguard Credit Facility at LIBOR plus 4%. Property Development and Land Operations - dba Wellsford Development - -------------------------------------------------------------------- The Company engages in selective development activities as opportunities arise and when justified by expected returns. The Company believes that by pursuing selective development activities it can achieve returns which are greater than returns which could be achieved by acquiring stabilized properties. Certain development activities may be conducted in joint ventures with local developers who may bear the substantial portion of the economic risks associated with the construction, development and initial rent-up of properties. As part of its strategy, the Company may seek to issue tax-exempt bond financing authorized by local governmental authorities which generally bears interest at rates substantially below rates available from conventional financing. Palomino Park The Company owns an approximate 80% interest in Phases I, II, III and IV of, and in an option to acquire (at a fixed price) and develop phase V of, a 1,800-unit class A multifamily development ("Palomino Park") in a suburb of Denver, Colorado. The Company has a related $14.8 million tax exempt mortgage note payable which requires interest only payments at a variable rate (currently approximately 4%) until it matures in December 2035 (the "Palomino Park Bonds"). The tax exempt mortgage note payable is security for tax-exempt bonds, which are backed by a letter of credit from a AAA rated financial institution. The Company and an affiliate of EQR have guaranteed the reimbursement of the financial institution in the event that the letter of credit is drawn upon (the latter guarantee being the "EQR Enhancement"). In December 1997, Phase I, known as Blue Ridge, was completed at a cost of approximately $41.5 million. At that time, the Company obtained a $34.5 million permanent loan (the "Blue Ridge Mortgage") secured by a mortgage on Blue Ridge. The Blue Ridge Mortgage matures in January 2008 and bears interest at a fixed rate of 6.92%. Principal payments are based on a 30-year amortization schedule. In November 1998, Phase II, known as Red Canyon, was completed at a cost of approximately $33.9 million. At that time, the Company acquired Red Canyon and the related construction loan was repaid with the proceeds of a $27 million permanent loan (the "Red Canyon Mortgage") secured by a mortgage on Red Canyon. The Red Canyon Mortgage matures in December 2008 and bears interest at a fixed rate of 6.68%. Principal payments are based on a 30-year amortization schedule. The Company has a gross investment of approximately $18.8 million at December 31, 1998 in the following multifamily development project, which is a phase of Palomino Park, and related infrastructure costs: Number of Estimated Estimated Name Units Location Total Cost Stabilization Date - ---- --------- -------- ---------- ------------------ Silver Mesa 264 Denver $40.0 million Second Qtr. 2000 This project is being developed pursuant to a fixed-price contract. The Company is committed to purchase 100% of this project upon completion, which is anticipated to occur in the second quarter of 2000. In addition, the Company is obligated to fund the first 20% of construction costs on this project as they are incurred. Silver Mesa is owned by Silver Mesa at Palomino Park LLC ("Phase III LLC"), a limited liability company, the members of which are Wellsford Park Highlands Corp. (99%), a majority owned and controlled subsidiary of the Company, and Al Feld ("Feld") (1%). Feld is a Denver-based developer specializing in the construction of luxury residential properties. Feld has constructed over 3,000 units since 1984. The construction loan on Silver Mesa is for approximately $27.7 million, matures in June 2001 (with a 6-month extension at the option of the Phase III LLC upon fulfillment of certain conditions), and bears interest at LIBOR plus 1.50%. Feld has guaranteed repayment of this loan. In May 1998, the Company acquired the land for Phase IV for approximately $3.2 million. Sonterra From the time of the Spin-off, the Company held a $17.8 million mortgage (the "Sonterra Loan") on, and option to purchase, a 344-unit class A residential apartment complex ("Sonterra at Williams Centre") located in Tucson, Arizona. In January 1998, the Company exercised its option and acquired Sonterra at Williams Centre for approximately $20.5 million, including satisfaction of the mortgage. In February 1998, the Company closed on $16.4 million of mortgage financing (the "Sonterra Mortgage") on this property, bearing interest at 6.87% and maturing in March 2008. Principal payments are based on a 30-year amortization schedule. Segment Financial Information See Note 10 to the Company's consolidated financial statements for additional information regarding the Company's industry segments. Future Investments The Company may in the future make equity investments in entities owned and/or operated by unaffiliated parties and which engage in real estate- related businesses and activities or businesses that service the real estate industry. Some of the entities in which the Company may invest may be start- up companies or companies in need of additional capital. The Company may also manage and lease properties owned by it or in which it has an equity or debt investment. Item 2. Properties. Wellsford/Whitehall owned the following commercial properties and land parcels at December 31, 1998: Decem- ber Year 31, Gross Con- 1998 Area structed/ 1998 En- (square Rehabili- Occu- cum- Property Location feet) tated pancy brance - -------- -------- ------- --------- ----- --- 1800 Valley Road Wayne, NJ 56,000 1980 100% (A) Greenbrook Fairfield, NJ 201,000 1987 91% (A) Chatham Chatham, NJ 63,000 1972/1997 52% (A) 300 Atrium Drive Somerset, NJ 149,000 1983 77% (A) 400 Atrium Drive Somerset, NJ 355,000 1985 97% (A) 500 Atrium Drive Somerset, NJ 167,000 1984 87% (A) 700 Atrium Drive Somerset, NJ 181,000 1985 97% (A) 1275 K Street Washington, DC 225,000 1983 78% (A) Mountain Heights #1 Berkeley Hts, NJ 183,000 1986 92% (A) 15 Broad Street Boston, MA 65,000 1920/1984 81% (A) GS Exhibit Center Somerset, NJ 82,000 1968/1989 52% (A) 150 Wells Newton, MA 11,000 1987 100% (A) 72 River Park Needham, MA 22,000 1983 100% (A) 70 Wells Newton, MA 29,000 1979 100% (A) 160 Wells Newton, MA 19,000 1970/1997 100% (A) 2331 Congress Portland, ME 24,000 1980 84% (A) 60/74 Turner Waltham, MA 16,000 1970 100% (A) 100 Wells Newton, MA 21,000 1978 100% (A) 333 Elm (Norfolk Pl) Dedham, MA 48,000 1983 92% (A)(B) Dedham Place Dedham, MA 160,000 1987 99% (A)(B) 128 Technology Ctr Waltham, MA 218,000 1986 100% (A)(B) 201 University Westwood, MA 82,000 1982 100% (A)(B) 7/57 Wells Newton, MA 88,000 1982 88% (A)(B) 75/85/95 Wells Newton, MA 242,000 1976/1986 100% (A)(B) Shattuck Andover, MA 63,000 1985 100% (A) Mt Airy Basking Ridge, NJ 104,000 1980 75% (A) Campus Drive Franklin Twp, NJ 199,000 1984 100% (A) Samsung Ridgefield Park, NJ 147,000 1992 66% (A) Pointview Wayne, NJ 515,000 1976/1998 N/A* (A) Morris Tech Ctr Parsippany, NJ 244,000 1963/77/98 N/A* (A) Mountain Heights #2 Berkeley Hts, NJ 115,000 1968/1998 N/A* (A) 117 Kendrick St Needham, MA 209,000 1963 100%* (A) 140 Kendrick St Needham, MA 261,000 1963 100%* (A) 600 Atrium Drive (land) Somerset, NJ N/A N/A N/A* (A) 6301 Stevens Forest Columbia, MD 38,000 1980 N/A* (A) ---------- --- TOTAL/AVERAGE 4,602,000 90% ========== === *Building under renovation, not included in average. (A) Encumbered by the Wellsford/Whitehall Bank Facility. (B) Encumbered by the Nomura Mortgage. Wellsford Capital owned the following commercial properties at December 31, 1998, which are encumbered by the $28.0 million Wellsford Capital Mortgage: Year Gross Con- Area structed/ 1998 (square Reha- Occu- Property Location feet) bilitated pancy - -------- -------- ------- --------- ----- Hoes Lane Piscataway, NJ 37,000 1987 83% Bradford Plaza West Chester, PA 124,000 1990 83% Chestnut Street Philadelphia, PA 50,000 1857/1990 90% Keewaydin Drive Salem, NH 125,000 1973 54% Turnpike Street Canton, MA 43,000 1980 100% Two Executive Cherry Hill, NJ 102,000 1970 68% Bay City Holdings Santa Monica, CA 114,000 1985 100% ------- ---- TOTAL/AVERAGE 595,000 80% ======= ==== The Company owned the following multifamily properties at December 31, 1998: Year Con- December structed/ 31, 1998 Reha- 1998 Encum- Property Location Units bilitated Occupancy brance -------- -------- ----- --------- --------- --------- Blue Ridge Denver, CO 456 1997 93% $34,144,108 Red Canyon Denver, CO 304 1998 96%(A) 27,000,000 Sonterra Tucson, AZ 344 1995 94% 16,277,682 ----- ------------------------- TOTAL/AVERAGE 1,104 93% $77,421,790 ===== ========================= (A) Property acquired in November 1998, not included in average occupancy. Item 3. Legal Proceedings. Neither the Company nor Wellsford/Whitehall are presently defendants in any material litigation nor, to the Company's knowledge, is any material litigation threatened against the Company or Wellsford/Whitehall other than routine litigation arising in the ordinary course of business and which is expected to be covered by liability insurance. Item 4. Submission of Matters to a Vote of Security-Holders. Not applicable. PART II Item 5. Market for Registrant's Common Equity and Related Shareholder Matters. (C) Market Information The Company's common shares are traded on the American Stock Exchange under the symbol "WRP". The high and low sales prices for the common shares on the American Stock Exchange and the dividends declared since the Company's inception are as follows: Common Shares --------------------------------- 1998 High Low Dividends ---- ---- --- --------- 1st Quarter $15.63 $13.25 N/A 2nd Quarter $15.38 $13.00 N/A 3rd Quarter $14.88 $ 9.00 N/A 4th Quarter $10.50 $ 6.75 N/A Common Shares --------------------------------- 1997 High Low Dividends ---- ---- --- --------- June 2 - June 30 $11.19 $10.50 N/A 3rd Quarter $16.13 $10.81 N/A 4th Quarter $17.25 $14.25 N/A (D) Holders The approximate number of holders of record of the common shares and Class A common shares (collectively, "Common Shares" or "Common Stock") were 3,200 and 1, respectively, as of March 8, 1999. These holders represent the interests of approximately 7,000 beneficial shareholders. (C) Dividends The Company paid no dividends during 1997 or 1998. The Company does not plan to distribute dividends for the foreseeable future, which will permit it to accumulate, for reinvestment, cash flow from investments, disposition of investments and other business activities. Item 6. Selected Consolidated Financial Data. The following table sets forth selected consolidated financial data for the Company and should be read in conjunction with the consolidated financial statements included elsewhere in this Form 10-K. Prior to the Company's 1997 investments, the Company's operations consisted of earning interest income on the Sonterra Mortgage (originated in July 1996) and the initial phase of construction development activity with respect to Palomino Park. Summary Consolidated Statement of Operations Data Year Ended December 31, - ------------------------- --------------------------------------------- (in thousands except per share data) 1998 1997 1996 ---- ---- ---- Revenues $ 26,154 $ 9,070 $ 757 Expenses (17,383) (3,819) -- Income from joint ventures 3,523 15 -- --------- --------- -------- Income before taxes $ 12,294 $ 5,266 $ 757 ========= ========= ======== Net income $ 9,444 $ 3,053 $ 757 ========= ========= ======== Net income per common share, basic $ 0.47 $ 0.18 $ 0.04 ========= ========= ======== Net income per common share, diluted $ 0.46 $ 0.18 $ 0.04 ========= ========= ======== Weighted average number of common shares outstanding 19,886 16,922 16,912 ====== ====== ====== Summary Consolidated Balance Sheet Data December 31, - ---------------------- --------------------------------------------------- (in thousands except per share data) 1998 1997 1996 1995 ---- ---- ---- ---- Real estate $150,322 $ 58,741 $ -- $ -- Notes receivable 124,706 105,632 17,800 -- Investment in joint ventures 80,776 44,780 -- -- Total assets 384,971 249,974 44,760 18,369 Mortgage notes payable 120,177 49,255 14,755 14,755 Credit facility 17,000 7,500 -- -- Shareholders' equity 231,625 181,158 30,005 3,614 The earnings per share amounts conform with Statement of Financial Accounting Standards No. 128 "Earnings per share". For further discussion of earnings per share and the impact of Statement No. 128, see the notes to the consolidated financial statements beginning on page F-7. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Overview The following discussion should be read in conjunction with the "Selected Consolidated Financial Data" and the Company's Consolidated Financial Statements and Notes thereto appearing elsewhere in this Form 10-K. Results of Operations - --------------------- Prior to the Company's 1997 investments, the Company's operations consisted of earning interest income on the Sonterra Loan (originated in July 1996) and the initial phase of construction development activity with respect to Palomino Park. Therefore, the increases in operating revenues and expenses between 1996 and 1997 reflected in the financial statements are the result of the acquisition of primarily all of the Company's operating assets during 1997. The accompanying consolidated financial statements include the assets and liabilities contributed to and assumed by the Company from the Trust, from the time such assets and liabilities were acquired or incurred, respectively, by the Trust. Such financial statements have been prepared using the historical basis of the assets and liabilities and the historical results of operations related to the Company's assets and liabilities. Comparison of the year ended December 31, 1998 to the year ended December 31, 1997. Rental income increased by $11.8 million. This increase is a result of the acquisition of properties in connection with the VLP Merger in February 1998 ($4.7 million), the completion of Blue Ridge ($5.3 million) and Red Canyon ($0.4 million) (Phases I and II of the Company's Palomino Park development) in December 1997 and November 1998, respectively, and the acquisition of Sonterra at Williams Centre in January 1998 ($2.7 million), net of the decrease associated with the contribution of all of the Company's then owned commercial properties to Wellsford/Whitehall in August 1997. Interest income increased by $5.1 million. This increase is primarily a result of the acquisition of approximately $157.5 million in notes receivable during the period from April 1997 through December 1998 bearing interest at rates between LIBOR +2% and approximately LIBOR +6% offset by the repayment of $60.0 million of notes receivable during this period. Property operating and maintenance expense, real estate tax expense, depreciation and amortization, and property management expense increased by $2.5 million, $1.1 million, $2.9 million, and $0.5 million, respectively. These increases are a result of the factors which affected rental income, as described above. Interest expense increased by $4.6 million as a result of the issuance of substantially all of the Company's debt other than the Palomino Park Bonds on or after December 31, 1997. All of the interest on the Company's debt prior to December 31, 1997 was capitalized to the Company's Palomino Park development. General and administrative expense increased by $1.9 million. This increase is a result of the Company commencing operations subsequent to the Spin-off in May 1997, as well as the Company's growth over the last year. Gain on sale of investments results from the sale of certain notes receivable acquired in the VLP Merger. Income from joint ventures increased by $3.5 million. This increase is a result of the Wellsford/Whitehall joint venture transaction in August 1997, the Creamer Realty Consultants joint venture transaction in January 1998 and the Liberty Hampshire joint venture transaction in July 1998. Minority interest is a result of EQR's 20% interest in the Company's Palomino Park development, as well as certain limited partnership interests (aggregating approximately 10%) in one of the Company's commercial office properties acquired in the VLP Merger. These limited partnership interests were bought out by the Company in October 1998 for approximately $1.1 million. The income tax provision increased $0.6 million as a result of the increase from approximately $4.2 million of taxable income during the period from the Spin-off through December 31, 1997 to approximately $12.3 million of taxable income during the year ended December 31, 1998, net of the effects of the utilization of the net operating loss carry forwards acquired in the VLP Merger ($2.2 million). Liquidity and Capital Resources - ------------------------------- The Company expects to meet its short-term liquidity requirements generally through its working capital and cash flow provided by operations. The Company considers its ability to generate cash to be adequate and expects it to continue to be adequate to meet operating requirements both in the short and long terms. The Company expects to meet its long-term liquidity requirements such as refinancing mortgages, financing acquisitions and development, and financing capital improvements by long-term borrowings, through the issuance of debt and the offering of additional debt and equity securities. The Company has (i) the commitment, until May 30, 2000, of an affiliate of EQR to acquire at the Company's option up to $25 million of the Company's Series A 8% Convertible Redeemable Preferred Stock ("Series A Preferred"), each share of which is convertible into shares of common stock at a price of $11.124 (the "EQR Preferred Commitment") and (ii) a $50 million two-year line of credit (extendible for one year) from BankBoston and MGT (the "WRP Bank Facility") which initially bears interest at an annual rate equal to LIBOR +175 basis points. The EQR Preferred Commitment is pledged as security for the WRP Bank Facility. If at May 30, 2000, the affiliate of EQR has purchased less than $25 million of Series A Preferred, it has the right to purchase the remainder of the $25 million not purchased prior to that time. As of December 31, 1998, $17 million was outstanding under the WRP Bank Facility which was repaid in January 1999. With respect to its Palomino Park investment, the Company has obtained a guarantee provided by the EQR Enhancement of $14.8 million. The Company's long-term debt matures as follows: $17.8 million in 1999 (including the $17.0 million balance of the WRP Bank Facility which was repaid in January 1999), $0.9 million in 2000, $29.0 million in 2001, $1.0 million in 2002, $1.1 million in 2003 and $87.4 million thereafter. The WRP Bank Facility contains various customary loan covenants and requires the Company to maintain a ratio of total consolidated liabilities to total consolidated assets of not more than 0.6 to 1, to maintain an overall debt service coverage ratio of at least 1.5 to 1 and to meet certain minimum borrowing base and equity level requirements. The WRP Bank Facility also limits the amount of undeveloped land the Company may hold. For a discussion of the Company's development communities and related capital commitments, see "Item 1. Business - Property Development and Land Investments - dba Wellsford Development." On June 2, 1997, the Company completed a Private Placement. The proceeds of the Private Placement of approximately $123.6 million were applied to (a) approximately $53 million to repay the WRP Bank Facility and other debt on the date of the Private Placement and (b) the balance towards certain 1997 investments and working capital. In December 1997, the Company closed on the Blue Ridge Mortgage. In January 1998, the Company closed on the Sonterra Mortgage. In February 1998, the Company completed the VLP Merger. In October 1998, the Company closed on the Wellsford Capital Mortgage. In November 1998, the Company closed on the Red Canyon Mortgage. In January 1999, a wholly-owned subsidiary of the Company obtained a $35 million secured loan facility (the "Wellsford Finance Bank Facility") from BankBoston, which can potentially be increased to $50 million. The Wellsford Finance Bank Facility bears interest at LIBOR + 2.75% and has a term of 3 years. The Company immediately drew $35 million on this line, the proceeds of which were used (a) to repay the $17 million balance of the WRP Bank Facility, and (b) for working capital purposes. The Company is obligated to pay a fee equal to one-quarter of one percent (0.25%) per annum on the average daily amount of the unused portion of the Wellsford Finance Bank Facility until maturity. Wellsford/Whitehall expects to meet its liquidity requirements, such as financing renovations to its properties, with operating cash flow from its properties, equity contributions from the owners of Wellsford/Whitehall, and the Wellsford/Whitehall Bank Facility. The net cash flow of the Company provided by operating activities increased from $6.0 million for the year ended December 31, 1997 to $7.0 million for the year ended December 31, 1998 and increased from $5.5 million for the year ended December 31, 1996 to $6.0 million for the year ended December 31, 1997. These increases generally resulted from the acquisition of the Company's investments as described in "Item 1. Business." Above. Investing activities of the Company used $107.1 million, $156.9 million and $31.2 million during the years ended December 31, 1998, 1997 and 1996, respectively. Investing activities consisted primarily of the acquisition and development of properties and the investments made in certain debt and equity instruments, net of proceeds from the sale of certain assets and the repayment of certain debt instruments. The Company currently has one multifamily community under development. Financing activities of the Company provided $80.3 million, $180.8 million and $25.6 million during the years ended December 31, 1998, 1997 and 1996, respectively. The Spin-off, Private Placement, Blue Ridge Mortgage, Sonterra Mortgage, Wellsford Capital Mortgage, Red Canyon Mortgage and WRP Bank Facility served as the primary sources of cash flow from financing activities. See the accompanying consolidated statements of cash flows included in the consolidated financial statements for a reconciliation of the Company's cash position for the years described therein. Recurring Capital Expenditures - ------------------------------ Regarding the Company's Blue Ridge (456 units), Red Canyon (304 units) and Sonterra at Williams Centre (344 units) properties, the Company expects to incur approximately $235 per unit in capital expenditures during the year ending December 31, 1999. Wellsford Capital expects to incur approximately $1.5 million of capital expenditures, tenant improvements, and leasing commissions with respect to the properties acquired in the VLP Merger during the year ending December 31, 1999. Wellsford/Whitehall Wellsford/Whitehall is currently involved in several projects to renovate, expand or reposition certain of its properties. For the year ending December 31, 1999, Wellsford/Whitehall expects to incur approximately $66.4 million in connection with these projects. In connection with its fully operating properties, Wellsford/Whitehall expects to incur approximately $3.1 million of capital expenditures, approximately $7.2 million of tenant improvement expenditures, and approximately $3.5 million of leasing costs during the year ending December 31, 1999. Other Capital Commitments - ------------------------- At December 31, 1998, the Company had the following discretionary capital commitments. Draws under the Abbey Credit Facility and Safeguard Credit Facility require additional collateral to be made available to the Company which is subject to the Company's approval. Capital calls related to investments to be made by the Company's joint ventures are also subject to the Company's approval of such investments. Item Amount - ---- ------ Undrawn Abbey Credit Facility commitment $ 4.0 million Undrawn Safeguard Credit Facility commitment $ 39.1 million Undrawn Wellsford/Whitehall equity commitment $ 13.6 million Undrawn Creamer Vitale Wellsford equity commitment $ 13.6 million Undrawn Liberty Hampshire SPFC JV equity commitment $ 23.1 million Inflation Substantially all of Wellsford Capital's and Wellsford/Whitehall's office leases provide for separate escalations of real estate taxes and operating expenses over a base amount. In addition, many of the office leases provide for fixed base rent increases or indexed escalations (based on the CPI or other measures). The Company believes that inflationary increases in expenses will generally be offset by the expense reimbursements and contractual rent increases described above. A substantial majority of the leases at the Company's multifamily properties are for a term of one year or less which may enable the Company to seek increased rents upon renewal or re-letting of apartment units. Such short- term leases generally minimize the risk to the Company of the adverse effects of inflation. Approximately 66% of the Company's investments in debt securities bear interest at floating rates or have remaining terms to maturity of less than one year. As such, the Company expects the rates of interest earned to increase in the event of high inflation. Year 2000 - --------- The Company has developed a plan to modify its information technology, primarily its accounting software, to recognize the year 2000. The Company currently expects the project to be substantially complete by the end of the second quarter of 1999 at a cost of less than $0.1 million which will be funded from operations, including costs incurred to date. The Company does not expect this project to have a significant effect on its operations. The timing and cost of this project will be closely monitored and are based on management's best estimates. Actual results, however, could differ from those anticipated. The Company also has initiated discussions with its third-party property management companies (the "Managers") to ensure that those parties have appropriate plans to allay any year 2000 issues that may impact the Company's operations. These issues would include both accounting/management software and non-information technology ("IT") systems such as fire safety, security and elevator systems. Wellsford/Whitehall has completed its analysis of such systems and has determined that no material adverse consequences will likely result from its year 2000 issues. Wellsford Capital and Wellsford Development have initiated such analysis, which is expected to be completed by the end of the second quarter of 1999. Under the most reasonably likely worst case scenario, wherein the Managers fail to update their software and non-IT systems, the Company has the ability to convert its accounting and management systems to a spreadsheet-based system on a temporary basis and to utilize its building engineers to manually override any non-IT systems which fail. While the Company believes its planning efforts are adequate to address its year 2000 concerns, there can be no guarantee that the systems of other companies on which the Company's systems and operations rely, primarily its banks, payroll processing company, creditors, and debtors, will be converted on a timely basis and will not have a material effect on the Company. Funds From Operations - --------------------- The Company considers Funds From Operations ("FFO") to be one appropriate measure of the performance of real estate companies because it is predicated on a cash flow analysis, as opposed to a measure predicated on generally accepted accounting principles ("GAAP"), which gives effect to non-cash items such as depreciation. FFO, for the Company's purposes, represents net income (loss) (computed in accordance with GAAP), plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures, and reflects gains (or losses) from the sale of real estate assets included in the Company's consolidated net income since the strategic sale of such assets is integral to the Company's operations. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. FFO does not represent cash generated from operating activities in accordance with GAAP and therefore should not be considered an alternative to net income as an indicator of the Company's operating performance or as an alternative to cash flow as a measure of liquidity and is not necessarily indicative of cash available to fund cash needs. Summary Statements of Operating Data Year Ended December 31, 1998 1997 1996 ---- ---- ---- Revenues $ 26,154,351 $ 9,070,375 $757,000 Expenses (17,383,369) (3,819,426) - Income from joint ventures 3,523,072 15,131 - ------------ ----------- -------- Income before taxes 12,294,054 5,266,084 757,000 Income tax expense ( 2,850,298) (2,213,007) - ------------ ----------- -------- Net income $ 9,443,756 $ 3,053,077 $757,000 Add: Depreciation and amortization 3,115,555 259,731 - JV depreciation and amortization 3,564,206 611,144 - ------------ ----------- --------- Funds From Operations $ 16,123,517 $ 3,923,952 $757,000 ============ =========== ========= Risks Associated with Forward-Looking Statements. This Form 10-K, together with other statements and information publicly disseminated by the Company, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward- looking statements. Such factors include, among others, the following, which are discussed in greater detail in the "Risk Factors" section of the Company's registration statement on Form S-11 (file No. 333-32445) filed with the Securities and Exchange Commission ("SEC") on July 30, 1997, as may be amended, which is incorporated herein by reference: general economic and business conditions, which will, among other things, affect demand for commercial and residential properties, availability and credit worthiness of prospective tenants, lease rents and the availability and cost of financing; difficulty of locating suitable investments; competition; risks of real estate acquisition, development, construction and renovation; vacancies at existing commercial and multifamily properties; dependence on rental income from real property; adverse consequences of debt financing; risks of investments in debt instruments, including possible payment defaults and reductions in the value of collateral; risks associated with equity investments in and with third parties: illiquidity of real estate investments; lack of prior operating history; and other risks listed from time to time in the Company's reports filed with the SEC. Therefore, actual results could differ materially from those projected in such statements. Item 7a. Quantitative and Qualitative Disclosures about Market Risk. The Company held the following market risk sensitive instruments at December 31, 1998: Balance Interest Maturity Fair Value Item (thousands) Rate Date Other Terms (thousands) - ---- ---------- -------- -------- ----------- ---------- 277 Park Loan $ 25,000 12% 5/2007 Interest only $27,580(C) Abbey Credit Facility 46,019 LIBOR+ 4% 9/2000 Interest only 46,019(D) Woodlands Loan 15,000 LIBOR+4.4% 7/2000 Interest only 15,000(D) REIT Bridge Loan 15,000 9.875%* 2/1999* Interest only 15,000(E) DeBartolo Loan 17,678 8.547% 7/2008 20 Year Amort. 16,916(F) Safeguard Loan 5,913 LIBOR+ 4% 4/2001 Interest only 5,913(D) -------- -------- Total Notes Rec $124,610 $126,428 ========= ======== WRP Bank Facility $ 17,000 LIBOR+1.75% 5/1999 (B) $ 17,000(G) Palomino Park Bonds 14,755 (A) 12/2035 Interest only 14,755(G) Blue Ridge Mtge 34,144 6.92% 1/2008 30 Yr. Amort. 34,144(H) Red Canyon Mtge. 27,000 6.68% 12/2008 30 Yr. Amort. 27,000(I) Wellsford Cap. Mtge. 28,000 LIBOR+2.75% 10/2001 Interest only 28,000(G) Sonterra Mtge. 16,278 6.87% 3/2008 30 Yr. Amort. 16,278(H) -------- -------- Total Debt $137,177 $137,177 ======== ======== * In January 1999, the interest rate and maturity date of this loan were modified to 12% and August 1999, respectively. (A) Rate approximates the Standard & Poor's/J.J. Kenney index for short- term high grade tax-exempt bonds (currently approximately 4%). (B) For more information on the WRP Bank Facility, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations." above. (C) The fair value of this investment was determined by reference to various market data. (D) The fair value of the Company's floating rate investments is considered to be their carrying amount. (E) The fair value of this short term investment is considered to be its carrying amount. (F) The fair value of this investment was determined by reference to various market data. (G) The fair value of the Company's floating rate debt is considered to be its carrying amount. (H) The fair value of this mortgage is considered to be its carrying amount since it is similar in both terms and collateral to the Red Canyon Mortgage which reflects current market conditions (see I below) (I) The fair value of this mortgage is considered to be its carrying amount as it is a recently executed transaction reflective of current market conditions. The Company's primary market risk exposure is to changes in interest rates. The Company manages this risk by offsetting its investments and financing exposures as well as by strategically timing and structuring its transactions. The Company has invested in $66.9 million of LIBOR-based debt instruments and has obtained $45 million of LIBOR-based financing as of December 31, 1998. The Company has invested in $57.7 million of fixed rate debt instruments and has obtained $77.4 million of fixed rate financing as of December 31, 1998. These exposures substantially offset one another. The Company believes that its net exposure to both LIBOR-based and fixed rate instruments is minimal because interest rates are currently near historical lows and increases in interest rates would be beneficial to the Company's net exposures, subject to credit risk. Item 8. Consolidated Financial Statements and Supplementary Data. The response to this Item 8 is included as a separate section of this annual report on Form 10-K. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III Item 10. Directors and Executive Officers of the Registrant. The executive officers and directors of the Company, their ages and their positions are as follows: Name Age Positions and Offices Held ---- --- -------------------------- Jeffrey H. Lynford 51 Chairman of the Board, Secretary and Director * Edward Lowenthal 54 President, Chief Executive Officer and Director*** Gregory F. Hughes 35 Chief Financial Officer David M. Strong 40 Vice President for Development Douglas Crocker II 58 Director* Rodney F. Du Bois 63 Director*** Richard S. Frary 51 Director**** Mark S. Germain 48 Director* Frank J. Hoenemeyer 79 Director** Frank J. Sixt 47 Director** - ---------------------- * Term expires 1999. ** Term expires 2000. *** Term expires 2001. **** Mr. Frary joined the board effective December 1, 1998. He will stand for re-election at the Company's 2000 annual meeting of shareholders. The information contained in the sections captioned "Nominees for Election as Directors", "Other Directors", "Executive Officers", and "Key Employees" of the Company's definitive proxy statement for the 1999 annual meeting of shareholders is incorporated herein by reference. Item 11. Executive Compensation. The information contained in the sections captioned "Executive Compensation", "Compensation of Directors", "Board Committees", "Employment Agreements", and "Management Incentive Plans" of the Company's definitive proxy statement for the 1999 annual meeting of shareholders is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management. The information contained in the section captioned "Security Ownership of Certain Beneficial Owners and Management" of the Company's definitive proxy statement for the 1999 annual meeting of shareholders is incorporated herein by reference. Item 13 Certain Relationships and Related Transactions. The information contained in the section captioned "Certain Transactions" of the Company's definitive proxy statement for the 1999 annual meeting of shareholders is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a) (1) Financial Statements The following consolidated financial information is included as a separate section of this annual report on Form 10-K: Consolidated Balance Sheets as of December 31, 1998 and 1997. Consolidated Statements of Income for the years ended December 31, 1998, 1997 and 1996. Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 1998, 1997 and 1996. Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996. Notes to Consolidated Financial Statements. (2) Financial Statement Schedules III. Real Estate and Accumulated Depreciation IV. Mortgage Loans on Real Estate All other schedules have been omitted because the required information of such other schedules is not present, is not present in amounts sufficient to require submission of the schedule or is included in the consolidated financial statements. (3) Exhibits (a) Exhibit No. Description+++ ----------- -------------- 3.1 Articles of Amendment and Restatement of the Company.**** 3.2 Articles Supplementary Classifying 335,000 Shares of Common Stock as Class A Common Stock.**** 3.3 Articles Supplementary Classifying 2,000,000 Shares of Common Stock as Series A 8% Convertible Redeemable Preferred Stock.**** 3.4 Bylaws of the Company.**** 4.1 Specimen certificate for Common Stock.*** 4.2 Specimen certificate for Class A Common Stock.**** 4.3 Specimen certificate for Series A 8% Convertible Redeemable Preferred Stock.**** 4.4 Warrant Agreement, dated as of August 28, 1997, between the Company and United States Trust Company of New York, as warrant agent, and Warrant Certificate No. 1 of the Company for 5,000,000 Warrants registered in the name of WHWEL Real Estate Limited Partnership.+ 4.5 Registration Rights Agreement, dated as of February 23, 1998, among the Company and Franklin Mutual Advisors, Inc. and Angelo Gordon & Co., L.P.++++ 10.1 Operating Agreement of Red Canyon at Palomino Park LLC between Wellsford Park Highlands Corp. and Al Feld, dated as of April 17, 1996, relating to Red Canyon.* 10.2 First Amendment to Operating Agreement of Red Canyon at Palomino Park LLC between Wellsford Park Highlands Corp. and Al Feld, dated as of May 19, 1997, relating to Red Canyon.**** 10.3 Tri-Party Agreement by and among NationsBank of Texas, N.A., Red Canyon at Palomino Park LLC, Wellsford Park Highlands Corp., Wellsford Residential Property Trust, Al Feld and The Feld Company, dated May 29, 1997, relating to Red Canyon.**** 10.4 Assignment and Assumption of Tri-Party Agreement by and among Wellsford Residential Property Trust, ERP Operating Limited Partnership, Red Canyon at Palomino Park LLC, Wellsford Park Highlands Corp., The Feld Company, Al Feld and NationsBank of Texas, N.A. dated May 30, 1997, relating to Red Canyon.**** 10.5 Agreement and Acknowledgment Regarding Tri-Party Agreement by and among NationsBank of Texas, N.A., Red Canyon at Palomino Park LLC, Wellsford Park Highlands Corp. and ERP Operating Limited Partnership dated May 30, 1997, relating to Red Canyon.**** 10.6 Second Amended and Restated Vacant Land Purchase and Sale Agreement between Mission Viejo Company and The Feld Company dated March 23, 1995, as amended by First Amendment, dated May 1, 1996, relating to the land underlying Palomino Park.* 10.7 Trust Indenture, dated as of December 1, 1995, between Palomino Park Public Improvements Corporation ("PPPIC") and United States Trust Company of New York, as trustee, securing Wellsford Residential Property Trust's Assessment Lien Revenue Bonds Series 1995 - $14,755,000.** 10.8 Letter of Credit Reimbursement Agreement, dated as of December 1, 1995, between PPPIC, Wellsford Residential Property Trust and Dresdner Bank AG, New York Branch.** 10.9 First Amendment to Letter of Credit Reimbursement Agreement, dated as of May 30, 1997, between PPPIC, Wellsford Residential Property Trust, Dresdner Bank AG, New York Branch and the Company.**** 10.10 Amendment to Wellsford Reimbursement Agreement by and between PPPIC, Wellsford Residential Property Trust and the Company, dated as of May 30, 1997.**** 10.11 Assignment and Assumption Agreement by and between Wellsford Residential Property Trust and the Company, dated as of May 30, 1997.**** 10.12 Credit Enhancement Agreement by and between the Company and ERP Operating Limited Partnership, dated as of May 30, 1997, relating to Palomino Park.**** 10.13 Reimbursement and Indemnification Agreement by and among the Company and ERP Operating Limited Partnership, dated as of May 30, 1997, relating to Palomino Park.**** 10.14 Guaranty by ERP Operating Limited Partnership for the benefit of Dresdner Bank AG, New York Branch, dated as of May 30, 1997, relating to Palomino Park.**** 10.15 Amended and Restated Promissory Note of the Company to the order of Dresdner Bank AG, New York Branch, dated May 30, 1997, relating to Palomino Park.**** 10.16 Common Stock and Preferred Stock Purchase Agreement by and between the Company and ERP Operating Limited Partnership dated as of May 30, 1997.**** 10.17 Registration Rights Agreement by and between the Company and ERP Operating Limited Partnership dated as of May 30, 1997.**** 10.18 Credit Agreement, dated as of April 25, 1997, between Park Avenue Financing Company LLC, PAMC Co-Manager Inc., PAFC Management, Inc., Stanley Stahl, The First National Bank of Boston, the Company, Other Banks that may become parties to the Agreement and The First National Bank of Boston, as Agent, relating to 277 Park Avenue.** 10.19 Assignment of Member's Interest, dated as of April 25, 1997, by PAFC Management, Inc. and Stanley Stahl to The First National Bank of Boston, relating to 277 Park Avenue (relating to interests in the Park Avenue Financing Company, LLC).** 10.20 Assignment of Member's Interest, dated as of April 25, 1997, by PAMC Co-Manager Inc. and Park Avenue Financing, LLC to The First National Bank of Boston, relating to 277 Park Avenue (relating to interests in 277 Park Avenue, LLC).** 10.21 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley Stahl to The First National Bank of Boston, relating to 277 Park Avenue (relating to stock in Park Avenue Management Corporation).** 10.22 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley Stahl to The First National Bank of Boston, relating to 277 Park Avenue (relating to stock in PAMC Co-Manager Inc.).** 10.23 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley Stahl to The First National Bank of Boston, relating to 277 Park Avenue (relating to stock in PAFC Management, Inc.).** 10.24 Conditional Guaranty of Payment and Performance, dated as of April 25, 1997, by Stanley Stahl, relating to 277 Park Avenue.** 10.25 Cash Collateral Account Security, Pledge and Assignment Agreement, dated as of April 25, 1997, between 277 Park Avenue, LLC, Park Avenue Management Corporation, Park Avenue Financing Company LLC, PAMC Co-Manager Inc., Stanley Stahl and The First National Bank of Boston, relating to 277 Park Avenue.** 10.26 Recognition Agreement, dated as of April 25, 1997, between The First National Bank of Boston, the Company, Column Financial, Inc., Park Avenue Financing Company LLC, PAMC Co-Manager, Inc. and 277 Park Avenue, LLC, relating to 277 Park Avenue.** 10.27 Intercreditor Agreement, dated as of April 25, 1997, between the Company and The First National Bank of Boston, as Agent, relating to 277 Park Avenue.** 10.28 Assignment and Acceptance Agreement, dated June 19, 1997, between BankBoston, N.A. (formerly known as The First National Bank of Boston) ("BankBoston") and the Company, relating to 277 Park Avenue.**** 10.29 Revolving Credit Agreement by and among the Company, BankBoston, Morgan Guaranty Trust Company of New York ("Morgan Guaranty"), other banks which may become parties and BankBoston, as agent, and Morgan Guaranty, as co- agent dated as of May 30, 1997.**** 10.30 Agreement Regarding Common Stock and Preferred Stock Purchase Agreement, dated as of May 30, 1997, among ERP Operating Limited Partnership, the Company and BankBoston, as agent.**** 10.31 Assignment of Common Stock Agreements, dated as of May 30, 1997, between the Company and BankBoston, as agent.**** 10.32 Collateral Assignment of Documents, Rights and Claims (including Collateral Assignment of Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing), made as of May 30, 1997, by the Company to BankBoston, as agent.**** 10.33 First Amended and Restated Loan Agreement, dated as of July 16, 1998 (the "First Amended and Restated Loan Agreement"), among Wellsford/Whitehall Holdings, L.L.C., as Borrower, and BankBoston, Goldman Sachs Mortgage Company, and Other Banks, as Banks, and BankBoston, as Administrative Agent and Co-Arranger and Co-Syndication Agent, and Goldman Sachs Mortgage Company, as Co-Arranger and Co-Syndication Agent. 10.34 Form of promissory note payable to the order of eight lenders by Wellsford/Whitehall Properties, L.L.C. under the First Amended and Restated Loan Agreement. 10.35 Amended and Restated Assignment of Member's Interest under the First Amended and Restated Loan Agreement, dated as of July 16, 1998, by Wellsford/Whitehall Holdings, L.L.C. to BankBoston, as Agent. 10.36 Amended and Restated Cash Collateral Agreement under the First Amended and Restated Loan Agreement, dated as of July 16, 1998, by and among Wellsford/Whitehall Holdings, L.L.C., WASH Manager L.L.C., Wells Avenue Holdings L.L.C. and BankBoston, as Agent. 10.37 Indemnity Agreement Regarding Hazardous Materials under the First Amended and Restated Loan Agreement, dated as of July 16, 1998, by Wellsford/Whitehall Holdings, L.L.C., Wellsford Commercial Properties Trust and WHWEL Real Estate Limited Partnership for the benefit of BankBoston. 10.38 Conditional Guaranty of Payment under the First Amended and Restated Loan Agreement, dated as of July 16, 1998, by Wellsford Commercial Properties Trust, WHWEL Real Estate Limited Partnership, the Company, Whitehall Street Real Estate Limited Partnership V, Whitehall Street Real Estate Limited Partnership VI, Whitehall Street Real Estate Limited Partnership VII and Whitehall Street Real Estate Limited Partnership VIII in favor of BankBoston and Goldman Sachs Mortgage Company. 10.39 Indemnity and Guaranty Agreement under the First Amended and Restated Loan Agreement, dated as of July 16, 1998, by Wellsford Commercial Properties Trust and WHWEL Real Estate Limited Partnership in favor of BankBoston, Goldman Sachs Mortgage Company and Other Banks. 10.40 Mezzanine Loan Agreement, dated as of July 16, 1998 (the "Mezzanine Loan Agreement"), among Wellsford/Whitehall Holdings II, L.L.C., as Borrower, and BankBoston, Goldman Sachs Mortgage Company, and Other Banks, as Banks, and BankBoston, as Administrative Agent and Co-Arranger and Co-Syndication Agent, and Goldman Sachs Mortgage Company, as Co-Arranger and Co-Syndication Agent. 10.41 Form of promissory note payable to the order of five lenders by Wellsford/Whitehall Properties II, L.L.C. under the Mezzanine Loan Agreement. 10.42 Assignment of Member's Interest under the Mezzanine Loan Agreement, dated as of July 16, 1998, between Wellsford/Whitehall Properties II, L.L.C. and BankBoston, as Agent. 10.43 Indemnity Agreement Regarding Hazardous Materials under the Mezzanine Loan Agreement, dated as of July 16, 1998, by Wellsford/Whitehall Properties II, L.L.C., Wellsford Commercial Properties Trust and WHWEL Real Estate Limited Partnership for the benefit of BankBoston. 10.44 Nomura Conditional Guaranty of Payment under the Mezzanine Loan Agreement, dated as of July 16, 1998, by Wellsford Commercial Properties Trust, WHWEL Real Estate Limited Partnership, the Company, Whitehall Street Real Estate Limited Partnership V, Whitehall Street Real Estate Limited Partnership VI, Whitehall Street Real Estate Limited Partnership VII and Whitehall Street Real Estate Limited Partnership VIII in favor of BankBoston and Goldman Sachs Mortgage Company. 10.45 Conditional Guaranty of Payment under the Mezzanine Loan Agreement, dated as of July 16, 1998, by Wellsford Commercial Properties Trust, WHWEL Real Estate Limited Partnership, the Company, Whitehall Street Real Estate Limited Partnership V, Whitehall Street Real Estate Limited Partnership VI, Whitehall Street Real Estate Limited Partnership VII and Whitehall Street Real Estate Limited Partnership VIII in favor of BankBoston and Goldman Sachs Mortgage Company. 10.46 Indemnity and Guaranty Agreement under the Mezzanine Loan Agreement, dated as of July 16, 1998, by Wellsford Commercial Properties Trust and WHWEL Real Estate Limited Partnership in favor of BankBoston, Goldman Sachs Mortgage Company and Other Banks. 10.47 $50 million Revolving Credit Agreement, dated as of January 12, 1999, among Wellsford Finance, Inc., as Borrower, and BankBoston and Other Banks, as Lender, and BankBoston, as Agent. 10.48 $50 million promissory note, dated January 12, 1999, payable to BankBoston by Wellsford Finance, Inc. 10.49 Collateral Assignment of Documents, Rights and Claims, dated January 12, 1999, from Wellsford Finance, Inc. to BankBoston, as Agent. 10.50 Limited Liability Company Operating Agreement of Wellsford/Whitehall Properties II, L.L.C., dated as of July 16, 1998. 10.51 Letter Agreement, dated as of July 16, 1998, between the Company and WHWEL Real Estate Limited Partnership, relating to warrants to be issued to WHWEL Real Estate Limited Partnership. 10.52 Fixed Rate Loan Agreement, dated as of August 11, 1998 (the "Fixed Rate Loan Agreement"), by and among First Union Real Estate Equity and Mortgage Investments, as Borrower, Bankers Trust Company, as Agent, and Bankers Trust Company, Wellsford Capital and BankBoston, as Lenders. 10.53 $15 million promissory note, dated August 11, 1998, payable to the order of Wellsford Capital by First Union Real Estate Equity and Mortgage Investments under the Fixed Rate Loan Agreement. 10.54 First Amendment of Fixed Rate Loan Agreement, dated as of January 8, 1999, among First Union Real Estate Equity and Mortgage Investments, as Borrower, Bankers Trust Company, Wellsford Capital and BankBoston, as Lenders, and Bankers Trust Company, as Agent. 10.55 Letter dated January 8, 1999, among First Union Real Estate Equity and Mortgage Investments, as Borrower, Bankers Trust Company, Wellsford Capital and BankBoston, as Lenders, and Bankers Trust Company, as Agent. 10.56 Revolving Credit Agreement for $70 million, dated as of August 28, 1997, between AP-Anaheim LLC, AP-Arlington LLC, AP-Atlantic LLC, AP-Cityview LLC, AP-Farrell Ramon LLC, AP-Palmdale LLC, AP-Redlands LLC, AP-Victoria LLC, AP-Victorville LLC, and AP-Sierra LLC, each a California limited liability company (collectively, the "Abbey Affiliates"), as Borrower, and Morgan Guaranty Trust Company of New York, as Lender.+ 10.57 Amendment to Revolving Credit Agreement, dated as of April 6, 1998, by AP-Diamond Bar LLC, AP-Edinger LLC, AP- Glendora LLC, AP- Anaheim LLC, AP- Arlington LLC, AP- Atlantic LLC, AP- Cityview LLC, AP- Redlands LLC, AP- Palmdale LLC, AP- Farrell Ramon LLC, AP- Sierra LLC, AP- Victoria LLC and AP- Victorville LLC (collectively, the "Amended Abbey Affiliates"), as Borrower, and Morgan Guaranty Trust Company of New York, as Lender. 10.58 Loan Participation Agreement, dated as of August 28, 1997, between Morgan Guaranty Trust Company of New York and the Company.+ 10.59 First Amendment to Participation Agreement, dated as of April 7, 1998, between Morgan Guaranty Trust Company of New York and Wellsford Capital. 10.60 $70 million promissory note, dated August 28, 1997, payable to the order of Morgan Guaranty Trust Company of New York by the Abbey Affiliates.+ 10.61 Amendment to Promissory Note, dated as of April 6, 1998, between the Amended Abbey Affiliates and Morgan Guaranty Trust Company of New York. 10.62 Purchase and Sale Agreement, dated as of September 18, 1997, among the Company, Wellsford Capital Corporation and Whitehall Street Real Estate Limited Partnership VII.++ 10.63 First Amended and Restated Master Credit Agreement, dated December 30, 1997, effective as of July 31, 1997, among The Woodlands Commercial Properties Company, L.P., The Woodlands Land Development Company, L.P., and BankBoston, Morgan Stanley Senior Funding, Inc., as Documentation Agent, and Other Banks, and BankBoston, as Managing Agent and Syndication Agent.++++ 10.64 Intercreditor Agreement, dated December 30, 1997, effective as of July 31, 1997, by and between BankBoston, Morgan Stanley Senior Funding, Inc. and the Other Lenders, relating to Woodlands.++++ 10.65 $4,186,991.87 Commercial Company Second Secured Term Loan Note, dated December 30, 1997, payable to the order of the Company by The Woodlands Commercial Properties Company, L.P. and The Woodlands Land Development Company, L.P.++++ 10.66 $10,813,008.13 Land Company Second Secured Term Loan Note, dated December 30, 1997, payable to the order of the Company by The Woodlands Land Development Company, L.P. and The Woodlands Commercial Properties Company, L.P.++++ 10.67 Revolving Credit Agreement, dated as of March 28, 1998, among Safeguard Capital Fund, L.P., as Borrower, and Morgan Guaranty Trust Company of New York, as Lender. 10.68 $90 million promissory note, dated March 28, 1998, payable to Morgan Guaranty Trust Company of New York by Safeguard Capital Fund, L.P. 10.69 Loan Participation Agreement, dated as of December 1, 1998, between Morgan Guaranty Trust Company of New York and Wellsford Capital. 10.70 Program Agreement for Clairborne Investors Mortgage Program between Creamer Realty Consultants and The Prudential Investment Corporation, dated as of December 10, 1997.++++ 10.71 Amended and Restated General Partnership Agreement of Creamer Realty Consultants, dated as of January 1, 1998, by and between Wellsford CRC Holding Corp. and FGC Realty Consultants, Inc.++++ 10.72 Limited Liability Company Agreement of Creamer Vitale Wellsford, L.L.C., dated as of January 20, 1998, by and between Wellsford CRC Holding Corp. and SX Advisors, LLC.++++ 10.73 Loan Agreement, dated as of February 27, 1998, between Wellsford Sonterra L.L.C., as Borrower, and Nationsbank, N.A., as Lender.++++ 10.74 $16,400,000 promissory note, dated February 27, 1998, payable to the order of NationsBank, N.A., by Wellsford Sonterra, L.L.C.++++ 10.75 Deed of Trust, Assignment of Leases and Rents and Security Agreement, dated February 27, 1998 by Wellsford Sonterra, L.L.C. in favor of NationsBank, N.A.++++ 10.76 $34,500,000 Multifamily Note, dated December 24, 1997, payable to the order of GMAC Commercial Mortgage Corporation by Park at Highlands L.L.C.++++ 10.77 Multifamily Deed of Trust, Assignment of Rents and Security Agreement, dated December 24, 1997, by Park at Highlands L.L.C. in favor of GMAC Commercial Mortgage Corporation.++++ 10.78 $28 million secured promissory note, dated October 22, 1998, payable to the order of Lehman Brothers Holdings Inc. by Wellsford Capital Properties, L.L.C. 10.79 Conditional Guarantee, dated as of October 22, 1998, by Wellsford Capital in favor of Lehman Brothers Holdings Inc. 10.80 Mortgage and Security Agreement, dated as of October 22, 1998, by Wellsford Capital Properties, L.L.C. to Lehman Brothers Holdings Inc. 10.81 1998 Management Incentive Plan of the Company. 10.82 1997 Management Incentive Plan of the Company.** 10.83 Rollover Stock Option Plan of the Company.** 10.84 Employment Agreement between the Company and Jeffrey H. Lynford.**** 10.85 Employment Agreement between the Company and Edward Lowenthal.**** 10.86 Employment Agreement between the Company and Gregory F. Hughes.**** 10.87 Employment Agreement between the Company and David M. Strong.**** 21.1 Subsidiaries of the Registrant. 27.1 Financial Data Schedule. 99.1 "Risk Factors" section of Amendment No. 2 to the Company's Registration Statement on Form S-11 (file no. 333-32445), as may be amended.+++++ - -------------------------- * Previously filed as an exhibit to the Form 10 filed on April 23, 1997. ** Previously filed as an exhibit to the Form 10/A Amendment No. 1 filed on May 21, 1997. *** Previously filed as an exhibit to the Form 10/A Amendment No. 2 filed on May 28, 1997. **** Previously filed an exhibit to the Form S-11 filed on July 30, 1997. ***** Previously filed as an exhibit to Amendment No. 1 to Form S-11 filed on November 14, 1997. + Previously filed as an exhibit to the Form 8-K filed on September 11, 1997. ++ Previously filed as an exhibit to the Form 8-K filed on September 23, 1997. +++ Wellsford acquired its interest in a number of these documents by assignment. ++++ Previously filed as an exhibit to the Form 10-K filed on March 31, 1998. +++++ Previously filed as part of Amendment No. 2 to the Registration Statement on Form S-11 filed on December 3, 1997. (b) During the last quarter of the period covered by this report, the Company filed the following reports on Form 8-K: Form 8-K dated December 1, 1998, regarding the addition of Richard S. Frary to the Company's board of directors. (c) The following exhibits are filed as exhibits to this Form 10- K: See Item 14 (a)(3) above. (d) The following documents are filed as a part of this report: None. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WELLSFORD REAL PROPERTIES, INC. By: /s/ Jeffrey H. Lynford --------------------------- (Jeffrey H. Lynford) Chairman of the Board, Secretary and Director Dated: March 26, 1999 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Name Title Date - ---------------------- ------------------------------ ------- /s/ Jeffrey H. Lynford Chairman of the Board, March 26, 1999 - ---------------------- Secretary and Director (Jeffrey H. Lynford) /s/ Edward Lowenthal President, Chief Executive March 26, 1999 - ---------------------- Officer and Director (Edward Lowenthal) (Principal Executive Officer) /s/ Gregory F. Hughes Chief Financial Officer March 26, 1999 - ---------------------- (Principal Financial and (Gregory F. Hughes) Accounting Officer) /s/ Rodney F. Du Bois Director March 26, 1999 - --------------------- (Rodney F. Du Bois) /s/ Mark S. Germain Director March 26, 1999 - --------------------- (Mark S. Germain) /s/ Frank J. Hoenemeyer Director March 26, 1999 - ----------------------- (Frank J. Hoenemeyer) /s/ Frank J. Sixt Director March 26, 1999 - ----------------- (Frank J. Sixt) /s/ Douglas Crocker II Director March 26, 1999 - ---------------------- (Douglas Crocker II) /s/ Richard S. Frary Director March 26, 1999 - ------------------- (Richard S. Frary) WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page No. in Form 10-K Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . .F-2 Consolidated Balance Sheets as of December 31, 1998 and 1997 . . . . . .F-3 Consolidated Statements of Income for the Years Ended December 31, 1998, 1997 and 1996 . . . . . . . . . . . . . . . . . . . .F-4 Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 1998, 1997 and 1996 . . . . . . . . . . . .F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996 . . . . . . . . . . . . . . . . . . . .F-6 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . .F-7 Wellsford/Whitehall Properties II, L.L.C. Consolidated Financial Statements and Notes. . . . . . . . . . . . . . F-28 FINANCIAL STATEMENT SCHEDULES III - Real Estate and Accumulated Depreciation. . . . . . . . . . . . S-1 IV- Mortgage Loans on Real Estate . . . . . . . . . . . . . . . . . . S-2 All other schedules have been omitted because the required information for such other schedules is not present, is not present in amounts sufficient to require submission of the schedule or because the required information is included in the consolidated financial statements. REPORT OF INDEPENDENT AUDITORS To the Shareholders and Board of Directors of Wellsford Real Properties, Inc. and Subsidiaries We have audited the accompanying consolidated balance sheets of Wellsford Real Properties, Inc. and subsidiaries (the "Company") as of December 31, 1998 and 1997, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1998. Our audits also included the financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Wellsford Real Properties, Inc. and subsidiaries at December 31, 1998 and 1997, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. /s/ Ernst & Young LLP New York, New York February 12, 1999 WELSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, -------------------------------- 1998 1997 -------------- -------------- ASSETS Real estate assets, at cost - Note 10 Land $ 18,813,000 $ 5,225,000 Buildings and improvements 115,425,760 36,338,624 -------------- -------------- 134,238,760 41,563,624 Less, accumulated depreciation (2,707,390) - -------------- -------------- 131,531,370 41,563,624 Construction in progress 18,791,075 17,177,824 -------------- -------------- 150,322,445 58,741,448 Notes receivable - Notes 4 and 10 124,706,499 105,631,611 Investment in joint ventures - Note 10 80,776,338 44,779,563 -------------- -------------- Total real estate assets 355,805,282 209,152,622 Cash and cash equivalents 10,122,037 29,895,212 Restricted cash - Note 3 8,007,850 7,695,910 Prepaid and other assets 11,035,489 3,229,956 ------------- -------------- Total Assets $ 384,970,658 $ 249,973,700 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Mortgage notes payable - Notes 5 and 10 $ 120,176,790 $ 49,255,000 Credit facility - Notes 4 and 5 17,000,000 7,500,000 Accrued expenses and other liabilities 12,788,324 9,763,109 ------------ -------------- Total Liabilities 149,965,114 66,518,109 ------------- -------------- Commitments and contingencies - Notes 4,5,6,7,8,9,10,11 and 13 - - Minority Interest - Note 10 3,380,721 2,297,295 Shareholders' Equity: Series A 8% Convertible Redeemable Preferred Stock, $.01 par value per share, 2,000,000 shares authorized, no shares issued and outstanding at December 31, 1998 or 1997 - - Common Stock 197,650,000 shares authorized- 20,410,605 and 16,656,707 shares, $.01 par value per share, issued and outstanding at December 31, 1998 and 1997, respectively 204,106 166,567 Class A Common Stock, 350,000 shares authorized - 339,806 shares, $.01 par value per share, issued and outstanding at December 31, 1998 and 1997 3,398 3,398 Paid in capital in excess of par value 228,212,205 179,721,827 Retained earnings 11,385,274 1,941,518 Deferred compensation - Note 7 (3,240,023) (675,014) Treasury stock, 489,671 shares - Note 7 (4,940,137) - -------------- -------------- Total Shareholders' Equity - Notes 1 and 7 231,624,823 181,158,296 -------------- -------------- Total Liabilities and Shareholders' Equity $ 384,970,658 $ 249,973,700 ============== ============== See Accompanying Notes WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME For the Years Ended December 31, -------------------------------------- 1998 1997 1996 ------------- ---------- ----------- REVENUE Rental income $ 13,126,974 $1,291,354 $ - Interest income 12,888,607 7,779,021 757,000 ------------ ---------- ---------- Total Revenue 26,015,581 9,070,375 757,000 ------------ ---------- ---------- EXPENSES Property operating and maintenance 2,786,839 241,257 - Real estate taxes 1,201,051 105,692 - Depreciation and amortization 3,157,129 294,563 - Property management 498,596 18,356 - Interest 4,599,309 - - General and administrative 5,062,895 3,159,558 - ------------ ---------- ---------- Total Expenses 17,305,819 3,819,426 - Gain on sale of investment 138,770 - - Income from joint ventures 3,523,072 15,135 - ------------ ---------- ---------- Income before minority interest 12,371,604 5,266,084 757,000 Minority interest (77,550) - - ------------ ---------- ---------- Income before taxes 12,294,054 5,266,084 757,000 Income tax expense - Note 2 2,850,298 2,213,007 - ------------ ---------- ---------- Net income $ 9,443,756 $3,053,077 $ 757,000 ============ ========== ========== Net income per common share, basic - Note 2 $ 0.47 $ 0.18 $ 0.04 ============ ========== ========== Net income per common share, diluted - Note 2 $ 0.46 $ 0.18 $ 0.04 ============ ========== ========== Weighted average number of common shares outstanding - Note 2 19,886,305 16,922,135 16,911,849 ============ ========== ========== See Accompanying Notes
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 Common Shares* Total ------------------ Paid-in Retained Deferred Shareholders' Shares Amount Capital** Earnings Compensation Equity -------- -------- ------------- ------------ ------------- ------------ December 31, 1995 - $ - $ 3,614,000 $ - $ - $ 3,614,000 Equity contributions - - 25,634,000 - - 25,634,000 Net income - - - 757,000 - 757,000 --------- --------- ------------- ------------ ------------- ----------- December 31, 1996 - - 29,248,000 757,000 - 30,005,000 Equity contributions prior to Spin-off - Note 1 - - 19,310,633 - - 19,310,633 Net income prior to Spin-off - Note 1 - - - 1,111,559 - 1,111,559 Spin-off - Note 1 4,887,577 48,875 1,819,684 (1,868,559) - - Private offering of common shares (net of issuance costs) - Note 7 12,000,000 120,000 121,574,562 - - 121,694,562 Issuance of Warrants - Note 7 - - 6,198,345 - - 6,198,345 Director and officer share grants - Note 7 108,936 1,090 1,570,603 - (675,014) 896,679 Net income subsequent to Spin-off - - - 1,941,518 - 1,941,518 ----------- --------- ------------- ------------ ----------- ------------ December 31, 1997 16,996,513 169,965 179,721,827 1,941,518 (675,014) 181,158,296 Shares issued in connection with VLP merger - Note 7 3,350,000 33,500 39,329,000 - - 39,362,500 Issuance of warrants - Note 7 - - 750,000 - - 750,000 Director and officer share grants - Note 7 403,898 4,039 3,471,241 - (2,700,023) 775,257 Amortization of deferred compensation - Note 7 - - - - 135,014 135,014 Net income - - - 9,443,756 - 9,443,756 ----------- --------- ------------- ------------ ----------- ------------ December 31, 1998 20,750,411 $ 207,504 $ 223,272,068 $ 11,385,274 $(3,240,023) $231,624,823 =========== ========= ============= ============ =========== ============ *Includes 339,806 Class A Common Shares. **Net of treasury stock See Accompanying Notes
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the years Ended December 31, ------------------------------------------------------ 1998 1997 1996 --------------- -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 9,443,756 $ 3,053,077 $ 757,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,168,583 294,563 - Undistributed joint venture income (2,083,506) (15,135) - Share grants 931,350 896,679 - Gain on sale of investments (138,770) - - Decrease (increase) in assets Restricted cash (311,940) (2,175,910) 4,894,000 Prepaid and other assets (7,957,209) (3,164,296) (134,000) (Decrease) increase in liabilities Accrued expenses and other liabilities 3,952,549 7,116,138 - ------------- ----------- ------------- Net cash provided by operating activities 7,004,813 6,005,116 5,517,000 ------------- ------------ ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Investments in real estate assets (125,514,325) (85,551,813) (13,351,000) Investments in joint ventures (33,511,554) (13,955,069) - Investments in notes receivable (67,230,199) (162,845,982) (17,800,000) Repayments of notes receivable 55,008,523 105,440,515 - Proceeds from sale of real estate assets 64,132,507 - - ------------- -------------------------------------- Net cash (used in) investing activities (107,115,048) (156,912,349) (31,151,000) ------------- -------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from credit facility 86,500,000 64,400,000 - Repayment of credit facility (77,000,000) (56,900,000) - Proceeds from bridge loan - 6,000,000 - Repayment of bridge loan - (6,000,000) - Proceeds from mortgage notes payable 71,400,000 34,500,000 - Repayment of mortgage notes payable (478,210) - - Equity contributions prior to Spin-off - 17,060,633 25,634,000 Equity contributions from minority interest - 47,250 - Distributions to minority interest (84,730) - - Proceeds from common shares - 121,694,562 - -------------- -------------------------------------- Net cash provided by financing activities 80,337,060 180,802,445 25,634,000 -------------- -------------------------------------- Net increase (decrease) in cash and cash equivalents (19,773,175) 29,895,212 - Cash and cash equivalents, beginning of year 29,895,212 - - -------------- --------------------------------------- Cash and cash equivalents, end of year $ 10,122,037 $ 29,895,212 $ - ============== ======================================= SUPPLEMENTAL INFORMATION: Cash paid during the year for interest $ 5,017,279 $ 1,506,508 $ 663,000 Cash paid during the year for income taxes $ 2,228,336 $ 2,242,000 $ - SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Shares issued in connection with acquisition of commercial office properties and notes receivable $ (39,362,500) $ (2,250,000) $ - Warrants issued in connection with acquisition of joint venture investments $ (750,000) $ (6,198,345) $ - See accompanying notes
WELLSFORD REAL PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Organization and Business Wellsford Real Properties, Inc. (and subsidiaries, collectively the "Company") was formed on January 8, 1997, as a corporate subsidiary of Wellsford Residential Property Trust (the "Trust"). The Trust was formed in 1992 as the successor to Wellsford Group Inc. (and affiliates) which was formed in 1986. On May 30, 1997, the Trust merged (the "Merger") with Equity Residential Properties Trust ("EQR"). Immediately prior to the Merger, the Trust contributed certain of its assets to the Company and the Company assumed certain liabilities of the Trust. Immediately after the contribution of assets to the Company and immediately prior to the Merger, the Trust distributed to its common shareholders all the outstanding shares of the Company owned by the Trust (the "Spin-off"). On June 2, 1997, the Company sold 12,000,000 shares of its common stock in a private placement (the "Private Placement") to a group of institutional investors at $10.30 per share, the Company's then book value per share (Note 7). The Company is a real estate merchant banking firm headquartered in New York City which acquires, develops, finances and operates real properties and organizes and invests in private and public real estate companies. The Company has established three strategic business units ("SBUs") within which it executes its business plan: an SBU for commercial property operations which is held in its subsidiary, Wellsford/Whitehall Properties II, L.L.C., an SBU for debt and equity activities and an SBU for property development and land operations. See Note 10 for additional information regarding the Company's industry segments. (2) Summary of Significant Accounting Policies Principles of Consolidation and Financial Statement Presentation. The accompanying consolidated financial statements include the accounts of Wellsford Real Properties, Inc. and its majority-owned and controlled subsidiaries. Investments in entities where the Company does not have a controlling interest, including Wellsford/Whitehall (see Note 10), are accounted for under the equity method. All significant inter-company accounts and transactions among Wellsford Real Properties, Inc. and its subsidiaries have been eliminated in consolidation. The accompanying consolidated financial statements include the assets and liabilities contributed to and assumed by the Company from the Trust, from the time such assets and liabilities were acquired or incurred, respectively, by the Trust. Such financial statements have been prepared using the historical basis of the assets and liabilities and the historical results of operations related to the Company's assets and liabilities. Income Recognition. Commercial properties are leased under operating leases. Rental revenue is recognized on a straight-line basis over the terms of the respective leases. Residential communities are leased under operating leases with terms of generally one year or less. Rental revenue is recognized monthly as it is earned. Cash and Cash Equivalents. The Company considers all demand and money market accounts and short term investments in government funds with an original maturity of three months or less to be cash and cash equivalents. Real Estate and Depreciation. Costs directly related to the acquisition and improvement of real estate are capitalized, including all improvements identified during the underwriting of a property acquisition. Ordinary repairs and maintenance are expensed as incurred. Tenant improvements and leasing commissions related to commercial properties are capitalized and depreciated over the terms of the related leases. Depreciation is computed over the expected useful lives of depreciable property on a straight line basis, principally 27.5 years for residential buildings and improvements, 40 years for commercial properties and 5 to 12 years for furnishings and equipment. Depreciation expense was $3.2 million and $0.3 million in 1998 and 1997, respectively, and included $0.3 million and $0.1 million of amortization of certain assets capitalized to the Company's Investment in Joint Ventures in 1998 and 1997, respectively. The Company reviews its real estate assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. No impairment was recorded during the years 1998, 1997 or 1996. Mortgage Note Receivable Impairment. The Company considers a note impaired if, based on current information and events, it is probable that all amounts due under the note agreement are not collectable. Impairment is measured based upon the fair value of the underlying collateral. No impairment has been recorded through December 31, 1998. Share Based Compensation. Statement of Financial Accounting Standard ("SFAS") 123 "Accounting for Stock-Based Compensation" establishes a fair value based method of accounting for share based compensation plans, including share options. However, registrants may elect to continue accounting for share option plans under Accounting Principles Board Opinion ("APB") 25, but are required to provide pro forma net income and earnings per share information "as if" the new fair value approach had been adopted (see Note 8). Because the Company has elected to continue to account for its share based compensation plans under APB 25, there has been no impact on the Company's consolidated financial statements resulting from SFAS 123. Segment Reporting. Effective January 1, 1997, the Company adopted SFAS 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS 131 superseded SFAS 14 "Financial Reporting for Segments of a Business Enterprise." SFAS 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. SFAS 131 also establishes standards for related disclosures about products and services, geographic areas, and major customers. The adoption of SFAS 131 did not affect results of operations or financial position, but did affect the disclosure of segment information. See Note 10. Income Taxes. The Company accounts for income taxes under SFAS 109 "Accounting for Income Taxes." Deferred income tax assets and liabilities are determined based upon differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The components of the income tax provision are as follows: Year Ended Year Ended December 31, 1998 December 31, 1997 ----------------- ----------------- Current federal tax $2,756,165 $1,776,595 Current state and local tax 909,197 456,838 Deferred federal tax (693,965) (16,239) Deferred state and local tax (121,099) (4,187) ----------- ----------- $2,850,298 $2,213,007 =========== =========== The reconciliation of income tax computed at the U.S. federal statutory rate to income tax expense is as follows: Year Ended Year Ended December 31, 1998 December 31, 1997 ----------------- ----------------- Amount Percent Amount Percent ------ ------- ------ ------- Tax at U.S. statutory rate $4,302,919 35.00% $1,454,084 35.00% State taxes, net of federal benefit 944,153 7.68% 374,711 9.02% Change in valuation (2,345,007) (19.07%) 381,490 9.18% allowance Non-deductible items 12,355 0.10% 2,722 0.07% Effect of change in state tax rate (64,122) (0.53%) -- -- ----------- -------- ---------- ------- $2,850,298 23.18% $2,213,007 53.27% =========== ======== ========== ======= The Company has net operating loss carryforwards of $76,557,331 for income tax purposes at December 31, 1998, that expire in the years 2005 through 2012. The Company's net operating loss carryforwards reflect a limit on utilization pursuant to Section 382 of the Internal Revenue Code of 1986, as amended, which limits the amount of losses available after an ownership change. Those carryforwards resulted from the Company's acquisition of Value Property Trust in 1998, and are limited in their use by the amount of income generated by Value Property Trust (see Note 10). Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows: Year Ended Year Ended December 31, 1998 December 31, 1997 ----------------- ----------------- Deferred Tax Assets: Net operating loss $32,674,669 $ -- Deferred compensation plan 2,794,787 3,021,641 AMT credit carryforward 377,612 -- Restricted share grant 341,440 -- Other 407,844 32,908 ------------ ------------ Subtotal 36,596,352 3,054,549 Valuation allowance (28,132,547) (2,361,603) ------------ ------------ Total deferred tax assets $ 8,463,805 $ 692,946 ============ ============ Deferred tax liabilities: Acquisition of Value Property Trust $(2,236,945) $ -- Built-in gain on stock in deferred compensation plan (640,200) (660,037) Undistributed Whitehall joint venture net income (595,506) -- Other (149,066) (12,483) ------------ ----------- Total deferred tax liabilities $(3,621,717) $ (672,520) ------------ ----------- Net deferred tax asset $ 4,842,088 $ 20,426 ============ =========== SFAS 109 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. After consideration of all the evidence, both positive and negative, management has determined that a $28,132,547 and $2,361,603 valuation allowance at December 31, 1998 and 1997, respectively, is necessary to reduce the deferred tax assets to the amount that will more likely than not be realized. The valuation allowance relates to NOL carryforwards and the deferred compensation plan. The $25,770,944 change in the valuation allowance in 1998 is primarily due to the Company's acquisition of Value Property Trust. This acquisition resulted in an increase in the net deferred tax asset of $4,006,598. Per Share Data. In 1997, SFAS 128 "Earnings per Share" was issued. SFAS 128 replaced the calculation of primary and fully diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is very similar to fully diluted earnings per share. All earnings per share amounts for all periods have been presented to conform to the SFAS 128 requirements. Earnings per common share are computed based upon the weighted average number of common shares outstanding during the period, including Class A common shares. Diluted earnings per common share are based upon the increased number of common shares that would be outstanding assuming the exercise of dilutive common share options (196,082 in 1998 and 169,264 in 1997) and warrants (296,775 in 1998 and 256,899 in 1997), under the treasury stock method. The Company was a corporate subsidiary of the Trust prior to the Spin- off. Earnings per share was calculated using the weighted average number of shares outstanding assuming that the Spin-off and Private Placement (Note 7) occurred on January 1, 1996. Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (3) Restricted Cash Restricted cash primarily consists of retirement plan deposits and debt service and construction reserve balances. At December 31, 1998 and 1997, retirement plan deposits amounted to $5,965,095 and $6,017,785, respectively, and reserve balances amounted to $2,042,755 and $1,678,125 respectively. Retirement plan deposits are made solely by, and at the discretion of, the Company's officers who participate in the plan. (4) Notes Receivable At December 31, 1998 and 1997, notes receivable consisted of the following: Interest Maturity Payment Balance Note Rate Date Terms December 31, - ---- -------- -------- ------- ------------------------ 1998 1997 ---- ---- 277 Park Loan 12% 5/2007 Interest Only $ 25,000,000 $ 25,000,000 Abbey Credit Facility LIBOR +4% 9/2000 Interest Only 46,019,350 28,626,650 IPH Mezzanine Facility LIBOR +5% 6/1998* Interest Only - 9,821,036 Woodlands Loan LIBOR +4.4% 7/2000 Interest Only 15,000,000 15,000,000 Park 80 Loan LIBOR +3% 3/1998 Interest Only - 5,100,000 Wellsford/ Whitehall Bridge Loan LIBOR +4% 2/1998 Interest Only - 4,283,925 Sonterra Loan** 9% 7/1999** Interest Only - 17,800,000 REIT Bridge Loan 9.875%*** 2/1999*** Interest Only 15,000,000 - DeBartolo Loan 8.547% 7/2008 20 Year Amort. 17,677,943 - Safeguard Credit Fac. LIBOR +4% 4/2001 Interest Only 5,912,500 - Other Various Various Various 96,706 - ------------ ----------- $124,706,499 $105,631,611 ========================= * Repaid in February 1998. **Effectively repaid in January 1998 as part of the Sonterra acquisition. See Note 12. ***In January 1999, the interest rate and maturity date of this loan were modified to 12% and August 1999, respectively. For additional information on the Company's notes receivable, see Note 10. (5) Debt At December 31, 1998 and 1997, the Company's debt consisted of the following: Maturity Stated Balance Debt Date Interest Rate December 31, ---- -------- ------------- ------------------------ - - 1998 1997 ---- ---- WRP Bank Facility (A) 5/1999 LIBOR +1.75% $ 17,000,000 $ 7,500,000 Palomino Park Bonds (B) 12/2035 Variable (C) 14,755,000 14,755,000 Blue Ridge Mortgage 1/2008 6.92% (D) 34,144,108 34,500,000 Red Canyon Mortgage 12/2008 6.68% (D) 27,000,000 - Wellsford Capital Mtge. 10/2001 LIBOR +2.75% 28,000,000 - Sonterra Mortgage 3/2008 6.87% (D) 16,277,682 - ------------ ----------- $137,176,790 $56,755,000 ============ =========== - ---------------------------- (A) The balance of the WRP Bank Facility was repaid in January 1999. (B) Mortgage secures tax exempt bonds. (C) Rate approximates the Standard & Poor's / J.J. Kenney index for short-term high grade tax-exempt bonds (currently approximately 4%). (D) Principal payments are made based on a 30-year amortization schedule. In December 1995, the Trust marketed and sold $14.8 million of tax- exempt bonds to fund construction at Palomino Park. At December 31, 1998, $1.1 million of the bond proceeds were being held in escrow pending their use for the funding of development. The bonds are secured by a letter of credit from Dresdner Bank, AG, NY Branch ("Dresdner"). An affiliate of EQR has made its own credit available to Dresdner in the form of a guaranty. The Blue Ridge Mortgage is secured by the Blue Ridge property (Note 10). The Red Canyon Mortgage is secured by the Red Canyon property (note 10). The Sonterra Mortgage is secured by the Sonterra property (Note 10). The Wellsford Capital Mortgage is secured by the properties acquired in the VLP Merger (Note 10). In May 1997, the Company obtained a $50 million two-year line of credit (extendable for one year) from BankBoston, N.A. and Morgan Guaranty Trust Company of New York (the "WRP Bank Facility"). The WRP Bank Facility is secured by the EQR Preferred Commitment (Note 7) and the 277 Park Loan. The Company is obligated to pay a fee equal to one-quarter of one percent (0.25%) per annum on the average daily amount of the unused portion of the WRP Bank Facility until maturity. The WRP Bank Facility contains various customary loan covenants and requires the Company to maintain a ratio of total consolidated liabilities to total consolidated assets of not more than 0.6 to 1, to maintain an overall debt service coverage ratio of at least 1.5 to 1 and to meet certain minimum borrowing base and equity level requirements. The WRP Bank Facility also limits the amount of undeveloped land the Company may hold. The Company's long-term debt matures as follows: $17.8 million in 1999 (including the $17.0 million balance of the WRP Bank Facility which was repaid in January 1999), $0.9 million in 2000, $29.0 million in 2001, $1.0 million in 2002, $1.1 million in 2003 and $87.4 million thereafter. The Company capitalizes interest related to buildings under construction and renovation to the extent such assets qualify for capitalization. Total interest capitalized during the years ended December 31, 1998, 1997 and 1996 was $0.8 million, $1.7 million and $0.7 million, respectively. (6) Transactions With Affiliates In February 1997, the contracts to purchase certain commercial properties were transferred to the Company by an entity ("Commercial Partnership") of which Messrs. Lynford and Lowenthal and the wife of Mark Germain (a director of the Company) are owners, for 218,447 shares of common stock having an aggregate value of approximately $2.25 million and the Company's agreement to repay a $1.0 million advance used for the down payment on one of the properties. Upon liquidation of Commercial Partnership, Mr. Lynford, Mr. Lowenthal and the wife of Mark Germain each received approximately 16.4%, 16.4% and 13.8%, respectively, of the shares of common stock issued to Commercial Partnership. The aggregate purchase price for these commercial properties paid by the Company was approximately $47.6 million, including the approximately $2.25 million referred to above. On May 30, 1997, the Company made short-term loans to Messrs. Lynford and Lowenthal in the amounts of $590,000 and $119,000, respectively. The proceeds of these loans, which were repaid on July 1, 1997, were used to satisfy certain withholding tax obligations. The Company earned approximately $0.1 million and $2.1 million in interest income and $0.3 million and $0.1 million in management fees during 1998 and 1997, respectively, from Wellsford/Whitehall (Note 10). (7) Shareholders' Equity On June 2, 1997, the Company completed the Private Placement. The proceeds of the Private Placement of approximately $123.6 million have been applied to (a) approximately $53 million to repay the WRP Bank Facility and other debt on the date of the Private Placement and (b) the balance towards certain investments described in Note 10 and working capital. In February 1998, the Company issued 3,350,000 shares of its common stock in connection with the VLP Merger (see Note 10). The WRP Bank Facility (Note 5) is secured by an affiliate of EQR's commitment, until May 30, 2000, to acquire at the Company's option up to $25 million of the Company's Series A 8% Convertible Redeemable Preferred Stock ("Series A Preferred"), each share of which is convertible into shares of common stock at a price of $11.124 (the "EQR Preferred Commitment"). If at May 30, 2000, the affiliate of EQR has purchased less than $25 million of Series A Preferred, it has the right to purchase the remainder of the $25 million not purchased prior to that time. In December 1997, three of the Company's executive officers each received a grant of 14,286 restricted common shares, which were issued to the Company's non-qualified deferred compensation plan. Twenty percent (20%) of each executive officer's restricted common shares vest on each anniversary date of the grant (December 5, 1997) over a 5-year period provided that the executive officer is still employed by the Company (otherwise, any unvested restricted common shares will be redeemed by the Company at $.01 per share). Based upon the market price on the date of grant of $15.75 per common share, the restricted common shares granted to each of the executive officers had a market value of $225,000. The total deferred compensation is included in "Deferred Compensation" and "General and Administrative Expense" on the Company's consolidated financial statements. In December 1998, four of the Company's executive officers received grants of restricted common shares, which aggregated 304,228 shares and were issued to the Company's non-qualified deferred compensation plan. One third of each executive officer's restricted common shares vest on each anniversary date of the grant (December 10, 1998) over a 3-year period provided that the executive officer is still employed by the Company (otherwise, any unvested restricted common shares will be redeemed by the Company at $.01 per share). Based upon the market price on the date of grant of $8.875 per common share, the restricted common shares granted to the executive officers had an aggregate market value of $2.7 million. The total deferred compensation is included in "Deferred Compensation" and "General and Administrative Expense" on the Company's consolidated financial statements. In December 1997, two of the Company's executive officers each received a grant of 19,048 common shares, which were issued to the Company's non- qualified deferred compensation plan. Based upon the market price on the date of grant of $15.75 per common share, the common shares granted to each of the executive officers had a market value of approximately $300,000, which is included in "General and Administrative" expense in the Company's consolidated financial statements. In December 1998, three of the Company's executive officers received grants of common shares, which aggregated 90,142 shares and were issued to the Company's non-qualified deferred compensation plan. Based upon the market price on the date of grant of $8.875 per common share, the common shares granted to the executive officers had an aggregate market value of approximately $800,000, which is included in "General and Administrative" expense in the Company's consolidated financial statements. The total value at the date of issuance of the Company's shares issued to the Company's non-qualified deferred compensation plan, including certain shares which were issued at the date of the Merger, is approximately $4.9 million. Pursuant to Emerging Issues Task Force Issue No. 97-14 (and 97-14A), "Accounting for Deferred Compensation Arrangements where Amounts Earned are Held in a Rabbi Trust and Invested," this amount has been classified as Treasury Stock in the Company's consolidated financial statements. In December 1998, the Company issued an aggregate of 6,353 common shares, as compensation to the non-employee members of the Company's board of directors pursuant to their related agreements, which were valued at an aggregate of approximately $81,000. Approximately $3.5 million of the Company's retained earnings relate to the Company's joint venture investments. The Company has warrants outstanding to issue a total of 4,280,230 shares of common stock (see Note 10). The Company did not distribute any dividends during 1998 or 1997. (8) Share Option Plan The Company has adopted certain incentive plans for the purpose of attracting and retaining the Company's directors, officers and employees. The Company has established share option and management incentive plans (the "Incentive Plans") which reserved 5,076,235 common shares for issuance under the Incentive Plans. Options granted under the Incentive Plans expire ten years from the date of grant, vest over periods ranging generally from 6 months to 5 years, and generally contain the right to receive reload options under certain conditions. At December 31, 1998 and 1997, 572,117 and 115,545 of the Company's outstanding options were exercisable, respectively. Options outstanding for the periods ended December 31, 1998 and 1997, which had a weighted average vesting period of approximately 4.1 years and 3.7 years, respectively, are as follows: Issued in 1997 as replacement options for Trust options (exercise prices between $6.67 and $10.30 per share, weighted average fair value of $5.19 per share) 1,326,235 Granted in 1997 (exercise prices between $10.30 and $15.81 per share, weighted average fair value of $7.31 per share) 1,622,375 Exercised in 1997 -- Forfeited in 1997 (1,000) Expired in 1997 -- ---------- December 31, 1997 (weighted average exercise price of $12.20) 2,947,610 Granted in 1998 (exercise prices between $8.91 and $20.00 per share, weighted average fair value of $5.63 per share) 636,000 Exercised in 1998 -- Forfeited in 1998 (25,000) Expired in 1998 -- ---------- December 31, 1998 (weighted average exercise price of $12.79) 3,558,610 ========= Pursuant to SFAS 123, described in Note 2, the pro forma net income available to common shareholders as if the fair value approach to accounting for share-based compensation had been applied would be $7.4 million or $0.37 per common share ($0.36 per diluted common share) in 1998 and $2.5 million or $0.14 per common share, basic and diluted, in 1997. The fair values of the options used in calculating these amounts were calculated using the Black-Scholes option pricing model and the following assumptions: (i) a risk-free interest rate of between 4.89% and 6.27%, depending on the data available on the date of grant, (ii) an expected life of 10 years, and (iii) an expected volatility between 20% and 38%, depending on the data available on the date of grant. The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option pricing models require the input of highly subjective assumptions including the expected share price volatility. Because the Company's employee share options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee share options. (9) Commitments and Contingencies The Company has entered into employment agreements with four of its officers. Such agreements are for terms which expire between 1999 and 2002, and provide for aggregate annual fixed payments of approximately $1.0 million, $1.0 million and $0.6 million in 1997, 1998 and 1999 through 2002, respectively. As a commercial real estate owner, the Company is subject to potential environmental costs. At this point in time, management of the Company is not aware of any environmental concerns that would have a material adverse effect on the Company's financial position or future results of operations. In 1997 the Company adopted a defined contribution savings plan pursuant to Section 401 of the Internal Revenue Code. Under such a plan there are no prior service costs. All employees are eligible to participate in the plan after one year of service. Employer contributions are made based on a discretionary amount determined by the Company's management. Employer contributions, if any, are based upon the amount contributed by an employee. During 1998 and 1997, the Company made contributions of approximately $12,000 and $4,000, respectively. The Company has entered into an operating lease for its New York headquarters. The lease is for 10 years and requires aggregate minimum rental payments of $7.3 million over that period. At December 31, 1998, the Company had the following discretionary capital commitments. Draws under the Abbey Credit Facility and Safeguard Credit Facility require additional collateral to be made available to the Company which is subject to the Company's approval. Capital calls related to investments to be made by the Company's joint ventures are also subject to the Company's approval of such investments. Item Amount ---- ------ Undrawn Abbey Credit Facility commitment $ 4.0 million Undrawn Safeguard Credit Facility commitment $39.1 million Undrawn Wellsford/Whitehall equity commitment $13.6 million Undrawn Creamer Vitale Wellsford equity commitment $13.6 million Undrawn Liberty Hampshire SPFC JV equity commitment $23.1 million
(10) Segment Information Wellsford/ Commercial Debt and Development Whitehall Property Equity and Land Properties II, L.L.C.* Investments Investments Investments Other Consolidated ---------------------- ----------- ----------- ----------- ----- ------------ December 31, 1998 (000s) - ------------------------ Real estate, net $ 493,177 $ - $ 37,666 $ 112,657 $ - $ 150,323 Notes receivable - - 124,707 - - 124,707 Investment in joint ventures - 69,529 11,248 - - 80,777 Cash and cash equivalents 8,585 49 2,999 1,528 13,553 18,129 Other assets 9,619 - 7,412 882 2,741 11,035 ----------------- ---------- ---------- ------------ -------- ---------- Total assets $ 511,381 $ 69,578 $ 184,032 $ 115,067 $ 16,294 $ 384,971 ================= ========== ========== ============ ======== ========== Mortgage notes payable $ 68,043 $ - $ 28,000 $ 92,177 $ - $ 120,177 Credit facilities 276,197 - - - 17,000 17,000 Accrued expenses and other liabilities 15,275 - 2,660 2,451 7,677 12,788 Minority interest - 47 - 3,334 - 3,381 Equity 151,866 69,531 153,372 17,105 (8,383) 231,625 ----------------- ---------- ---------- ------------ -------- ---------- Total liabilities and equity $ 511,381 $ 69,578 $ 184,032 $ 115,067 $ 16,294 $ 384,971 ================= ========== ========== ============ ======== ========== Year Ended December 31, 1998 (000s) - ----------------------------------- Rental income $ 53,460 $ - $ 4,761 $ 8,366 $ - $ 13,127 Interest income 163 - 12,130 401 357 12,888 ----------------- ---------- ---------- ------------ -------- ---------- Total income 53,623 - 16,891 8,767 357 26,015 ----------------- ---------- ---------- ------------ -------- ---------- Operating expenses 20,279 - 2,087 2,399 - 4,486 Depreciation and amortization 7,387 175 842 2,040 100 3,157 Interest 19,085 - 1,285 3,272 42 4,599 General and administrative 3,299 - 397 - 4,666 5,063 ----------------- ---------- ---------- ------------ -------- ---------- Total expenses 50,050 175 4,611 7,711 4,808 17,305 ----------------- ---------- ---------- ------------ -------- ---------- Gain on sale of investments 2,866 - 139 - - 139 Income from joint venture - 2,812 711 - - 3,523 Minority Interest - - (50) (28) - (78) ----------------- ---------- ---------- ------------ -------- ---------- Income (loss) before taxes $ 6,439 $ 2,637 $ 13,080 $ 1,028 $(4,451) $ 12,294 ================= ========== ========== ============ ======== ========== December 31, 1997 (000s) - -------------------------- Real estate, net $ 218,846 $ - $ - $ 58,741 $ - $ 58,741 Notes receivable - - 87,832 17,800 - 105,632 Investment in joint venture - 44,780 - - - 44,780 Cash and cash equivalents 2,878 - - - 29,896 29,896 Other assets 7,311 - 1,313 3,040 6,572 10,925 ----------------- ---------- ---------- ------------ -------- ---------- Total assets $ 229,035 $ 44,780 $ 89,145 $ 79,581 $ 36,468 $ 249,974 ================= ========== ========== ============ ======== ========== Mortgage notes payable $ 4,284 $ - $ - $ 49,255 $ - $ 49,255 Credit facilities 146,909 - - 7,500 - 7,500 Accrued expenses and other liabilities 3,717 - - 1,838 7,925 9,763 Minority interest - - - 2,297 - 2,297 Equity 74,125 44,780 89,145 18,691 28,543 181,159 ----------------- ---------- ---------- ------------ -------- ---------- Total liabilities and equity $ 229,035 $ 44,780 $ 89,145 $ 79,581 $ 36,468 $ 249,974 ================= ========== ========== ============ ======== ========== Year Ended December 31, 1997 (000s) - ----------------------------------- Rental income $ 8,504 $ 1,291 $ - $ - $ - $ 1,291 Interest income 24 - 5,002 1,602 1,175 7,779 ----------------- ---------- ---------- ------------ -------- ---------- Total income 8,528 1,291 5,002 1,602 1,175 9,070 ----------------- ---------- ---------- ------------ -------- ---------- Operating expenses 3,494 365 - - - 365 Depreciation and amortization 1,220 188 - - 106 294 Interest 2,949 - - - - - General and administrative 835 - - - 3,160 3,160 ----------------- ---------- ---------- ------------ -------- ---------- Total expenses 8,498 553 - - 3,266 3,819 ----------------- ---------- ---------- ------------ -------- ---------- Income from joint venture - 15 - - - 15 ----------------- ---------- ---------- ------------ -------- ---------- Income (loss) before taxes $ 30 $ 753 $ 5,002 $ 1,602 $(2,091) $ 5,266 ================= ========== ========== ============ ======== ========== * The Company accounts for its investment in this joint venture under the equity method. This investment is held in the Company's "Commercial Property Investments" segment. /TABLE (10) Segment Information (continued) Commercial Property Operations - Wellsford/Whitehall Wellsford/Whitehall Properties II, L.L.C. ("Wellsford/Whitehall") owned and operated 35 office buildings containing approximately 4.6 million square feet ("SF") of office space as of December 31, 1998, including approximately 1.4 million SF under renovation, with an aggregate gross book value of approximately $501.7 million. At the time of the Spin-off, the Company owned six commercial office buildings, five of which were vacant at that time, containing an aggregate of approximately 949,400SF and acquired for an aggregate of approximately $47.6 million (the "WRP Commercial Properties"). In August 1997, the Company, in a joint venture with WHWEL Real Estate Limited Partnership ("Whitehall"), an affiliate of Goldman, Sachs & Co., formed a private real estate operating company, Wellsford/Whitehall. The Company contributed the WRP Commercial Properties and Whitehall contributed four commercial properties upon formation of Wellsford/Whitehall. The Company manages Wellsford/Whitehall on a day- to-day basis, and certain major decisions require the consent of both partners. The Company had a 47.7% interest in Wellsford/Whitehall at December 31, 1998. Two properties, 700 Atrium Drive and Mountain Heights (two buildings), were acquired in September and December 1997, respectively, for $18.1 million and $29.1 million, respectively. In addition, Wellsford/Whitehall purchased an industrial warehouse in New Jersey in December 1997 for $7.1 million. The Wellsford/Whitehall transactions described above were funded primarily by capital contributions from the Company and Whitehall, by $48 million in debt which encumbered certain of the properties contributed by Whitehall (the "Atrium Loan") which was assumed by Wellsford/Whitehall, and by a term loan agreement (the "Wellsford/Whitehall Bridge Loan") between the Company and Wellsford/Whitehall. The Atrium Loan bore interest at LIBOR +3%. Wellsford/Whitehall has an interest rate protection agreement which was related to this loan which caps LIBOR at 7.69% on a notional balance of $64 million until June 15, 2000. The lender on this loan was Goldman Sachs Mortgage Company. The Atrium Loan was repaid in December 1997. Wellsford/Whitehall has retained the interest rate protection agreement to hedge other floating rate borrowings. Pursuant to the Wellsford/Whitehall Bridge Loan, the Company agreed to loan Wellsford/Whitehall up to approximately $86.3 million bearing interest at LIBOR +3% until November 26, 1997 and at LIBOR +4% until maturity. The Wellsford/Whitehall Bridge Loan was fully repaid in 1998. In December 1997, Wellsford/Whitehall obtained a $375 million loan facility (the "Wellsford/Whitehall Bank Facility") from BankBoston and Goldman Sachs Mortgage Company, consisting of a secured term loan facility of up to $225 million and a secured revolving credit facility of up to $150 million. The term loan facility bore interest at LIBOR +1.6% and had a term of four years; the revolving credit facility bore interest at LIBOR +2.5% and had a term of three years. In February 1998, Wellsford/Whitehall acquired a 65,000SF building in Boston, MA for $5.5 million and 19 acres of undeveloped land in Somerset, NJ for $2.0 million, which is adjacent to four buildings currently owned by Wellsford/Whitehall. In March 1998, Wellsford/Whitehall purchased an 82,000 SF property in Somerset, NJ for approximately $5.4 million. In May 1998, Wellsford/Whitehall completed the acquisition of a 977,000SF portfolio of thirteen office buildings for $148.7 million (the "Boston Portfolio"). The Boston Portfolio was financed with (i) the assumption of $68.3 million of mortgage debt, (ii) a $35.8 million draw on the Wellsford/Whitehall Bank Facility, (iii) the issuance of $19.0 million of Wellsford/Whitehall 6% convertible preferred units, (iv) $18.0 million of capital contributions and (v) the issuance of $7.6 million of Wellsford/Whitehall common units. In May 1998, Wellsford/Whitehall acquired two warehouse buildings totaling approximately 470,000SF for $28.4 million in Needham, MA. In June 1998, Wellsford/Whitehall acquired an approximately 63,000SF building located in Andover, MA for approximately $7.4 million and two office buildings totaling 104,000SF located in Basking Ridge, NJ for approximately $15.0 million. In July 1998, Wellsford/Whitehall modified the Wellsford/Whitehall Bank Facility. Under the new terms, $300 million represents a senior secured credit facility bearing interest at LIBOR +1.65% and $75 million represents a secured mezzanine facility bearing interest at LIBOR +3.2%. Both facilities mature on December 15, 2000 and are extendable for one year by Wellsford/Whitehall. As of December 31, 1998, approximately $276.2 million was outstanding under the Wellsford/Whitehall Bank Facility ($207.3 million of which was under the senior facility). In September 1998, Wellsford/Whitehall purchased two office buildings totaling approximately 199,000SF in Franklin Township, NJ for approximately $22.8 million. In November 1998, Wellsford/Whitehall purchased a 38,000SF office building in Columbia, MD for approximately $2.6 million. In December 1998, Wellsford/Whitehall purchased a 147,000SF office building in Ridgefield Park, NJ for approximately $19.3 million. The 1998 Wellsford/Whitehall acquisitions described above, other than the Boston Portfolio, were funded primarily by capital contributions from the Company and Whitehall, and by draws on the Wellsford/Whitehall Bank Facility. The Company is entitled to incentive compensation equal to (a) 17.5% of available cash after a return of capital to the Company and Whitehall and a 17.5% return on equity to each of them, and (b) 22.5% of available cash after a 22.5% return on equity to the Company and Whitehall. The Company and Whitehall have committed to make additional equity contributions of $50 million each for new acquisitions, capital needs, and working capital, of which $13.6 million remained unfunded by each at December 31, 1998. Whitehall may exchange the membership units it receives in Wellsford/Whitehall relating to capital contributions in excess of an additional $25 million up to an additional $50 million, for shares of the Company's common stock or, in the Company's sole discretion, cash, based upon the price paid for such membership units and the current market value of the Company's common stock. In connection with the formation of Wellsford/Whitehall, the Company issued warrants (the "Whitehall Warrants") to Whitehall to purchase 4,132,230 shares of the Company's common stock at an exercise price of $12.10 per share. The Whitehall Warrants are exercisable for five years for either, at the Company's option, shares of the Company's common stock or cash. The exercise price for the Whitehall Warrants is payable in cash or, after August 28, 1999, either with cash or membership units in Wellsford/Whitehall. The Company has agreed with Whitehall to conduct its business and activities relating to office properties (but not other types of commercial properties) located in North America solely through its interest in Wellsford/Whitehall except, in certain circumstances, where Wellsford/Whitehall has declined the investment opportunity. Debt and Equity Activities At December 31, 1998, the Company had $124.7 million of debt investments which bore interest at an average yield of approximately 4.6% over LIBOR and had an average remaining term to maturity of 4.1 years. 277 Park The Company and BankBoston have provided an $80 million loan (the "277 Park Loan") to entities which own substantially all of the equity interests (the "Equity Interests") in the entity which owns an approximately 1.75 million SF office building located in New York City (the "277 Park Property"). The Company has advanced $25 million pursuant to the 277 Park Loan. The 277 Park Loan is secured primarily by a pledge of the Equity Interests owned by the borrowers. The 277 Park Loan is subordinated to a 10-year $345 million first mortgage loan (the "REMIC Loan") on the 277 Park Property. The 277 Park Loan bears interest at the rate of approximately 12% per annum for the first nine years of its term and at a floating annual rate during the tenth year equal to LIBOR +5.15% or the BankBoston base rate plus 5.15%, as elected by the borrowers. The principal amount of the 277 Park Loan and all accrued interest will be payable in May 2007; the REMIC Loan is also due in May 2007. The Company earned approximately $3.0 million in interest income, or 11.5% of its total non-joint venture revenues, on the 277 Park Loan during 1998. The Abbey Company In August 1997, the Company and Morgan Guaranty Trust Company of New York ("MGT") originated a $70 million secured credit facility (the "Abbey Credit Facility") to affiliates of The Abbey Company, Inc. ("Abbey"). In May 1998, the Company and MGT expanded the Abbey Credit Facility to $120 million. In December 1998, Abbey repaid $20 million, thereby reducing the total available to $100 million. The Abbey Credit Facility will be made available to Abbey until September 2000. Advances under the facility can be made for up to 65% of the value of the borrowing base collateral which consisted of 24 properties, all cross-collateralized, totaling approximately 1.7 million SF at December 31, 1998. As of December 31, 1998, approximately $46.0 million had been advanced by the Company under the Abbey Credit Facility. Under the terms of its participation agreement with MGT, the Company will fund a 50% junior participation on all advances under the Abbey Credit Facility. The Company is entitled to receive interest on its advances under the Abbey Credit Facility at LIBOR +4%. The Company earned approximately $3.9 million, or 15.0% of its total non-joint venture revenues, on the Abbey Credit Facility during 1998. IPH Mezzanine Facility In December 1997, Wellsford Ventures, Inc. ("Ventures"), a wholly-owned subsidiary of the Company, joined with Fleet Real Estate, Inc. ("FRE"), a subsidiary of Fleet Financial Group, to issue an approximately $32.5 million subordinated credit facility (the "IPH Mezzanine Facility") to Industrial Properties Holding, L.P. ("IPH"). Each of Ventures and FRE were committed to advance up to 50% of the IPH Mezzanine Facility. Ventures advanced approximately $9.8 million under the IPH Mezzanine Facility. The IPH Mezzanine Facility was repaid in February 1998, at which time the Company received a total of $0.8 million in interest and fees. Advances under the IPH Mezzanine Facility bore interest at an annual rate of LIBOR +5%. Woodlands In December 1997, BankBoston, Morgan Stanley Senior Funding, Inc. and certain other lenders made available to the owners and developers of a 25,000 acre master-planned residential community located north of Houston (the "Woodlands Property"), loans in the aggregate principal amount of $369 million (the "Woodlands Loan"). The Woodlands Loan consists of a revolving credit loan in the principal amount of $179 million (the "Revolving Loan"), a secured term loan in the principal amount of $130 million (the "Secured Loan"), and a second secured term loan in the principal amount of $60 million (the "Second Secured Loan"). The Company has advanced $15 million pursuant to the Second Secured Loan. The Second Secured Loan is subordinate to the Revolving Loan and the Secured Loan and bears interest equal to LIBOR +4.40%. Interest on the Second Secured Loan is payable monthly to the extent there is available cash after payment of interest on the Revolving Loan and the Secured Loan and provided no event of default has occurred under the Woodlands Loan. The principal amount of the Woodlands Loan and all accrued interest thereon will be payable on July 31, 2000, with two, one-year extension options available. Park 80 In December 1997, the Company originated a $5.1 million loan bearing interest at LIBOR +3% which was repaid in August 1998 (the "Park 80 Loan"). The Park 80 Loan was secured by a mortgage on an 80,000SF mid- rise office building in Saddlebrook, New Jersey. Value Property Trust In February 1998, the Company completed the previously announced merger (the "VLP Merger") with Value Property Trust ("VLP") for total consideration of approximately $169 million, which was accounted for as a purchase. As of December 31, 1998, approximately $5.1 million was recorded as a net deferred tax asset reflecting the value of VLP's net operating loss carryforwards. Thirteen of the twenty VLP properties, which were under contract to an affiliate of Whitehall, were subsequently sold for an aggregate of approximately $64 million. The Company retained seven of the VLP properties containing an aggregate of approximately 0.6 million square feet located primarily in the northeastern U.S. The following is a schedule by years of future minimum rentals on non-cancelable operating leases related to these properties as of December 31, 1998: Year ending December 31: 1999 $ 3,932,869 2000 3,332,939 2001 2,719,396 2002 1,724,215 2003 1,152,237 Later years 3,981,242 ----------- Total minimum future rentals $16,842,898 =========== In October 1998, the Company closed on $28 million of non-recourse financing (the "Wellsford Capital Mortgage") on the portfolio of seven commercial properties acquired in the VLP Merger. The loan bears interest at LIBOR +2.75% and has a term of three years. The proceeds were used to repay amounts outstanding on the WRP Bank Facility and for working capital purposes. Clairborne Investors In January 1998, the Company acquired a 49% interest in Creamer Realty Consultants, a real estate advisory and consulting firm, and formed Creamer Vitale Wellsford, L.L.C. ("Creamer Vitale Wellsford"). Creamer Realty Consultants and Creamer Vitale Wellsford, together with Prudential Real Estate Investors ("PREI), a division of Prudential Investment Corporation, have established the Clairborne Investors Mortgage Investment Program to make opportunistic investments and to provide liquidity to participants in large syndicated mortgage loan transactions. The parties have agreed to contribute up to $150 million to fund acquisitions approved by the parties, of which a subsidiary of the Company will fund 10%. Creamer Vitale Wellsford will originate, co- invest, and manage the investments of the program. The Company's original investment in these entities was $1.3 million of cash and 148,000 five-year warrants to purchase the Company's common shares at $15.175 per share, valued at approximately $0.7 million. In November 1998, Creamer Vitale Wellsford acquired a $17 million participation in a $56 million mortgage, bearing interest at LIBOR +1.75% and due in 3.5 years, at a significant discount to face value. The Company funded approximately $1.4 million of this participation. DeBartolo In July 1998, the Company purchased an $18 million participation in a $175 million loan (the "DeBartolo Loan"). The DeBartolo Loan is secured by partnership units in Simon DeBartolo Group, L.P., the operating partnership of a real estate investment trust which owns approximately 175 million SF of mall space nationwide. The DeBartolo loan bears interest at 8.547%, payable quarterly, pays principal based on a 20 year amortization schedule and is due in July 2008. REIT Bridge Loan In August 1998, the Company funded a $15 million participation in a $100 million unsecured loan (the "REIT Bridge Loan") to a publicly traded real estate investment trust which owns 22 regional malls, eight multifamily apartment properties and five office properties nationwide. This loan bore interest at 9.875% and was due in February 1999 with two three-month extensions available to the borrower. In January 1999, the REIT Bridge Loan was modified to extend the maturity date to August 1999 and increase the interest rate to 12%. The borrower paid a 1.5% loan fee at origination and a 1% loan fee upon modification. Liberty Hampshire In July and August 1998, the Company invested a total of $2.1 million in the Liberty Hampshire Company, L.L.C. ("Liberty Hampshire") which structures, establishes and provides management and services for special purpose finance companies ("SPFCs") formed to invest in financial assets. The Company also invested a total of $4.4 million in a joint venture SPFC with Liberty Hampshire. This SPFC has invested in a participation in the DeBartolo Loan and has acquired an interest in REIS Reports, Inc.("REIS"), a leading provider of real estate market information to institutional investors. The primary shareholder of REIS is the brother of Mr. Lynford; Mr. Lynford recused himself from the REIS investment decision. Safeguard In December 1998, the Company and MGT originated a $90 million secured credit facility (the "Safeguard Credit Facility") to Safeguard Capital Fund, L.P. ("Safeguard"). The Safeguard Credit Facility will be made available to Safeguard until April 2001. Advances under the facility can be made for up to 75% of the value of the borrowing base collateral which consisted of 4 properties, all cross-collateralized, totaling approximately 0.3 million SF at December 31, 1998. As of December 31, 1998, approximately $5.9 million had been advanced by the Company under the Safeguard Credit Facility. Under the terms of its participation agreement with MGT, the Company will fund a 50% junior participation on all advances under the Safeguard Credit Facility. The Company is entitled to receive interest on its advances under the Safeguard Credit Facility at LIBOR +4%. Property Development and Land Operations Palomino Park The Company owns an approximate 80% interest in Phases I, II, III and IV of, and in an option to acquire (at a fixed price) and develop phase V of, a 1,800-unit class A multifamily development ("Palomino Park") in a suburb of Denver, Colorado. The Company has a related $14.8 million tax exempt mortgage note payable which requires interest only payments at a variable rate (currently approximately 4%) until it matures in December 2035 (the "Palomino Park Bonds"). The tax exempt mortgage note payable is security for tax-exempt bonds, which are backed by a letter of credit from a AAA rated financial institution. The Company and an affiliate of EQR have guaranteed the reimbursement of the financial institution in the event that the letter of credit is drawn upon (the latter guarantee being the "EQR Enhancement"). In December 1997, Phase I, known as Blue Ridge, was completed at a cost of approximately $41.5 million. At that time, the Company obtained a $34.5 million permanent loan (the "Blue Ridge Mortgage") secured by a mortgage on Blue Ridge. The Blue Ridge Mortgage matures in January 2008 and bears interest at a fixed rate of 6.92%. Principal payments are based on a 30-year amortization schedule. In November 1998, Phase II, known as Red Canyon, was completed at a cost of approximately $33.9 million. At that time, the Company acquired Red Canyon and the related construction loan was repaid with the proceeds of a $27 million permanent loan (the "Red Canyon Mortgage") secured by a mortgage on Red Canyon. The Red Canyon Mortgage matures in December 2008 and bears interest at a fixed rate of 6.68%. Principal payments are based on a 30-year amortization schedule. The Company had a gross investment of approximately $18.8 million at December 31, 1998 in one multifamily development project, Silver Mesa, which is Phase III of Palomino Park consisting of 264 units, and related infrastructure costs. This project is being developed pursuant to a fixed-price contract. The Company is committed to purchase 100% of this project upon completion and the achievement of certain occupancy levels. In addition, the Company is obligated to fund the first 20% of construction costs on this project as they are incurred. Silver Mesa is owned by Silver Mesa at Palomino Park LLC, a limited liability company, the members of which are Wellsford Park Highlands Corp. (99%), a majority owned and controlled subsidiary of the Company, and Al Feld (1%). In May 1997, the Company acquired the land for Silver Mesa for approximately $2.1 million. In May 1998, the Company acquired the land for Phase IV for approximately $3.2 million. Sonterra From the time of the Spin-off, the Company held a $17.8 million mortgage on, and option to purchase, a 344-unit class A residential apartment complex ("Sonterra at Williams Centre") in Tucson, Arizona. In January 1998, the Company exercised its option and acquired Sonterra at Williams Centre for approximately $20.5 million, including satisfaction of the mortgage. In February 1998, the Company closed on $16.4 million of mortgage financing (the "Sonterra Mortgage") on this property, bearing interest at 6.87% and maturing in March 2008. Principal payments are based on a 30-year amortization schedule. (11) Fair Value of Financial Instruments The Company held the following financial instruments at December 31, 1998: Balance Interest Maturity Other Fair Value Item (thousands) Rate Date Terms (thousands) ---- ----------- -------- --------- ------ ----------- 277 Park Loan $ 25,000 12% 5/2007 Interest only $ 27,580 (C) Abbey Credit Facility 46,019 LIBOR+ 4% 9/2000 Interest only 46,019 (D) Woodlands Loan 15,000 LIBOR +4.4% 7/2000 Interest only 15,000 (D) REIT Bridge Loan 15,000 9.875%* 2/1999* Interest only 15,000 (E) DeBartolo Loan 17,678 8.547% 7/2008 20 Year Amort. 16,916 (F) Safeguard Credit Fac. 5,913 LIBOR+ 4% 4/2001 Interest only 5,913 (D) ------- -------- Total Notes Rec. $124,610 $126,428 ======== ========= WRP Bank Facility $ 17,000 LIBOR+1.75% 5/1999 (B) $ 17,000 (G) Palomino Park Bonds 14,755 (A) 12/2035 Interest only 14,755 (G) Blue Ridge Mtge. 34,144 6.92% 1/2008 30 Year Amort. 34,144 (H) Red Canyon Mtge. 27,000 6.68% 12/2008 30 Year Amort. 27,000 (I) Wellsford Cap. Mtge. 28,000 LIBOR + 2.75% 10/2001 Interest Only 28,000 (G) Sonterra Mortgage 16,278 6.87% 3/2008 30 Year Amort. 16,278 (H) ------- -------- Total Debt $137,177 $137,177 ======= ======== *In January 1999, the interest rate and maturity date of this loan were modified to 12% and August 1999, respectively. (A) Rate approximates the Standard & Poor's/J.J. Kenney index for short-term high grade tax-exempt bonds (currently approximately 4%). (B) For more information on the WRP Bank Facility, see Note 5. (C) The fair value of this investment was determined by reference to various market data. (D) The fair value of the Company's floating rate investments is considered to be their carrying amount. (E) The fair value of this short term investment is considered to be its carrying amount. (F) The fair value of this investment was determined by reference to various market data. (G) The fair value of the Company's floating rate debt is considered to be its carrying amount. (H) The fair value of this mortgage is considered to be its carrying amount since it is similar in both terms and collateral to the Red Canyon Mortgage, which reflects current market conditions (see (I) below). (I) The fair value of this mortgage is considered to be its carrying amount as it is a recently executed transaction reflective of current market conditions. (12) Summarized Consolidated Quarterly Information (Unaudited) Summarized consolidated quarterly financial information for the years ended December 31, 1998 and 1997 is as follows: Three Months Ended (Unaudited) --------------------------------------------------------- March 31 June 30 September 30 December 31 -------- ------- ------------ ----------- 1998 - ---------------- Revenue $ 6,225,168 $ 8,358,939 $ 6,777,822 $ 8,315,494 Expenses 3,499,879 4,160,672 4,790,082 4,932,736 ----------- ----------- ----------- ----------- Income before taxes 2,725,289 4,198,267 1,987,740 3,382,758 Income tax expense 1,248,000 1,984,000 (1,029,000) 647,298 ----------- ----------- ----------- ----------- Net income avail- able for common shareholders $ 1,477,289 $ 2,214,267 $ 3,016,740 $ 2,735,460 =========== =========== =========== =========== Net income per common share, basic* $ 0.08 $ 0.11 $ 0.15 $ 0.13 =========== =========== =========== =========== Net income per common share, diluted* $ 0.08 $ 0.10 $ 0.15 $ 0.13 =========== =========== =========== =========== Weighted average number of common shares out- standing 18,376,910 20,349,688 20,349,688 20,441,157 ========== ========== ========== ========== Three Months Ended (Unaudited) ------------------------------------------------------ March 31 June 30 September 30 December 31 -------- ------- ------------ ----------- 1997 - ---------------- Revenue $ 400,500 $ 1,775,359 $ 3,369,120 $ 3,540,531 Expenses -- 475,728 1,631,215 1,712,483 ----------- ----------- ----------- ----------- Income before taxes 400,500 1,299,631 1,737,905 1,828,048 Income tax expense -- 284,000 719,000 1,210,007 ----------- ----------- ----------- ----------- Net income available for common shareholders $ 400,500 $ 1,015,631 $ 1,018,905 $ 618,041 =========== =========== =========== =========== Net income per common share, basic* $ 0.02 $ 0.06 $ 0.06 $ 0.04 =========== =========== =========== =========== Net income per common share, diluted* $ 0.02 $ 0.06 $ 0.06 $ 0.03 =========== =========== =========== =========== Weighted average number of common shares out- standing 16,911,849 16,911,849 16,911,849 16,935,776 =========== =========== =========== =========== All earnings per share amounts conform with SFAS 128 requirements (Note 2). * Aggregate quarterly earnings per share amounts may not equal annual amounts presented elsewhere in these consolidated financial statements due to rounding differences. (13) Subsequent Events In January 1999, the Company acquired a parcel of land in Broomfield, CO for approximately $7.2 million. In connection with this transaction, the Company collected $0.4 million of consulting fees in 1998 and expects to receive a minimum of $0.9 million in 1999. A third party has an option to purchase this parcel of land for $7.2 million until April 30, 1999. In January 1999, a wholly-owned subsidiary of the Company obtained a $35 million secured loan facility (the "Wellsford Finance Bank Facility") from BankBoston, which can potentially be increased to $50 million. The Wellsford Finance Bank Facility bears interest at LIBOR + 2.75% and has a term of 3 years. The Company immediately drew $35 million on this line, the proceeds of which were used (a) to repay the $17 million balance of the WRP Bank Facility, and (b) for working capital purposes. The Company is obligated to pay a fee equal to one-quarter of one percent (0.25%) per annum on the average daily amount of the unused portion of the Wellsford Finance Bank Facility until maturity. In January 1999, the REIT Bridge Loan was modified as described in Note 10. Consolidated Financial Statements Wellsford/Whitehall Properties II, L.L.C. and Subsidiaries December 31, 1998 with Report of Independent Auditors WELLSFORD/WHITEHALL PROPERTIES II, L.L.C. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ Page No. -------- Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . .3 Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . . . . . .4 Consolidated Statements of Income. . . . . . . . . . . . . . . . . . . .5 Consolidated Statements of Changes in Members' Equity. . . . . . . . . .6 Consolidated Statements of Cash Flows. . . . . . . . . . . . . . . . . .7 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . .9 REPORT OF INDEPENDENT AUDITORS ------------------------------ To the Members of Wellsford/Whitehall Properties II, L.L.C. and Subsidiaries: We have audited the accompanying consolidated balance sheets of Wellsford/Whitehall Properties II, L.L.C. (formerly Wellsford/Whitehall Properties, L.L.C.) and subsidiaries (the "Company") as of December 31, 1998 and 1997, and the related consolidated statements of income, changes in members' equity and cash flows for the year ended December 31, 1998 and for the period from August 28, 1997 (Inception) to December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Wellsford/Whitehall Properties II, L.L.C. and subsidiaries at December 31, 1998 and 1997, and the consolidated results of their operations and their cash flows for the year ended December 31, 1998 and for the period from August 28, 1997 (Inception) to December 31, 1997, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP New York, New York February 12, 1999 Wellsford/Whitehall Properties II, L.L.C. and Subsidiaries Consolidated Balance Sheets December 31, -------------------------------- 1998 1997 -------------- -------------- ASSETS Real estate assets, at cost - Notes 3,4,5 and 6 Land $ 61,131,765 $ 26,884,000 Buildings and improvements 387,897,683 161,567,641 -------------- -------------- 449,029,448 188,451,641 Less, accumulated depreciation (8,484,889) (1,219,849) -------------- -------------- 440,544,559 187,231,792 Construction in progress 52,662,902 31,510,074 -------------- -------------- 493,207,461 218,741,866 Cash and cash equivalents 6,410,614 2,878,259 Restricted cash 2,174,026 -- Deferred costs, net of accumulated amortization 3,764,980 4,774,774 Receivables, prepaids and other assets (Note 7) 5,823,846 2,639,634 ------------- -------------- Total Assets $ 511,380,927 $ 229,034,533 ============== ============== LIABILITIES AND MEMBERS' EQUITY Liabilities: Mortgage loan (Note 6) $ 68,043,333 $ -- Secured revolving credit facility (Note 6) -- 38,984,000 Secured term loan (Note 6) -- 107,925,000 Secured senior credit facility (Note 6) 207,289,846 -- Secured mezzanine credit facility (Note 6) 68,907,482 -- Unsecured loan (Note 6) -- 4,283,925 Accrued expenses and other liabilities (Note 7) 11,224,384 3,122,371 Distributions payable (Note 8) 3,298,814 -- Security deposits 751,234 594,094 ------------ -------------- Total Liabilities 359,515,093 154,909,390 ------------- -------------- Commitments and contingencies - Notes 6, 8, 9 and 11 -- -- Members' Equity (Note 8): Membership units, $.01 par value per unit 99,403 64,855 Paid in capital 130,032,663 74,030,079 Series A convertible preferred membership units 19,000,000 -- Retained earnings 2,733,768 30,209 -------------- -------------- Total Members' Equity 151,865,834 74,125,143 -------------- -------------- Total Liabilities and Members' Equity $ 511,380,927 $ 229,034,533 ============== ============== See Accompanying Notes Wellsford/Whitehall Properties II, L.L.C. and Subsidiaries Consolidated Statements of Income For the Period From For the August 28, 1997 Year Ended (Inception) to December 31, 1998 December 31, 1997 ----------------- ----------------- Revenues: Rental income (Note 4) $ 52,514,859 $ 8,334,619 Interest and other income 1,108,437 193,086 --------------- ---------------- Total revenues 53,623,296 8,527,705 --------------- ---------------- Expenses: Property operations and maintenance 13,379,303 2,346,644 Real estate taxes 5,550,662 970,501 Depreciation and amortization 7,387,077 1,219,849 Property and asset management 1,348,552 175,873 Interest (Note 6) 19,085,016 2,949,280 General and administrative 3,299,496 835,349 --------------- ---------------- Total Expenses 50,050,106 8,497,496 --------------- ---------------- Income before gain on disposition and distributions to Series A convertible preferred membership unit holders 3,573,190 30,209 Gain on disposition (Note 3) 2,866,183 -- --------------- ---------------- Net income before distributions to Series A convertible preferred membership unit holders 6,439,373 30,209 Distributions to Series A convertible preferred membership unit holders (728,333) -- --------------- ---------------- Net income available for membership unit holders $ 5,711,040 $ 30,209 =============== ================ Net income per membership unit (Note 2) $ 0.69 $ 0.01 =============== ================ Weighted average number of membership units outstanding (Note 2) $ 8,291,273 $ 5,277,314 =============== ================ See Accompanying Notes
Wellsford/Whitehall Properties II, L.L.C. and Subsidiaries Consolidated Statement of Changes in Members' Equity For the Period from August 28, 1997 (Inception) to December 31, 1998 Series A Convertible Membership Units Preferred Total -------------------- Paid-in Membership Retained Members' Units Amount Capital Units Earnings Equity --------- --------- ------------ ----------- --------- ------------ Initial equity contributions - August 28, 1997 5,000,000 $50,000 $49,950,000 $ -- $ -- $50,000,000 (Inception) Additional equity contributions 1,485,508 14,855 24,080,079 -- -- 24,094,934 Net income -- -- -- -- 30,209 30,209 -------- ------- ------------ ----------- --------- ------------ December 31, 1997 6,485,508 64,855 74,030,079 -- 30,209 74,125,143 Issuance of membership units in connection with contribution of assets 468,557 4,686 7,595,309 19,000,000 -- 26,599,995 Additional equity contributions 2,986,260 29,862 48,407,275 -- -- 48,437,137 Net income -- -- -- 728,333 5,711,040 6,439,373 Distributions -- -- -- (728,333) (3,007,481) (3,735,814) ---------- ------- ------------ ----------- ---------- ------------ December 31, 1998 9,940,325 $99,403 $130,032,663 $19,000,000 $2,733,768 $151,865,834 ========== ======= ============ =========== ========== ============
See Accompanying Notes Wellsford/Whitehall Properties II, L.L.C. and Subsidiaries Consolidated Statement of Cash Flows For the Period From For the August 28, 1997 Year Ended (Inception) to December 31, 1998 December 31, 1997 ----------------- ----------------- CASH FLOWS FROM OPERATING ACTIVITIES: Basic Earnings $ 6,439,373 $ 30,209 Adjustments to reconcile net income to net cash provided by operating activities: Gain on disposal of real estate assets (2,866,183) -- Depreciation and amortization 7,387,077 1,233,889 Amortization of deferred financing costs 1,672,413 -- Deferred rental revenue (1,476,178) (380,103) Decrease (increase) in assets: Receivables, prepaids and other assets (851,453) 192,076 (Decrease) increase in liabilities: Accrued expenses and other liabilities 4,828,066 1,285,498 Security deposits 157,140 -- -------------- ------------ Net cash provided by operating activities 15,290,255 2,361,569 -------------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions of real estate assets (163,082,206) (46,768,417) Prepaid acquisition costs (1,124,579) -- Disposal of real estate assets, net of selling expenses 4,561,013 -- Improvements to real estate assets (22,066,915) (15,519,011) ------------- ------------ Net cash used in investing activities (181,712,687) (62,287,428) ------------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from term loans 23,587,620 107,925,000 Proceeds from credit facilities 67,037,844 38,984,000 Proceeds from mortgage loans -- 375,602 Proceeds from unsecured loan -- 48,025,000 Proceeds from secured senior credit facility 207,289,846 -- Proceeds from secured mezzanine credit facility 68,907,482 -- Repayment of term loans (131,512,620) -- Repayment of credit facilities (106,021,844) -- Repayment of mortgage loans (297,483) (48,468,556) Repayment of unsecured loan (4,283,925) (105,440,515) Increase in restricted cash (2,174,026) -- Deferred financing and organization costs (578,244) (4,774,774) Preferred distributions (437,000) -- Initial cash contribution -- 2,083,427 Equity contributions 48,437,137 24,094,934 ------------- ------------ Net cash provided by financing activities 169,954,787 62,804,118 ------------- ------------ Net increase in cash & cash equivalents 3,532,355 2,878,259 Cash & cash equivalents, beginning of period 2,878,259 -- ------------- ------------ Cash & cash equivalents, end of period $ 6,410,614 $ 2,878,259 ============= ============ SUPPLEMENTAL DISCLOSURE: Cash paid for interest $ 18,296,284 $ 2,953,786 ============= ============ SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Initial contribution of real estate assets $157,927,131 Initial contribution of other assets 968,786 Assumption of unsecured loan (61,699,440) Assumption of mortgage (48,092,954) Assumption of other liabilities (1,186,950) Initial equity contribution (50,000,000) ------------ Initial cash contribution $ (2,083,427) ============ Membership units issued in exchange for contribution of real estate assets $ 7,599,995 Series A convertible preferred membership units issued in exchange for contribution of real estate assets 19,000,000 Assumption of mortgage loan 68,340,816 Purchase of real estate assets (94,940,811) ------------- $ 0 ============= See Accompanying Notes NOTES TO CONSOLIDATED FINANCIAL STATEMENTS WELLSFORD/WHITEHALL PROPERTIES II, L.L.C. AND SUBSIDIARIES DECEMBER 31, 1998 (1) Organization and Business Wellsford/Whitehall Properties II, L.L.C. (formerly Wellsford/Whitehall Properties, L.L.C.) and subsidiaries (the "Company") was formed on August 28, 1997 as a private real estate operating company. The Company is a joint venture between Wellsford Commercial Properties Trust ("WCPT"), a subsidiary of Wellsford Real Properties, Inc. ("WRP"), and WHWEL Real Estate Limited Partnership ("Whitehall"), an affiliate of Goldman, Sachs & Co (the "Members"). The Company will terminate on December 31, 2045, unless sooner by the written consent of the Members. The Company seeks to acquire commercial properties and create value through adaptive reuse. The Company believes that appropriate well- located commercial properties which are currently underperforming can be acquired on advantageous terms and repositioned with the expectation of achieving enhanced returns which are greater than returns which could be achieved by acquiring a stabilized property. The Company's current target markets include New York, New Jersey, Connecticut and the Boston, Baltimore and Washington D.C. metropolitan areas. WCPT manages the Company on a day-to-day basis, and certain major and operational decisions require the consent of both partners. WCPT intends to qualify as a real estate investment trust ("REIT"). On May 15, 1998 thirteen office buildings located in suburban Boston with an aggregate value of approximately $148.7 million were contributed to the Company for a combination of cash, Series A convertible preferred membership units and membership units (the "Saracen Transaction"). In connection with this transaction, several shareholders of the Saracen Companies (the "Saracen Members") were issued both Series A convertible preferred membership units and membership units and the Company assumed a mortgage loan on six of the properties aggregating approximately $68.3 million. The Company currently owns and operates 35 commercial buildings containing approximately 4.6 million square feet ("SF") of office space in the Northeastern United States, including approximately 1.4 million SF under renovation. The properties are located in Northern New Jersey (16), Downtown Boston (1), Suburban Boston (16), Suburban Baltimore (1) and Washington, D.C. (1). (2) Summary of Significant Accounting Policies Principles of Consolidation. The accompanying consolidated financial statements include the accounts of Wellsford/Whitehall Properties II, L.L.C. and its wholly owned subsidiaries. All significant inter-company accounts and transactions among Wellsford/Whitehall Properties II, L.L.C. and its subsidiaries have been eliminated in consolidation. Income Recognition. Commercial properties are leased under operating leases. Rental revenue is recognized on a straight-line basis over the terms of the respective leases. Cash and Cash Equivalents. The Company considers all demand and money market accounts and short term investments in government funds with an original maturity of three months or less to be cash and cash equivalents. Restricted Cash. Restricted cash primarily consists of debt service reserve balances. Real Estate and Depreciation. Real estate assets are stated at cost. Costs directly related to the acquisition and improvement of real estate are capitalized, including the purchase price, legal fees, acquisition costs, interest, property taxes and other costs during the period of development. Ordinary repairs and maintenance items are expensed as incurred. Replacements and betterments are capitalized and depreciated over their estimated useful lives. Tenant improvements and leasing commissions are capitalized and depreciated over the terms of the related leases. Depreciation is computed over the expected useful lives of depreciable property on a straight-line basis, principally 40 years for commercial properties and 5 to 12 years for furnishings and equipment. Statement of Financial Accounting Standard ("SFAS") 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of" requires that long-lived assets to be held and used be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. SFAS 121 has not had an impact on the Company's consolidated financial statements at December 31, 1998. Deferred Costs. Deferred costs consist primarily of costs incurred to obtain financing. Such deferred financing costs are amortized on a straight-line basis over the term of the respective agreement and such amortization is included in interest expense in the accompanying Consolidated Statements of Income. Fair Value of Financial Instruments. The Company's financial instruments consist of cash and cash equivalents and long term debt. The Company believes that the carrying amount of cash and cash equivalents approximates fair value due to the short maturity of this item. In addition, the Company believes that the carrying values of its senior secured credit facility and its secured mezzanine credit facility approximate fair value because such debt consists of variable rate debt that reprices frequently. The Company believes that the carrying value of its mortgage loan approximates fair value based upon an analysis of various market data. Interest-Rate Swap Agreement. To reduce the impact of certain changes in interest rates on its long-term debt, the Company has entered into an interest-rate swap agreement. This agreement involves the exchange of amounts based on a variable interest rate for amounts based on a fixed interest rate over the life of the agreement without an exchange of the notional amount upon which the payments are based. The differential to be paid or received as interest rates change is settled quarterly and recognized as an adjustment to interest expense (the accrual accounting method). The fair value of the swap agreements and changes in the fair value as a result of changes in market interest rates are not recognized in the accompanying financial statements. There have been no gains or losses on terminations of interest-rate swap agreements in 1998. Income Taxes. The Company is a limited liability company. In accordance with the tax law regarding such entities, each of the Company's membership unit holders is responsible for reporting their share of the Company's taxable income or loss on their separate tax returns. Accordingly, the Company has recorded no provision for federal, state or local income taxes. Per Unit Data. Net income per membership unit is computed based upon the weighted average number of membership units outstanding during the period. Conversion of the Series A convertible preferred membership units is antidilutive and, accordingly, is not included in the calculation. Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications. Certain reclassifications have been made to the prior period presentation to make it consistent with the current year. Recently Issued Accounting Pronouncements. In June 1998 SFAS 133 "Accounting for Derivative Instruments and Hedging Activities" was issued. SFAS 133 is required to be adopted in years beginning after June 15, 1999. SFAS 133 permits early adoption as of the beginning of any fiscal quarter after its issuance. The Company expects to adopt SFAS 133 effective January 1, 2000. The Company does not anticipate that the adoption of FAS 133 will have a material impact on its financial position or results of operations.
(3) Commercial Properties The Company owns the following commercial properties at December 31, 1998: Year Gross Area Constructed/ Gross (square feet) Rehabilitated Investment Property Location (unaudited) (unaudited) (000's) - -------- -------- ------------- ------------- ---------- Pointview Corporate Center Wayne, NJ 515,000 1976/1998 $ 32,369 (2 buildings) 1800 Valley Road Wayne, NJ 56,000 1980 4,122 Greenbrook Corporate Center Fairfield, NJ 201,000 1987 24,472 Chatham Executive Center Chatham, NJ 63,000 1972/1997 10,855 300 Atrium Drive Somerset, NJ 149,000 1983 18,489 400 Atrium Drive Somerset, NJ 355,000 1985 32,795 500 Atrium Drive Somerset, NJ 167,000 1984 20,721 700 Atrium Drive Somerset, NJ 181,000 1985 18,167 1275 K Street Washington, DC 225,000 1983 35,422 Mountain Heights Center Berkeley Hts, NJ 298,000 1968/1986/1998 35,196 (2 buildings) Morris Technology Center Parsippany, NJ 244,000 1963/1977/1998 8,417 15 Broad Street Boston, MA 65,000 1920/1984 5,599 600 Atrium Drive (land) Somerset, NJ N/A N/A 2,075 Garden State Exhibit Center Somerset, NJ 82,000 1968/1989 5,832 150 Wells Avenue Newton, MA 11,000 1987 1,273 72 River Park Needham, MA 22,000 1983 2,630 70 Wells Avenue Newton, MA 29,000 1979 3,930 160 Wells Avenue Newton, MA 19,000 1970/1997 3,421 2331 Congress Street Portland, ME 24,000 1980 2,158 60/74 Turner Street Waltham, MA 16,000 1970 2,153 100 Wells Avenue Newton, MA 21,000 1978 2,548 333 Elm Street Dedham, MA 48,000 1983 5,814 Dedham Place Dedham, MA 160,000 1987 27,189 128 Technology Center Waltham, MA 218,000 1986 36,138 201 University Avenue Westwood, MA 82,000 1982 9,677 7/57 Wells Avenue Newton, MA 88,000 1982 12,089 75/85/95 Wells Avenue Newton, MA 242,000 1976/1986 40,127 117 Kendrick Street Needham, MA 209,000 1963 13,292 140 Kendrick Street Needham, MA 261,000 1963 16,266 Shattuck Office Center Andover, MA 63,000 1985 7,597 180/188 Mt Airy Road Basking Ridge, NJ 104,000 1980 15,649 377/379 Campus Drive Franklin Twp, NJ 199,000 1984 22,934 6301 Stevens Forest Lane Columbia, MD 38,000 1980 2,640 105 Challenger Road Ridgefield Park, NJ 147,000 1992 19,636 --------- -------- 4,602,000 $501,692 ========= ======== No individual tenant aggregated greater than 9% of rental revenue in 1998.
All of the above properties are encumbered by the Bank Facility (Note 6). In addition, 333 Elm Street, Dedham Place, 128 Technology Center, 201 University Avenue, 7/57 Wells Avenue and Wells Research Center are encumbered by the Nomura Loan (Note 6). The Company capitalizes interest related to buildings under renovation to the extent such assets qualify for capitalization. Total interest incurred and capitalized was $20,385,672 and $2,973,069, respectively, for the year ended December 31, 1998 and $4,207,793 and $1,258,513, respectively, for the period from August 28, 1997 (Inception) to December 31, 1997 (the "Period"). In May 1998, the Company sold one office building to a prospective tenant for net proceeds of approximately $4,561,000 and recorded a gain of approximately $2.9 million. (4) Leases Office space in the properties is generally leased to tenants under lease terms which provide for the tenants to pay base rents plus increases in operating expenses in excess of specified amounts. Non-cancelable operating leases with tenants expire on various dates through 2013. The future minimum lease payments to be received under leases existing as of December 31, 1998 are as follows (in 000s): 1999 $ 55,151 2000 50,055 2001 42,355 2002 30,961 2003 27,179 Thereafter 36,528 -------- Total $242,229 ======== The above future minimum lease payments do not include specified payments for tenant reimbursements of operating expenses which amounted to approximately $4,878,000 and $602,000 for the year ended December 31, 1998 and the Period, respectively. (5) Ground Lease The leasehold interest in a 147,000 SF property located in Ridgefield Park, NJ is subject to a ground lease held by the local municipality. Future minimum rental payments under the lease until its expiration in January 2084 are as follows (in 000s): 1999 $ 125 2000 125 2001 125 2002 125 2003 125 Thereafter 18,349 ------- Total $18,974 ======= (6) Long Term Debt At December 31, 1998, the Company's long term debt consisted of the following: Balance Maturity Stated (000s) Debt Date Interest Rate 12/31/98 - ---- -------- ------------- -------- Mortgage Loan 2/2027 8.03% $ 68,043 Secured Senior Credit Facility 12/2000 LIBOR + 1.65% 207,290 Secured Mezzanine Credit Facility 12/2000 LIBOR + 3.20% 68,907 -------- $344,240 ======== The Company's transactions described in Note 1 were funded primarily by capital contributions from WCPT and Whitehall, by $48 million in debt which encumbered certain of the properties contributed by Whitehall (the "Atrium Loan") which was assumed by the Company, and by a mortgage ("Mortgage") between the Company and WRP. The Atrium Loan bore interest at LIBOR +3% and was due on May 15, 2000. The lender on this loan was Goldman Sachs Mortgage Company. This loan was repaid in December 1997. Pursuant to an unsecured loan, WRP had agreed to loan the Company up to approximately $86.3 million bearing interest at LIBOR plus 3% until November 1997 and at LIBOR plus 4% until maturity in June 1998 (the "Unsecured Loan"). This loan, aggregating $4,283,925 at December 31, 1997, was repaid in June 1998. Interest expense on the Unsecured Loan was $145,321 and $2,137,488 in 1998 and the Period, respectively. In December 1997, the Company obtained the $375 million loan facility (the "Prior Bank Facility") consisting of a secured term loan facility ("Secured Term Loan") of up to $225 million and a secured revolving credit facility ("Secured Revolving Credit Facility") of up to $150 million. The term loan facility bore interest at LIBOR +1.6% and had a term of four years; the revolving credit facility bore interest at LIBOR +2.5% and had a term of three years. The Prior Bank Facility was modified and repaid in July 1998. In July 1998, the Company modified the Prior Bank Facility with BankBoston and Goldman Sachs Mortgage to provide for a secured senior credit facility ("Secured Senior Credit Facility") of up to $300 million and a secured mezzanine credit facility ("Secured Mezzanine Credit Facility") of up to $75 million (collectively, the "Bank Facility"). The loans bear interest at LIBOR + 1.65% and LIBOR + 3.20%, respectively, and have a term of twenty-nine months, which may be renewed by the Company for an additional twelve months, subject to certain conditions. The proceeds from the Bank Facility were used to repay amounts outstanding under the Prior Bank Facility. In connection with the Saracen transaction, the Company assumed a mortgage loan held by Nomura Asset Capital Corporation in the original amount of approximately $68,341,000 (the "Nomura Loan"). The loan bears interest at a rate of 8.03% and requires monthly payments of principal and interest until maturity in February 2027. The Bank Facility, the Prior Bank Facility and the Nomura Loan contain various customary covenants regarding the ratio of liabilities to assets, debt service coverage and minimum equity. As of December 31, 1998 and 1997, the Company was in compliance with the terms of these covenants. The aggregate maturities for the Company's long-term debt obligations for each of the next five years and thereafter at December 31, 1998 are as follows (in 000s): 1999 $ 574 2000 276,804 2001 674 2002 731 2003 793 Thereafter 64,664 -------- Total $344,240 ======== To reduce the impact of certain changes in interest rates on its long- term debt, the Company has an interest rate swap agreement and an interest rate protection agreement. The interest rate swap agreement fixes LIBOR at 5.9% for up to $220 million until May 2000. The interest rate protection agreement caps LIBOR at 7.69% for up to $64 million until June 15, 2000. The cost of the interest rate protection agreement is being amortized on a straight-line basis over its life. The net settlement amount of the interest-rate swap agreement and the amortization of the interest rate protection agreement which is recorded as an adjustment of interest expense in 1998 and 1997 aggregated approximately $459,000 and $14,000, respectively. At December 31, 1998, the fair value of the interest rate swap agreement was approximately ($2,700,000). (7) Transactions With Affiliates In connection with the transactions described in Note 1, on August 28, 1997 WRP issued 5,000,000 warrants (the "Warrants") to Whitehall to purchase 4,132,230 shares of WRP common stock at an exercise price of $12.10 per share. Such exercise price was based on the fair value of the membership units of the Company at their issuance date. The Warrants are exercisable for five years for either, at WRP's option, shares of WRP's common stock or cash. The exercise price for the Warrants is payable in cash or, after August 28, 1999, either with cash or membership units in the Company. Such transaction would have no net impact on the number of membership units outstanding. Under the terms of the joint venture, WCPT is entitled to an administrative fee of $300,000 per year for the reimbursement of salaries and costs incurred relating to the operation of the Company. The fees incurred by the Company were $300,000 for the year ended December 31, 1998 and $100,000 for the Period. Such amounts were paid during the first quarter of the subsequent year. An affiliate of Whitehall performed asset management services for the Company for which the Company incurred fees of approximately $133,000 for the year ended December 31, 1998 and $292,000 for the Period. This contract expired February 25, 1998. Affiliates of the Saracen Members performed asset management and property management services for the Company. These fees amounted to approximately $649,000 for the year ended December 31, 1998. At December 31, 1998 and 1997, the Company has approximately $408,023 and $1,252,000, respectively, of receivables from its Members, which amount is included in receivables, prepaids and other assets on the accompanying Consolidated Balance Sheets. WCPT leases space at Chatham Executive Center. Revenue related to this lease for the year ended December 31, 1998 and for the Period amounted to $0. Affiliates of the Saracen Members lease space at 7/57 Wells Avenue. Revenue related to these leases for the year ended December 31, 1998 amounted to $67,572. (8) Members' Equity WCPT is entitled to incentive compensation equal to (a) 17.5% of available cash after a return of capital to WCPT and Whitehall and a 17.5% return on equity to each of them, and (b) 22.5% of available cash after a 22.5% return on equity to WCPT and Whitehall. At December 31, 1998, WCPT and Whitehall have committed to make additional equity contributions of approximately $13,633,000 and $13,835,000, respectively, for new acquisitions, capital needs, and working capital. Whitehall may exchange the membership units it receives in the Company relating to capital contributions in excess of an additional $25 million up to an additional $50 million, for shares of WRP's common stock or, at WRP's sole discretion, cash, based upon the price paid for such membership units and the current market value of WRP's common stock. Such transaction would have no net impact on the number of membership units outstanding. At the formation of the Company, 2,505,000 membership units were issued to WCPT, representing its 50.1% interest, and 2,495,000 units were issued to Whitehall, representing its 49.9% interest. Subsequently an additional 2,239,028 and 2,232,740 units were issued to WCPT and Whitehall (1,495,966 and 1,490,294, respectively, in 1998), respectively, in connection with additional capital contributions used to fund acquisitions and renovations. In connection with the Saracen Transaction, 468,557 membership units and 760,000 Series A convertible preferred membership units were issued to the Saracen Members. The membership units were issued at a price of $16.22 per membership unit. The Series A convertible preferred membership units are convertible into membership units at a price of $18.65 per membership unit. These units also provide for cumulative dividend payments of the greater of (a) 6% or (b) the dividend payable to membership unit holders, calculated on an as converted basis, payable quarterly in arrears, and have a liquidation preference of $25 per Series A convertible preferred membership unit plus accrued and unpaid distributions. The number of membership units issued and outstanding as of December 31, 1998 and 1997 is as follows: December 31, 1998 1997 ---- ---- [S] [C] [C] WCPT 4,744,028 3,248,062 Whitehall 4,727,740 3,237,446 Saracen Members 468,557 -- --------- --------- Total 9,940,325 6,485,508 ========= ========= During the year ended December 31, 1998, preferred distributions of $728,333 were declared. Of that amount, $437,000 was paid during the year. The remainder was paid during first quarter 1999. Distributions of $3,007,481 were declared on November 19, 1998 to membership unit holders on record as of that date. These were paid during first quarter 1999. (9) Commitments and Contingencies Under the terms of the joint venture agreement at any time prior to an initial public offering by WCPT and after August 28, 2001, either WCPT or Whitehall may require the Company to sell any and all of its properties. As a commercial real estate owner, the Company is subject to potential environmental costs. At this point in time, management of the Company is not aware of any environmental concerns that would have a material adverse effect on the Company's financial position or future results of operations. The Company has management agreements with unaffiliated property management companies to manage the operations of the properties. Management fees are generally based on 2% to 3% of gross rentals collected and are generally terminable on 30 days notice. In November 1998, the Company entered into a contract to purchase a property located in Morristown, NJ for $14 million. The property consists of a 97,000 SF building and 15 acres of developable land. The Company participates in WRP's defined contribution savings plan which was established pursuant to Section 401 of the Internal Revenue Code. All of the Company's employees are eligible to participate after one year of service. Employer contributions are made based upon a discretionary amount determined by the Company's management. Employer contributions, if any, are based upon the amount contributed by an employee. During 1998, the Company made contributions of approximately $14,000. (10) Subsequent Events In February 1999, the Company executed an agreement to purchase two properties located in Suburban Baltimore totaling 127,000 SF for $13.8 million. The purchase may be completed by May 1999, subject to certain contingencies. (11) Year 2000 (unaudited) The Company has developed a plan to modify its information technology ("IT"), primarily its accounting software, to recognize the year 2000. The Company currently expects the project to be substantially complete by the end of the second quarter of 1999 at a cost of less than $0.1 million which will be funded from operations, including costs incurred to date. The Company does not expect this project to have a significant effect on its operations. The timing and cost of this project will be closely monitored and are based on management's best estimates. Actual results, however, could differ from those anticipated. The Company also has initiated discussions with its third-party property management companies (the "Managers") to ensure that those parties have appropriate plans to allay any year 2000 issues that may impact the Company's operations. These issues would include both accounting/management software and non-information technology systems such as fire safety, security and elevator systems. Wellsford/Whitehall has completed its analysis of such systems and has determined that no material adverse consequences will likely result from its year 2000 issues. Under the most reasonably likely worst case scenario, wherein the Managers fail to update their software and non-IT systems, the Company has the ability to convert its accounting and management systems to a spreadsheet-based system on a temporary basis and to utilize its building engineers to manually override any non-IT systems which fail. While the Company believes its planning efforts are adequate to address its year 2000 concerns, there can be no guarantee that the systems of other companies on which the Company's systems and operations rely, primarily its banks, payroll processing company, creditors, and debtors, will be converted on a timely basis and will not have a material effect on the Company. Schedule III
Date Year # Of # Of Property Name Acquired Location Built Sq. Ft. Units - ------------- -------- -------- ----- ------- ----- Blue Ridge - Garden Apts. 12/97 Denver, CO 1997 N/A 456 Red Canyon - Garden Apts. 11/98 Denver, CO 1998 N/A 304 Sonterra - Garden Apts. 1/98 Tucson, AZ 1995 N/A 344 Hoes Lane - Office 2/98 Piscataway, NJ 1987 37,238 N/A Bradford Plaza - Retail 2/98 West Chester, PA 1990 123,881 N/A Chestnut Street - Office 2/98 Philadelphia, PA 1857 (B) 49,953 N/A Keewaydin Drive - Industrial 2/98 Salem, NH 1973 125,230 N/A Turnpike Street - Industrial 2/98 Canton, MA 1980 43,160 N/A Two Executive - Office 2/98 Cherry Hill, NJ 1970 102,310 N/A Bay City Holdings - Office 2/98 Santa Monica, CA 1985 114,375 N/A ------- ----- Total 596,147 1,104 ======= ===== December 31, 1998 (thousands) ---------------------------------------------------------------------------------------------------- Cost Initial Cost Capitalized Total Cost (A) Total Cost ----------------------- Subsequent ------------------------ Net of Bldgs & to Bldgs & Accum Accumulated Property Name Land Improve Total Acquisition Land Improve Total Depr Depreciation Encumbrances - ------------- ---- ------- ----- ----------- ---- ------- ----- ----- ------------ ------------ Blue Ridge - Garden Apts. $5,225 $36,339 $41,564 $91 $5,225 $36,430 $41,655 $1,325 $40,330 $34,144 Red Canyon - Garden Apts. $5,060 $28,844 $33,904 $0 $5,060 $28,844 $33,904 $87 $33,817 $27,000 Sonterra - Garden Apts. $3,075 $17,272 $20,347 $0 $3,075 $17,272 $20,347 $628 $19,719 $16,278 Hoes Lane - Office $289 $1,652 $1,941 $5 $289 $1,657 $1,946 $34 $1,912 (D) Bradford Plaza - Retail $1,692 $9,628 $11,320 $11 $1,692 $9,639 $11,331 $200 $11,131 (D) Chestnut Street - Office $533 $3,018 $3,551 $1 $533 $3,019 $3,552 $63 $3,489 (D) Keewaydin Drive - Industrial $502 $2,847 $3,349 $0 $502 $2,847 $3,349 $59 $3,290 (D) Turnpike Street - Industrial $359 $3,037 $3,396 $0 $359 $3,037 $3,396 $64 $3,332 (D) Two Executive - Office $517 $3,013 $3,530 $3 $517 $3,016 $3,533 $63 $3,470 (D) Bay City Holdings - Office $1,561 $9,640 $11,201 $25 $1,561 $9,665 $11,226 $184 $11,042 (D) ------- -------- -------- ---- ------- -------- -------- ------ -------- ------- Total $18,813 $115,290 $134,103 $136 $18,813 $115,426 $134,239 $2,707 $131,532 $77,422 ======= ======== ======== ==== ======= ======== ======== ====== ======== ======= (C) (A) The aggregate cost for federal income tax purposes is $133.0 million. (B) Renovated in 1986 and 1990. (C) Reconciliation of carrying amount: Balance at January 1, 1997 $0 Additions: Acquisitions 85,552 Deductions: Cost of real estate sold (43,988) -------- Balance at January 1, 1998 41,564 Additions: Acquisitions 156,533 Capital improvements 136 Deductions: Cost of real estate sold (63,994) -------- Balance at December 31, 1998 $134,239 ======== (D) These properties are encumbered by the $28.0 million Wellsford Capital Mortgage.
Schedule IV - -----------
December, 31, 1998 (thousands) ----------------------------------------------- Total Principal Type Subject To of Interest Maturity Payment Prior Face Carrying Delinquent Note Receivable Security Rate Date Terms Liens Amount Amount(A) Payments - --------------- -------- -------- -------- ------- ----- ------ --------- ---------- 277 Park Loan Office(B) 12.000% 5/07(I) Interest Only $345,000 $25,000 $25,000 $0 Abbey Credit Facility Mixed(C) LIBOR + 4% 9/00 Interest Only $0 $46,019(M) $46,019 $0 Woodlands Loan Mixed(D) LIBOR + 4.4% 7/00(J) Interest Only $309,000 $15,000 $15,000 $0 DeBartolo Loan Mixed(E) 8.547% 7/08(K) P & I(L) $0 $17,678 $17,678 $0 REIT Bridge Loan Unsecured(F) 9.875%(H) 2/99(H) Interest Only $444,600 $15,000 $14,949 $0 Safeguard Credit Facility Storage Fac.(G) LIBOR + 4% 4/01 Interest Only $0 $5,913(N) $5,913 $0 REMICs Coops/condos Various Various Various $0 $253 $148 $21 ---------- -------- -------- --- Total $1,098,600 $124,863 $124,707 $21 (O) (A) The aggregate carrying amount for federal income tax purposes is equal to the total face amount reflected in this schedule. (B) This loan is secured by certain equity interests in an entity which owns a 52-story, 1.75 million sq. ft. office building in New York, NY. (C) This loan is secured by first mortgage liens on 24 office, industrial and retail properties located in CA and aggregating 1.7 million sq. ft. (D) This loan is secured by certain equity interests and other collateral in a 25,000 acre master-planned community in Houston, TX. (E) This loan is secured by certain equity interests in an entity which owns 175 million square feet of regional malls and other invesetments. (F) The borrower is an entity which owns regional malls, multifamily and office properties. (G) This loan is secured by first mortgage liens on 4 storage facilities located in the U.S. and aggregating 0.3 million sq. ft. (H) In January 1999, the interest rate and maturity date of this loan were modified to 12% and August 1999, respectively. (I) This loan precludes prepayments until May 2003. From May 2003 to April 2006, a prepayment penalty based on a yield maintenance formula (as defined in the related documents) is applicable. From May 2006 to maturity, no prepayment penalty is applicable. (J) Two one-year extension options are available to the borrower. (K) This loan requires any prepayments to be accompanied by a prepayment penalty based on a yield maintenance formula (as defined in the related documents). (L) This loan requires principal payments of varying amounts and a $12.6 million balloon payment at maturity. (M) The maximum balance of the Company's 50% portion of this facility is $50 million. (N) The maximum balance of the Company's 50% portion of this facility is $45 million. (O) Reconcoliation of carrying amount. Balance at January 1, 1997 $17,800 Additions: New loans 164,645 Funding of credit facilities 28,627 Deductions: Collection of principal (105,440) ---------- Balance at January 1, 1998 105,632 Additions: New loans 40,604 Funding of credit facilities 33,305 Amortization of discount 410 Deductions: Collection of principal (55,244) ---------- Balance at December 31, 1998 $124,707 ========== /TABLE EXHIBIT INDEX Exhibit No. Description+++ - ---------- -------------- 3.1 Articles of Amendment and Restatement of the Company.**** 3.2 Articles Supplementary Classifying 335,000 Shares of Common Stock as Class A Common Stock.**** 3.3 Articles Supplementary Classifying 2,000,000 Shares of Common Stock as Series A 8% Convertible Redeemable Preferred Stock.**** 3.4 Bylaws of the Company.**** 4.1 Specimen certificate for Common Stock.*** 4.2 Specimen certificate for Class A Common Stock.**** 4.3 Specimen certificate for Series A 8% Convertible Redeemable Preferred Stock.**** 4.4 Warrant Agreement, dated as of August 28, 1997, between the Company and United States Trust Company of New York, as warrant agent, and Warrant Certificate No. 1 of the Company for 5,000,000 Warrants registered in the name of WHWEL Real Estate Limited Partnership.+ 4.5 Registration Rights Agreement, dated as of February 23, 1998, among the Company and Franklin Mutual Advisors, Inc. and Angelo Gordon & Co., L.P.++++ 10.1 Operating Agreement of Red Canyon at Palomino Park LLC between Wellsford Park Highlands Corp. and Al Feld, dated as of April 17, 1996, relating to Red Canyon.* 10.2 First Amendment to Operating Agreement of Red Canyon at Palomino Park LLC between Wellsford Park Highlands Corp. and Al Feld, dated as of May 19, 1997, relating to Red Canyon.**** 10.3 Tri-Party Agreement by and among NationsBank of Texas, N.A., Red Canyon at Palomino Park LLC, Wellsford Park Highlands Corp., Wellsford Residential Property Trust, Al Feld and The Feld Company, dated May 29, 1997, relating to Red Canyon.**** 10.4 Assignment and Assumption of Tri-Party Agreement by and among Wellsford Residential Property Trust, ERP Operating Limited Partnership, Red Canyon at Palomino Park LLC, Wellsford Park Highlands Corp., The Feld Company, Al Feld and NationsBank of Texas, N.A. dated May 30, 1997, relating to Red Canyon.**** 10.5 Agreement and Acknowledgment Regarding Tri-Party Agreement by and among NationsBank of Texas, N.A., Red Canyon at Palomino Park LLC, Wellsford Park Highlands Corp. and ERP Operating Limited Partnership dated May 30, 1997, relating to Red Canyon.**** 10.6 Second Amended and Restated Vacant Land Purchase and Sale Agreement between Mission Viejo Company and The Feld Company dated March 23, 1995, as amended by First Amendment, dated May 1, 1996, relating to the land underlying Palomino Park.* 10.7 Trust Indenture, dated as of December 1, 1995, between Palomino Park Public Improvements Corporation ("PPPIC") and United States Trust Company of New York, as trustee, securing Wellsford Residential Property Trust's Assessment Lien Revenue Bonds Series 1995 - $14,755,000.** 10.8 Letter of Credit Reimbursement Agreement, dated as of December 1, 1995, between PPPIC, Wellsford Residential Property Trust and Dresdner Bank AG, New York Branch.** 10.9 First Amendment to Letter of Credit Reimbursement Agreement, dated as of May 30, 1997, between PPPIC, Wellsford Residential Property Trust, Dresdner Bank AG, New York Branch and the Company.**** 10.10 Amendment to Wellsford Reimbursement Agreement by and between PPPIC, Wellsford Residential Property Trust and the Company, dated as of May 30, 1997.**** 10.11 Assignment and Assumption Agreement by and between Wellsford Residential Property Trust and the Company, dated as of May 30, 1997.**** 10.12 Credit Enhancement Agreement by and between the Company and ERP Operating Limited Partnership, dated as of May 30, 1997, relating to Palomino Park.**** 10.13 Reimbursement and Indemnification Agreement by and among the Company and ERP Operating Limited Partnership, dated as of May 30, 1997, relating to Palomino Park.**** 10.14 Guaranty by ERP Operating Limited Partnership for the benefit of Dresdner Bank AG, New York Branch, dated as of May 30, 1997, relating to Palomino Park.**** 10.15 Amended and Restated Promissory Note of the Company to the order of Dresdner Bank AG, New York Branch, dated May 30, 1997, relating to Palomino Park.**** 10.16 Common Stock and Preferred Stock Purchase Agreement by and between the Company and ERP Operating Limited Partnership dated as of May 30, 1997.**** 10.17 Registration Rights Agreement by and between the Company and ERP Operating Limited Partnership dated as of May 30, 1997.**** 10.18 Credit Agreement, dated as of April 25, 1997, between Park Avenue Financing Company LLC, PAMC Co-Manager Inc., PAFC Management, Inc., Stanley Stahl, The First National Bank of Boston, the Company, Other Banks that may become parties to the Agreement and The First National Bank of Boston, as Agent, relating to 277 Park Avenue.** 10.19 Assignment of Member's Interest, dated as of April 25, 1997, by PAFC Management, Inc. and Stanley Stahl to The First National Bank of Boston, relating to 277 Park Avenue (relating to interests in the Park Avenue Financing Company, LLC).** 10.20 Assignment of Member's Interest, dated as of April 25, 1997, by PAMC Co-Manager Inc. and Park Avenue Financing, LLC to The First National Bank of Boston, relating to 277 Park Avenue (relating to interests in 277 Park Avenue, LLC).** 10.21 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley Stahl to The First National Bank of Boston, relating to 277 Park Avenue (relating to stock in Park Avenue Management Corporation).** 10.22 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley Stahl to The First National Bank of Boston, relating to 277 Park Avenue (relating to stock in PAMC Co-Manager Inc.).** 10.23 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley Stahl to The First National Bank of Boston, relating to 277 Park Avenue (relating to stock in PAFC Management, Inc.).** 10.24 Conditional Guaranty of Payment and Performance, dated as of April 25, 1997, by Stanley Stahl, relating to 277 Park Avenue.** 10.25 Cash Collateral Account Security, Pledge and Assignment Agreement, dated as of April 25, 1997, between 277 Park Avenue, LLC, Park Avenue Management Corporation, Park Avenue Financing Company LLC, PAMC Co-Manager Inc., Stanley Stahl and The First National Bank of Boston, relating to 277 Park Avenue.** 10.26 Recognition Agreement, dated as of April 25, 1997, between The First National Bank of Boston, the Company, Column Financial, Inc., Park Avenue Financing Company LLC, PAMC Co-Manager, Inc. and 277 Park Avenue, LLC, relating to 277 Park Avenue.** 10.27 Intercreditor Agreement, dated as of April 25, 1997, between the Company and The First National Bank of Boston, as Agent, relating to 277 Park Avenue.** 10.28 Assignment and Acceptance Agreement, dated June 19, 1997, between BankBoston, N.A. (formerly known as The First National Bank of Boston) ("BankBoston") and the Company, relating to 277 Park Avenue.**** 10.29 Revolving Credit Agreement by and among the Company, BankBoston, Morgan Guaranty Trust Company of New York ("Morgan Guaranty"), other banks which may become parties and BankBoston, as agent, and Morgan Guaranty, as co-agent dated as of May 30, 1997.**** 10.30 Agreement Regarding Common Stock and Preferred Stock Purchase Agreement, dated as of May 30, 1997, among ERP Operating Limited Partnership, the Company and BankBoston, as agent.**** 10.31 Assignment of Common Stock Agreements, dated as of May 30, 1997, between the Company and BankBoston, as agent.**** 10.32 Collateral Assignment of Documents, Rights and Claims (including Collateral Assignment of Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing), made as of May 30, 1997, by the Company to BankBoston, as agent.**** 10.33 First Amended and Restated Loan Agreement, dated as of July 16, 1998 (the "First Amended and Restated Loan Agreement"), among Wellsford/Whitehall Holdings, L.L.C., as Borrower, and BankBoston, Goldman Sachs Mortgage Company, and Other Banks, as Banks, and BankBoston, as Administrative Agent and Co- Arranger and Co-Syndication Agent, and Goldman Sachs Mortgage Company, as Co-Arranger and Co-Syndication Agent. 10.34 Form of promissory note payable to the order of eight lenders by Wellsford/Whitehall Properties, L.L.C. under the First Amended and Restated Loan Agreement. 10.35 Amended and Restated Assignment of Member's Interest under the First Amended and Restated Loan Agreement, dated as of July 16, 1998, by Wellsford/Whitehall Holdings, L.L.C. to BankBoston, as Agent. 10.36 Amended and Restated Cash Collateral Agreement under the First Amended and Restated Loan Agreement, dated as of July 16, 1998, by and among Wellsford/Whitehall Holdings, L.L.C., WASH Manager L.L.C., Wells Avenue Holdings L.L.C. and BankBoston, as Agent. 10.37 Indemnity Agreement Regarding Hazardous Materials under the First Amended and Restated Loan Agreement, dated as of July 16, 1998, by Wellsford/Whitehall Holdings, L.L.C., Wellsford Commercial Properties Trust and WHWEL Real Estate Limited Partnership for the benefit of BankBoston. 10.38 Conditional Guaranty of Payment under the First Amended and Restated Loan Agreement, dated as of July 16, 1998, by Wellsford Commercial Properties Trust, WHWEL Real Estate Limited Partnership, the Company, Whitehall Street Real Estate Limited Partnership V, Whitehall Street Real Estate Limited Partnership VI, Whitehall Street Real Estate Limited Partnership VII and Whitehall Street Real Estate Limited Partnership VIII in favor of BankBoston and Goldman Sachs Mortgage Company. 10.39 Indemnity and Guaranty Agreement under the First Amended and Restated Loan Agreement, dated as of July 16, 1998, by Wellsford Commercial Properties Trust and WHWEL Real Estate Limited Partnership in favor of BankBoston, Goldman Sachs Mortgage Company and Other Banks. 10.40 Mezzanine Loan Agreement, dated as of July 16, 1998 (the "Mezzanine Loan Agreement"), among Wellsford/Whitehall Holdings II, L.L.C., as Borrower, and BankBoston, Goldman Sachs Mortgage Company, and Other Banks, as Banks, and BankBoston, as Administrative Agent and Co-Arranger and Co- Syndication Agent, and Goldman Sachs Mortgage Company, as Co- Arranger and Co-Syndication Agent. 10.41 Form of promissory note payable to the order of five lenders by Wellsford/Whitehall Properties II, L.L.C. under the Mezzanine Loan Agreement. 10.42 Assignment of Member's Interest under the Mezzanine Loan Agreement, dated as of July 16, 1998, between Wellsford/Whitehall Properties II, L.L.C. and BankBoston, as Agent. 10.43 Indemnity Agreement Regarding Hazardous Materials under the Mezzanine Loan Agreement, dated as of July 16, 1998, by Wellsford/Whitehall Properties II, L.L.C., Wellsford Commercial Properties Trust and WHWEL Real Estate Limited Partnership for the benefit of BankBoston. 10.44 Nomura Conditional Guaranty of Payment under the Mezzanine Loan Agreement, dated as of July 16, 1998, by Wellsford Commercial Properties Trust, WHWEL Real Estate Limited Partnership, the Company, Whitehall Street Real Estate Limited Partnership V, Whitehall Street Real Estate Limited Partnership VI, Whitehall Street Real Estate Limited Partnership VII and Whitehall Street Real Estate Limited Partnership VIII in favor of BankBoston and Goldman Sachs Mortgage Company. 10.45 Conditional Guaranty of Payment under the Mezzanine Loan Agreement, dated as of July 16, 1998, by Wellsford Commercial Properties Trust, WHWEL Real Estate Limited Partnership, the Company, Whitehall Street Real Estate Limited Partnership V, Whitehall Street Real Estate Limited Partnership VI, Whitehall Street Real Estate Limited Partnership VII and Whitehall Street Real Estate Limited Partnership VIII in favor of BankBoston and Goldman Sachs Mortgage Company. 10.46 Indemnity and Guaranty Agreement under the Mezzanine Loan Agreement, dated as of July 16, 1998, by Wellsford Commercial Properties Trust and WHWEL Real Estate Limited Partnership in favor of BankBoston, Goldman Sachs Mortgage Company and Other Banks. 10.47 $50 million Revolving Credit Agreement, dated as of January 12, 1999, among Wellsford Finance, Inc., as Borrower, and BankBoston and Other Banks, as Lender, and BankBoston, as Agent. 10.48 $50 million promissory note, dated January 12, 1999, payable to BankBoston by Wellsford Finance, Inc. 10.49 Collateral Assignment of Documents, Rights and Claims, dated January 12, 1999, from Wellsford Finance, Inc. to BankBoston, as Agent. 10.50 Limited Liability Company Operating Agreement of Wellsford/Whitehall Properties II, L.L.C., dated as of July 16, 1998. 10.51 Letter Agreement, dated as of July 16, 1998, between the Company and WHWEL Real Estate Limited Partnership, relating to warrants to be issued to WHWEL Real Estate Limited Partnership. 10.52 Fixed Rate Loan Agreement, dated as of August 11, 1998 (the "Fixed Rate Loan Agreement"), by and among First Union Real Estate Equity and Mortgage Investments, as Borrower, Bankers Trust Company, as Agent, and Bankers Trust Company, Wellsford Capital and BankBoston, as Lenders. 10.53 $15 million promissory note, dated August 11, 1998, payable to the order of Wellsford Capital by First Union Real Estate Equity and Mortgage Investments under the Fixed Rate Loan Agreement. 10.54 First Amendment of Fixed Rate Loan Agreement, dated as of January 8, 1999, among First Union Real Estate Equity and Mortgage Investments, as Borrower, Bankers Trust Company, Wellsford Capital and BankBoston, as Lenders, and Bankers Trust Company, as Agent. 10.55 Letter dated January 8, 1999, among First Union Real Estate Equity and Mortgage Investments, as Borrower, Bankers Trust Company, Wellsford Capital and BankBoston, as Lenders, and Bankers Trust Company, as Agent. 10.56 Revolving Credit Agreement for $70 million, dated as of August 28, 1997, between AP-Anaheim LLC, AP-Arlington LLC, AP- Atlantic LLC, AP-Cityview LLC, AP-Farrell Ramon LLC, AP- Palmdale LLC, AP-Redlands LLC, AP-Victoria LLC, AP-Victorville LLC, and AP-Sierra LLC, each a California limited liability company (collectively, the "Abbey Affiliates"), as Borrower, and Morgan Guaranty Trust Company of New York, as Lender.+ 10.57 Amendment to Revolving Credit Agreement, dated as of April 6, 1998, by AP-Diamond Bar LLC, AP-Edinger LLC, AP- Glendora LLC, AP- Anaheim LLC, AP- Arlington LLC, AP- Atlantic LLC, AP- Cityview LLC, AP- Redlands LLC, AP- Palmdale LLC, AP- Farrell Ramon LLC, AP- Sierra LLC, AP- Victoria LLC and AP- Victorville LLC (collectively, the "Amended Abbey Affiliates"), as Borrower, and Morgan Guaranty Trust Company of New York, as Lender. 10.58 Loan Participation Agreement, dated as of August 28, 1997, between Morgan Guaranty Trust Company of New York and the Company.+ 10.59 First Amendment to Participation Agreement, dated as of April 7, 1998, between Morgan Guaranty Trust Company of New York and Wellsford Capital. 10.60 $70 million promissory note, dated August 28, 1997, payable to the order of Morgan Guaranty Trust Company of New York by the Abbey Affiliates.+ 10.61 Amendment to Promissory Note, dated as of April 6, 1998, between the Amended Abbey Affiliates and Morgan Guaranty Trust Company of New York. 10.62 Purchase and Sale Agreement, dated as of September 18, 1997, among the Company, Wellsford Capital Corporation and Whitehall Street Real Estate Limited Partnership VII.++ 10.63 First Amended and Restated Master Credit Agreement, dated December 30, 1997, effective as of July 31, 1997, among The Woodlands Commercial Properties Company, L.P., The Woodlands Land Development Company, L.P., and BankBoston, Morgan Stanley Senior Funding, Inc., as Documentation Agent, and Other Banks, and BankBoston, as Managing Agent and Syndication Agent.++++ 10.64 Intercreditor Agreement, dated December 30, 1997, effective as of July 31, 1997, by and between BankBoston, Morgan Stanley Senior Funding, Inc. and the Other Lenders, relating to Woodlands.++++ 10.65 $4,186,991.87 Commercial Company Second Secured Term Loan Note, dated December 30, 1997, payable to the order of the Company by The Woodlands Commercial Properties Company, L.P. and The Woodlands Land Development Company, L.P.++++ 10.66 $10,813,008.13 Land Company Second Secured Term Loan Note, dated December 30, 1997, payable to the order of the Company by The Woodlands Land Development Company, L.P. and The Woodlands Commercial Properties Company, L.P.++++ 10.67 Revolving Credit Agreement, dated as of March 28, 1998, among Safeguard Capital Fund, L.P., as Borrower, and Morgan Guaranty Trust Company of New York, as Lender. 10.68 $90 million promissory note, dated March 28, 1998, payable to Morgan Guaranty Trust Company of New York by Safeguard Capital Fund, L.P. 10.69 Loan Participation Agreement, dated as of December 1, 1998, between Morgan Guaranty Trust Company of New York and Wellsford Capital. 10.70 Program Agreement for Clairborne Investors Mortgage Program between Creamer Realty Consultants and The Prudential Investment Corporation, dated as of December 10, 1997.++++ 10.71 Amended and Restated General Partnership Agreement of Creamer Realty Consultants, dated as of January 1, 1998, by and between Wellsford CRC Holding Corp. and FGC Realty Consultants, Inc.++++ 10.72 Limited Liability Company Agreement of Creamer Vitale Wellsford, L.L.C., dated as of January 20, 1998, by and between Wellsford CRC Holding Corp. and SX Advisors, LLC.++++ 10.73 Loan Agreement, dated as of February 27, 1998, between Wellsford Sonterra L.L.C., as Borrower, and Nationsbank, N.A., as Lender.++++ 10.74 $16,400,000 promissory note, dated February 27, 1998, payable to the order of NationsBank, N.A., by Wellsford Sonterra, L.L.C.++++ 10.75 Deed of Trust, Assignment of Leases and Rents and Security Agreement, dated February 27, 1998 by Wellsford Sonterra, L.L.C. in favor of NationsBank, N.A.++++ 10.76 $34,500,000 Multifamily Note, dated December 24, 1997, payable to the order of GMAC Commercial Mortgage Corporation by Park at Highlands L.L.C.++++ 10.77 Multifamily Deed of Trust, Assignment of Rents and Security Agreement, dated December 24, 1997, by Park at Highlands L.L.C. in favor of GMAC Commercial Mortgage Corporation.++++ 10.78 $28 million secured promissory note, dated October 22, 1998, payable to the order of Lehman Brothers Holdings Inc. by Wellsford Capital Properties, L.L.C. 10.79 Conditional Guarantee, dated as of October 22, 1998, by Wellsford Capital in favor of Lehman Brothers Holdings Inc. 10.80 Mortgage and Security Agreement, dated as of October 22, 1998, by Wellsford Capital Properties, L.L.C. to Lehman Brothers Holdings Inc. 10.81 1998 Management Incentive Plan of the Company. 10.82 1997 Management Incentive Plan of the Company.** 10.83 Rollover Stock Option Plan of the Company.** 10.84 Employment Agreement between the Company and Jeffrey H. Lynford.**** 10.85 Employment Agreement between the Company and Edward Lowenthal.**** 10.86 Employment Agreement between the Company and Gregory F. Hughes.**** 10.87 Employment Agreement between the Company and David M. Strong.**** 21.1 Subsidiaries of the Registrant. 27.1 Financial Data Schedule. 99.1 "Risk Factors" section of Amendment No. 2 to the Company's Registration Statement on Form S-11 (file no. 333-32445), as may be amended.+++++ - -------------------------- * Previously filed as an exhibit to the Form 10 filed on April 23, 1997. ** Previously filed as an exhibit to the Form 10/A Amendment No. 1 filed on May 21, 1997. *** Previously filed as an exhibit to the Form 10/A Amendment No. 2 filed on May 28, 1997. **** Previously filed an exhibit to the Form S-11 filed on July 30, 1997. ***** Previously filed as an exhibit to Amendment No. 1 to Form S-11 filed on November 14, 1997. + Previously filed as an exhibit to the Form 8-K filed on September 11, 1997. ++ Previously filed as an exhibit to the Form 8-K filed on September 23, 1997. +++ Wellsford acquired its interest in a number of these documents by assignment. ++++ Previously filed as an exhibit to the Form 10-K filed on March 31, 1998. +++++ Previously filed as part of Amendment No. 2 to the Registration Statement on Form S-11 filed on December 3, 1997. EX-10.33 2 FIRST AMENDED AND RESTATED LOAN AGREEMENT DATED AS OF JULY 16, 1998 among WELLSFORD/WHITEHALL HOLDINGS, L.L.C., as Borrower and BANKBOSTON, N.A., GOLDMAN SACHS MORTGAGE COMPANY, THE OTHER BANKS WHICH ARE PARTIES TO THIS AGREEMENT, and OTHER BANKS WHICH MAY BECOME PARTIES TO THIS AGREEMENT, as Banks and BANKBOSTON, N.A., AS ADMINISTRATIVE AGENT AND CO-ARRANGER AND CO-SYNDICATION AGENT and GOLDMAN SACHS MORTGAGE COMPANY, AS CO-ARRANGER AND CO-SYNDICATION AGENT TABLE OF CONTENTS Page Section 1. DEFINITIONS AND RULES OF INTERPRETATION. . . . . . . . . . . . .2 Section 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . .2 Section 1.2. Rules of Interpretation.. . . . . . . . . . . . . . . . 23 Section 2. THE FACILITY.. . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 2.1. Commitment to Lend. . . . . . . . . . . . . . . . . . 24 Section 2.2. Facility Fee. . . . . . . . . . . . . . . . . . . . . 25 Section 2.3. Reduction of Commitment. . . . . . . . . . . . . . . 25 Section 2.4. Notes. . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 2.5. Interest on Loans.. . . . . . . . . . . . . . . . . . . 26 Section 2.6. Requests for Loans. . . . . . . . . . . . . . . . . . . 26 Section 2.7. Funds for Loans.. . . . . . . . . . . . . . . . . . . . 28 Section 2.8. Extension of Maturity Date. . . . . . . . . . . . . . . 28 Section 2.9. Termination of Advances. . . . . . . . . . . . . . . . 29 Section 3. REPAYMENT OF THE LOANS.. . . . . . . . . . . . . . . . . . . . 29 Section 3.1. Stated Maturity. . . . . . . . . . . . . . . . . . . . 29 Section 3.2. Mandatory Prepayments.. . . . . . . . . . . . . . . . . 30 Section 3.3. Optional Prepayments. . . . . . . . . . . . . . . . . 30 Section 3.4. Partial Prepayments. . . . . . . . . . . . . . . . . . 31 Section 3.5. Effect of Prepayments. . . . . . . . . . . . . . . . . 31 Section 4. CERTAIN GENERAL PROVISIONS.. . . . . . . . . . . . . . . . . . 31 Section 4.1. Conversion Options. . . . . . . . . . . . . . . . . . . 31 Section 4.2. Closing Fee. . . . . . . . . . . . . . . . . . . . . . 32 Section 4.3. Agent's Fee. . . . . . . . . . . . . . . . . . . . . . 32 Section 4.4. Funds for Payments. . . . . . . . . . . . . . . . . . . 32 Section 4.5. Computations. . . . . . . . . . . . . . . . . . . . . 32 Section 4.6. Inability to Determine Eurodollar Rate. . . . . . . . 33 Section 4.7. Illegality. . . . . . . . . . . . . . . . . . . . . . 33 Section 4.8. Additional Interest. . . . . . . . . . . . . . . . . . 33 Section 4.9. Additional Costs, Etc. . . . . . . . . . . . . . . . . 34 Section 4.10. Capital Adequacy. . . . . . . . . . . . . . . . . . . 35 Section 4.11. Indemnity of Borrower. . . . . . . . . . . . . . . . 35 Section 4.12. Interest on Overdue Amounts; Late Charge. . . . . . . 35 Section 4.13. Intentionally Omitted. . . . . . . . . . . . . . . . . 35 Section 4.14. Certificate. . . . . . . . . . . . . . . . . . . . . 36 Section 4.15. Limitation on Interest. . . . . . . . . . . . . . . . 36 Section 4.16. Certain Provisions Relating to Increased Costs. . . . 36 Section 5. COLLATERAL SECURITY. . . . . . . . . . . . . . . . . . . . . . 37 Section 5.1. Collateral. . . . . . . . . . . . . . . . . . . . . . 37 Section 5.2. Appraisals. . . . . . . . . . . . . . . . . . . . . . 37 Section 5.3. Release of Collateral. . . . . . . . . . . . . . . . . 38 Section 5.4. Additional Collateral.. . . . . . . . . . . . . . . . . 41 Section 5.5. Holdback. . . . . . . . . . . . . . . . . . . . . . . 42 Section 5.6. Disbursement of Tenant Improvement Reserve. . . . . . 42 Section 6. REPRESENTATIONS AND WARRANTIES.. . . . . . . . . . . . . . . . 44 Section 6.1. Corporate Authority, Etc. . . . . . . . . . . . . . . . 44 Section 6.2. Governmental Approvals. . . . . . . . . . . . . . . . 45 Section 6.3. Title to Properties; Leases. . . . . . . . . . . . . . 46 Section 6.4. Financial Statements. . . . . . . . . . . . . . . . . 46 Section 6.5. No Material Adverse Changes. . . . . . . . . . . . . . 46 Section 6.6. Franchises, Patents, Copyrights, Etc. . . . . . . . . 47 Section 6.7. Litigation. . . . . . . . . . . . . . . . . . . . . . 47 Section 6.8. No Materially Adverse Contracts, Etc. . . . . . . . . 47 Section 6.9. Compliance with Other Instruments, Laws, Etc. . . . . 47 Section 6.10. Tax Status. . . . . . . . . . . . . . . . . . . . . . 48 Section 6.11. No Event of Default. . . . . . . . . . . . . . . . . 48 Section 6.12. Holding Company and Investment Company Acts. . . . . 48 Section 6.13. Absence of UCC Financing Statements, Etc. . . . . . . 48 Section 6.14. Setoff, Etc. . . . . . . . . . . . . . . . . . . . . 48 Section 6.15. Certain Transactions. . . . . . . . . . . . . . . . . 48 Section 6.16. Employee Benefit Plans. . . . . . . . . . . . . . . . 49 Section 6.17. ERISA Taxes. . . . . . . . . . . . . . . . . . . . . 49 Section 6.18. Plan Payments. . . . . . . . . . . . . . . . . . . . 49 Section 6.19. Regulations U and X. . . . . . . . . . . . . . . . . 49 Section 6.20. Environmental Compliance. . . . . . . . . . . . . . . 50 Section 6.21. Subsidiaries. . . . . . . . . . . . . . . . . . . . . 51 Section 6.22. Leases. . . . . . . . . . . . . . . . . . . . . . . . 51 Section 6.23. Loan Documents. . . . . . . . . . . . . . . . . . . . 52 Section 6.24. Mortgaged Property and Mezzanine Property. . . . . . 52 (a) Off-Site Utilities. . . . . . . . . . . . . . . . . . . . 52 (b) Access, Etc. . . . . . . . . . . . . . . . . . . . . . . . 52 (c) Independent Building. . . . . . . . . . . . . . . . . . . 52 (d) Condition; No Asbestos. . . . . . . . . . . . . . . . . . 53 (e) Compliance with Law. . . . . . . . . . . . . . . . . . . . 53 (f) No Required Consents, Permits, Etc. . . . . . . . . . . . 53 (g) Insurance. . . . . . . . . . . . . . . . . . . . . . . . . 53 (h) Real Property Taxes; Special Assessments. . . . . . . . . 54 (i) Historic Status. . . . . . . . . . . . . . . . . . . . . . 54 (j) Eminent Domain; Casualty. . . . . . . . . . . . . . . . . 54 (k) Leases. . . . . . . . . . . . . . . . . . . . . . . . . . 54 (l) Management Agreements. . . . . . . . . . . . . . . . . . . 55 (m) Other Material Real Property Agreements; No Options. . . . 55 Section 6.25. Mezzanine Mortgage Loan Documents. . . . . . . . . . 55 Section 6.26. Brokers. . . . . . . . . . . . . . . . . . . . . . . 56 Section 6.27. Fair Consideration. . . . . . . . . . . . . . . . . . 56 Section 6.28. Solvency. . . . . . . . . . . . . . . . . . . . . . . 56 Section 6.29. No Bankruptcy Filing. . . . . . . . . . . . . . . . . 56 Section 6.30. No Fraudulent Intent. . . . . . . . . . . . . . . . . 56 Section 6.31. Other Debt. . . . . . . . . . . . . . . . . . . . . . 56 Section 6.32. Ownership. . . . . . . . . . . . . . . . . . . . . . 57 Section 6.33. Special Purpose Entity. . . . . . . . . . . . . . . . 58 Section 6.34. Management Agreements. . . . . . . . . . . . . . . . 58 Section 6.35. Obligations as Members. . . . . . . . . . . . . . . . 58 Section 7. AFFIRMATIVE COVENANTS OF THE BORROWER. . . . . . . . . . . . . 58 Section 7.1. Punctual Payment. . . . . . . . . . . . . . . . . . . 58 Section 7.2. Maintenance of Office. . . . . . . . . . . . . . . . . 58 Section 7.3. Records and Accounts. . . . . . . . . . . . . . . . . 59 Section 7.4. Financial Statements, Certificates and Information. . 59 Section 7.5. Notices.. . . . . . . . . . . . . . . . . . . . . . . . 62 Section 7.6. Existence; Maintenance of Properties. . . . . . . . . . 63 Section 7.7. Insurance. . . . . . . . . . . . . . . . . . . . . . . 64 Section 7.8. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 69 Section 7.9. Inspection of Properties and Books. . . . . . . . . . 70 Section 7.10. Compliance with Laws, Contracts, Licenses, and Permits. . . . . . . . . . . . . . . . . . . . . . . 70 Section 7.11. Use of Proceeds. . . . . . . . . . . . . . . . . . . 71 Section 7.12. Further Assurances. . . . . . . . . . . . . . . . . . 71 Section 7.13. Management Agreements. . . . . . . . . . . . . . . . 71 Section 7.14. ERISA Compliance. . . . . . . . . . . . . . . . . . . 72 Section 7.15. Condemnation. . . . . . . . . . . . . . . . . . . . . 72 Section 7.16. Intentionally Omitted. . . . . . . . . . . . . . . . . 73 Section 7.17. Compliance. . . . . . . . . . . . . . . . . . . . . . 73 Section 7.18. Intentionally Omitted. . . . . . . . . . . . . . . . . 73 Section 7.19. Leasing. . . . . . . . . . . . . . . . . . . . . . . 73 Section 7.20. Special Purpose Entity. . . . . . . . . . . . . . . . 74 Section 7.21. Plan Assets, etc. . . . . . . . . . . . . . . . . . . 75 Section 7.22. Budgets. . . . . . . . . . . . . . . . . . . . . . . 75 Section 7.23. Preservation and Maintenance. . . . . . . . . . . . . 75 Section 7.24. Use of Mezzanine Property. . . . . . . . . . . . . . 76 Section 7.25. Property Owner to Remain a Single-Purpose Entity. . . 76 Section 7.26. Condominium. . . . . . . . . . . . . . . . . . . . . . 77 Section 8. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.. . . . . . . . . . 78 Section 8.1. Restrictions on Indebtedness. . . . . . . . . . . . . 78 Section 8.2. Restrictions on Liens, Etc. . . . . . . . . . . . . . 79 Section 8.3. Restrictions on Investments . . . . . . . . . . . . . . 80 Section 8.4. Merger, Consolidation. . . . . . . . . . . . . . . . . 82 Section 8.5. Sale and Leaseback; Ground Lease. . . . . . . . . . . 82 Section 8.6. Compliance with Environmental Laws. . . . . . . . . . 82 Section 8.7. Distributions. . . . . . . . . . . . . . . . . . . . . 84 Section 8.8. Intentionally Omitted.. . . . . . . . . . . . . . . . . 84 Section 8.9. Development Activity. . . . . . . . . . . . . . . . . 84 Section 8.10. Intentionally Omitted. . . . . . . . . . . . . . . . . 85 Section 8.11. Transfers. . . . . . . . . . . . . . . . . . . . . . 85 Section 8.12. Additional Covenants with Respect to Indebtedness, Operations, Fundamental Changes. . . . . . . . . . . 85 Section 8.13. Additional Restrictions Concerning the Mezzanine Property.. . . . . . . . . . . . . . . . . . . . . . . 87 Section 8.14. Mezzanine Mortgage Loan Documents. . . . . . . . . . 88 Section 9. FINANCIAL COVENANTS OF BORROWER. . . . . . . . . . . . . . . . 88 Section 9.1. Debt Service Coverage Test Amount. . . . . . . . . . . 89 Section 9.2. Designated Collateral Value. . . . . . . . . . . . . . 89 Section 9.3. WWP Financial Covenants. . . . . . . . . . . . . . . . 89 Section 10. CLOSING CONDITIONS. . . . . . . . . . . . . . . . . . . . . . 89 Section 10.1. Loan Documents. . . . . . . . . . . . . . . . . . . . 90 Section 10.2. Certified Copies of Organizational Documents. . . . . 90 Section 10.3. Bylaws; Resolutions. . . . . . . . . . . . . . . . . 90 Section 10.4. Incumbency Certificate; Authorized Signers. . . . . . 90 Section 10.5. Opinion of Counsel. . . . . . . . . . . . . . . . . . 90 Section 10.6. Payment of Fees. . . . . . . . . . . . . . . . . . . 90 Section 10.7. Appraisals. . . . . . . . . . . . . . . . . . . . . . 91 Section 10.8. Environmental Reports. . . . . . . . . . . . . . . . 91 Section 10.9. Insurance. . . . . . . . . . . . . . . . . . . . . . 91 Section 10.10. Performance; No Default. . . . . . . . . . . . . . . 91 Section 10.11. Representations and Warranties. . . . . . . . . . . 91 Section 10.12. Proceedings and Documents. . . . . . . . . . . . . . 91 Section 10.13. Eligible Real Estate Qualification Documents. . . . 91 Section 10.14. Compliance Certificate. . . . . . . . . . . . . . . 91 Section 10.15. Other Documents. . . . . . . . . . . . . . . . . . . 92 Section 10.16. No Condemnation/Taking. . . . . . . . . . . . . . . 92 Section 10.17. Governmental Policy. . . . . . . . . . . . . . . . . 92 Section 10.18. Other. . . . . . . . . . . . . . . . . . . . . . . . 92 Section 10.19. Satisfaction of Conditions as to Initial Collateral. 92 Section 11. CONDITIONS TO ALL BORROWINGS. . . . . . . . . . . . . . . . 92 Section 11.1. Prior Conditions Satisfied. . . . . . . . . . . . . . 92 Section 11.2. Representations True; No Default. . . . . . . . . . . 92 Section 11.3. No Legal Impediment. . . . . . . . . . . . . . . . . 93 Section 11.4. Governmental Regulation. . . . . . . . . . . . . . . 93 Section 11.5. Proceedings and Documents. . . . . . . . . . . . . . 93 Section 11.6. Borrowing Documents. . . . . . . . . . . . . . . . . 93 Section 11.7. Endorsement to Title Policy. . . . . . . . . . . . . 93 Section 11.8. Future Advances Tax Payment. . . . . . . . . . . . . 93 Section 12. EVENTS OF DEFAULT; ACCELERATION; ETC. . . . . . . . . . . . . 94 Section 12.1. Events of Default and Acceleration. . . . . . . . . . 94 Section 12.lA. Limitation of Cure Periods. . . . . . . . . . . . . 98 Section 12.2. Termination of Commitments. . . . . . . . . . . . . . 98 Section 12.3. Remedies. . . . . . . . . . . . . . . . . . . . . . . 98 Section 12.4. Distribution of Collateral Proceeds. . . . . . . . . 99 Section 12.5. Default under Mezzanine Mortgage Loan Documents. . . 99 Section 13. SETOFF. . . . . . . . . . . . . . . . . . . . . . . . . . . .101 Section 14. THE AGENT.. . . . . . . . . . . . . . . . . . . . . . . . . .101 Section 14.1. Authorization. . . . . . . . . . . . . . . . . . . .101 Section 14.2. Employees and Agents. . . . . . . . . . . . . . . . .101 Section 14.3. No Liability. . . . . . . . . . . . . . . . . . . . .101 Section 14.4. No Representations. . . . . . . . . . . . . . . . . .102 Section 14.5. Payments.. . . . . . . . . . . . . . . . . . . . . . .102 Section 14.6. Holders of Notes. . . . . . . . . . . . . . . . . . .103 Section 14.7. Indemnity. . . . . . . . . . . . . . . . . . . . . .103 Section 14.8. Agent as Bank. . . . . . . . . . . . . . . . . . . .103 Section 14.9. Resignation. . . . . . . . . . . . . . . . . . . . .103 Section 14.10. Duties in the Case of Enforcement. . . . . . . . . .104 Section 15. EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . .104 Section 16. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . .105 Section 17. SURVIVAL OF COVENANTS, ETC. . . . . . . . . . . . . . . . .107 Section 18. ASSIGNMENT AND PARTICIPATION. . . . . . . . . . . . . . . . .107 Section 18.1. Conditions to Assignment by Banks. . . . . . . . . .107 Section 18.2. Register. . . . . . . . . . . . . . . . . . . . . . .108 Section 18.3. New Notes. . . . . . . . . . . . . . . . . . . . . .108 Section 18.4. Participations. . . . . . . . . . . . . . . . . . . .109 Section 18.5. Pledge by Bank. . . . . . . . . . . . . . . . . . . .109 Section 18.6. No Assignment by Borrower. . . . . . . . . . . . . .109 Section 18.7. Disclosure. . . . . . . . . . . . . . . . . . . . . .109 Section 18.8. Additional Restrictions on Assignments and Participations. . . . . . . . . . . . . . . . . . . .109 Section 19. NOTICES.. . . . . . . . . . . . . . . . . . . . . . . . . . .110 Section 20. RELATIONSHIP. . . . . . . . . . . . . . . . . . . . . . . .111 Section 21. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE. . . . .111 Section 22. HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . .112 Section 23. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . .112 Section 24. ENTIRE AGREEMENT, ETC.. . . . . . . . . . . . . . . . . . . .112 Section 25. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . .112 Section 26. DEALINGS WITH THE BORROWER. . . . . . . . . . . . . . . . . .113 Section 27. CONSENTS, AMENDMENTS, WAIVERS, ETC. . . . . . . . . . . . . .113 Section 28. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . .113 Section 29. LIMITATION ON LIABILITY.. . . . . . . . . . . . . . . . . . .114 Section 30. NO UNWRITTEN AGREEMENTS.. . . . . . . . . . . . . . . . . . .114 Section 31. TIME OF THE ESSENCE.. . . . . . . . . . . . . . . . . . . . .114 Section 32. BANKRUPTCY. . . . . . . . . . . . . . . . . . . . . . . . . .114 SCHEDULES AND EXHIBITS: EXHIBIT A FORM OF NOTE EXHIBIT B FORM OF REQUEST FOR LOAN EXHIBIT C FORM OF COMPLIANCE CERTIFICATE EXHIBIT D FORM OF REQUEST FOR EXTENSION OF LOAN EXHIBIT E CERTIFICATE SCHEDULE 1.1 BANKS AND COMMITMENTS SCHEDULE 5.3 DESCRIPTION OF GREENBROOK CORPORATE CENTER AND POINT VIEW VACANT LAND SCHEDULE 6.3 TITLE TO PROPERTIES SCHEDULE 6.4 ALL-IN ACQUISITION COST, DESIGNATED COLLATERAL VALUE AND RELEASE PRICES SCHEDULE 6.7 LITIGATION SCHEDULE 6.17 ERISA PLANS SCHEDULE 6.21 SUBSIDIARIES SCHEDULE 6.24 AGREEMENTS SCHEDULE 6.31-1 MEZZANINE MORTGAGE LOAN DOCUMENTS SCHEDULE 6.31-2 ALLOCATION OF MORTGAGE LOAN FIRST AMENDED AND RESTATED LOAN AGREEMENT THIS FIRST AMENDED AND RESTATED LOAN AGREEMENT is made as of the 16th day of July, 1998, by and among WELLSFORD/WHITEHALL HOLDINGS, L.L.C., a Delaware limited liability company, having its principal place of business at 610 Fifth Avenue, 7th Floor, New York, New York 10020 ("Borrower"), BANKBOSTON, N.A., a national banking association, GOLDMAN SACHS MORTGAGE COMPANY, a New York limited partnership, the other lending institutions which are parties to this Agreement as "Banks", and the other lending institutions which may become parties hereto pursuant to Section 18 (collectively, the "Banks"), and BANKBOSTON, N.A., as Agent for the Banks and Co-Arranger and Co-Syndication Agent (the "Agent"), and GOLDMAN SACHS MORTGAGE COMPANY, as Co-Arranger and Co-Syndication Agent. RECITALS. WHEREAS, Borrower (formerly known as WEL/WH 1275 K Street, L.L.C.), BankBoston, N.A., Goldman Sachs Mortgage Company and Agent have entered into that certain Term Loan Agreement dated as of December 15, 1997 (the "Original Loan Agreement"); and WHEREAS, Wellsford/Whitehall Properties, L.L.C. ("Revolver Borrower"), BankBoston, N.A., Goldman Sachs Mortgage Company and Agent have entered into that certain Revolving Credit Agreement dated as of December 15, 1997 (the "Original Revolving Credit Agreement"); and WHEREAS, Revolver Borrower has merged into and with Borrower, with Borrower being the surviving entity, and accordingly, the assets and liabilities of Revolver Borrower have been assumed by the Borrower; and WHEREAS, in connection with such merger, Borrower has requested that the Banks consolidate, amend and restate the provisions of the Original Loan Agreement and the Original Revolving Credit Agreement; and WHEREAS, Agent, Borrower and the Banks desire to consolidate, amend and restate the Original Loan Agreement and the Original Revolving Credit Agreement in their entirety; NOW, THEREFORE, in consideration of the recitals herein and the mutual covenants contained herein, the parties hereto hereby consolidate, amend and restate the Original Loan Agreement and the Original Revolving Credit Agreement in their entirety and covenant and agree as follows: Section 1. DEFINITIONS AND RULES OF INTERPRETATION. Section 1.1. Definitions. The following terms shall have the meanings set forth in this Section l or elsewhere in the provisions of this Agreement referred to below: Acknowledgments. The Acknowledgments executed by Property Owner, Manager and Member, respectively, in favor of the Agent. Advance Termination Date. March 31, 2000. Agent. BankBoston, N.A., a national banking association, its successors and assigns, acting as agent for the Banks. Agent's Head Office. The Agent's head office located at 100 Federal Street, Boston, Massachusetts 02110, or at such other location as the Agent may designate from time to time by notice to the Borrower and the Banks. Agent's Special Counsel. Long Aldridge & Norman LLP or such other counsel as may be approved by the Agent. Agreement. This First Amended and Restated Loan Agreement, including the Schedules and Exhibits hereto. Agreement Regarding Fees. The Amended and Restated Agreement Regarding Fees dated of even date herewith among Borrower, BKB and Goldman. Appraisal. An MAI appraisal of the value of a parcel of Mortgaged Property or Mezzanine Property, determined on an "as-is" fair market value basis, performed by an independent appraiser selected by the Agent who is not an employee of the Borrower, WWP, the Agent or a Bank, the form and substance of such appraisal and the identity of the appraiser to be in accordance with regulatory laws and policies (both regulatory and internal) applicable to the Banks, including, without limitation, FIRREA, and otherwise acceptable to the Majority Banks. Appraised Value. The fair market value of a parcel of Mortgaged Property or Mezzanine Property, determined by the most recent Appraisal of such parcel or update obtained pursuant to Section 5.2 or Section 10.7, subject, however, to such changes or adjustments to the value determined thereby as may be required by the appraisal departments of the Majority Banks in their good faith business judgment. Approved Budget. The annual Budgets as approved by the Mezzanine Mortgagee in accordance with the terms of the Mezzanine Mortgage Loan Agreement. Assignment of Interests. The Amended and Restated Assignment of Member's Interest of even date herewith from Borrower to the Agent, as the same may be modified or amended, pursuant to which there shall be assigned to the Agent for the benefit of the Banks a security interest in the Equity Interests, such assignment to be in form and substance satisfactory to the Agent. Assignment of Leases and Rents. Each of the absolute assignments of leases and rents from the Borrower to the Agent pursuant to which there shall be assigned to the Agent for the benefit of the Banks a security interest in the interest of such party, as lessor with respect to all Leases of all or any part of a Mortgaged Property, each such absolute assignment to be in form and substance satisfactory to the Agent. Balance Sheet Date. May 31, 1998. Bankruptcy Code. Title 11, U.S.C.A., as amended from time to time or any successor statute thereto. Banks. BKB, Goldman, the other lending institutions which are a party hereto and any other Person who becomes an assignee of any rights of a Bank pursuant to Section 18 (but not including any Participant, as defined in Section 18). Base Rate. The higher of (a) the annual rate of interest announced from time to time by BKB at its head office in Boston, Massachusetts as its "base rate", and (b) one-half of one percent (0.5%) above the Federal Funds Effective Rate (rounded upwards, if necessary, to the next one-eighth of one percent). Any change in the rate of interest payable hereunder resulting from a change in the Base Rate shall become effective as of the opening of business on the day on which such change in the Base Rate becomes effective. Base Rate Loans. Those Loans bearing interest calculated by reference to the Base Rate. BKB. BankBoston, N.A., a national banking association. Borrower. As defined in the preamble hereto. Budget. The annual budget of the Property Owner with respect to the Mezzanine Property, prepared by Property Owner in accordance with the terms of the Mezzanine Mortgage Loan Agreement. Building. All of the buildings, structures and improvements now or hereafter located on any Mortgaged Property or Mezzanine Property. Building Service Equipment. All apparatus, fixtures and articles of personal property owned by the Borrower or the Property Owner, now or hereafter attached to or used or procured for use in connection with the operation or maintenance of any building, structure or other improvement located on or included in the Mortgaged Property or Mezzanine Property, including, but without limiting the generality of the foregoing, all engines, furnaces, boilers, stokers, pumps, heaters, tanks, dynamos, motors, generators, switchboards, electrical equipment, heating, plumbing, lifting and ventilating apparatus, air-cooling and air-conditioning apparatus, gas and electric fixtures, elevators, escalators, fittings, and machinery and all other equipment of every kind and description, used or procured for use in the operation of a Building (except apparatus, fixtures or articles of personal property belonging to lessees or other occupants of such building or to persons other than the Borrower or the Property Owner, unless the same be abandoned by any such lessee or other occupant or person and shall become the Borrower's or the Property Owner's property by reason of such abandonment), together with any and all replacements thereof and additions thereto. Business Day. Any day on which banking institutions in the city in which the Agent's Head Office is located are open for the transaction of banking business and, in the case of Eurodollar Rate Loans, which also is a Eurodollar Business Day. Capital Improvement Project. With respect to any Real Estate now or hereafter owned by the Borrower which is utilized principally as commercial office space, capital improvements consisting of rehabilitation, refurbishment, replacement and improvements (including Tenant Improvement Projects and Leasing Commissions) to the existing Buildings on such Real Estate which may be properly capitalized under generally accepted accounting principles. Capital Improvement Reserve. For any period an amount equal to seventy- five cents ($0.75) per annum multiplied by the weighted average of rentable square footage of the Mortgaged Property and the Mezzanine Property during such period. Cash Collateral Agreement. The Amended and Restated Cash Collateral Agreement dated of even date herewith among Agent, Borrower, Property Owner, Member and Manager. CERCLA. See Section 6.20. Closing Date. The first date on which all of the conditions set forth in Section 10 and Section 11 have been satisfied. Co-Agent. Goldman. Code. The Internal Revenue Code of 1986, as amended. Collateral. All of the property, rights and interests of the Borrower which are or are intended to be subject to the security interests, liens and mortgages created by the Security Documents, including, without limitation, the Mortgaged Property and the Mezzanine Collateral. Commitment. With respect to each Bank, the amount set forth on Schedule 1.1 hereto as the amount of such Bank's Commitment to make or maintain Loans to the Borrower, as the same may be reduced from time to time in accordance with the terms of this Agreement; provided that from and after the Advance Termination Date, the Commitment of each Bank shall equal its Commitment Percentage of the aggregate principal amount of the Loans from time to time outstanding. Commitment Percentage. With respect to each Bank, the percentage set forth on Schedule 1.1 hereto as such Bank's percentage of the aggregate Commitments of all of the Banks. Compliance Certificate. See Section 7.4(d). Conditional Guaranty. The Conditional Guaranty of Payment made by Wellsford Commercial, WHWEL, Wellsford Real Properties, Whitehall Street Real Estate Limited Partnership V, Whitehall Street Real Estate Limited Partnership VI, Whitehall Street Real Estate Limited Partnership VII and Whitehall Street Real Estate Limited Partnership VIII, in favor of the Agent and the Banks, as the same may be modified or amended. Condominium. Dedham Place Condominium. Condominium Documents. Collectively, (a) that certain Master Deed of Dedham Place Condominium (and all exhibits annexed thereto) made by Dedham Place Associates Joint Venture, and recorded in the Norfolk County, Commonwealth of Massachusetts Registry of Deeds on November 27, 1991 at Book 9118, page 376 et al., and (b) the Dedham Place Condominium Trust and Bylaws dated November 20, 1991 and made by Dominic J. Saraceno, as trustee. Consolidated or combined. With reference to any term defined herein, that term as applied to the accounts of WWP and its Subsidiaries, consolidated or combined in accordance with generally accepted accounting principles. Consolidated Total Assets. With respect to WWP and its Subsidiaries, the sum of (a) an amount equal to (i) an amount equal to the difference of (A) the Net Operating Income of the Stabilized Properties of WWP and its Subsidiaries for the period covered by the four previous consecutive fiscal quarters (treated as a single accounting period) minus (B) the Capital Improvement Reserve for such Stabilized Properties for such period divided by (ii) a nine and one-fourth percent (9.25%) capitalization rate, (b) the sum of (i) the Appraised Value of the Non-Stabilized Properties that are Mortgaged Properties and Mezzanine Properties plus (ii) the historic cost of capital improvements to such Non-Stabilized Properties (including Tenant Improvement Projects and Leasing Commissions) from the date of the most recent Appraisal thereof pursuant to this Agreement, (c) the sum of (i) the all-in acquisition cost (including reasonable closing costs) of the Non- Stabilized Properties of WWP and its Subsidiaries that are not Mortgaged Properties or Mezzanine Properties plus (ii) the historic cost of capital improvements to such Non-Stabilized Properties (if this clause (c) is applicable thereto) from the date of acquisition thereof (provided that the Agent shall have the right to obtain at Borrower's expense an Appraisal with respect to any of such Non-Stabilized Properties, and the Appraised Value determined from such Appraisal shall be substituted for the amount in clause (c)(i) for the applicable property for the purposes of such calculation), (d) the historic cost of investments in Investment Partnerships; and (e) the aggregate cash and Short-term Investments of such Person; provided that prior to such time as WWP or a Subsidiary has owned and operated any Stabilized Property for four full fiscal quarters, the Net Operating Income with respect to such Stabilized Property shall be annualized in such manner as the Agent shall approve, such approval not to be unreasonably withheld. Notwithstanding anything herein to the contrary, Leasing Commissions shall only be included for the purposes of clause (b)(ii) after and only for so long as the tenant under the applicable Lease takes occupancy and is paying rent in accordance with the terms of the Lease approved pursuant to Section 5.6. The assets of WWP and its Subsidiaries shall be adjusted to reflect WWP's allocable share of such assets for the relevant period or as of the date of determination. Contribution Agreement. The Contribution Agreement dated as of February 12, 1998 among WWP, as Contributee, and Saracen Properties, Inc. and certain other parties, as Contributor, as amended by Amendment No. 1 to Contribution Agreement dated as of May 15, 1998. Construction Inspector. A firm of professional engineers or architects selected by the Agent and reasonably acceptable to the Borrower. Conversion Request. A notice given by the Borrower to the Agent of its election to convert or continue a Loan in accordance with Section 4.1. Debt Service Coverage Test Amount. For any period of four consecutive fiscal quarters then ended, the sum of principal and interest which would have been payable during such period on a loan in the original principal amount equal to the outstanding principal balance of the Loan and the Mezzanine Mortgage Loan as of the date of such determination bearing interest at a rate per annum equal to the sum of the then current annual yield on seven (7) year obligations issued by the United States Treasury most recently prior to the date of such determination plus one and sixty-five one- hundredths percent (1.65%) and with the principal thereof being payable based on a 25 year mortgage style amortization schedule (expressed as a mortgage constant percentage). Such determination of the Debt Service Coverage Test Amount by the Agent shall be conclusive and binding absent manifest error. For the initial twelve (12) months following December 15, 1997, such debt service shall be determined by annualizing the debt service from and after December 15, 1997 in a manner as reasonably determined by Borrower and reasonably acceptable to the Agent (provided that in the event that as of the date of any determination such amounts shall not have been determined as so provided, then such amount shall be annualized in a manner reasonably acceptable to the Agent). Default. See Section 12.1. Deposit Account Agreement. The Deposit Account Agreement dated as of December 31, 1996 among LaSalle National Bank, Property Owner and Mezzanine Mortgagee. Designated Collateral Value. At the relevant time of reference thereto, the sum of (a) the lesser of (i) sixty percent (60%) of the sum of (x) the all-in acquisition cost (including reasonable closing costs) of a Mortgaged Property plus (y) the historic cost of capital improvements (including any Tenant Improvement Projects and Leasing Commissions) to such Mortgaged Property after the date of such acceptance and (ii) sixty percent (60%) of the sum of (x) the Appraised Value of a Mortgaged Property as determined in connection with the acceptance of such Mortgaged Property as Collateral or as most recently determined pursuant to Section 2.8 of this Agreement, subject to the terms of Section 5.4, plus (y) the historic cost of Tenant Improvement Projects and Leasing Commissions to such Mortgaged Property after the date of such acceptance, plus (b) the current value of cash and Short-term Investments, if any, at the time pledged to the Agent as Collateral pursuant to a Pledge Agreement, plus (c) for so long as the Equity Interests are pledged to the Agent as Collateral pursuant to the Assignment of Interests, an amount equal to the sum of (i) the sum of sixty percent (60%) of the Appraised Value of the Mezzanine Property as determined in connection with the acceptance of the Equity Interests as Collateral or as most recently determined pursuant to Section 2.8 of this Agreement, subject to the terms of Section 5.4, minus (ii) the principal Indebtedness of the Property Owner as of the date of acquisition of the Equity Interests (such amount being $68,340,815.57), plus (d) the current value determined in a manner agreed to by the Majority Banks of Collateral accepted by the Majority Banks under clause (vi) of Section 5.1. Notwithstanding anything herein to the contrary, Leasing Commissions shall only be included for the purposes of clauses (a)(i)(y) and (a)(ii)(y) after and only for so long as the tenant under the applicable Lease takes occupancy and is paying rent in accordance with the terms of the Lease approved pursuant to Section 5.6 For the purposes of clause (a) above, the lesser of the amount determined pursuant to clause (a)(i) and (a)(ii) above shall be the Designated Collateral Value for each such Mortgaged Property subject thereto, and the aggregate of the amounts determined for each Mortgaged Property subject thereto shall be the Designated Collateral Value for all such Mortgaged Properties; provided, however, that with respect to the Mortgaged Properties listed in Schedule 6.4 hereto, the initial Designated Collateral Value for such properties is as set forth on Schedule 6.4; provided further that in the event that the Maturity Date is extended pursuant to Section 2.8, the Designated Collateral Value for each of such Mortgaged Properties listed on Schedule 6.4 shall be the lesser of the amount determined pursuant to clause (a)(i) and (a)(ii) above. The initial Designated Collateral Value for the Mezzanine Property is set forth on Schedule 6.4 hereto. Distribution. The declaration or payment of any dividend or distribution on or in respect of any shares of the Borrower, other than dividends or distributions payable solely in equity securities of the Borrower; the purchase, redemption, exchange or other retirement of any shares of the Borrower, directly or indirectly through a Subsidiary of the Borrower or otherwise; the return of capital by the Borrower to its shareholders as such; or any other distribution on or in respect of any shares of the Borrower. Dollars or $. Dollars in lawful currency of the United States of America. Domestic Lending Office. Initially, the office of each Bank designated as such in Schedule 1.1 hereto; thereafter, such other office of such Bank, if any, located within the United States that will be making or maintaining Base Rate Loans. Drawdown Date. The date on which any Loan is made or is to be made, and the date on which any Loan is converted or combined in accordance with Section 4.1. Eligible Real Estate. Real Estate: (a) which is owned in fee by the Borrower; (b) which is located within the northeastern United States, excluding those States which prescribe a "single-action" or similar rule limiting the rights of creditors secured by real property, except to the extent such exclusion is waived in writing by the Majority Banks with respect to a specific parcel of Real Estate; (c) which is utilized principally for commercial office purposes; (d) which is approved by the Majority Banks after the date hereof in their sole judgment; (e) as to which all of the representations set forth in Section 6 of this Agreement concerning Mortgaged Property are true and correct; and (f) as to which the Agent has received all Eligible Real Estate Qualification Documents, so long as all of such documents remain in full force and effect. Eligible Real Estate Qualification Documents. With respect to any parcel of Real Estate proposed to be included in the Eligible Real Estate each of the following: (a) Security Documents. Such Security Documents relating to such Real Estate as the Agent shall require, in form and substance satisfactory to the Agent and duly executed and delivered by the respective parties thereto. (b) Enforceability Opinion. The favorable legal opinion of counsel to the Borrower reasonably acceptable to the Agent qualified to practice in the State in which such Real Estate is located, addressed to the Banks and in form and substance satisfactory to the Agent as to the enforceability of such Security Documents and such other matters as the Agent shall reasonably request. (c) Perfection of Liens. Evidence reasonably satisfactory to the Agent that the Security Documents are effective to create in favor of the Agent a legal, valid and enforceable first (except for Permitted Liens entitled to priority under applicable law) lien and security interest in such Real Estate and that all filings, recordings, deliveries of instruments and other actions necessary or desirable to protect and preserve such liens or security interests have been duly effected. (d) Survey and Taxes. The Survey of such Real Estate, together with the Surveyor Certification and evidence of payment of all real estate taxes, assessments and municipal charges on such Real Estate which on the date of determination are required to have been paid under Section 7.8. (e) Title Insurance; Title Exception Documents. The Title Policy covering such Real Estate, including all endorsements thereto, and together with proof of payment of all fees and premiums for such policy, and true and accurate copies of all documents listed as exceptions under such policy. (f) UCC Certification. A certification from the Title Insurance Company or counsel satisfactory to the Agent that a search of the public records designated by the Agent disclosed no conditional sales contracts, security agreements, chattel mortgages, leases of personalty, financing statements or title retention agreements which affect any property, rights or interests of the Borrower that are or are intended to be subject to the security interest, assignments, and mortgage liens created by the Security Documents relating to such Real Estate except to the extent that the same are discharged and removed prior to or simultaneously with the inclusion of such Real Estate in the Collateral. (g) Management Agreement. A true copy of the Management Agreement relating to such Real Estate. (h) Leases. True and correct copies of all Leases for such Real Estate and any lease summaries prepared by Borrower with respect thereto, together with the forms of Lease to be used by the Borrower in connection with future leasing of such Mortgaged Property, such forms of Lease to be in form and substance satisfactory to the Agent. (i) Subordination Agreements. A Subordination, Attornment and Non-Disturbance Agreement from each tenant of such Real Estate as required by the Agent, dated not more than sixty (60) days prior to the inclusion of such Real Estate in the Collateral and satisfactory in form and substance to the Agent. (j) Estoppel Certificates. Estoppel certificates from each tenant of such parcel of Real Estate as required by Agent, such certificates to be dated not more than sixty (60) days prior to the inclusion of such Real Estate in the Collateral and to be satisfactory in form and substance to the Agent. (k) Certificates of Insurance. Each of (i) a current certificate of insurance as to the insurance maintained on such Real Estate (including flood insurance if necessary) from the insurer or an independent insurance broker dated as of the date of determination, identifying insurers, types of insurance, insurance limits, and policy terms; (ii) certified copies of all policies evidencing such insurance (or certificates therefor signed by the insurer or an agent authorized to bind the insurer); and (iii) such further information and certificates from the Borrower, its insurers and insurance brokers as the Agent may reasonably request, all of which shall be in compliance with the requirements of this Agreement. (l) Hazardous Substance Assessments. A hazardous waste site assessment report concerning Hazardous Substances and asbestos on such Real Estate dated or updated not more than three months prior to the inclusion of such Real Estate in the Collateral unless otherwise approved by the Agent, from an Environmental Engineer, such report to contain no qualifications except those that are acceptable to the Majority Banks in their sole discretion and to otherwise be in form and substance satisfactory to the Majority Banks. (m) Certificate of Occupancy. A copy of the certificate(s) of occupancy issued to the Borrower for such parcel of Real Estate permitting the use and occupancy of the Building thereon (or evidence that any previously issued certificate(s) of occupancy is not required to be reissued to the Borrower), or a legal opinion reasonably satisfactory to the Agent that no certificates of occupancy are necessary to the use and occupancy thereof. (n) Appraisal. An Appraisal of such Real Estate, in form and substance satisfactory to the Majority Banks and dated not more than three months prior to the inclusion of such Real Estate in the Collateral. (o) Zoning and Land Use Opinion of Counsel. A favorable opinion concerning the Real Estate addressed to the Agent and dated the date of the inclusion of such Real Estate in the Collateral, in form and substance satisfactory to the Agent, from counsel approved by the Agent admitted to practice in the State in which such parcel is located, as to zoning and land use compliance, or such other evidence regarding zoning and land use compliance as the Agent may approve in its reasonable discretion. (p) Construction Inspector Report. A report or written confirmation from the Construction Inspector satisfactory in form and content to the Majority Banks, dated or updated not more than three months prior to the inclusion of such Real Estate in the Collateral, addressing such matters as the Majority Banks may reasonably require, including without limitation that the Construction Inspector has reviewed the plans and specifications or other available materials for all Buildings on the Real Estate, that the condition of the Buildings is good, that all Buildings were constructed and completed in a good and workmanlike manner, that the Buildings satisfy all applicable building, zoning, handicapped access and Environmental Laws applicable thereto, and whether or not the Real Estate and the Buildings thereon are a conforming use under applicable zoning laws. (q) Permit and Legal Compliance Assurances. Evidence satisfactory to the Agent that all activities being conducted on such Real Estate which require federal, state or local licenses or permits have been duly licensed and that such licenses or permits are in full force and effect, and that the Real Estate, the Buildings and the use and occupancy thereof are in compliance in all material respects with all applicable federal, state or local laws, ordinances or regulations. (r) Operating Statements. Operating statements for such Real Estate in the form of such statements delivered to the Banks under Section 6.4(b) covering each of the four fiscal quarters ending immediately prior to the addition of such Mortgaged Property to the Collateral. (s) Doing Business Opinion. An opinion, dated the date of the inclusion of such Real Estate in the Collateral, of legal counsel to the Borrower reasonably acceptable to the Agent qualified to practice in the State in which such Real Estate is located to the effect that neither the Agent nor any Bank shall be required to qualify to do business in such State or any political subdivision thereof or to become liable to pay any taxes in such State or any political subdivision thereof solely on account of the receipt of the lien on such Real Estate securing the Obligation, such opinion to be satisfactory to the Agent. (t) Additional Documents. Such other documents, certificates, reports or assurances as the Agent or the Majority Banks may reasonably require in their discretion. Employee Benefit Plan. Any employee benefit plan within the meaning of Section 3(3) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate, other than a Multiemployer Plan. Environmental Engineer. A firm of independent professional engineers or other scientists generally recognized as expert in the detection, analysis and remediation of Hazardous Substances and related environmental matters and reasonably acceptable to the Agent. Environmental Laws. See Section 6.20(a). Equity Interests. One hundred percent (100%) of the direct legal, equitable and beneficial interests of the Borrower in and to Member. ERISA. The Employee Retirement Income Security Act of 1974, as amended and in effect from time to time. ERISA Affiliate. Any Person which is treated as a single employer with the Borrower under Section 414 of the Code. ERISA Reportable Event. A reportable event with respect to a Guaranteed Pension Plan within the meaning of Section 4043 of ERISA and the regulations promulgated thereunder as to which the requirement of notice has not been waived. Eurocurrency Reserve Rate. For any day with respect to a Eurodollar Rate Loan, the maximum rate (expressed as a decimal) at which any lender subject thereto would be required to maintain reserves under Regulation D of the Board of Governors of the Federal Reserve System (or any successor or similar regulations relating to such reserve requirements) against "Eurocurrency Liabilities" (as that term is used in Regulation D or any successor or similar regulation), if such liabilities were outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on and as of the effective date of any change in the Eurocurrency Reserve Rate. Eurodollar Business Day. Any day on which commercial banks are open for international business (including dealings in Dollar deposits) in London or such other Eurodollar interbank market as may be selected by the Agent and the Banks in their sole discretion acting in good faith. Eurodollar Lending Office. Initially, the office of each Bank designated as such in Schedule 1.1 hereto; thereafter, such other office of such Bank, if any, that shall be making or maintaining Eurodollar Rate Loans. Eurodollar Rate. For any Interest Period with respect to a Eurodollar Rate Loan, the rate per annum equal to the quotient (rounded upwards to the nearest 1/16 of one percent) of (a) the rate at which the Reference Bank's Eurodollar Lending Office is offered Dollar deposits two Eurodollar Business Days prior to the beginning of such Interest Period in whatever interbank Eurodollar market may be selected by the Reference Bank in its sole discretion, acting in good faith, for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of the Eurodollar Rate Loan to which such Interest Period applies, divided by (b) a number equal to 1.00 minus the Eurocurrency Reserve Rate. Eurodollar Rate Loans. Loans bearing interest calculated by reference to a Eurodollar Rate. Event of Default. See Section 12.1. Excess Property Income. As defined in the Cash Collateral Agreement. Federal Funds Effective Rate. For any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent. generally accepted accounting principles. Principles that are (a) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, as in effect from time to time and (b) consistently applied with past financial statements of the Borrower adopting the same principles; provided that a certified public accountant would, insofar as the use of such accounting principles is pertinent, be in a position to deliver an unqualified opinion (other than a qualification regarding changes in generally accepted accounting principles) as to financial statements in which such principles have been properly applied. Goldman. Goldman Sachs Mortgage Company. Goldman Group. Collectively, the partners of WHWEL as of any date that are affiliates of The Goldman Sachs Group L.P. Guaranteed Pension Plan. Any employee pension benefit plan within the meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate the benefits of which are guaranteed on termination in full or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer Plan. Guarantor. Collectively, the WWP Members and any other Person which is now or may hereafter become a party to a Guaranty, and individually any one of them. Guaranty. Collectively, the Indemnity and Guaranty Agreement by the WWP Members in favor of Agent and the Banks, the Conditional Guaranty, the WWP Member Indemnity Agreement and each other guaranty which may hereafter be delivered to the Agent and the Banks in connection with the Loan, each in form and substance satisfactory to Agent in its sole discretion. Hazardous Substances. See Section 6.20(b). Holdback. See Section 5.5. Indebtedness. All obligations, contingent and otherwise, that in accordance with generally accepted accounting principles should be classified upon the obligor's balance sheet as liabilities, or to which reference should be made by footnotes thereto, including in any event and whether or not so classified: (a) all debt and similar monetary obligations, whether direct or indirect (including, without limitation, all obligations evidenced by bonds, debentures, notes or similar debt instruments and subordinated indebtedness); (b) all liabilities secured by any mortgage, pledge, security interest, lien, charge or other encumbrance existing on property owned or acquired subject thereto, whether or not the liability secured thereby shall have been assumed; and (c) all guarantees, interest rate and currency swap obligations, endorsements and other contingent obligations whether direct or indirect in respect of indebtedness of others, including contingent obligations that in accordance with generally accepted accounting principles are required to be footnoted on the Borrower's balance sheet and any obligation to supply funds to or in any manner to invest directly or indirectly in a Person, to purchase indebtedness, or to assure the owner of indebtedness against loss through an agreement to purchase goods, supplies or services for the purpose of enabling the debtor to make payment of the indebtedness held by such owner or otherwise, and the obligation to reimburse the issuer in respect of any letter of credit; and (d) any obligation as a lessee or an obligor under a capitalized lease. Indemnity Agreement. Collectively, the Indemnity Agreements Regarding Hazardous Materials made by the Borrower and the WWP Members in favor of the Agent and the Banks, pursuant to which such parties agree to indemnify the Agent and the Banks with respect to Hazardous Substances and Environmental Laws, such Indemnity Agreement to be in form and substance satisfactory to the Agent. Instruction Letter. That certain letter agreement dated May 15, 1998 among the Agent, the Property Owner, LaSalle National Bank and Amresco Services, L.P., concerning the payment of Excess Property Income to Agent. Interest Payment Date. (a) As to each Loan, the first day of each January, April, July and October during the term of such Loan, and (b) also as to each Eurodollar Rate Loan, the last day of the Interest Period relating thereto. Interest Period. With respect to each Eurodollar Rate Loan: (a) initially, the period commencing on the Drawdown Date of such Loan and ending one, two or three months thereafter; and (b) thereafter, each period commencing on the day following the last day of the next preceding Interest Period applicable to such Loan and ending on the last day of one of the periods set forth above, as selected by the Borrower in a Conversion Request; provided that all of the foregoing provisions relating to Interest Periods are subject to the following: (A) if any Interest Period with respect to a Eurodollar Rate Loan would otherwise end on a day that is not a Eurodollar Business Day, that Interest Period shall end and the next Interest Period shall commence on the next preceding or succeeding Eurodollar Business Day as determined conclusively by the Reference Bank in accordance with the then current bank practice in the applicable Eurodollar interbank market; (B) if the Borrower shall fail to give notice as provided in Section 4.1, the Borrower shall be deemed to have requested a conversion of the affected Eurodollar Rate Loan to a Base Rate Loan on the last day of the then current Interest Period with respect thereto; and (C) no Interest Period relating to any Eurodollar Rate Loan shall extend beyond the Maturity Date. Investment Partnerships. Investments in joint ventures, general partnerships, limited partnerships, limited liability companies or any other business association formed for the purpose of acquiring fee interests in income-producing commercial office properties, provided that Borrower shall have sufficient Voting Interests or other rights to veto or block any major actions to be taken by any other Person owning an interest in such Investment Partnership. Any wholly-owned Subsidiary of the Borrower shall not be deemed to be an Investment Partnership. Investments. With respect to any Person, all shares of capital stock, evidences of Indebtedness and other securities issued by any other Person, all loans, advances, or extensions of credit to, or contributions to the capital of, any other Person, all purchases of the securities or business or integral part of the business of any other Person and commitments and options to make such purchases, all interests in real property, and all other investments; provided, however, that the term "Investment" shall not include (i) equipment, inventory and other tangible personal property acquired in the ordinary course of business, or (ii) current trade and customer accounts receivable for services rendered in the ordinary course of business and payable in accordance with customary trade terms. In determining the aggregate amount of Investments outstanding at any particular time: (a) there shall be included as an Investment all interest accrued with respect to Indebtedness constituting an Investment unless and until such interest is paid; (b) there shall be deducted in respect of each such Investment any amount received as a return of capital (but only by repurchase, redemption, retirement, repayment, liquidating dividend or liquidating distribution); (c) there shall not be deducted in respect of any Investment any amounts received as earnings on such Investment, whether as dividends, interest or otherwise, except that accrued interest included as provided in the foregoing clause (a) may be deducted when paid; and (d) there shall not be deducted from the aggregate amount of Investments any decrease in the value thereof. Leases. Leases, licenses and agreements whether written or oral, relating to the use or occupation of space in or on the Building or on the Mortgaged Property or the Mezzanine Property. Leasing Commissions. Reasonable and customary commissions paid to a licensed real estate broker in connection with a Lease for all or any portion of the Mortgaged Properties commonly known as Point View, 15 Broad, Mountain Heights, Morris Technology Center and the Polaroid Buildings, approved pursuant to Section 5.6, pursuant to commission agreements containing such terms and provisions as are then prevailing between third party, unaffiliated owners and brokers for comparable leases of space at properties similar to such Mortgaged Property in the market area in which such Mortgaged Property is located. Liens. See Section 8.2. Loan Documents. This Agreement, the Notes, the Security Documents, the Guaranty, the Acknowledgments, and all other documents, instruments or agreements executed or delivered by or on behalf of the Borrower, the Guarantor, Property Owner, Manager, Member or the parties to the WWP Member Indemnity Agreement evidencing or securing the Loans. Loan Request. See Section 2.6. Loans. The aggregate Loans to be made by the Banks hereunder. Majority Banks. As of any date, the Bank or Banks whose aggregate Commitment Percentage is equal to or greater than sixty-six and two-thirds percent (66.67%). Management Agreements. Agreements, whether written or oral, providing for the management of the Mortgaged Property, the Mezzanine Property or any of them. Manager. WASH Manager L.L.C., a Delaware limited liability company. Manager Organizational Agreements. That certain Certificate of Formation for WASH Manager L.L.C., filed on April 7, 1998 with the Secretary of State of the State of Delaware, and that certain Operating Agreement for WASH Manager L.L.C., dated as of May 15, 1998. Maturity Date. December 15, 2000, as the same may be extended as provided in Section 2.8, or such earlier date on which the Loans shall become due and payable pursuant to the terms hereof. Member. Wells Avenue Holdings L.L.C., a Delaware limited liability company. Member Organizational Agreements. That certain Certificate of Formation for Wells Avenue Holdings L.L.C. filed on April 2, 1998 with the Delaware Secretary of State, and that certain Operating Agreement for Wells Avenue Holdings L.L.C., a Delaware limited liability company, dated as of May 15, 1998 Mezzanine Collateral. All of the property, rights and interests of the Borrower which are or are intended to be subject to the security interests, security title and liens created by the Assignment of Interests and any further collateral assignment for the benefit of the Agent relating to direct or indirect interests in the Property Owner, including, without limitation, UCC-1 financing statements executed and delivered in connection therewith. Mezzanine Loan Documents. Collectively, this Agreement (to the extent of provisions relating directly or indirectly to the Property Owner or interests therein, the Mezzanine Collateral or the Mezzanine Property, including without limitation Section 32), the Assignment of Interests, the Cash Collateral Agreement, the Conditional Guaranty, any further assignments or pledges to the Agent for the benefit of the Banks (including without limitation UCC-1 Financing statements executed and delivered in connection therewith), and all other documents, instruments, acknowledgments or agreements executed or delivered to Agent or the Banks in connection with the Mezzanine Collateral, the Mezzanine Property or the direct or indirect interests in the Property Owner. Mezzanine Management Agreement. As defined in Section 6.34. Mezzanine Mortgagee. Initially, Nomura Asset Capital Corporation, and its successors and assigns as the holder or holders of the Mezzanine Mortgage Loan Documents, and any servicer or trustee acting on behalf of the holder or holders of interests in the note secured thereby, as the case may be. As of the date hereof, the servicer is Amresco Services, L.P. Mezzanine Mortgage Loan. The first mortgage loan to the Property Owner, in the original principal amount of $69,000,000.00. Mezzanine Mortgage Loan Agreement. The Loan Agreement dated as of December 31, 1996 between the Property Owner and the Mezzanine Mortgagee, as amended by (i) that certain First Amendment to Loan Agreement dated as of December 31, 1996 between the Property Owner and Nomura Asset Capital Corporation and (ii) that certain Second Amendment to Loan Agreement and Consent of Lender dated May 15, 1998 among Property Owner, Manager, Member and LaSalle National Bank, as Trustee. Mezzanine Mortgage Loan Documents. Collectively, the documents listed on Schedule 6.30-1 attached hereto and made a part hereof. Mezzanine Property. The real property owned by the Property Owner and commonly known as 128 Tech Center, 7/57 Wells Avenue, 75/85/95 Wells Avenue, 201 University Avenue, Dedham Place and Norfolk Place (333 Elm Street). Mortgaged Property. Collectively, the Eligible Real Estate which is conveyed to and accepted by the Agent as security for the Obligations pursuant to the Security Deeds. Multiemployer Plan. Any multiemployer plan within the meaning of Section 3(37) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate. Negative Carry. See Section 5.5. Net Income (or Deficit). With respect to any Person (or any asset of any Person) for any fiscal period, the net income (or deficit) of such Person (or attributable to such asset), after deduction of all expenses, taxes and other proper charges, determined in accordance with generally accepted accounting principles. Net Operating Income. With respect to any Person for any period, an amount equal to the sum of (a) the Net Income of such Person (attributable to the Mortgaged Properties or the Mezzanine Properties for such period) plus (b) depreciation, amortization and interest deducted in calculating such Net Income plus (c) any extraordinary or non-recurring losses deducted in calculating such Net Income plus/minus (d) Rent Adjustments with respect to Leases for the Mortgaged Properties or the Mezzanine Properties minus (e) any income included in calculating such Net Income from the Mortgaged Properties or the Mezzanine Properties from tenants which are 60 or more days delinquent in the payment of any rent minus (f) any extraordinary or non-recurring gains included in calculating such Net Income. Net Operating Income shall be determined in a manner consistent with the manner in which it has previously been calculated and provided to the Banks. Nomura Mortgages. Individually, a Mortgage, Assignment of Leases and Rents and Security Agreement dated as of December 31, 1996 by the Property Owner for the benefit of Mezzanine Mortgagee, which relates to a Mezzanine Property, and collectively, all of them. Non-Stabilized Property. Any Real Estate owned by the Borrower or the Property Owner which is not a Stabilized Property. Notes. See Section 2.4. Notice. See Section 19. Obligations. All indebtedness, obligations and liabilities of the Borrower to any of the Banks and the Agent, individually or collectively, under this Agreement or any of the other Loan Documents or in respect of any of the Loans or the Notes, or other instruments at any time evidencing any of the foregoing, whether existing on the date of this Agreement or arising or incurred hereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise. Operating Agreement. That certain Amended and Restated Limited Liability Company Operating Agreement of Wellsford/Whitehall Holdings, L.L.C., dated as of July 16, 1998, being the operating agreement of the Borrower. Original Loan Agreement. As defined in the preamble hereto. Original Revolving Credit Agreement. As defined in the preamble hereto. Outstanding. With respect to the Loans, the aggregate unpaid principal thereof as of any date of determination. PBGC. The Pension Benefit Guaranty Corporation created by Section 4002 of ERISA and any successor entity or entities having similar responsibilities. Permitted Liens. Liens, security interests and other encumbrances permitted by Section 8.2. When such term is used with respect to the Mezzanine Property, "Permitted Liens" shall mean only those liens and encumbrances as are shown in the Pro Forma Marked Owner's Title Insurance Commitment #9851-00015 issued by Chicago Title Insurance Company in connection with the acquisition by the Borrower of the direct and indirect interests in the Property Owner. Person. Any individual, corporation, partnership, limited liability company, trust, unincorporated association, business, or other legal entity, and any government or any governmental agency or political subdivision thereof. Plan Assets. Assets of any employee benefit plan subject to Part 4, Subtitle A, Title I of ERISA. Pledge Agreement. Each agreement from time to time in effect in form and substance satisfactory to the Agent pursuant to which the Borrower or the Guarantor may pledge cash, Short-term Investments or other property referred to in clause (v) of Section 5.1 as part of the Collateral securing the Obligations. Potential Collateral. Any property of the Borrower which is not at the time included in the Collateral and which consists of (i) Eligible Real Estate which is a Stabilized Property, (ii) Real Estate which is a Non- Stabilized Property which is capable of becoming Eligible Real Estate through the approval of the Majority Banks and the completion and delivery of Eligible Real Estate Qualification Documents, (iii) cash, (iv) Short-term Investments and (v) other property referred to in clause (vi) of Section 5.1. Property Owner. Wells Avenue Senior Holdings LLC, a Massachusetts limited liability company. Property Owner Organizational Agreements. That certain Certificate of Organization of Wells Avenue Senior Holdings LLC filed on December 31, 1996 with the Secretary of State of the Commonwealth of Massachusetts and that certain Operating Agreement of Wells Avenue Senior Holdings LLC, dated as of December 31, 1996, as amended by Amendment No. 1 dated May 15, 1998. Rating Agencies. Collectively, the "Rating Agencies" as defined in the Mezzanine Mortgage Loan Documents. Real Estate. All real property at any time owned or leased (as lessee or sublessee) by the Borrower or the Property Owner. REIT Status. With respect to Wellsford Commercial, its status as a real estate investment trust as defined in Section 856(a) of the Code. Record. The record, including computer records, maintained by the Agent with respect to any Loan referred to in the Notes. Reference Bank. BKB. Register. See Section 18.2. Release. See Section 6.20(c)(iii). Rent Adjustments. For any Person, straight line adjustments to rent payable under Leases, as determined in accordance with generally accepted accounting principles. Rent Roll. A report prepared by the Borrower or the Property Owner showing for each tenant its occupancy status, lease expiration date, market rent, lease rent and other information in such form as may have been approved by the Agent, such approval not to be unreasonably withheld. Reportable Event. Any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder. Revolving Credit Termination Date. December 31, 1998. SEC. The federal Securities and Exchange Commission. Secured Mezzanine Loan Agreement. That certain Mezzanine Loan Agreement dated of even date herewith by and among WWP, BKB, the other lending institutions that are or become parties thereto and BKB in its capacity as agent for itself and the other lending institutions that are or become parties thereto, as the same may be amended, restated, consolidated, supplemented, renewed, extended or replaced. Secured Mezzanine Loan Agreement Lenders. The lenders from time to time a party to the Secured Mezzanine Loan Agreement, which term shall include without limitation any agent or nominee acting on behalf of such lenders. Security Deeds. The Mortgages, Deeds to Secure Debt and Deeds of Trust from the Borrower to the Agent for the benefit of the Banks (or to trustees named therein acting on behalf of the Agent for the benefit of the Banks) pursuant to which the Borrower has conveyed a Mortgaged Property as security for the Obligations. Security Documents. Collectively, the Security Deeds, the Assignments of Rents and Leases, the Indemnity Agreement, the Guaranty, the Assignment of Interests, any further collateral assignments to the Agent for the benefit of the Banks, and each Pledge Agreement, including, without limitation, U.C.C.-1 financing statements executed and delivered in connection therewith. Short-term Investments. Investments described in subsections (a) through (g), inclusive, of Section 8.3. For all purposes of this Agreement and the other Loan Documents, the value of Short-term Investments at any time shall be the current market value thereof determined in a manner reasonably satisfactory to the Agent. Stabilized Property. Each parcel of Eligible Real Estate (a) which is fully operational; (b) which is eighty percent (80%) leased and occupied pursuant to bona-fide arm's length leases to third parties unaffiliated with Borrower, any Guarantor or any of the Subsidiaries of the Borrower; (c) no more than thirty-five percent (35%) of the Leases (based on the ratio of the rentable square footage of such Real Estate that is occupied under such Leases to the total rentable square footage of such Real Estate) for such Real Estate are scheduled to expire (without regard to any extension options not exercised) within two (2) years of the acceptance of such Real Estate as a Mortgaged Property or the Equity Interests as Collateral with respect to the Mezzanine Property (whether under this Agreement, the Original Loan Agreement or the Original Revolving Credit Agreement); (d) less than all of the Leases for such Real Estate are scheduled to expire (without regard to any extension options not exercised) within five (5) years of the date of the acceptance of such Real Estate as a Mortgaged Property or the Equity Interests as Collateral with respect to the Mezzanine Property (whether under this Agreement, the Original Loan Agreement or the Original Revolving Credit Agreement); and (e) such Real Estate shall have a projected annual return to Borrower of not less than 9% on acquisition cost based upon cash flows in place as of the date of determination. The determination of whether a property is a Stabilized Property for the purposes of determining the Designated Collateral Value shall be made at such time as it is accepted as a Mortgaged Property or Mezzanine Property as provided above, as applicable provided that a property may be later determined to be a Stabilized Property for the purposes of determining Consolidated Total Assets at such time as a property satisfies the requirements for a Stabilized Property set forth in the definition. State. A state of the United States of America. Subordination, Attornment and Non-Disturbance Agreement. An agreement among the Agent, the Borrower and a tenant under a Lease pursuant to which such tenant agrees to subordinate its rights under the Lease to the lien of the Security Deed and agrees to recognize the Agent or its successor in interest as landlord under the Lease in the event of a foreclosure under the Security Deed, such agreement to be in form and substance satisfactory to the Agent. Subsidiary. Any corporation, association, partnership, limited liability company, trust, or other business or other legal entity of which the designated parent shall at any time own directly or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of votes or controlling interests) of the outstanding Voting Interests. Survey. An instrument survey of a Mortgaged Property or a Mezzanine Property prepared by a registered land surveyor which shall show the location of all buildings, structures, easements and utility lines on such property, shall be sufficient to remove the standard survey exception from the Title Policy, shall show that all buildings and structures are within the lot lines of the Mortgaged Property or the Mezzanine Property and shall not show any encroachments by others (or to the extent any encroachments are shown, such encroachments shall be acceptable to the Agent in its sole discretion), shall show rights of way, adjoining sites, establish building lines and street lines, the distance to, and names of the nearest intersecting streets and such other details as the Agent may reasonably require; shall show the zoning district or districts in which the Mortgaged Property or the Mezzanine Property is located and shall show whether or not the Mortgaged Property or the Mezzanine Property is located in a flood hazard district as established by the Federal Emergency Management Agency or any successor agency or is located in any flood plain, flood hazard or wetland protection district established under federal, state or local law and shall otherwise be in form and substance reasonably satisfactory to the Agent. Surveyor Certification. With respect to each parcel of Mortgaged Property or Mezzanine Property, a certificate executed by the surveyor who prepared the Survey with respect thereto, dated as of a recent date and containing such information relating to such parcel as the Majority Banks or the Title Insurance Company may reasonably require, such certificate to be reasonably satisfactory to the Agent in form and substance. Tenant Improvement Project. With respect to the Mortgaged Properties commonly known as Point View, 15 Broad, Mountain Heights, Morris Technology Center and the Polaroid Buildings, base building and/or tenant improvements to the existing Buildings on such Mortgaged Property to be performed by the Borrower in connection with any Lease approved pursuant to Section 5.6. Tenant Improvement Reserve. The amount of $32,000,000.00, which amount shall be reserved from the amounts available to be borrowed under this Agreement and shall be disbursed as provided in Section 5.6. Test Period. See Section 9.1. Title Insurance Company. Commonwealth Land Title Insurance Company or another title insurance company or companies reasonably approved by the Agent. Title Policy. With respect to each parcel of Mortgaged Property, an ALTA standard form title insurance policy (or, if such form is not available, an equivalent form of or legally promulgated form of mortgagee title insurance policy reasonably acceptable to the Agent) issued by a Title Insurance Company (with such reinsurance or co-insurance as the Agent may require, any such reinsurance to be with direct access endorsements to the extent available under applicable law) in such amount as the Agent may require insuring the priority of the Security Deeds and that the Borrower holds marketable fee simple title to such parcel, subject only to the encumbrances permitted by the Security Deed and which shall not contain standard exceptions for mechanics liens, persons in occupancy (other than tenants as tenants only under Leases) or matters which would be shown by a survey, shall not insure over any matter except to the extent that any such affirmative insurance is acceptable to the Agent in its sole discretion, and shall contain (a) a revolving credit endorsement and (b) such other endorsements and affirmative insurance as the Agent reasonably may require and is available in the State in which the Real Estate is located, including but not limited to (i) a comprehensive endorsement, (ii) a variable rate of interest endorsement, (iii) a usury endorsement, (iv) a doing business endorsement, (v) in States where available, an ALTA form 3.1 zoning endorsement, (vi) a "tie-in" endorsement, and (vii) a "first loss" endorsement. Total Commitment. The sum of the Commitments of the Banks, as in effect from time to time. Type. As to any Loan, its nature as a Base Rate Loan or a Eurodollar Rate Loan. Under Development. Any Real Estate shall be considered under development until such time as (a) a certificate of occupancy has been obtained, (b) seventy-five percent (75%) of the net leasable area is leased and occupied, and (c) the gross revenue from the operation of such Real Estate shall have been not less than the operating costs (including amounts properly allocable to such period for expenses which are not payable on a regular basis during such period, such as taxes and insurance) for three (3) consecutive months. Voting Interests. Stock or similar ownership interests, of any class or classes (however designated), the holders of which are at the time entitled, as such holders, (a) to vote for the election of a majority of the directors (or persons performing similar functions) of the corporation, association, partnership, trust or other business entity involved, or (b) to control, manage, or conduct the business of the corporation, partnership, association, trust or other business entity involved. Wellsford Commercial. Wellsford Commercial Properties Trust, a Maryland real estate investment trust. Wellsford Real Properties. Wellsford Real Properties, Inc., a Maryland corporation. WHWEL. WHWEL Real Estate Limited Partnership, a Delaware limited partnership. WWP. Wellsford/Whitehall Properties II, L.L.C., a Delaware limited liability company. WWP Member Indemnity Agreement. The Indemnity Agreement by Wellsford Real Properties, Whitehall Street Real Estate Limited Partnership V, Whitehall Street Real Estate Limited Partnership VI, Whitehall Street Real Estate Limited Partnership VII and Whitehall Street Real Estate Limited Partnership VIII in favor of the Agent and the Banks, as the same may be modified or amended. WWP Members. Wellsford Commercial and WHWEL. Section 1.2. Rules of Interpretation. (a) A reference to any document or agreement shall include such document or agreement as amended, modified or supplemented from time to time in accordance with its terms and the terms of this Agreement. (b) The singular includes the plural and the plural includes the singular. (c) A reference to any law includes any amendment or modification to such law. (d) A reference to any Person includes its permitted successors and permitted assigns. (e) Accounting terms not otherwise defined herein have the meanings assigned to them by generally accepted accounting principles applied on a consistent basis by the accounting entity to which they refer. (f) The words "include", "includes" and "including" are not limiting. (g) The words "approval" and "approved", as the context so determines, means an approval in writing given to the party seeking approval after full and fair disclosure to the party giving approval of all material facts necessary in order to determine whether approval should be granted. (h) All terms not specifically defined herein or by generally accepted accounting principles, which terms are defined in the Uniform Commercial Code as in effect in the State of New York, have the meanings assigned to them therein. (i) Reference to a particular "Section ", refers to that section of this Agreement unless otherwise indicated. (j) The words "herein", "hereof", "hereunder" and words of like import shall refer to this Agreement as a whole and not to any particular section or subdivision of this Agreement. Section 2. THE FACILITY. Section 2.1. Commitment to Lend. Subject to the terms and conditions set forth in this Agreement, each of the Banks severally agrees to lend to the Borrower, and the Borrower may borrow from time to time between the Closing Date and the Advance Termination Date upon notice by the Borrower to the Agent given in accordance with Section 2.6, such sums as are requested by the Borrower for the purposes set forth in Section 7.11 up to the lesser of (a) a maximum aggregate principal amount outstanding (after giving effect to all amounts requested) at any one time equal to such Bank's Commitment and (b) such Bank's Commitment Percentage of the difference of (i) the aggregate Designated Collateral Value minus (ii) an amount equal to the aggregate Holdback; provided, that, in all events no Default or Event of Default shall have occurred and be continuing; and provided, further, that the outstanding principal amount of the Loans (after giving effect to all amounts requested) shall not at any time exceed the Total Commitment. The Borrower may repay and reborrow from time to time between the Closing Date and the Revolving Credit Termination Date. Notwithstanding anything herein to the contrary, in no event shall the amount of the Loans advanced for purposes permitted under this Agreement, other than the purposes contemplated by Section 5.6, exceed $268,000,000.00, and in no event shall the Borrower be permitted to request Loans after the Revolving Credit Termination Date except for amounts requested pursuant to Section 5.6. The Loans shall be made pro rata in accordance with each Bank's Commitment Percentage. The Loan Request shall constitute a representation and warranty by the Borrower that all of the conditions set forth in Section 10 and Section 11, in the case of the initial Loan, and Section 11, in the case of all other Loans, have been satisfied on the date of such funding. Section 2.2. Facility Fee. The Borrower agrees to pay to the Agent for the accounts of the Banks in accordance with their respective Commitment Percentages a facility fee calculated at the rate of 0.1875% per annum on the average daily amount by which the Total Commitment exceeds the outstanding principal amount of Loans during each calendar quarter or portion thereof commencing on the date hereof and ending on the Advance Termination Date; provided, however, that from and after the Revolving Credit Termination Date and ending on the Advance Termination Date, such fee shall be calculated at the rate of 0.1875% per annum on the average daily amount by which the Tenant Improvement Reserve exceeds the outstanding principal amount of Loans disbursed pursuant to Section 5.6 from the Tenant Improvement Reserve. The facility fee shall be payable quarterly in arrears on the first day of each calendar quarter for the immediately preceding calendar quarter or portion thereof, or on any earlier date on which the Commitments shall be reduced or shall terminate as provided in Section 2.3, with a final payment on the Advance Termination Date. Section 2.3. Reduction of Commitment. The Borrower shall have the right at any time and from time to time upon five Business Days' prior written notice to the Agent to reduce by $1,000,000 or an integral multiple of $1,000,000 in excess thereof or to terminate entirely the unborrowed portion of the Commitments, whereupon the Commitments of the Banks shall be reduced pro rata in accordance with their respective Commitment Percentages of the amount specified in such notice or, as the case may be, terminated, any such reduction to be without penalty (unless such reduction requires repayment of a Eurodollar Rate Loan). Promptly after receiving any notice of the Borrower delivered pursuant to this Section 2.3, the Agent will notify the Banks of the substance thereof. Upon the effective date of any such reduction or termination, the Borrower shall pay to the Agent for the respective accounts of the Banks the full amount of any facility fee under Section 2.2 then accrued on the amount of the reduction. No reduction or termination of the Commitments may be reinstated. Notwithstanding the foregoing, in no event shall the aggregate Commitments be reduced to less than $200,000,000.00. Section 2.4. Notes. The Loans shall be evidenced by a single promissory note of the Borrower to each Bank in substantially the form of Exhibit A hereto (collectively, the "Notes"), dated as of the Closing Date and completed with appropriate insertions. Each such Note shall be payable to the order of each Bank in the principal amount equal to such Bank's Commitment or, if less, the outstanding amount of all Loans made by such Bank, plus interest accrued thereon, as set forth below. The Borrower irrevocably authorizes the Agent to make or cause to be made, at or about the time of the Drawdown Date of any Loan or at the time of receipt of any payment of principal thereof, an appropriate notation on the Agent's Record reflecting the making of such Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Loans set forth on the Agent's Record shall be prima facie evidence of the principal amount thereof owing and unpaid to each Bank, but the failure to record, or any error in so recording, any such amount on the Agent's Record shall not limit or otherwise affect the obligations of the Borrower hereunder or under any Note to make payments of principal of or interest on any Note when due. By delivery of the Notes, there shall not be deemed to have occurred, and there has not otherwise occurred, any payment, satisfaction or novation of the Indebtedness evidenced by the "Notes" described in the Original Revolving Credit Agreement or the Indebtedness evidenced by the "Notes" described in the Original Loan Agreement, which Indebtedness is instead allocated among the Banks as of the date hereof and evidenced by the Notes and their respective Commitment Percentages and the Banks shall as of the date hereof make such adjustments to the outstanding Loans so that such outstanding Loans are consistent with their respective Commitment Percentages. Section 2.5. Interest on Loans. (a) Each Base Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the date on which such Base Rate Loan is converted to a Eurodollar Rate Loan at a rate per annum equal to the Base Rate. (b) Each Eurodollar Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at a rate per annum equal to the sum of the Eurodollar Rate determined for such Interest Period plus one and sixty- five one-hundredths percent (1.65%). (c) The Borrower promises to pay interest on each Loan in arrears on each Interest Payment Date with respect thereto. (d) Base Rate Loans and Eurodollar Rate Loans may be converted to Loans of the other Type as provided in Section 4.1. Section 2.6. Requests for Loans. (a) Except with respect to the initial Loan funded at the Closing Date, the Borrower shall give to the Agent written notice in the form of Exhibit B hereto (or telephonic notice confirmed in writing in the form of Exhibit B hereto) of each Loan requested hereunder (a "Loan Request") no less than five (5) Business Days prior to the proposed Drawdown Date. The Borrower shall not make a Loan Request more frequently than two (2) times each month. Each such notice shall specify with respect to the requested Loan the proposed principal amount, Drawdown Date, Interest Period (if applicable) and Type. Each such notice shall also contain (i) a statement as to the purpose for which such advance shall be used (which purpose shall be in accordance with the terms of Section 5.6 or Section 7.11, as applicable), (ii) in the case of any advance relating to any Capital Improvement Project for a Mortgaged Property or a Mezzanine Property, a certification from the Borrower that all materialmen, laborers, subcontractors and any other parties who might or could claim statutory or common law liens and are furnishing or have furnished material or labor to the Mortgaged Property or Mezzanine Property, as applicable, have been paid (or will be paid from the proceeds of the requested advance) all amounts due for such labor and materials, and if requested by the Agent, delivery to the Agent of affidavits, lien waivers or other evidence reasonably satisfactory to the Agent evidencing the same, and (iii) a certification by the chief financial or chief accounting officer of the Borrower that the Borrower and the Guarantor are and will be in compliance with all of their respective covenants under the Loan Documents after giving effect to the making of such Loan. With respect to any Loan proposed to be funded after the initial Loan funded at the Closing Date, the Borrower shall have complied with all requirements set forth in Section 5.4 and the Majority Banks shall have granted their consent to and accepted the additional Collateral for such Loan in accordance with the terms and conditions of Section 5.4. (b) Promptly upon receipt of any such notice, the Agent shall notify each of the Banks thereof. Except as provided in this Section 2.6, each such Loan Request shall be irrevocable and binding on the Borrower and shall obligate the Borrower to accept the Loan requested from the Banks on the proposed Drawdown Date, provided that, in addition to the Borrower's other remedies against any Bank which fails to advance its proportionate share of a requested Loan, such Loan Request may be revoked by the Borrower by notice received by the Agent no later than the Drawdown Date if any Bank fails to advance its proportionate share of the requested Loan in accordance with the terms of this Agreement, provided further that the Borrower shall be liable in accordance with the terms of this Agreement (including, without limitation, amounts due pursuant to Section 4.8) to any Bank which is prepared to advance its proportionate share of the requested Loan for any costs, expenses or damages incurred by such Bank as a result of the Borrower's election to revoke such Loan Request. Nothing herein shall prevent the Borrower or the funding Banks from seeking recourse against any Bank that fails to advance its proportionate share of a requested Loan (but not any other Bank) as required by this Agreement for the actual and consequential damages incurred by the Borrower (including, without limitation, amounts required to be paid under this Agreement by the Borrower to any Bank) and such funding Banks proximately caused by such Bank that has failed to advance its proportionate share, provided that in no event shall such Bank be liable for punitive or exemplary damages. The Borrower may without cost or penalty revoke a Loan Request by delivering notice thereof to each of the Banks no later than three (3) Business Days prior to the Drawdown Date. Each Loan Request shall be (a) for a Base Rate Loan in a minimum aggregate amount of $1,000,000 or an integral multiple of $100,000 in excess thereof, or (b) for a Eurodollar Rate Loan in a minimum aggregate amount of $2,000,000 or an integral multiple of $100,000 in excess thereof; provided, however, that there shall be no more than five (5) Eurodollar Rate Loans outstanding at any one time. In the event that the proceeds from such Loan are to be used for a purpose other than a Capital Improvement Project, then the Borrower shall provide to the Agent as soon as practicable thereafter such evidence as the Agent shall reasonably require to evidence that such funds have been used for such purpose (which evidence may include, without limitation, a closing statement). Section 2.7. Funds for Loans. (a) Not later than 2:00 p.m. (Boston time) on the proposed Drawdown Date of any Loans, each of the Banks will make available to the Agent, at the Agent's Head Office, in immediately available funds, the amount of such Bank's Commitment Percentage of the amount of the requested Loans which may be disbursed pursuant to Section 2.1. Upon receipt from each Bank of such amount, and upon receipt of the documents required by Section 10 and Section 11 and the satisfaction of the other conditions set forth therein, to the extent applicable, the Agent will make available to the Borrower the aggregate amount of such Loans made available to the Agent by the Banks by crediting such amount to the account of the Borrower maintained at the Agent's Head Office. The failure or refusal of any Bank to make available to the Agent at the aforesaid time and place on any Drawdown Date the amount of its Commitment Percentage of the requested Loans shall not relieve any other Bank from its several obligation hereunder to make available to the Agent the amount of such other Bank's Commitment Percentage of any requested Loans, including any additional Loans that may be requested subject to the terms and conditions hereof to provide funds to replace those not advanced by the Bank so failing or refusing, provided that the Borrower may by notice received by the Agent no later than the Drawdown Date refuse to accept any Loan which is not fully funded in accordance with the Borrower's Loan Request subject to the terms of Section 2.6. In the event of any such failure or refusal, the Banks not so failing or refusing shall be entitled to a priority secured position as against the Bank or Banks so failing or refusing for such Loans as provided in Section 12.4. (b) Unless Agent shall have been notified by any Bank prior to the applicable Drawdown Date that such Bank will not make available to Agent such Bank's pro rata share of a proposed Loan, Agent may in its discretion assume that such Bank has made such Loan available to Agent in accordance with the provisions of this Agreement and Agent may, if it chooses, in reliance upon such assumption make such Loan available to Borrower, and such Bank shall be liable to the Agent for the amount of such advance. Section 2.8. Extension of Maturity Date. (a) Provided that no Default or Event of Default shall have occurred and be continuing, the Borrower shall have the option, to be exercised by giving written notice to the Agent in the form of Exhibit D hereto at least 90 days prior to the Maturity Date, subject to the terms and conditions set forth in this Agreement, to extend the Maturity Date by one (1) year. The request by the Borrower for extension of the Maturity Date shall constitute a representation and warranty by the Borrower that all of the conditions set forth in this Section shall have been satisfied on the date of such request or shall be satisfied prior to the then existing Maturity Date. (b) The obligations of the Agent and the Banks to extend the Maturity Date shall be subject to the satisfaction of the following conditions precedent on or prior to the Maturity Date (without regard to any extension): (i) Payment of Extension Fee. The Borrower shall pay to the Agent for the pro rata accounts of the Banks in accordance with their respective Commitment Percentages an extension fee equal to fifteen- hundredths of one percent (0.15%) of the Total Commitment, which fee shall, when paid, be fully earned and non-refundable under any circumstances. (ii) No Default. On the date the Extension Request is given and on the Maturity Date (as determined without regard to such extension) there shall exist no Default or Event of Default. (iii) Representations and Warranties. The representations and warranties made by the Borrower, any of its Subsidiaries, the Guarantor, the Manager, the Member or the Property Owner in the Loan Documents or otherwise made by or on behalf of such Persons in connection therewith or after the date thereof shall have been true and correct in all material respects when made and (other than representations as to the Guarantor) shall also be true and correct in all material respects on the Maturity Date (as determined without regard to such extension) other than for changes in the ordinary course of business permitted by this Agreement that have not had any materially adverse affect on the business of any of such Persons. (iv) Appraisals. The Agent shall have received at Borrower's expense Appraisals or updates of prior Appraisals to determine the current Appraised Value and Designated Collateral Value of the Mortgaged Property and the Mezzanine Property, which Appraisals shall be ordered, reviewed and approved as provided in Section 5.2(a). The aggregate outstanding principal amount of the Loans shall be reduced to an amount such that the aggregate outstanding principal amount of the Loans does not exceed the Designated Collateral Value (as most recently determined based upon the Appraisals obtained pursuant to this Section 2.8). Section 2.9. Termination of Advances. Notwithstanding anything in this Agreement to the contrary, the Borrower shall have no right to obtain from the Banks, and the Banks shall have no obligation to lend to Borrower, any additional sums under this Agreement after the Advance Termination Date. Section 3. REPAYMENT OF THE LOANS. Section 3.1. Stated Maturity. The Borrower promises to pay on the Maturity Date, and there shall become absolutely due and payable on the Maturity Date, all of the Loans outstanding on such date, together with any and all accrued and unpaid interest thereon. Section 3.2. Mandatory Prepayments. (a) Except with the prior written approval of the Majority Banks, which approval may be withheld in the sole and absolute discretion of the Majority Banks, if at any time the outstanding principal amount of the Mezzanine Mortgage Loan is prepaid in full, whether voluntarily, involuntarily or as the result of an acceleration of the maturity date thereof, all of the outstanding Obligations together with any and all accrued but unpaid interest thereon and prepayment fees shall become absolutely due and payable. For the purposes hereof, and without limiting the generality of the foregoing, the Mezzanine Mortgage Loan shall be deemed to have been prepaid in the event that (i) a Nomura Mortgage or the Nomura Mortgages are assigned by the holder thereof to a new holder for the purpose of facilitating a refinance of the indebtedness secured thereby or (ii) the Property Owner defeases the Mezzanine Mortgage Loan as permitted by Section 2.3.3 of the Mezzanine Mortgage Loan Agreement. (b) If at any time there shall occur, whether voluntarily, involuntarily or by operation of law, a sale, transfer, assignment, conveyance, option or other disposition of, or any mortgage, hypothecation, encumbrance, financing or refinancing of (i) any assets or properties of the Property Owner, except for the Mezzanine Mortgage Loan and releases of the Mezzanine Property in accordance with the terms of this Agreement, and except as provided in Section 7.23(a) with respect to the replacement of fixtures, equipment, machinery and other personal property by the Property Owner in connection with the operation of the Mezzanine Property in the ordinary course of business, (ii) any of the Mezzanine Collateral, (iii) any other assets or properties of the Manager or the Member, (iv) any direct or indirect interest of either Borrower, the Manager or the Member in the Property Owner, (v) any direct or indirect interest of the Member in the Manager, or (vi) any direct or indirect interest of Borrower in the Member, all of the Obligations outstanding on such date, together with any and all accrued but unpaid interest thereon and prepayment fees, shall become absolutely due and payable. A pledge or transfer by WWP of its interest in the Borrower to the Secured Mezzanine Loan Agreement Lenders shall not cause a mandatory prepayment under this Section 3.2(b). Section 3.3. Optional Prepayments. The Borrower shall not have the right at any time prior to December 15, 1998 to prepay the Loans, as a whole or in part. At any time after December 15, 1998, the Borrower shall have the right, at the Borrower's election, to prepay the outstanding amount of the Loans, as a whole or in part, at any time without penalty or premium; provided, that the full or partial prepayment of the outstanding amount of any Eurodollar Rate Loans pursuant to this Section 3.3 may be made only on the last day of the Interest Period relating thereto except as otherwise required pursuant to Section 4.7 unless payment is first made of any amounts payable pursuant to Section 4.8. The Borrower shall give the Agent, no later than 10:00 a.m., Boston time, at least three (3) Business Days prior written notice of any prepayment pursuant to this Section 3.3 of any Base Rate Loans and at least four Eurodollar Business Days notice of any proposed repayment pursuant to this Section 3.3 of Eurodollar Rate Loans, in each case specifying the proposed date of payment of Loans and the principal amount to be paid. Section 3.4. Partial Prepayments. Each partial prepayment of the Loans under Section 3.3 shall be in an integral multiple of $100,000, shall be accompanied by the payment of accrued interest on the principal prepaid to the date of payment and, after payment of such interest, shall be applied, in the absence of instruction by the Borrower, first to the principal of Base Rate Loans and then to the principal of Eurodollar Rate Loans. Section 3.5. Effect of Prepayments. Amounts of the Loans prepaid under Section 3.3 prior to the Revolving Credit Termination Date may be reborrowed as provided in Section 2. Notwithstanding anything herein to the contrary, amounts of the Loans prepaid after the Revolving Credit Termination Date may not be reborrowed. Section 4. CERTAIN GENERAL PROVISIONS. Section 4.1. Conversion Options. (a) The Borrower may elect from time to time to convert any outstanding Loan to a Loan of another Type and such Loan shall thereafter bear interest as a Base Rate Loan or a Eurodollar Rate Loan, as applicable; provided that (i) with respect to any such conversion of a Eurodollar Rate Loan to a Base Rate Loan, the Borrower shall give the Agent at least three Business Days' prior written notice of such election, and such conversion shall only be made on the last day of the Interest Period with respect to such Eurodollar Rate Loan; (ii) with respect to any such conversion of a Base Rate Loan to a Eurodollar Rate Loan, the Borrower shall give the Agent at least four Eurodollar Business Days' prior written notice of such election and the Interest Period requested for such Loan, the principal amount of the Loan so converted shall be in a minimum aggregate amount of $2,000,000 or an integral multiple of $100,000 in excess thereof and, after giving effect to the making of such Loan, there shall be no more than five (5) Eurodollar Rate Loans outstanding at any one time; and (iii) no Loan may be converted into a Eurodollar Rate Loan when any Default or Event of Default has occurred and is continuing. All or any part of the outstanding Loans of any Type may be converted as provided herein, provided that no partial conversion shall result in a Base Rate Loan in an aggregate principal amount of less than $1,000,000 or a Eurodollar Rate Loan in an aggregate principal amount of less than $2,000,000 and that the aggregate principal amount of each Loan shall be in an integral multiple of $100,000. On the date on which such conversion is being made, each Bank shall take such action as is necessary to transfer its Commitment Percentage of such Loans to its Domestic Lending Office or its Eurodollar Lending Office, as the case may be. Each Conversion Request relating to the conversion of a Base Rate Loan to a Eurodollar Rate Loan shall be irrevocable by the Borrower. (b) Any Loan may be continued as such Type upon the expiration of an Interest Period with respect thereto by compliance by the Borrower with the terms of Section 4.1; provided that no Eurodollar Rate Loan may be continued as such when any Default of the type described in subsections (a), (b), (c) or (d) of Section 12.1 or Event of Default has occurred and is continuing, but shall be automatically converted to a Base Rate Loan on the last day of the Interest Period relating thereto ending during the continuance of any Default or Event of Default. (c) In the event that the Borrower does not notify the Agent of its election hereunder with respect to any Loan, such Loan shall be automatically converted to a Base Rate Loan at the end of the applicable Interest Period. Section 4.2. Closing Fee. The Borrower has paid to BKB and Goldman a closing fee as specified in the Agreement Regarding Fees. BKB and Goldman shall pay on the Closing Date to the other Banks a closing fee in accordance with their separate agreement. Section 4.3. Agent's Fee. The Borrower shall pay to the Agent, for the Agent's own account, an Agent's fee as specified in the Agreement Regarding Fees. Section 4.4. Funds for Payments. (a) All payments of principal, interest, facility fees, Agent's fees, closing fees and any other amounts due hereunder or under any of the other Loan Documents shall be made to the Agent, for the respective accounts of the Banks and the Agent, as the case may be, at the Agent's Head Office, not later than 12:00 noon (Boston time) on the day when due, in each case in immediately available funds. The Agent is hereby authorized to charge the account of the Borrower with BKB, on the dates when the amount thereof shall become due and payable, with the amounts of the principal of and interest on the Loans and all fees, charges, expenses and other amounts owing to the Agent and/or the Banks under the Loan Documents. (b) All payments by the Borrower hereunder and under any of the other Loan Documents shall be made without setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless the Borrower is compelled by law to make such deduction or withholding. If any such obligation is imposed upon the Borrower with respect to any amount payable by it hereunder or under any of the other Loan Documents, the Borrower will pay to the Agent, for the account of the Banks or (as the case may be) the Agent, on the date on which such amount is due and payable hereunder or under such other Loan Document, such additional amount in Dollars as shall be necessary to enable the Banks or the Agent to receive the same net amount which the Banks or the Agent would have received on such due date had no such obligation been imposed upon the Borrower. The Borrower will deliver promptly to the Agent certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by the Borrower hereunder or under such other Loan Document. Section 4.5. Computations. All computations of interest on the Loans and of other fees to the extent applicable shall be based on a 360-day year and paid for the actual number of days elapsed. Except as otherwise provided in the definition of the term "Interest Period" with respect to Eurodollar Rate Loans, whenever a payment hereunder or under any of the other Loan Documents becomes due on a day that is not a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and interest shall accrue during such extension. The outstanding amount of the Loans as reflected on the records of the Agent from time to time shall be considered prima facie evidence of such amount. Section 4.6. Inability to Determine Eurodollar Rate. In the event that, prior to the commencement of any Interest Period relating to any Eurodollar Rate Loan, the Agent shall determine that adequate and reasonable methods do not exist for ascertaining the Eurodollar Rate for such Interest Period, the Agent shall forthwith give notice of such determination (which shall be conclusive and binding on the Borrower and the Banks) to the Borrower and the Banks. In such event (a) any Loan Request with respect to Eurodollar Rate Loans shall be automatically withdrawn and shall be deemed a request for Base Rate Loans and (b) each Eurodollar Rate Loan will automatically, on the last day of the then current Interest Period thereof, become a Base Rate Loan, and the obligations of the Banks to make Eurodollar Rate Loans shall be suspended until the Agent determines that the circumstances giving rise to such suspension no longer exist, whereupon the Agent shall so notify the Borrower and the Banks. Section 4.7. Illegality. Notwithstanding any other provisions herein, if any present or future law, regulation, treaty or directive or the interpretation or application thereof shall make it unlawful, or any central bank or other governmental authority having jurisdiction over a Bank or its Eurodollar Lending Office shall assert that it is unlawful, for any Bank to make or maintain Eurodollar Rate Loans, such Bank shall forthwith give notice of such circumstances to the Agent and the Borrower and thereupon (a) the commitment of the Banks to make Eurodollar Rate Loans or convert Loans of another type to Eurodollar Rate Loans shall forthwith be suspended and (b) the Eurodollar Rate Loans then outstanding shall be converted automatically to Base Rate Loans on the last day of each Interest Period applicable to such Eurodollar Rate Loans or within such earlier period as may be required by law. Section 4.8. Additional Interest. If any Eurodollar Rate Loan or any portion thereof is repaid or is converted to a Base Rate Loan for any reason on a date which is prior to the last day of the Interest Period applicable to such Eurodollar Rate Loan, the Borrower will pay to the Agent upon demand for the account of the Banks in accordance with their respective Commitment Percentages, in addition to any amounts of interest otherwise payable hereunder, any amounts required to compensate the Banks for any losses, costs or expenses which may reasonably be incurred as a result of such payment or conversion, including, without limitation, an amount equal to daily interest for the unexpired portion of such Interest Period on the Eurodollar Rate Loan or portion thereof so repaid or converted at a per annum rate equal to the excess, if any, of (a) the interest rate calculated on the basis of the Eurodollar Rate applicable to such Eurodollar Rate Loan minus (b) the yield obtainable by the Agent upon the purchase of debt securities customarily issued by the Treasury of the United States of America which have a maturity date most closely approximating the last day of such Interest Period (it being understood that the purchase of such securities shall not be required in order for such amounts to be payable and that a Bank shall not be obligated or required to have actually obtained funds at the Eurodollar Rate). Section 4.9. Additional Costs, Etc. Notwithstanding anything herein to the contrary, if any future applicable law or any amendment or modification of present applicable law which expression, as used herein, includes statutes, rules and regulations thereunder and legally binding interpretations thereof by any competent court or by any governmental or other regulatory body or official with appropriate jurisdiction charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued to any Bank or the Agent by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), shall: (a) subject any Bank or the Agent to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Agreement, the other Loan Documents, such Bank's Commitment or the Loans (other than taxes based upon or measured by the income or profits of such Bank or the Agent), or (b) materially change the basis of taxation (except for changes in taxes on income or profits) of payments to any Bank of the principal of or the interest on any Loans or any other amounts payable to any Bank under this Agreement or the other Loan Documents, or (c) impose or increase or render applicable any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or loans by, or commitments of an office of any Bank beyond those in effect as of the date hereof, or (d) impose on any Bank or the Agent any other conditions or requirements with respect to this Agreement, the other Loan Documents, the Loans, such Bank's Commitment, or any class of loans or commitments of which any of the Loans or such Bank's Commitment forms a part; and the result of any of the foregoing is (i) to increase the cost to any Bank of making, funding, issuing, renewing, extending or maintaining any of the Loans or such Bank's Commitment, or (ii) to reduce the amount of principal, interest or other amount payable to such Bank or the Agent hereunder on account of such Bank's Commitment or any of the Loans, or (iii) to require such Bank or the Agent to make any payment or to forego any interest or other sum payable hereunder, the amount of which payment or foregone interest or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by such Bank or the Agent from the Borrower hereunder, then, and in each such case, the Borrower will, within fifteen (15) days of demand made by such Bank or (as the case may be) the Agent at any time and from time to time and as often as the occasion therefor may arise, pay to such Bank or the Agent such additional amounts as such Bank or the Agent shall determine in good faith to be sufficient to compensate such Bank or the Agent for such additional cost, reduction, payment or foregone interest or other sum. Each Bank and the Agent in determining such amounts may use any reasonable averaging and attribution methods, generally applied by such Bank or the Agent. Section 4.10. Capital Adequacy. If after the date hereof any Bank determines that (a) the adoption of or change in any law, rule, regulation or guideline regarding capital requirements of general application for banks or bank holding companies or any change in the interpretation or application thereof by any governmental authority charged with the administration thereof, or (b) compliance by such Bank or its parent bank holding company with any future guideline, request or directive of any such entity regarding capital adequacy or any amendment or change in interpretation of any existing guideline, request or directive (whether or not having the force of law), has the effect of reducing the return on such Bank's or such holding company's capital as a consequence of such Bank's commitment to make Loans hereunder to a level below that which such Bank or holding company could have achieved but for such adoption, change or compliance (taking into consideration such Bank's or such holding company's then existing policies with respect to capital adequacy and assuming the full utilization of such entity's capital) by any amount deemed by such Bank to be material, then such Bank may notify the Borrower thereof. The Borrower agrees to pay to such Bank the amount of such reduction in the return on capital as and when such reduction is determined, upon presentation by such Bank of a statement of the amount setting for the Bank's calculation thereof. In determining such amount, such Bank may use any reasonable averaging and attribution methods, generally applied by such Bank or the Agent. Section 4.11. Indemnity of Borrower. The Borrower agrees to indemnify each Bank and to hold each Bank harmless from and against any loss, cost or expense that such Bank may sustain or incur as a consequence of (a) default by the Borrower in payment of the principal amount of or any interest on any Eurodollar Rate Loans as and when due and payable, including any such loss or expense arising from interest or fees payable by such Bank to lenders of funds obtained by it in order to maintain its Eurodollar Rate Loans, or (b) default by the Borrower in making a borrowing or conversion after the Borrower has given (or is deemed to have given) a Loan Request or a Conversion Request; provided, however, that the Borrower shall not be required to so indemnify any Bank pursuant to clause (b) above which fails or refuses to fund its proportionate share of a Loan in accordance with the terms of this Agreement. Section 4.12. Interest on Overdue Amounts; Late Charge. Overdue principal and (to the extent permitted by applicable law) interest on the Loans and all other overdue amounts payable hereunder or under any of the other Loan Documents shall bear interest payable on demand at a rate per annum equal to four percent (4.0%) above the Base Rate from the date due until such amount shall be paid in full (after as well as before judgment). In addition, the Borrower shall pay a late charge equal to three percent (3.0%) of any amount of interest and/or principal payable on the Loans or any other amounts payable hereunder or under the Loan Documents, which is not paid within ten days of the date when due. Section 4.13. Intentionally Omitted. Section 4.14. Certificate. A certificate setting forth any amounts payable pursuant to Section 4.8, Section 4.9, Section 4.10, Section 4.11 or Section 4.12 and a brief explanation of such amounts which are due, submitted by any Bank or the Agent to the Borrower, shall be conclusive in the absence of manifest error. Section 4.15. Limitation on Interest. Notwithstanding anything in this Agreement to the contrary, all agreements between the Borrower and the Banks and the Agent, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of any of the Obligations or otherwise, shall the interest contracted for, charged or received by the Banks exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, interest would otherwise be payable to the Banks in excess of the maximum lawful amount, the interest payable to the Banks shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance the Banks shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal balance of the Obligations and to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal of the Obligations, such excess shall be refunded to the Borrower. All interest paid or agreed to be paid to the Banks shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal of the Obligations (including the period of any renewal or extension thereof) so that the interest thereon for such full period shall not exceed the maximum amount permitted by applicable law. This section shall control all agreements between the Borrower and the Banks and the Agent. Section 4.16. Certain Provisions Relating to Increased Costs. If any Bank requests compensation for any losses or costs to be reimbursed pursuant to any one or more of the provisions of Section 4.9 or Section 4.10, then, upon request of Borrower, such Bank shall use reasonable efforts in a manner consistent with such institution's practice in connection with loans like the Loan to eliminate, mitigate or reduce amounts that would otherwise be payable by Borrower under the foregoing provisions, provided that such action would not be otherwise prejudicial to such Bank, including, without limitation, by designating another of such Bank's offices, branches or affiliates; the Borrower agreeing to pay all reasonably incurred costs and expenses incurred by such Bank in connection with any such action. Notwithstanding anything to the contrary contained herein, if no Default or Event of Default shall have occurred and be continuing, and if any Bank has requested payment or compensation for any losses or costs to be reimbursed pursuant to any one or more of the provisions of Section 4.9 or Section 4.10 (each, an "Affected Bank"), then, within thirty (30) days after such request for payment or compensation, Borrower shall have the one-time right as to such Affected Bank, to be exercised by delivery of written notice delivered to the Agent and the Affected Bank within thirty (30) days of receipt of such notice, to elect to cause the Affected Bank to transfer its Commitment. The Agent shall promptly notify the remaining Banks that each of such Banks shall have the right, but not the obligation, to acquire a portion of the Commitment, pro rata based upon their relevant Commitment Percentages, of the Commitment of the Affected Bank (or if any of such Banks does not elect to purchase its pro rata share, then to such remaining Banks in such proportion as approved by the Agent). In the event that the Banks do not elect to acquire all of the Affected Bank's Commitment, then the Agent shall endeavor to obtain a new Bank to acquire such remaining Commitment. Upon any such purchase of the Commitment of the Affected Bank, the Affected Bank's interest in the Obligations and its rights hereunder and under the Loan Documents shall terminate at the date of purchase, and the Affected Bank shall promptly execute all documents reasonably requested to surrender and transfer such interest. The purchase price for the Affected Bank's Commitment shall equal any and all amounts outstanding and owed by Borrower to the Affected Bank, including principal and all accrued and unpaid interest or fees. Section 5. COLLATERAL SECURITY. Section 5.1. Collateral. The Obligations shall be secured by (i) a perfected first priority lien or security title to be held by the Agent for the benefit of the Banks in the Mortgaged Property pursuant to the terms of the Security Deeds, (ii) a perfected first priority security interest to be held by the Agent for the benefit of the Banks in the Leases for the Mortgaged Property pursuant to the Assignments of Rents and Leases, (iii) the Indemnity Agreement, (iv) a perfected first priority security interest to be held by the Agent for the benefit of the Banks in the Equity Interests pursuant to the terms of the Assignment of Interests, (v) a perfected first priority lien to be held by the Agent for the benefit of the Banks in cash and Short-term Investments of the Borrower from time to time pledged to the Agent pursuant to one or more Pledge Agreements, (vi) a perfected first priority security interest to be held by the Agent for the benefit of the Banks in the collateral described in the Cash Collateral Agreement, and (vii) such additional collateral, if any , as the Agent may from time to time accept as security for the Obligations with the consent of the Majority Banks, which consent may be given or withheld in the sole discretion of the Majority Banks. The Obligations shall also be guaranteed pursuant to the Guaranty. Section 5.2. Appraisals. (a) The Agent on behalf of the Banks shall require Appraisals of each of the Mortgaged Property and the Mezzanine Property in the event that the Borrower exercises its extension option pursuant to Section 2.8, which will be ordered by the Agent and reviewed and approved by the appraisal departments of the Majority Banks, in order to determine the current Appraised Value of the Mortgaged Property and the Mezzanine Property, and the Borrower shall pay to the Agent on demand all reasonable costs of all such Appraisals; provided, however, that so long as no Default or Event of Default shall have occurred and be continuing and regulatory requirements of any Bank generally applicable to real estate loans of the category made under this Agreement as reasonably interpreted by such Bank shall not require more frequent Appraisals, and except as required with respect to the addition of Eligible Real Estate as a Mortgaged Property under Section 5.4, the Borrower shall not be required to pay for an Appraisal of a particular Mortgaged Property or Mezzanine Property except in connection with such extension request. (b) Notwithstanding the provisions of Section 5.2(a), the Agent may obtain Appraisals or perform internal studies updating and revising prior Appraisals with respect to the Mortgaged Property and the Mezzanine Property or such portion thereof as the Majority Banks shall determine, for the purpose of determining the current Appraised Value of the Mortgaged Property and the Mezzanine Property at any time following a partial condemnation of or uninsured casualty to a Mortgaged Property or a Mezzanine Property (provided that such Appraisal shall be limited to the affected property). The expense of such Appraisals and updates performed pursuant to this Section 5.2(b) shall be borne by the Borrower. Section 5.3. Release of Collateral. (a) Provided no Default or Event of Default shall have occurred hereunder and be continuing (or would exist immediately after giving effect to the transactions contemplated by this Section 5.3), the Agent shall release a Mortgaged Property or other Collateral from the lien of the Security Documents encumbering the same upon the request of the Borrower and upon the following terms and conditions (provided that a release of a Mezzanine Property shall be governed by the provisions of Section 5.3(b)): (i) The Borrower shall deliver to the Agent written notice of its desire to obtain each such release no later than fifteen (15) days prior to the date on which each such release is to be effected together with evidence satisfactory to the Agent that such release is to facilitate a sale of such Mortgaged Property or other Collateral to an unrelated third party in a bona-fide arms-length transaction for a cash sales price; and (ii) The Borrower shall submit to the Agent with such request a Compliance Certificate prepared using the financial statements of the Borrower most recently provided or required to be provided to the Agent under Section 6.4 or Section 7.4 adjusted in the best good faith estimate of the Borrower to give effect to the proposed release and demonstrating that no Default or Event of Default with respect to the covenants referred to therein shall exist after giving effect to such release; and (iii) The Borrower shall pay all reasonable costs and expenses of the Agent in connection with such release, including without limitation, reasonable attorney's fees and disbursements; and (iv) The Borrower shall pay to the Agent for the account of the Banks, which payment shall be applied to reduce the outstanding principal balance of the Loans, a release price equal to one hundred twenty percent (120%) of the Designated Collateral Value of such Collateral. In the event of a release pursuant hereto, the amount available to be borrowed against the Collateral remaining after such release shall be reduced by an amount equal to twenty percent (20%) of the Designated Collateral Value of the Collateral so released without reducing the Designated Collateral Value of the remaining Mortgaged Properties or other Collateral for purposes of calculating release prices. Notwithstanding the foregoing, (A) the vacant land described on Schedule 5.3(a) hereto comprising part of the Mortgaged Property commonly known as Point View and (B) the farm house improvements at the Mortgaged Property commonly known as 180/188 Mt. Airy Road subject to the purchase option contained in Paragraph 33 of that certain Agreement between Fidelity Union Bank, as ancillary trustee for Mellon Bank, N.A., as trustee for Westinghouse Master Trust Fund, as landlord, and Mt. Airy Associates/ Management, as tenant, dated November 8, 1982, shall be released upon the payment to the Agent for the account of the Banks an amount (without premium) equal to eighty percent (80%) of the gross sales proceeds less reasonable and customary closing costs from such sale, the Mortgaged Property commonly known as 74 Turner Street shall be released upon the payment to the Agent for the account of the Banks an amount (without premium) equal to twenty-four percent (24%) of the gross sales proceeds less reasonable and customary closing costs from such sale (the "74 Turner Release Price"), and the vacant land described on Schedule 5.3(b) hereto comprising part of the Mortgaged Property commonly known as Greenbrook Corporate Center shall be released upon the payment to the Agent for the account of the Banks an amount (without premium) equal to the amount allocated to such vacant land in the Appraisal of such Mortgaged Property (as most recently determined pursuant to this Agreement) upon the sale of such land to an unrelated third party, provided that the Borrower shall submit to the Agent with the request for the release of the Point View and Greenbrook Corporate Center land, 74 Turner Street or such improvements at Mt. Airy (A) a survey satisfactory to Agent showing such land that Borrower desires to release from the Security Documents and such other evidence as Agent may reasonably require to show the availability of unrestricted (whether by private agreement or governmental provision) direct access to public roads and utilities from all unreleased portions of such Mortgaged Property, (B) a certification from Borrower that the conveyance by Borrower of such land which is requested to be released will not violate the terms of any lease, agreement, ordinance or restriction by which such Mortgaged Property is subject (and, with respect to the release of 74 Turner Street, any lease, agreement, ordinance or restriction by which the Mezzanine Property commonly known as 128 Technology Center is subject) and, with respect to the release of 74 Turner Street, a certification from an appropriate licensed professional that the Mezzanine Property commonly known as 128 Technology Center satisfies all zoning requirements applicable thereto, including without limitation, parking requirements without utilization of 74 Turner Street, and (C) evidence of the proper subdivision of the property to be released. Such payments shall be applied to reduce the outstanding principal balance of the Loans; provided, that the Borrower shall not be required to make a payment which would reduce the principal balance below zero. Upon the release of 74 Turner Street, the Designated Collateral Value for the Mezzanine Property commonly known as 128 Technology Center shall be reduced by the amount of the 74 Turner Release Price. (b) Provided no Default or Event of Default shall have occurred hereunder or the other Loan Documents and be continuing (or would exist immediately after giving effect to the transactions contemplated by this Section 5.3), the Property Owner may from time to time release a Mezzanine Property from the lien of the Nomura Mortgage encumbering the same, and thereafter (or concurrently) sell, transfer or otherwise convey such Mezzanine Property to a third party, without thereby requiring the prepayment of the outstanding Obligations as provided in Section 3.2 upon the request of the Borrower and upon the following terms and conditions: (i) The Borrower shall deliver to the Agent written notice of Property Owner's desire to obtain each such release no later than fifteen (15) days prior to the date on which each such release is to be effected together with evidence satisfactory to the Agent that such release is to facilitate a sale of such Mezzanine Property to an unrelated third party in a bona-fide arms-length transaction for a cash sales price or a bona-fide refinance and that such release is in compliance with the requirements of the Mezzanine Mortgage Loan Documents (or has otherwise been consented to by the Mezzanine Mortgagee); and (ii) The Borrower shall submit to the Agent with such request a Compliance Certificate prepared using the financial statements of the Borrower most recently provided or required to be provided to the Agent under Section 6.4 or Section 7.4 adjusted in the best good faith estimate of the Borrower to give effect to the proposed release and demonstrating that no Default or Event of Default with respect to the covenants referred to therein shall exist after giving effect to such release; and (iii) The Borrower shall pay all reasonable costs and expenses of the Agent in connection with such release, including without limitation, reasonable attorney's fees and disbursements; and (iv) The Borrower shall pay to the Agent for the account of the Banks, which payment shall be applied to reduce the outstanding principal balance of the Loans, a release price for such property as set forth on Schedule 6.4. In the event of a release pursuant hereto, the amount available to be borrowed against the collateral remaining for the Loans after such release shall be reduced by an amount equal to twenty percent (20%) of the Designated Collateral Value of the Collateral so released without reducing the Designated Collateral Value of such remaining collateral for the purposes of calculating release prices or the release prices set forth on Schedule 6.4; provided that upon a release of the Mezzanine Property commonly known as 201 University, the amount available to be borrowed against the balance of the Mezzanine Collateral remaining for the Loan shall be reduced by the sum of $48,465.00, provided further that such reduction shall not reduce the release prices set forth on Schedule 6.4. Such payments shall be applied to reduce the outstanding principal balance of the Loans; provided, that the Borrower shall not be required to make a payment which would reduce the principal balance below zero; and (b) No release of a Mortgaged Property from the lien of the Security Documents encumbering the same or the release of any other Collateral or Mezzanine Property shall be granted by Lender prior to December 15, 1998, unless the release payment applicable thereto pursuant to Section 5.3(a) or Section 5.3(b) hereinabove shall be deposited into an account of the Agent or other cash collateral vehicle acceptable to Agent in its sole discretion, which shall be pledged to the Agent, pursuant to documentation acceptable to Agent in its sole discretion, for the account of the Banks as security for the Obligations and which shall not be applied against or reduce the Outstanding Loans, unless the Agent shall otherwise so elect in its sole discretion. Section 5.4. Additional Collateral. (a) The Borrower shall have the right subject to the terms hereof to add to the Collateral any other Real Estate that is owned by the Borrower and which is not security for any other Indebtedness. Such addition shall be completed by the execution and delivery to the Agent of each of the Eligible Real Estate Qualification Documents. Notwithstanding the foregoing, the addition of such Collateral shall not increase the Designated Collateral Value or the amounts available to be borrowed by the Borrower unless each of the following conditions shall be satisfied: (i) if such proposed collateral is Real Estate, such Real Estate shall be Eligible Real Estate; (ii) no Default or Event of Default shall have occurred or exist or would occur or exist if such asset were included within the Collateral and the requested Loan fully funded, including, without limitation, under Section 9.1; (iii) the Borrower shall have executed and delivered to the Agent all Eligible Real Estate Qualification Documents or other instruments, documents, or agreements, including Uniform Commercial Code financing statements, as the Agent shall deem necessary or desirable to perfect a first priority security interest in, or lien on, such Collateral, all of which instruments, documents or agreements shall be in form and substance satisfactory to the Agent in its sole discretion; and (iv) the Agent, on behalf of the Banks, shall have received any other appraisals, surveys, rent rolls, environmental reports, title insurance reports, certificates, opinions or other information or documentation with respect to the Collateral as the Agent, in its sole discretion, shall deem necessary or desirable. The Borrower acknowledges that the decision of the Majority Banks to grant or withhold their consent to the acceptance of additional Collateral under this Section 5.4 shall be based entirely on such factors as the Majority Banks deem relevant in their sole discretion, including, without limitation, those enumerated in clauses (i) through (iv) hereinabove, and such consent may be granted or withheld solely at the discretion of the Majority Banks; provided, however, that if the such Real Estate is a Stabilized Property, acceptance of such Real Estate shall be subject only to the satisfaction of the terms of Section 5.4(a)(ii), (iii) and (iv). (b) In connection with each such addition, the Borrower shall pay to the Agent the reasonable out-of-pocket costs and expenses (including reasonable attorney's fees and expenses) of the Agent in connection with the addition of such Collateral. (c) In no event shall the acquisition cost of any Mortgaged Property or the Equity Interests exceed $40,000,000.00. Section 5.5. Holdback. The Banks have required that Borrower reserve from the amounts available to be borrowed under this Agreement an amount necessary to cover (a) eighty percent (80%) of the corporate general and administrative costs of the Borrower, and (b) eighty percent (80%) of the operating expenses for each Non-Stabilized Property for which net operating income from such property is insufficient to cover (such amount pursuant to clause (b) is hereinafter referred to as the "Negative Carry") as reasonably determined by the Borrower subject to the approval of the Agent in an amount to cover all such costs for a period of eighteen (18) months; provided that in the event that as of any date of determination such amount shall not have been determined as so provided, then such amount shall be as reasonably determined by Agent (such amount is hereafter referred to as the "Holdback"). Amounts reserved under the Holdback shall not bear interest until disbursed. The Borrower may request a disbursement of amounts reserved pursuant to the Holdback to pay such costs as such costs are incurred, but at no time shall the amount of the Holdback be less than an amount sufficient to cover such cost and expenses for a period of six (6) months, and the Borrower shall take such actions as are necessary (including the prepayment of the Loan to reinstate the Holdback to such minimum level if it should ever fall below such level). The Holdback described in Section 5.5(a) shall be allocated pro rata among all Non-Stabilized Properties that also have a Holdback described in Section 5.5(b). At such time as a Non-Stabilized Property shall become a Stabilized Property, the Holdback for such Non-Stabilized Property shall be eliminated, provided that any Holdback for corporate general and administrative costs shall be re-allocated among the remaining Non-Stabilized Properties that also have a Holdback described in Section 5.5(b) pro rata based upon their respective Designated Collateral Values. As of the date of this Agreement, the Holdback is $3,957,601.60. The Holdback shall be determined by the Agent for each additional Mortgaged Property that is included as Collateral which is a Non-Stabilized Property at the time such Mortgaged Property is added to the Collateral. At such time as the Borrower shall deliver to the Agent evidence satisfactory to the Agent that the "Holdback" under the Secured Mezzanine Loan Agreement is no longer required pursuant to the terms of the last sentence of Section 5.5 thereof, the Holdback shall no longer be required under this Agreement. Section 5.6. Disbursement of Tenant Improvement Reserve. Amounts from the Tenant Improvement Reserve shall be available to be disbursed hereunder for Tenant Improvement Projects and Leasing Commissions. With respect to Loan Requests for Loans to fund Tenant Improvement Projects or Leasing Commissions, Loans shall be made on the following basis: (a) prior to any disbursements from the Tenant Improvement Reserve, the Borrower shall submit to the Agent for approval by the Majority Banks the proposed Lease to which the Tenant Improvement Project and/or Leasing Commission relate and a separate budget for such proposed Tenant Improvement Project and Leasing Commission (a "Building Capital Project Budget") setting forth the total cost required to construct the Tenant Improvement Project to be constructed by the Borrower pursuant to such Lease (such cost is hereinafter referred to as the "Total Cost") and the Leasing Commissions with respect to such Lease; (b) upon written approval by the Majority Banks in their sole and absolute discretion of a Lease and the corresponding Building Capital Project Budget, the Borrower may thereafter submit Loan Requests for Tenant Improvement Projects with respect to the applicable Mortgaged Property which Loan Requests shall separately identify the Mortgaged Property and the Tenant Improvement Project for which funds are requested and shall identify that portion of the Total Cost that has been drawn and the amount of the Total Cost remaining to be drawn (separately identifying amounts drawn under this Agreement and amounts drawn by WWP under the Secured Mezzanine Loan Agreement) and a certification that the amount of the Total Cost remaining to be drawn (including amounts available to be drawn pursuant to the Secured Mezzanine Loan Agreement with respect thereto) together with equity funds to be provided by Borrower will be sufficient to cause the Tenant Improvement Project to be completed in full; provided that prior to the initial disbursement with respect to a Tenant Improvement Project, the Borrower shall provide to the Agent evidence satisfactory to the Agent that Borrower has paid from equity twenty-five percent (25%) of the amounts identified in the Building Capital Project Budget for such Tenant Improvement Project; (c) upon compliance with all terms and conditions set forth in this Agreement with respect to advances of the Loans including, without limitation, the terms and conditions in Section 2.6 and this Section 5.6, Loan Requests for Tenant Improvement Projects for work in place will be funded in accordance with the applicable Building Capital Project Budget; provided, however, if the Agent in its sole and absolute discretion determines at any time that the cost of completing a Tenant Improvement Project is in excess of the amount remaining with respect thereto in the Building Capital Project Budget and equity funds provided by Borrower, no additional advances with respect to such Tenant Improvement Project shall be made unless the Borrower shall provide such funds as the Agent in its sole and absolute discretion determines are necessary to fully complete such Tenant Improvement Project in accordance with the terms of this Section 5.6; (d) amounts disbursed for any approved Tenant Improvement Project shall be an amount not to exceed, under any circumstances, the costs and expenses actually incurred by the Borrower with respect thereto notwithstanding the approval by the Agent of the Total Cost thereof or the amounts set forth in any Building Capital Project Budget with respect thereto; (e) the Borrower shall construct each Tenant Improvement Project in a good and workmanlike manner and in compliance with all applicable laws and complete the approved Tenant Improvement Project within the time periods and as required by, and in accordance with, the Lease with respect thereto; (f) amounts disbursed for Leasing Commissions shall be an amount not to exceed, under any circumstances, the commission actually incurred by Borrower which is reasonable and customary for a licensed real estate broker in the market area in which the Mortgaged Property is located; (g) with respect to a Loan Request to pay any portion of the Leasing Commissions, Borrower shall provide evidence as reasonably requested by the Agent that such Leasing Commissions are then due and payable or have been properly paid; provided that prior to the initial disbursement with respect to a Leasing Commission, the Borrower shall provide to the Agent evidence satisfactory to the Agent that Borrower has paid from equity twenty- five percent (25%) of the amounts identified in the Building Capital Project Budget for such Leasing Commission; and (h) with respect to each Loan Request for Tenant Improvement Projects or Leasing Commissions, the Borrower shall provide the Agent with such additional documents, certificates, lien waivers and affidavits as the Agent may reasonably request. Section 6. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to the Agent and the Banks as follows. Section 6.1. Corporate Authority, Etc. (a) Incorporation; Good Standing. The Borrower is a limited liability company duly organized pursuant to its organizational documents and amendments thereto filed with the Secretary of State of Delaware and is validly existing and in good standing under the laws of the State of Delaware. WWP is a limited liability company duly organized pursuant to its organizational documents and amendments thereto filed with the Secretary of State of Delaware and is validly existing and in good standing under the laws of the State of Delaware. Wellsford Commercial is a Maryland real estate investment trust duly organized pursuant to its organizational documents and amendments thereto filed with the Secretary of State of Maryland and is validly existing and in good standing under the laws of the State of Maryland. WHWEL is a limited partnership duly organized pursuant to its organizational documents and amendments thereto filed with the Secretary of State of Delaware and is validly existing and in good standing under the laws of the State of Delaware. The Member is a limited liability company duly organized pursuant to its organizational documents and amendments thereto filed with the Secretary of State of Delaware and is validly existing and in good standing under the laws of the State of Delaware. Manager is a limited liability company duly organized pursuant to its organizational documents and amendments thereto filed with the Secretary of State of Delaware and is validly existing and in good standing under the laws of the State of Delaware. Property Owner is a limited liability company duly organized pursuant to its organizational documents and amendments thereto filed with the Secretary of Commonwealth of Massachusetts and is validly existing and in good standing under the laws of the Commonwealth of Massachusetts. Each of the Borrower, the Member, the Property Owner and the Manager (i) has all requisite power to own its property and conduct its business as now conducted and as presently contemplated, and (ii) is in good standing as a foreign entity and is duly authorized to do business in the jurisdictions where the Mortgaged Property or other Collateral held by it, or, as to Manager, Member and Property Owner, the Mezzanine Property and other Mezzanine Collateral held by it, is located and in each other jurisdiction where a failure to be so qualified in such other jurisdiction could have a materially adverse effect on the business, assets or financial condition of such Person. (b) Subsidiaries. Without limiting the foregoing, each of the Subsidiaries of the Borrower and the Guarantor (i) is a corporation, limited partnership, limited liability company or trust duly organized under the laws of its State of organization and is validly existing and in good standing under the laws thereof, (ii) has all requisite power to own its property and conduct its business as now conducted and as presently contemplated and (iii) is in good standing and is duly authorized to do business in each jurisdiction where Mortgaged Property, Mezzanine Property or other Collateral held by it is located and in each other jurisdiction where a failure to be so qualified could have a materially adverse effect on the business, assets or financial condition of the Borrower or such Subsidiary or any Guarantor. Neither the Property Owner, Manager nor Member has any Subsidiaries, other than those which own their respective interests in Property Owner. (c) Authorization. The execution, delivery and performance of this Agreement and the other Loan Documents to which any of the Borrower, the Member, the Manager, the Property Owner or the Guarantor are or are to become a party and the transactions contemplated hereby and thereby (i) are within the authority of the such Person, (ii) have been duly authorized by all necessary proceedings on the part of such Person, (iii) do not and will not conflict with or result in any breach or contravention of any provision of law, statute, rule or regulation to which such Person is subject or any judgment, order, writ, injunction, license or permit applicable to such Person, (iv) do not and will not conflict with or constitute a default (whether with the passage of time or the giving of notice, or both) under any provision of the articles of incorporation , bylaws, or other charter documents of, or any agreement or other instrument binding upon, such Person, or any of its properties, and (v) do not and will not result in or require the imposition of any lien or other encumbrance on any of the properties, assets or rights of any such Person (other than those in favor of the Agent pursuant to the terms of the Loan Documents). (d) Enforceability. The execution and delivery of this Agreement and the other Loan Documents to which any of the Borrower, the Member, the Manager, the Property Owner or the Guarantor are or are to become a party are valid and legally binding obligations of such Person enforceable in accordance with the respective terms and provisions hereof and thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought. Section 6.2. Governmental Approvals. The execution, delivery and performance by the Borrower, the Member, the Manager, the Property Owner and the Guarantor of this Agreement and the other Loan Documents, as applicable, and the transactions contemplated hereby and thereby do not require the approval or consent of, or filing with, any governmental agency or authority other than those already obtained and the filing of the Security Documents in the appropriate records office with respect thereto. Section 6.3. Title to Properties; Leases. Except as indicated on Schedule 6.3 hereto, the Borrower owns all of the assets reflected in the balance sheet of the Borrower as of the Balance Sheet Date or acquired since that date (except property and assets sold or otherwise disposed of in the ordinary course of business since that date), subject to no rights of others, including any mortgages, leases, conditional sales agreements, title retention agreements, liens or other encumbrances except Permitted Liens. The Property Owner owns all of the assets reflected in the balance sheet of the Property Owner dated as of the Balance Sheet Date, subject to no rights of others, including any rights of first refusal, right of first offer or other right to acquire, mortgages, leases, conditional sales agreements, title retention agreements, liens or other encumbrances, except the Mezzanine Mortgage Loan, the Permitted Liens, the rights of tenants as tenants only under the Leases reflected in the Rent Rolls for the Mezzanine Property and the right of first offer with respect to a sale of 201 University Avenue, Westwood Massachusetts. Section 6.4. Financial Statements. The Borrower has furnished to each of the Banks: (a) an unaudited balance sheet and an unaudited statement of income and cash flows of Borrower as of the Balance Sheet Date certified by the Borrower's chief financial or chief accounting officer to have been prepared in accordance with generally accepted accounting principles and to fairly present the financial condition of the Borrower as at the close of business on the dates thereof (subject to year-end adjustments); (b) an unaudited consolidated statement of operating income for the Mortgaged Property satisfactory in form to the Agent and certified by the Borrower's chief financial or accounting officer as fairly presenting the operating income for such parcels for such periods; and (c) the balance sheet of the Property Owner dated as of the Balance Sheet Date and an unaudited consolidated statement of operating income for the Mezzanine Property satisfactory in form to the Agent and certified by the Borrower's chief financial or accounting officer as fairly presenting the operating income for such parcels for such periods. Such balance sheet and statements of income, stockholder's equity and cash flows have been prepared in accordance with generally accepted accounting principles and fairly present the financial condition of the Borrower and the Property Owner as of such dates and the results of the operations of the Borrower, the Mortgaged Property, the Property Owner and the Mezzanine Property for such periods. There are no liabilities, contingent or otherwise, of the Borrower or the Property Owner involving material amounts not disclosed in said financial statements and the related notes thereto as of their respective dates. The all-in acquisition costs of the Mortgaged Properties and the Mezzanine Property, the Designated Collateral Value as of the date hereof allocable thereto and the classification of such property as a Stabilized Property or Non-Stabilized Property are as set forth on Schedule 6.4 hereto. Section 6.5. No Material Adverse Changes. Since the Balance Sheet Date, there has occurred no materially adverse change in the financial condition or business of the Borrower, as shown on or reflected in the balance sheet of the Borrower, as of the Balance Sheet Date, or its consolidated statement of income or cash flows for the fiscal year then ended, other than changes in the ordinary course of business that have not had any materially adverse effect either individually or in the aggregate on the business or financial condition of the Borrower. There has occurred no materially adverse change in the financial condition or business of the Property Owner as shown on or reflected in the balance sheet of the Property Owner as of the Balance Sheet Date, or its statement of income or cash flows for the fiscal year then ended, other than changes in the ordinary course of business that have not had any materially adverse effect either individually or in the aggregate on the business or financial condition of the Property Owner. Section 6.6. Franchises, Patents, Copyrights, Etc. The Borrower, the Member, the Property Owner, the Manager and the Guarantor possess all franchises, patents, copyrights, trademarks, trade names, service marks, licenses and permits, and rights in respect of the foregoing, adequate for the conduct of their business substantially as now conducted without known conflict with any rights of others. Section 6.7. Litigation. Except as stated on Schedule 6.7 there are no actions, suits, proceedings or investigations of any kind pending or threatened against the Borrower, the Member, the Property Owner, the Manager, the Guarantor, the Mortgaged Property, the Mezzanine Collateral or the Mezzanine Property before any court, tribunal or administrative agency or board that, if adversely determined, might, either in any case or in the aggregate, materially adversely affect the properties, assets, financial condition or business of such Person or materially impair the right of such Person to carry on business substantially as now conducted by it, or result in any liability not adequately covered by insurance, or for which adequate reserves are not maintained on the balance sheet of such Person, or which question the validity of this Agreement or any of the other Loan Documents or any of the Mezzanine Mortgage Loan Documents, any action taken or to be taken pursuant hereto or thereto or any lien or security interest created or intended to be created pursuant hereto or thereto, or which will adversely affect the ability of such Person to pay and perform the Obligations in the manner contemplated by this Agreement and the other Loan Documents. There are no judgments outstanding against or affecting the Borrower, the Guarantor or the Mortgaged Property in excess of $250,000.00, or against or affecting the Member, the Manager, the Property Owner, the Mezzanine Collateral or the Mezzanine Property. Section it u No Materially Adverse Contracts, Etc. None of the Borrower, the Member, the Property Owner, the Manager or the Guarantor is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation that has or is expected in the future to have a materially adverse effect on the business, assets or financial condition of any such Person. None of the Borrower, the Member, the Property Owner, the Manager or the Guarantor is a party to any contract or agreement that has or is expected, in the judgment of the officers of such Person, to have any materially adverse effect on the business of any such Person. Section 6.9. Compliance with Other Instruments, Laws, Etc. None of the Borrower, the Member, the Property Owner, the Manager or the Guarantor is in violation of any provision of its charter or other organizational documents, by-laws, or any agreement or instrument to which it may be subject or by which it or any of its properties may be bound or any decree, order, judgment, statute, license, rule or regulation, in any of the foregoing cases in a manner that could result in the imposition of substantial penalties or materially and adversely affect the financial condition, properties or business of such Person. Section 6.10. Tax Status. Each of the Borrower, the Member, the Property Owner, the Manager and the Guarantor (a) has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (b) has paid all taxes and other governmental assessments and charges shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and by appropriate proceedings and (c) has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers or members of each of the Borrower, the Member, the Property Owner, the Manager and the Guarantor know of no basis for any such claim. Section 6.11. No Event of Default. No Default or Event of Default has occurred and is continuing. Section 6.12. Holding Company and Investment Company Acts. None of the Borrower, the Member, the Property Owner, the Manager or the Guarantor is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935; nor is it an "investment company", or an "affiliated company" or a "principal underwriter" of an "investment company", as such terms are defined in the Investment Company Act of 1940. Section 6.13. Absence of UCC Financing Statements, Etc. Except with respect to Permitted Liens, the Mezzanine Mortgage Loan Documents and the Loan Documents, there is no financing statement, security agreement, chattel mortgage, real estate mortgage or other document filed or recorded with any filing records, registry, or other public office, that purports to cover, affect or give notice of any present or possible future lien on, or security interest or security title in, any property of the Borrower, the Member, the Property Owner or the Manager or rights thereunder. Section 6.14. Setoff, Etc. The Collateral and the rights of the Agent and the Banks with respect to the Collateral are not subject to any setoff, claims, withholdings or other defenses. The Borrower is the owner of the Collateral free from any lien, security interest, encumbrance or other claim or demand, except Permitted Liens. Section 6.15. Certain Transactions. Except as disclosed in writing to the Agent, and except with respect to that certain Property Management Agreement between Property Owner and Northeast Real Estate Services LLC, dated May 15, 1998, none of the members, officers, trustees, directors, or employees of the Borrower, the Member, the Property Owner, the Manager or the Guarantor is a party to any transaction with each other (other than for services as employees, officers and directors and transactions solely between Guarantors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, trustee, director or such employee or, to the knowledge of such Person, any corporation, partnership, trust or other entity in which any member, officer, trustee, director, or any such employee has a substantial interest or is a member, officer, director, trustee or partner. Section 6.16. Employee Benefit Plans. The Borrower, the Member, the Property Owner, the Manager and each ERISA Affiliate are in compliance in all material respects with ERISA. There has been no Reportable Event with respect to any Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan. There has been no institution of proceedings or any other action by PBGC, the Borrower, the Member, the Property Owner, the Manager or any ERISA Affiliate to terminate or withdraw or partially withdraw from any such Plan under any circumstances which could lead to material liabilities to PBGC or, with respect to a Multiemployer Plan, the "Reorganization" or "Insolvency" (as each such term is defined in ERISA) of any such Plan. To the best of the Borrower's knowledge, no "prohibited transaction" (within the meaning of Section 406 of ERISA or Section 4975 of the Code) has occurred with respect to any such Plan, and neither the consummation of the transactions provided for in this Agreement and compliance by the Borrower, the Member, the Property Owner, the Manager and the Guarantor with the provisions hereof and the other Loan Documents, nor the consummation of the transactions provided for in the Mezzanine Mortgage Loan Documents and compliance by the Property Owner with the provisions thereof, will involve any prohibited transaction. Section 6.17. ERISA Taxes. None of the Borrower, the Member, the Property Owner, the Manager nor any ERISA Affiliate thereof is currently and the Borrower has no reason to believe that any such Person or any ERISA Affiliate will become subject to any liability (other than routine expenses or contributions relating to the Plans set forth on Schedule 6.17, if timely paid), tax or penalty whatsoever to any person whomsoever, which liability, tax or penalty is directly or indirectly related to any Plans set forth on Schedule 6.17 including, but not limited to, any penalty or liability arising under Title I or Title IV of ERISA, any tax or penalty resulting from a loss of deduction under Sections 404 and 419 of the Code, or any tax or penalty under Chapter 43 of the Code, except such liabilities, taxes or penalties (when taken as a whole) as will not have a material adverse effect on such Person or upon its financial condition, assets, business, operations, liabilities or prospects. Section 6.18. Plan Payments. The Borrower, the Member, the Property Owner, the Manager and each ERISA Affiliate has made full and timely payment of all amounts (i) required to be contributed under the terms of each Plan set forth on Schedule 6.17 and applicable law and (ii) required to be paid as expenses of each Plan set forth on Schedule 6.17. No Plan set forth on Schedule 6.17 would have an "amount of unfunded benefit liabilities" (as defined in Section 4001(a)(18) of ERISA) if such Plan were terminated as of the date on which this representation and warranty is made. Section 6.19. Regulations U and X. No portion of any Loan is to be used for the purpose of purchasing or carrying any "margin security" or "margin stock" as such terms are used in Regulations U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224. Section 6.20. Environmental Compliance. The Borrower or an affiliate or agent thereof has conducted or caused to be conducted Phase I environmental site assessments with respect to the past usage and condition of the Mortgaged Property and the Mezzanine Property and the operations conducted thereon, and is familiar with the present condition and usage of the Mortgaged Property and the Mezzanine Property and the operations conducted thereon and, based upon such reports and knowledge, makes the following representations and warranties. (a) With respect to the Mortgaged Property and the Mezzanine Property, none of the Borrower, the Member, the Property Owner, the Manager or the Guarantor or any operator of the Mortgaged Property or the Mezzanine Property, or any operations thereon is in violation, or alleged violation, of any judgment, decree, order, law, license, rule or regulation pertaining to environmental matters, including without limitation, those arising under the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any state or local statute, regulation, ordinance, order or decree relating to the environment (hereinafter "Environmental Laws"), which violation involves the Mortgaged Property or the Mezzanine Property, and would have a material adverse effect on the environment or the business, assets or financial condition of any such Person. (b) None of the Borrower, the Member, the Property Owner, the Manager or the Guarantor has received any notice from any third party including, without limitation, any federal, state or local governmental authority, (i) that it has been identified by the United States Environmental Protection Agency ("EPA") as a potentially responsible party under CERCLA with respect to a site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B (1986); (ii) that any hazardous waste, as defined by 42 U.S.C. Section 9601(5), any hazardous substances as defined by 42 U.S.C. Section 9601(14), any pollutant or contaminant as defined by 42 U.S.C. Section 9601(33) or any toxic substances, oil or hazardous materials or other chemicals or substances regulated by any Environmental Laws ("Hazardous Substances") which it has generated, transported or disposed of have been found at any site at which a federal, state or local agency or other third party has conducted or has ordered that such Person, conduct a remedial investigation, removal or other response action pursuant to any Environmental Law; or (iii) that it is or shall be a named party to any claim, action, cause of action, complaint, or legal or administrative proceeding (in each case, contingent or otherwise) arising out of any third party's incurrence of costs, expenses, losses or damages of any kind whatsoever in connection with the release of Hazardous Substances. (c) With respect to the Mortgaged Property and the Mezzanine Property, except as specifically set forth in the environmental site assessment reports for the initial Mortgaged Property and the Mezzanine Property, each of which has been provided to the Agent on or before the date hereof or, in the case of Mortgaged Property acquired after the date hereof, the environmental site assessment reports with respect thereto provided to the Agent under Section 5.4: (i) no portion of the Mortgaged Property or the Mezzanine Property has been used for the handling, processing, storage or disposal of Hazardous Substances except in accordance with applicable Environmental Laws, and no underground tank or other underground storage receptacle for Hazardous Substances is located on any portion of the Mortgaged Property or the Mezzanine Property; (ii) in the course of any activities conducted by the Borrower, the Member, the Property Owner, the Manager, the Guarantor or the operators of its properties, no Hazardous Substances have been generated or are being used on the Mortgaged Property or the Mezzanine Property except in the ordinary course of business and in accordance with applicable Environmental Laws; (iii) there has been no past or present releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, disposing or dumping (a "Release") or threatened Release of Hazardous Substances on, upon, into or from the Mortgaged Property or the Mezzanine Property, or, to the best of the Borrower's knowledge, on, upon, into or from the other properties of Borrower, the Property Owner, the Manager or the Guarantor, which Release would have a material adverse effect on the value of any of the Mortgaged Property or the Mezzanine Property or adjacent properties or the environment; (iv) to the best of the Borrower's knowledge, there have been no Releases on, upon, from or into any real property in the vicinity of any of the Mortgaged Property or the Mezzanine Property which, through soil or groundwater contamination, may have come to be located on, and which would have a material adverse effect on the value of, the Mortgaged Property or the Mezzanine Property; and (v) to the best of Borrower's knowledge and belief, any Hazardous Substances that have been generated on any of the Mortgaged Property or the Mezzanine Property have been transported off-site only by carriers having an identification number issued by the EPA or approved by a state or local environmental regulatory authority having jurisdiction regarding the transportation of such substance and, to the best knowledge of the Borrower without independent investigation, treated or disposed of only by treatment or disposal facilities maintaining valid permits as required under all applicable Environmental Laws, which transporters and facilities have been and are, to the best of the Borrower's knowledge, operating in compliance with such permits and applicable Environmental Laws. (d) None of the Borrower, the Member, the Property Owner, the Manager, the Guarantor, the Mortgaged Property nor the Mezzanine Property is required by any applicable Environmental Law to perform Hazardous Substances site assessments, or remove or remediate Hazardous Substances, or give notice to any governmental agency or to record or deliver to other Persons an environmental disclosure document or statement by virtue of the transactions set forth herein and contemplated hereby, or as a condition to the recording of the Security Deed or to the effectiveness of any other transactions contemplated hereby. Section 6.21. Subsidiaries. Schedule 6.21 sets forth all of the Subsidiaries of the Borrower. The form and jurisdiction of organization of each of the Subsidiaries, and the Borrower's ownership interest therein, is set forth in said Schedule 6.21. Section 6.22. Leases. The Borrower has delivered to the Agent true copies of the Leases and any amendments thereto relating to the Mortgaged Property and the Mezzanine Property. Section 6.23. Loan Documents. All of the representations and warranties made by or on behalf of the Borrower, the Member, the Property Owner, the Manager or the Guarantor in the Loan Documents to which it is a party or any document or instrument delivered to the Agent or the Banks pursuant to or in connection with any of such Loan Documents are true and correct in all material respects, and no such Person has failed to disclose such information as is necessary to make such representations and warranties not misleading. Section 6.24. Mortgaged Property and Mezzanine Property. The Borrower makes the following representations and warranties concerning each Mortgaged Property and Mezzanine Property: (a) Off-Site Utilities. All water, sewer, electric, gas, telephone and other utilities necessary for the use and operation of the Mortgaged Property and the Mezzanine Property are installed to the property lines of the Mortgaged Property and the Mezzanine Property through dedicated public rights-of-way or through perpetual private easements approved by the Agent with respect to which, in the case of the Mortgaged Property, the applicable Security Deed creates a valid and enforceable first lien and, except in the case of drainage facilities, are connected to the Building located thereon with valid permits and are adequate to service the Building in compliance with applicable law. (b) Access, Etc. The streets abutting the Mortgaged Property and the Mezzanine Property are dedicated and accepted public roads, to which the Mortgaged Property and the Mezzanine Property have direct access by trucks and other motor vehicles and by foot, or are perpetual private ways (with direct access by trucks and other motor vehicles and by foot to public roads) to which the Mortgaged Property and the Mezzanine Property have direct access approved by the Agent and with respect to which, in the case of the Mortgaged Property, the applicable Security Deed creates a valid and enforceable first lien. All private ways providing access to the Mortgaged Property and the Mezzanine Property are zoned in a manner which will permit access to the Building over such ways by trucks and other commercial and industrial vehicles. or Independent Building. Each Building is fully independent in all respects including, without limitation, in respect of structural integrity, heating, ventilating and air conditioning, plumbing, mechanical and other operating and mechanical systems, and electrical, sanitation and water systems, all of which are connected directly to off-site utilities located in public streets or ways or through insured perpetual private easements approved by the Agent. Each Building is located on a lot which is separately assessed for purposes of real estate tax assessment and payment. Each Building, all Building Service Equipment and all paved or landscaped areas related to or used in connection with each Building are, except as specifically disclosed on a Survey delivered to the Agent prior to the date hereof and except as disclosed in the Condominium Documents with respect to the Condominium only, located wholly within the perimeter lines of the lot or lots on which the Mortgaged Property or Mezzanine Property is located. Property Owner has not made any additions, alterations or improvements to the Mezzanine Property, nor have any other changes occurred with respect to the Mezzanine Property, from the last revision date of the survey of the Mezzanine Property delivered by Borrower to the Agent that in accordance with good surveying practices should be disclosed on an as-built survey of the Mezzanine Property. (d) Condition; No Asbestos. Except as may otherwise be specifically disclosed in any written engineering report furnished or caused to be furnished by the Borrower to the Agent prior to the date hereof, each Building is structurally sound, in good repair and free of material defects in materials and workmanship. All major building systems located within each Building, including without limitation heating, ventilating and air conditioning, electrical, sprinkler, plumbing or other mechanical systems, are in good working order and condition. No asbestos is located in or on any Building, except for nonfriable asbestos or contained friable asbestos which is being monitored and/or remediated in accordance with the recommendations of an Environmental Engineer. (e) Compliance with Law. Except as may otherwise be specifically disclosed on the face of any certificate of occupancy delivered to the Agent prior to the date hereof, each Building as presently constructed, used, occupied and operated does not violate any applicable federal or state law or governmental regulation, or any local ordinance, order or regulation, including but not limited to laws, regulations, or ordinances relating to zoning, building use and occupancy, subdivision control, fire protection, health, sanitation, safety, handicapped access, historic preservation and protection, tidelands, wetlands, flood control and Environmental Laws. Each Building complies with applicable zoning laws and regulations and is not a so-called non-conforming use. The zoning laws permit use of each Building for its current use. There is such number of parking spaces on the lot or lots on which each Building is located as is adequate under the zoning laws and regulations to permit use of each Building for its current use. (f) No Required Consents, Permits, Etc. None of the Borrower, the Member, the Property Owner, the Manager or the Guarantor has received notice of, or has knowledge of, any approvals, consents, licenses, permits, utility installations and connections (including, without limitation, drainage facilities), curb cuts and street openings, required by applicable laws, rules, ordinances or regulations or any agreement affecting the Mortgaged Property or the Mezzanine Property for the maintenance, operation, servicing and use of the Mortgaged Property or the Mezzanine Property or the Building for its current use which have not been granted, effected, or performed and completed (as the case may be), or any fees or charges therefor which have not been fully paid, or which are no longer in full force and effect. No such approvals, consents, permits or licenses (including, without limitation, any railway siding agreements) will terminate, or become void or voidable or terminable on any foreclosure sale of the Mortgaged Property pursuant to the Security Deed. To the best knowledge of the Borrower, there are no outstanding notices, suits, orders, decrees or judgments relating to zoning, building use and occupancy, fire, health, sanitation or other violations affecting, against, or with respect to, the Mortgaged Property or the Mezzanine Property or any part thereof. (g) Insurance. None of the Borrower, the Member, the Property Owner, the Manager or the Guarantor has received any notice from any insurer or its agent requiring performance of any work with respect to the Mortgaged Property or the Mezzanine Property or canceling or threatening to cancel any policy of insurance, and the Mortgaged Property and the Mezzanine Property comply with the requirements of all carriers of insurance on the Mortgaged Property and the Mezzanine Property. (h) Real Property Taxes; Special Assessments. There are no unpaid or outstanding real estate or other taxes or assessments on or against the Mortgaged Property or the Mezzanine Property or any part thereof which are payable by the Borrower or the Property Owner or any prior owner of the Mortgaged Property or the Mezzanine Property (except only real estate taxes or other taxes or assessments, that are not yet due and payable). The Borrower has delivered or caused to be delivered to the Agent, or has requested from the appropriate authorities and will deliver to the Agent promptly upon receipt, true and correct copies of real estate tax bills for the Mortgaged Property and the Mezzanine Property for the past three fiscal tax years. No abatement proceedings are pending with reference to any real estate taxes assessed against the Mortgaged Property or the Mezzanine Property. There are no betterment assessments or other special assessments presently pending with respect to any portion of the Mortgaged Property or the Mezzanine Property, and none of the Borrower, the Member, the Property Owner, the Manager or the Guarantor has received any notice of any such special assessment being contemplated. (i) Historic Status. No Building is a historic structure or landmark and no Building, Mortgaged Property or Mezzanine Property is located within any historic district pursuant to any federal, state or local law or governmental regulation. (j) Eminent Domain; Casualty. There are no pending eminent domain proceedings against the Mortgaged Property or Mezzanine Property or any part thereof, and, to the knowledge of the Borrower, no such proceedings are presently threatened or contemplated by any taking authority. No Mortgaged Property, Mezzanine Property or Building nor any part thereof is now damaged or injured as a result of any fire, explosion, accident, flood or other casualty. (k) Leases. An accurate and complete Rent Roll and summary thereof in a form reasonably satisfactory to the Agent as of the date of inclusion of each Mortgaged Property or Mezzanine Property (or such other recent date as may be acceptable to the Agent) with respect to all Leases of any portion of the Mortgaged Property and the Mezzanine Property has been provided to the Agent. The Leases reflected on such Rent Roll constitute as of the date thereof the sole agreements and understandings relating to leasing or licensing of space at such Mortgaged Property or Mezzanine Property and in the Building relating thereto. There are no occupancies, rights, privileges or licenses in or to any Mortgaged Property or Mezzanine Property or portion thereof other than pursuant to the Leases reflected in Rent Rolls previously furnished to the Agent for such Mortgaged Property or Mezzanine Property. Except as set forth in each Rent Roll, the Leases reflected therein are in full force and effect in accordance with their respective terms, without any payment default or any other material default thereunder, nor are there any defenses, counterclaims, offsets, concessions or rebates available to any tenant thereunder, and none of the Borrower, the Member, the Property Owner, the Manager or the Guarantor has given or made any notice of any payment or other material default, or any claim, which remains uncured or unsatisfied, with respect to any of the Leases. The Rent Rolls furnished to the Banks accurately and completely set forth all rents payable by and security, if any, deposited by tenants, no tenant having paid more than one month's rent in advance. The Borrower has reviewed the estoppel certificates delivered by the tenants of the Mortgaged Property and the Mezzanine Property to the Agent and such estoppel certificates as of the date thereof are true and correct in all material respects. Except as otherwise set forth in Schedule A-5 to the Contribution Agreement, all tenant improvements or work to be done, furnished or paid for by the Borrower, the Member, the Property Owner, the Manager or the Guarantor or credited or allowed to a tenant, for, or in connection with, the Building pursuant to any Lease has been completed and paid for or provided for in a manner satisfactory to the Agent. No material leasing, brokerage or like commissions, fees or payments are due from the Borrower, the Member, the Property Owner, the Manager or the Guarantor in respect of the Leases. (l) Management Agreements. Borrower has delivered to Agent true, correct and complete copies of the Management Agreements for the Mortgaged Property and the Mezzanine Property. To the best knowledge of the Borrower, there are no material claims or any bases for material claims in respect of the Mortgaged Property or the Mezzanine Property or its operation by any party to any Management Agreement. (m) Other Material Real Property Agreements; No Options. There are no material agreements pertaining to the Mortgaged Property, the Mezzanine Property or any Building thereon or the operation or maintenance of any thereof other than as described in this Agreement (including the Schedules hereto) or otherwise disclosed in writing to the Agent by the Borrower; and no person or entity has any right or option to acquire the Mortgaged Property, the Mezzanine Property or any Building thereon or any portion thereof or interest therein (other than the right of first offer of Computer Associates set forth in its lease with respect to 201 University Avenue, the option to purchase the farmhouse improvements at the Mortgaged Property commonly known as 180/188 Mt. Airy Road as described in Section 5.3(a)(iv), and the option of JVC Americas Corp. to acquire approximately 2.5 acres of the Mortgaged Property commonly known as 1800 Valley). All service agreements with respect to the Mortgaged Property and the Mezzanine Property are terminable upon thirty (30) days notice with no penalty or premium or as otherwise disclosed in writing to the Agent. Section 6.25. Mezzanine Mortgage Loan Documents. The Borrower hereby restates and reaffirms each of the representations and warranties made by the Property Owner set forth in the Mezzanine Mortgage Loan Documents (including without limitation those set forth in Section 4.1 of the Mezzanine Mortgage Loan Agreement and Paragraph 2 of the Nomura Mortgages) as if the same were more fully set forth herein and were made to the Agent and the Banks herein as of the date hereof; provided, however, that (i) any references in the Mezzanine Mortgage Loan Documents to "Permitted Encumbrances" shall for the purposes hereof be a reference to Permitted Liens and (ii) the "Rent Rolls" referred to in subsection 4.1(aa) of the Mezzanine Mortgage Loan Agreement shall for the purposes hereof be deemed to mean the latest Rent Rolls for the Mezzanine Properties heretofore delivered by Borrower to Agent. Section 6.26. Brokers. None of the Borrower, the Property Owner, the Manager, the Member or the Guarantor has engaged or otherwise dealt with any broker, finder or similar entity in connection with this Agreement or the Loans contemplated hereunder. Section 6.27. Fair Consideration. The Borrower (and, as applicable, the Guarantor), by receiving the benefits under this Agreement and the other Loan Documents is receiving "reasonably equivalent value" within the meaning of Section 548 of the Bankruptcy Code, Title 11, U.S.C.A. and "fair consideration" within the meaning of Consolidated Laws of New York Annotated, Chapter 12, Article 10, Section 272 in exchange for the delivery of the Security Documents to Agent, and but for the willingness of the Guarantor to enter into the Guaranty, Borrower would be unable to obtain the financing contemplated hereunder which financing will enable Borrower (including the Guarantor) to have available financing to conduct and expand its business. The transaction evidenced by this Agreement and the other Loan Documents is in the best interests of the Borrower and the Guarantor and the creditors of such Persons. Section 6.28. Solvency. As of the Closing Date and after giving effect to the transactions contemplated by this Agreement and the other Loan Documents, including all of the Loans made or to be made hereunder, none of the Borrower, the Member, the Property Owner, the Manager or the Guarantor is insolvent on a balance sheet basis, the sum of such Person's assets exceeds the sum of such Person's liabilities, each such Person is able to pay its debts as they become due, and each such Person has sufficient capital to carry on its business. Section 6.29. No Bankruptcy Filing. None of the Borrower, the Member, the Property Owner, the Manager or the Guarantor is contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or the liquidation of its assets or property, and Borrower has no knowledge of any Person contemplating the filing of any such petition against it or any of such other Persons. Section 6.30. No Fraudulent Intent. Neither the execution and delivery of this Agreement or any of the other Loan Documents nor the performance of any actions required hereunder or thereunder is being undertaken by the Borrower, the Member, the Property Owner, the Manager or the Guarantor with or as a result of any actual intent by any of such Persons to hinder, delay or defraud any entity to which any of such Persons is now or will hereafter become indebted. Section 6.31. Other Debt. None of the Borrower, the Member, the Property Owner, the Manager, the Guarantor or any of their respective Subsidiaries is in default in the payment of any other Indebtedness or under any agreement, mortgage, deed of trust, security agreement, financing agreement, indenture or lease to which any of them is a party. The Borrower is not a party to or bound by any agreement, instrument or indenture that may require the subordination in right or time of payment of any of the Obligations to any other indebtedness or obligation of the Borrower. Without limiting the foregoing, no "Default" or "Event of Default" under the Mezzanine Mortgage Loan Documents has occurred. The Borrower has provided to the Agent copies of all agreements, mortgages, deeds of trust, financing agreements or other material agreements binding upon Borrower, the Guarantor, the Property Owner, the Member or the Manager or their respective properties and entered into by such Person as of the date of this Agreement with respect to any Indebtedness of such Person. Attached hereto as Schedule 6.31-1 is a true, accurate and complete list of all of the Mezzanine Mortgage Loan Documents. Without limiting the foregoing, Borrower has delivered to the Agent true, correct and complete copies of the Mezzanine Mortgage Loan Documents, and none of the Mezzanine Mortgage Loan Documents has been modified or amended in any respect except as set forth in Schedule 6.31-1 hereto. As of the date hereof, the outstanding principal balance secured by the Nomura Mortgages is [$68,340,815.57] and interest has been paid through [May 10, 1998.] The initial allocation of the Mezzanine Mortgage Loan among the Mezzanine Properties is set forth on Schedule 6.31-2 hereto. As of the date hereof, the amount on deposit in the "Tax and Insurance Escrow Fund" (as defined in the Mezzanine Mortgage Loan Documents) is approximately [$278,184.89,] the amount on deposit in the "Capital Reserve Fund" (as defined in the Mezzanine Mortgage Loan Documents) is approximately [$181,243.70,] and the amount on deposit in the "Rollover Reserve Fund" (as defined in the Mezzanine Mortgage Loan Documents) is approximately [$608,232.64.] Section 6.32. Ownership. WWP is the sole member of the Borrower, subject to the pledge by WWP of its interest in the Borrower to the Secured Mezzanine Loan Agreement Lenders. Wellsford Commercial and WHWEL own 94.64% of the membership units in WWP. Wellsford Real Properties owns not less than 99% of the legal, equitable and beneficial interests in Wellsford Commercial. Whitehall Street Real Estate Limited Partnership V, Whitehall Street Real Estate Limited Partnership VI, Whitehall Street Real Estate Limited Partnership VII and Whitehall Street Real Estate Limited Partnership VIII are partners of WHWEL, a member of WWP. Member and Manager are and shall remain the sole members of the Property Owner free and clear of all liens, restrictions, claims, pledges, encumbrances, charges, claims or rights of third parties and rights of set-off or recoupment whatsoever, and no other Person owns or shall own any legal, equitable or beneficial interests in the Property Owner, or have any right to vote or exercise control over the Property Owner or its management (except for the rights of the "independent manager" of the Property Owner, as set forth in the Property Owner Organizational Agreements). Member is and shall remain the sole member of Manager, free and clear of all liens, restrictions, claims, pledges, encumbrances, charges, claims or rights of third parties and rights of set-off or recoupment whatsoever, and no other Person owns or shall own any legal, equitable or beneficial interests in Manager, or have any right to vote or exercise control over the Manager or its management (except for the rights of the "independent manager" of the Manager, as set forth in the Manager Organizational Agreements). Borrower is and shall remain the sole member of the Member free and clear of all liens, restrictions, claims, pledges, encumbrances, charges, claims or rights of third parties and rights of set-off or recoupment whatsoever, and no other Person owns or shall own any legal, equitable or beneficial interest in the Member, or have any right to vote or exercise control over the Member or its management (except for the rights of the "independent manager" of the Member as set forth in the Member Organizational Agreements). Property Owner owns no assets other than the Mezzanine Property, and no other Person owns any legal, equitable or beneficial interests in the Mezzanine Property, other than the interest as tenants only of the tenants listed on the Rent Roll delivered to the Agent pursuant to Section 6.24(k). Manager and the Member own no assets other than their respective interests in the Property Owner, and as to the Member, its interests in the Manager. Section 6.33. Special Purpose Entity. The Borrower is in full and complete compliance with the Operating Agreement. Section 6.34. Management Agreements. The Mezzanine Property is managed by Northeast Real Estate Services LLC pursuant to a Management Agreement between the Property Owner and Northeast Real Estate Services LLC dated May 15, 1998 (the "Mezzanine Management Agreement"). The Borrower has delivered to the Agent a true, correct and complete copy of such Mezzanine Management Agreement. There are no claims or any basis for any claim in respect of the Mezzanine Property or its operation by any party to the Mezzanine Management Agreement. Section 6.35. Obligations as Members. (a) All duties, obligations and responsibilities required to be performed by the Manager and the Member as of the date hereof under the Property Owner Organizational Agreements and by the Member as of the date hereof under the Manager Organizational Agreements, have been performed, and no default or condition which with the passage of time or the giving of notice, or both, would constitute a default exists under the Property Owner Organizational Agreements or the Manager Organizational Agreements. (b) Except for the Loan Documents, the Mezzanine Mortgage Loan Documents and, with respect to clause (iii) only, the Property Owner Organizational Agreements, the Manager Organizational Agreements and the Member Organizational Agreements, neither the Property Owner, the Manager nor the Member is a party to or is bound by any indenture, contract or other agreement which purports to prohibit, restrict, limit, or control (i) the transfer or pledge of direct or indirect interests in the Property Owner, the Manager or the Member, (ii) the exercise of voting rights with respect to the such Persons or (iii) the management of such Persons. Section i AFFIRMATIVE COVENANTS OF THE BORROWER. The Borrower covenants and agrees that, so long as any Loan or Note is outstanding or any Bank has any obligation to make any Loans: Section 7.1. Punctual Payment. The Borrower will duly and punctually pay or cause to be paid the principal and interest on the Loans and all interest and fees provided for in this Agreement, all in accordance with the terms of this Agreement and the Notes as well as all other sums owing pursuant to the Loan Documents. Section 7.2. Maintenance of Office. The Borrower will maintain its chief executive office at 610 Fifth Avenue, 7th Floor, New York County, New York, New York, or at such other place in the United States of America as the Borrower shall designate upon prior written notice to the Agent and the Banks, where notices, presentations and demands to or upon the Borrower in respect of the Loan Documents may be given or made. Section 7.3. Records and Accounts. The Borrower will keep and will cause the Property Owner to (a) keep true and accurate records and books of account in which full, true and correct entries will be made in accordance with generally accepted accounting principles and (b) maintain adequate accounts and reserves for all taxes (including income taxes), depreciation and amortization of its properties, contingencies and other reserves. The Borrower will not make and will not allow the Property Owner to make, without the prior written consent of the Majority Banks, (x) any material changes to the accounting procedures used by such Person in preparing the financial statements and other information described in Section 6.4 or (y) a change in its fiscal year. Section 7.4. Financial Statements, Certificates and Information. The Borrower will deliver or cause to be delivered to the Agent with sufficient copies for each of the Banks: (a) as soon as practicable, but in any event not later than 90 days after the end of each fiscal year of the Borrower, the audited balance sheet of the Borrower at the end of such year, and the related audited statements of income, changes in shareholders' equity and cash flows for such year, each setting forth in comparative form the figures for the previous fiscal year (other than the fiscal year ending prior to the Closing Date for which such statements of Borrower were not separately prepared) and all such statements to be in reasonable detail, prepared in accordance with generally accepted accounting principles, and accompanied by an auditor's report prepared without qualification by Ernst & Young LLP or by another "Big Six" accounting firm, together with the unaudited annual operating statement of each Mortgaged Property and the Mezzanine Property (which statement shall also be reconciled to the budget for the Mortgaged Property and the Mezzanine Property), together with a certification by Borrower's chief financial or chief accounting officer that the information contained in such statement fairly presents the operations of the Mortgaged Property and the Mezzanine Property for such period, and any other information the Banks may reasonably need to complete a financial analysis of the Borrower; (b) as soon as practicable, but in any event not later than 45 days after the end of each fiscal quarter of the Borrower (including the fourth quarter), copies of the unaudited balance sheet of the Borrower as of the end of such quarter, and the related unaudited consolidated statements of income, changes in shareholders' equity and cash flows for the portion of the Borrower's fiscal year then elapsed, and the unaudited operating statement for the Mortgaged Property and the Mezzanine Property for such quarter and year-to-date (which statement shall also be reconciled to the budget for the Mortgaged Property and the Mezzanine Property), all in reasonable detail and prepared in accordance with generally accepted accounting principles, together with a certification by the principal financial or accounting officer of the Borrower that the information contained in such financial statements fairly presents the financial position of the Borrower and the operations of the Mortgaged Property and the Mezzanine Property on the date thereof (subject to year-end adjustments); (c) as soon as practicable, but in any event not later than 45 days after the end of each fiscal quarter of the Borrower (including the fourth fiscal quarter in each year), copies of a statement of Net Operating Income for such fiscal quarter and year-to-date for each of the Mortgaged Properties and the Mezzanine Properties, prepared in a manner reasonable satisfactory to the Agent, together with a certification by the Borrower's chief financial or chief accounting officer that the information contained in such statement fairly presents the Net Operating Income of the Mortgaged Property and the Mezzanine Property for such period; (d) simultaneously with the delivery of the financial statements referred to in subsections (a) and (b) above, a statement (a "Compliance Certificate") certified by the principal financial or accounting officer of the Borrower in the form of Exhibit C hereto setting forth in reasonable detail computations evidencing compliance with the covenants contained in Section 9, and (if applicable) reconciliations to reflect changes in generally accepted accounting principles since the Balance Sheet Date; (e) concurrently with the delivery of the financial statements described in subsections (b) and (c) above, a certificate signed by the President or Chief Financial Officer of the Borrower to the effect that, having read this Agreement, and based upon an examination which they deem sufficient to enable them to make an informed statement, there does not exist any Default or Event of Default, or if such Default or Event of Default has occurred, specifying the facts with respect thereto; (f) contemporaneously with the filing, mailing or releasing thereof, copies of all press releases and all material of a financial nature filed with the SEC, if applicable, or sent to all of the members of the Borrower; (g) as soon as practicable but in any event not later than 45 days after the end of each fiscal quarter of the Borrower (including the fourth fiscal quarter in each year), updated Rent Rolls with respect to the Mortgaged Property and the Mezzanine Property and a summary of each Rent Roll in form reasonably satisfactory to the Agent; (h) as soon as practicable, but in any event not later than 30 days prior to the beginning of each calendar year, the annual operating budget for each Mortgaged Property, in form and substance satisfactory to the Majority Banks; (i) promptly after they are filed with the Internal Revenue Service, copies of all annual federal income tax returns and amendments thereto of the Borrower and the Guarantor; (j) not later than 45 days after the end of each fiscal quarter of the Borrower (including the fourth fiscal quarter in each year), the market comparable study conducted by the Borrower's internal staff or its property managers, and at other times copies of such market studies relating to the Mortgaged Property and the Mezzanine Property as are from time to time prepared by or on behalf of the Borrower; (k) to the extent not otherwise provided to Agent hereunder, a copy of each statement, report, Rent Roll, tax return or other matter required to be delivered to the Mezzanine Mortgagee pursuant to the Mezzanine Mortgage Loan Documents as and when the same is required to be delivered to the Mezzanine Mortgagee pursuant to the terms thereof; (l) not later than 45 days after the end of each fiscal quarter (including the fourth quarter), a certification by the principal financial or accounting officer of the Borrower to the effect that to such Person's knowledge no "Default" or "Event of Default" exists under the Mezzanine Mortgage Loan Documents, or if such Person shall obtain knowledge of any then existing "Default" or "Event of Default" under the Mezzanine Mortgage Loan Documents, they shall disclose in such statement such "Defaults" or "Events of Default"; (m) not later than 45 days after the end of each fiscal quarter (including the fourth quarter), a copy of each Lease entered into by or on behalf of the Borrower or Property Owner, respectively, during such quarter; (n) promptly upon issuance of the same by any of the Property Owner, the Borrower, the Member or the Manager, duplicate copies of any and all notices of any proposed sale or other disposition, or financing or refinancing, of any interest of or in the Property Owner or of the Mezzanine Property or of the Mezzanine Collateral, together with all material documents related thereto and a description of the material terms thereof; (o) duplicate copies of any and all notices of default by or under the Property Owner Organizational Agreements, the Member Organizational Agreements or the Manager Organizational Agreements or of any failure by any Persons to perform any obligation under such agreements; (p) duplicate copies of any and all notices sent by the Property Owner to any Rating Agency, or sent by a Rating Agency to the Property Owner; (q) not later than 45 days after the end of each calendar year, evidence that the Property Owner, the Member and the Manager have taken all actions required by the respective states in which they are organized and Massachusetts law to remain in good standing; (r) duplicate copies of any and all appraisals or updates thereof that are required to be delivered by the Property Owner to the Mezzanine Mortgagee pursuant to any of the Mezzanine Mortgage Loan Documents as and when the same are required to be delivered to the Mezzanine Mortgagee; and (s) from time to time such other financial data and information in the possession of or reasonably obtainable by the Borrower or the Property Owner relating to the Borrower, the Property Owner, the Manager, the Member, the Mortgaged Property, the Mezzanine Property or the Mezzanine Collateral (including without limitation auditors' management letters, property inspection and environmental reports and information as to zoning and other legal and regulatory changes affecting the Borrower) as the Agent may reasonably request. Section 7.5. Notices. (a) Defaults. The Borrower will promptly notify the Agent in writing of the occurrence of any Default or Event of Default. If any Person shall give any notice or take any other action in respect of a claimed default (whether or not constituting an Event of Default) under this Agreement or under any note, evidence of indebtedness, indenture or other obligation (including, without limitation, the Mezzanine Mortgage Loan Documents) to which or with respect to which any of the Borrower, the Member, the Property Owner, the Manager or the Guarantor is a party or obligor, whether as principal or surety, and such default would permit the holder of such note or obligation or other evidence of indebtedness to accelerate the maturity thereof, which acceleration would have a material adverse effect on any such Person, the Borrower shall forthwith give written notice thereof to the Agent and each of the Banks, describing the notice or action and the nature of the claimed default. (b) Environmental Events. The Borrower will promptly give notice to the Agent (i) upon the Borrower or the Guarantor obtaining knowledge of any potential or known Release, or threat of Release, of any Hazardous Substances at or from the Mortgaged Property or the Mezzanine Property; (ii) of any violation of any Environmental Law that the Borrower, the Guarantor or the Property Owner reports in writing or is reportable by such Person in writing (or for which any written report supplemental to any oral report is made) to any federal, state or local environmental agency and (iii) upon becoming aware thereof, of any inquiry, proceeding, investigation, or other action, including a notice from any agency of potential environmental liability, of any federal, state or local environmental agency or board, that in either case involves the Mortgaged Property or the Mezzanine Property or has the potential to materially affect the assets, liabilities, financial conditions or operations of such Person or the Agent's liens or security title on the Collateral pursuant to the Security Documents. (c) Notification of Claims Against Collateral. The Borrower will, immediately upon becoming aware thereof, notify the Agent in writing of any setoff, claims (including, with respect to the Mortgaged Property and Mezzanine Property, environmental claims), withholdings or other defenses to which any of the Collateral or the Mezzanine Property or the rights of the Borrower, the Member, the Property Owner, the Manager, the Guarantor or the Agent or the Banks with respect to the Mezzanine Property or the Mortgaged Property or any of the Collateral or Mezzanine Collateral are subject. In addition, the Borrower will, immediately upon becoming aware thereof, notify the Agent in writing of the occurrence of any material default under any Lease, the intention of any tenant under a Lease to withhold any fixed or base rent or the actual withholding thereof, or any bankruptcy, insolvency or cessation of operations by any tenant under a Lease. (d) Notice of Litigation and Judgments. The Borrower will give notice to the Agent in writing within 15 days of becoming aware of any litigation or proceedings threatened in writing or any pending litigation and proceedings affecting any of the Borrower, the Property Owner, the Member, the Manager or the Guarantor or to which any of such Persons is or is to become a party involving an uninsured claim against any of such Persons that could reasonably be expected to have a materially adverse effect on any of such Persons and stating the nature and status of such litigation or proceedings. The Borrower will give notice to the Agent, in writing, in form and detail satisfactory to the Agent and each of the Banks, within ten days of any judgment not covered by insurance, whether final or otherwise, against any of the Borrower, the Property Owner, the Manager, the Member or the Guarantor in an amount in excess of $250,000. (e) Notification of Banks. Promptly after receiving any notice under this Section 7.5, the Agent will forward a copy thereof to each of the Banks, together with copies of any certificates or other written information that accompanied such notice. Section 7.6. Existence; Maintenance of Properties. (a) The Borrower will do or cause to be done all things necessary to preserve and keep in full force and effect its existence as a Delaware limited liability company and shall not amend or modify the Operating Agreement in any manner without the prior written consent of the Agent. The Borrower will do or cause to be done all things necessary to preserve and keep in full force all of its rights and franchises. The Borrower will continue to engage primarily in the business now conducted by it. The Borrower will cause each of the Property Owner, the Member and the Manager to do or cause to be done all things necessary to preserve and keep in full force and effect and in good standing their legal existence as a corporation, limited partnership, trust or limited liability company, as applicable. Without limiting the foregoing, the Property Owner, the Member and the Manager shall take all actions as are necessary to maintain all protection afforded to limited liability companies in their states of organization and Massachusetts. The Borrower will do or cause to be done all things necessary to preserve and keep in full force and affect all of the rights and franchises of the Property Owner, the Manager and the Member. The Borrower will cause each of the Property Owner, the Member and the Manager to continue to engage primarily in the respective businesses now conducted by each of them and in related businesses. (b) The Borrower (i) will cause all of its properties used or useful in the conduct of its business and the Mezzanine Property to be maintained and kept in good condition, repair and working order (ordinary wear and tear excepted) and supplied with all necessary equipment, and (ii) will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof in all cases in which the failure so to do would have a material adverse effect on the condition of the applicable Mortgaged Property or other Collateral or Mezzanine Property or on the financial condition, assets or operations of the Borrower, the Property Owner, the Member, the Manager or the Guarantor. Section 7.7. Insurance. (a) The Borrower will, at its expense, procure and maintain, or cause to be procured and maintained, for the benefit of the Borrower and the Agent, insurance policies issued by such insurance companies, in such amounts, in such form and substance, and with such coverages, endorsements, deductibles and expiration dates as are acceptable to the Agent, providing the following types of insurance covering the Mortgaged Property: (i) "All Risks" property insurance (including broad form flood, broad form earthquake and comprehensive boiler and machinery coverages) on each Building and the contents therein of the Borrower in an amount not less than one hundred percent (100%) of the full replacement cost of each Building and the contents therein of the Borrower, with deductibles not to exceed $50,000 for any one occurrence, with a replacement cost coverage endorsement, and, if requested by the Agent, a contingent liability from operation of building laws endorsement in such amounts as the Agent may require. Full replacement cost as used herein means the cost of replacing the Building (exclusive of the cost of excavations, foundations and footings below the lowest basement floor) and the contents therein of the Borrower without deduction for physical depreciation thereof; (ii) During the course of construction or repair of any Building having a cost in excess of $1,000,000, the insurance required by clause (i) above shall be written on a builders risk, completed value, non-reporting form, meeting all of the terms required by clause (i) above, covering the total value of work performed, materials, equipment, machinery and supplies furnished, existing structures, and temporary structures being erected on or near the Real Estate, including coverage against collapse and damage during transit or while being stored off-site, and containing a soft costs (including loss of rents) coverage endorsement and a permission to occupy endorsement; (iii) Flood insurance if at any time any Building is located in any federally designated "special hazard area" (including any area having special flood, mudslide and/or flood-related erosion hazards, and shown on a Flood Hazard Boundary Map or a Flood Insurance Rate Map published by the Federal Emergency Management Agency as Zone A, AO, Al-30, AE, A99, AH, VO, Vl-30, VE, V, M or E) and the broad form flood coverage required by clause (i) above is not available, in an amount equal to the full replacement cost or the maximum amount then available under the National Flood Insurance Program; (iv) Rent loss insurance in an amount sufficient to recover at least the total estimated gross receipts from all sources of income, including without limitation, rental income, for the Real Estate for a twelve month period; (v) Commercial general liability insurance against claims for personal injury (to include, without limitation, bodily injury and personal and advertising injury) and property damage liability, all on an occurrence basis, if commercially available, with such coverages as the Agent may reasonably request (including, without limitation, contractual liability coverage, completed operations coverage for a period of two years following completion of construction of any improvements on the Real Estate, and coverages equivalent to an ISO broad form endorsement), with a general aggregate limit of not less than $1,000,000, a completed operations aggregate limit of not less than $1,000,000, and a combined single "per occurrence" limit of not less than $1,000,000 for bodily injury, property damage and medical payments; (vi) During the course of construction or repair of any improvements on the Real Estate in excess of $1,000,000, owner's contingent or protective liability insurance covering claims not covered by or under the terms or provisions of the insurance required by clause (v) above; (vii) Employers liability insurance (with respect to the Borrower's employees only); (viii) Umbrella liability insurance with limits of not less than $50,000,000 to be in excess of the limits of the insurance required by clauses (v), (vi) and (vii) above, with coverage at least as broad as the primary coverages of the insurance required by clauses (v), (vi) and (vii) above, with any excess liability insurance to be at least as broad as the coverages of the lead umbrella policy. All such policies shall be endorsed to provide defense coverage obligations; (ix) Workers' compensation insurance for all employees of the Borrower engaged on or with respect to the Real Estate; and (x) Such other insurance in such form and in such amounts as may from time to time be required by the Majority Banks against other insurable hazards and casualties which at the time are commonly insured against in the case of properties of similar character and location to the Real Estate. The Borrower shall pay or cause to be paid all premiums on insurance policies. The insurance policies with respect to all Mortgaged Properties provided for in clauses (v), (vi) and (viii) above with respect to all Mortgaged Property shall name the Agent and each Bank as an additional insured. The insurance policies provided for in clauses (i), (ii), (iii) and (iv) above shall name the Agent as mortgagee and loss payee, shall be first payable in case of loss to the Agent, and shall contain mortgage clauses and lender's loss payable endorsements in form and substance acceptable to the Agent. The Borrower shall deliver duplicate originals or certified copies of all such policies to the Agent, and the Borrower shall promptly furnish to the Agent all renewal notices and evidence that all premiums or portions thereof then due and payable have been paid. At least 15 days prior to the expiration date of the policies, the Borrower shall deliver to the Banks evidence of continued coverage, including a certificate of insurance, as may be satisfactory to the Agent. (b) All policies of insurance required by this Agreement shall contain clauses or endorsements to the effect that (i) no act or omission of either the Borrower or anyone acting for the Borrower shall affect the validity or enforceability of such insurance insofar as the Agent is concerned, (ii) the insurer waives any right of setoff, counterclaim, subrogation, or any deduction in respect of any liability of the Borrower and the Agent, (iii) such insurance is primary and without right of contribution from any other insurance which may be available, (iv) such policies shall not be modified, canceled or terminated prior to the scheduled expiration date thereof without the insurer thereunder giving at least 15 days prior written notice to the Agent by certified or registered mail, and (v) that the Agent or the Banks shall not be liable for any premiums thereon or subject to any assessments thereunder, and shall in all events be in amounts sufficient to avoid any coinsurance liability. (c) The insurance required by this Agreement may be effected through a blanket policy or policies covering additional locations and property of the Borrower and other Persons not included in the Mortgaged Property, provided that such blanket policy or policies comply with all of the terms and provisions of this Section 7.7 and contain endorsements or clauses reasonably satisfactory to the Agent. (d) All policies of insurance required by this Agreement shall be issued by companies licensed to do business in the State where the policy is issued and also in the states where the Real Estate is located and having a rating in Best's Key Rating Guide of at least "A" and a financial size category of at least "VIII". (e) The Borrower shall not carry separate insurance, concurrent in kind or form or contributing in the event of loss, with any insurance required under this Agreement unless such insurance complies with the terms and provisions of this Section 7.7. (f) In the event of any loss or damage to the Mortgaged Property, the Borrower shall give immediate written notice to the insurance carrier and the Agent, and the Agent shall furnish a copy of such notice promptly to each of the Banks. The Borrower may make proof of loss and adjust and compromise any claim under insurance policies which is of an amount not more than $1,000,000.00 so long as no Event of Default has occurred and is continuing and so long as such claim is pursued diligently and in good faith. The Borrower hereby irrevocably authorizes and empowers the Agent, at the Agent's option in the Agent's sole discretion or at the request of the Majority Banks in their sole discretion, as attorney in fact for the Borrower, to make proof of any loss except as provided in the preceding sentence, to adjust and compromise any claim under insurance policies, to appear in and prosecute any action arising from such insurance policies, to collect and receive insurance proceeds, and to deduct therefrom the Agent's expenses incurred in the collection of such proceeds. If the Mortgaged Property is acquired by the Agent or any nominee through foreclosure, deed in lieu of foreclosure or otherwise is acquired from the owner thereof, all right, title and interest of the owner of such Mortgaged Property in and to any insurance policies and unearned premiums thereon and in and to the proceeds thereof resulting from loss or damage to the Mortgaged Property prior to such sale or acquisition shall pass to the Agent or any other successor in interest to the owner or purchaser or grantee of the Mortgaged Property. (g) Subject to the terms of the following sentence, the Borrower authorizes the Agent, at the Agent's option or at the request of the Majority Banks' in their sole discretion, to (i) apply the balance of such proceeds to the payment of the Obligations whether or not then due, or (ii) if the Agent or the Majority Banks shall require the reconstruction or repair of the Mortgaged Property, to hold the balance of such proceeds to be used to pay all taxes, charges, sewer use fees, water rates and assessments which may be imposed upon the Mortgaged Property and the Obligations as they become due during the course of reconstruction or repair of the Mortgaged Property and to reimburse the Borrower, in accordance with such terms and conditions as Agent may prescribe, for the cost of such reconstruction or repair of the Mortgaged Property, and on completion of such reconstruction or repair to pay any excess funds to the Borrower so long as no Default or Event of Default has occurred and is continuing, or if a Default or Event of Default has occurred and is continuing, to apply any of the excess to the payment of the Obligations. Notwithstanding the foregoing, the Agent shall make such net proceeds available to the Borrower to reconstruct and repair the Mortgaged Property, in accordance with such terms and conditions as the Agent may prescribe for the disbursement of such proceeds to assure completion of such reconstruction or repair provided that (A) no Default or Event of Default shall have occurred and be continuing, (B) the Borrower shall have provided to Agent additional cash security in an amount equal to the amount reasonably estimated by the Agent to be the amount in excess of such proceeds which will be required to complete such repair or restoration, and (C) the Agent shall determine that such repair or reconstruction can be completed prior to the Maturity Date, (D) the cost of such reconstruction or repair is not estimated by the Agent to exceed fifty percent (50%) of the Appraised Value of such Mortgaged Property, (E) the Agent shall have approved the plans and specifications for such repair or restoration and determined that the repaired or restored Mortgaged Property will provide the Banks with adequate security for the Obligations, and (F) the Borrower shall have delivered to the Agent written agreements binding upon all tenants or other parties having present or future rights to possession of any portion of the Mortgaged Property or having any right to require repair, restoration or completion of the Mortgaged Property or any portion thereof, agreeing upon a date for delivery of possession of the Mortgaged Property or their respective portions thereof, or for such required repair, restoration or completion, to permit time which is sufficient in the judgment of the Agent for such repair or restoration and approving the plans and specifications for such repair or restoration, or other evidence satisfactory to the Agent that none of such tenants or other parties may terminate their Leases as a result of such casualty or have a right to approve the plans and specifications for such repair or restoration. (h) The Borrower, at its expense, will procure and maintain or cause to be procured and maintained, insurance covering the Borrower and the Mortgaged Property in such amounts and against such risks and casualties as are customary for properties of similar character and location, due regard being given to the type of improvements thereon, their construction, location, use and occupancy. (i) The Borrower shall provide or cause to be provided to the Agent for the benefit of the Banks Title Policies for all of the Mortgaged Property which shall at all times be in an aggregate amount of not less than the initial Designated Collateral Value attributable to such Mortgaged Property (provided that a Title Policy for an individual Mortgaged Property need not equal the aggregate Designated Collateral Value). Each Title Policy shall also contain, to the extent available, a tie-in endorsement aggregating the insurance coverage provided under all of the policies with tie-in endorsements. (j) The Borrower will cause the Property Owner, at its expense, to procure and maintain the insurance policies required by the Mezzanine Mortgage Loan Documents. Each commercial general liability or umbrella liability policy with respect to the Mezzanine Property shall name the Agent and the Banks as an additional insured and shall contain a cross liability/severability endorsement. The Borrower shall deliver duplicate originals or certified copies of all such policies to the Agent, and the Borrower shall promptly furnish to the Agent all renewal notices and evidence that all premiums or portions thereof then due and payable have been paid. At least 15 days prior to the expiration date of all such policies, the Borrower shall deliver to the Agent evidence of continued coverage, including a certificate of insurance, as may be reasonably satisfactory to the Agent. Agent acknowledges and agrees that such insurance may be provided by the Borrower covering the Mezzanine Property as well as other properties directly or indirectly owned by the Borrower, provided that such insurance satisfies the requirements of the Mezzanine Mortgage Loan Documents and the Loan Documents. (k) In the event of any loss or damage to the Mezzanine Property, the Borrower shall give prompt written notice to the insurance carrier and the Agent. The Agent acknowledges that the Property Owner's rights to any insurance proceeds are subject to the terms of the Mezzanine Mortgage Loan Documents. The Borrower may not and shall not permit the Property Owner to settle, adjust or compromise any claim under such insurance policies without the prior written consent of the Agent; provided, further, that the Property Owner may make proof of loss and adjust and compromise any claim under casualty insurance policies which is of an amount less than $1,000,000.00 so long as no Default or Event of Default has occurred. Any proceeds of such claim which are not used to reconstruct or repair the Mezzanine Property, or applied to the balance of the loan evidenced by the Mezzanine Mortgage Loan Documents, shall be deposited into the accounts established pursuant to the Mezzanine Mortgage Loan Documents to the extent required thereby, or if such deposit is not required thereunder, then such proceeds shall be paid to (i) Borrower (and not to Agent) so long as the Mezzanine Property has been fully repaired and restored and no Default or Event of Default has occurred and is continuing, or (ii) if a Default of Event of Default has occurred and is continuing, or if the Mezzanine Property has not been so fully repaired or restored, then such excess insurance proceeds shall be paid to Agent and applied to the payment of the Obligations whether or not then due. Notwithstanding anything contained in the Loan Documents to the contrary, Agent hereby agrees that the Property Owner may use all insurance proceeds to restore and repair the Mezzanine Property, provided that such use is permitted or required under the terms of the Mezzanine Mortgage Loan Documents. (l) In the event that the Property Owner is permitted pursuant to the terms of the Mezzanine Mortgage Loan Documents to reconstruct, restore or repair the Mezzanine Property following a casualty to any portion of the Mezzanine Property, the Borrower shall cause the Property Owner to promptly and diligently repair and restore the Mezzanine Property in the manner and within the time periods required by the Mezzanine Mortgage Loan Documents, the Leases and any other agreements affecting the Mezzanine Property. In the event that Property Owner is permitted pursuant to the terms of the Mezzanine Mortgage Loan Documents to elect not to reconstruct, restore or repair the Mezzanine Property following a casualty to any portion of the Mezzanine Property, the Borrower shall not permit the Property Owner to elect not to reconstruct, restore or repair the Mezzanine Property without the prior written consent of the Agent. Section 7.8. Taxes. (a) The Borrower will duly pay and discharge, or cause to be paid and discharged, before the same shall become overdue, all taxes, assessments and other governmental and private charges imposed upon the Borrower, the Member, the Manager, the Property Owner and upon the Mortgaged Property and any other Collateral, such Person's sales and activities, or any part thereof, or upon the income or profits therefrom, as well as all claims for labor, materials, or supplies that if unpaid might by law become a lien or charge upon any of its property, and shall in any event cause the prompt, full and unconditional discharge of all liens imposed on or against the Collateral or the Mezzanine Collateral or any portion thereof within thirty (30) days after receiving written notice (whether from the Mezzanine Mortgagee, the Agent, the lienholder or any other Person) of the filing thereof; provided that so long as no Event of Default has occurred, any such tax, assessment, charge, levy or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings which shall suspend the collection thereof with respect to such property, neither such property nor any portion thereof or interest therein would be in any danger of sale, forfeiture or loss by reason of such proceeding and the Borrower or such Person shall have set aside adequate reserves with respect thereto as the Agent may reasonably require; and provided, further, that forthwith upon the commencement of proceedings to foreclose any lien that may have attached as security therefor, the Borrower either (i) will provide a bond issued by a surety reasonably acceptable to the Majority Banks and sufficient to stay all such proceedings or (ii) if no such bond is provided, will pay each such tax, assessment, charge, levy or claim. (b) The Borrower shall cause the Property Owner to pay all "Taxes" and "Other Charges" (as defined in the Mezzanine Mortgage Loan Agreement), to pay all claims for labor, material or supplies that if unpaid or unbonded might by law become a lien or charge upon any of its property (including the Mezzanine Property), and to keep the Mezzanine Property free from all Liens (other than the lien of the Nomura Mortgages and the Permitted Liens), and shall in any event cause the prompt, full and unconditional discharge of all Liens imposed upon the Mezzanine Property or any portion thereof within thirty (30) days after receiving written notice (whether from the Mezzanine Mortgagee, the Agent, the lienholder or any other Person) of the filing thereof or such earlier time as may be required by the Mezzanine Mortgage Loan Documents; subject in each case to the Property Owner's right to contest the same as permitted in but subject to the conditions set forth in the Nomura Mortgages so long as no Event of Default has occurred. In the event that the Property Owner elects to commence any contest or similar proceeding with respect to any such Taxes, Other Charges, Liens or other claims described herein, the Borrower shall provide prompt written notice thereof to the Agent together with such evidence as the Agent may reasonably require showing the Property Owner's satisfaction of the requirements set forth in Section 5.1(b) of the Mezzanine Mortgage Loan Agreement. Notwithstanding the foregoing, the Borrower shall cause the Property Owner promptly to pay any contested Taxes, Other Charges, Lien or claim and the payment thereof shall not be deferred, if the Mezzanine Mortgagee or the Property Owner may be subject to civil or criminal damages as a result thereof. If such action or proceeding is terminated or discontinued adversely to the Property Owner, then the Borrower shall deliver to the Agent reasonable evidence of payment of such contested Taxes, Other Charges or Lien. Section 7.9. Inspection of Properties and Books. The Borrower shall permit the Banks, through the Agent or any representative designated by the Agent, at the Borrower's expense to visit and inspect any of the properties of the Borrower and the Mezzanine Property, to examine the books of account of the Borrower and the Property Owner (and to make copies thereof and extracts therefrom) and to discuss the affairs, finances and accounts of the Borrower and the Property Owner with, and to be advised as to the same by, its officers, all at such reasonable times and intervals as the Agent or any Bank may reasonably request. The Banks shall use good faith efforts to coordinate such visits and inspections so as to minimize the interference with and disruption to the Borrower's and the Property Owner's normal business operations. Section 7.10. Compliance with Laws, Contracts, Licenses, and Permits. The Borrower will comply and will cause the Property Owner, the Member and the Manager to comply in all respects with (i) all applicable laws and regulations now or hereafter in effect wherever its business is conducted, including all Environmental Laws, (ii) the provisions of its or their certificate of formation, operating agreement, corporate charter, and other charter documents and bylaws, (iii) all agreements and instruments to which it is a party or by which it or any of its properties may be bound, (iv) all applicable decrees, orders, and judgments, and (v) all licenses and permits required by applicable laws and regulations for the conduct of its business or the ownership, use or operation of its properties. The Borrower covenants and agrees to give Agent prompt notice of any non-compliance with such laws, ordinances, regulations or requirements and of any notice of non-compliance therewith which the Borrower, the Property Owner, the Member or the Manager receives or any threatened or pending proceedings in respect thereto or with respect to the Mezzanine Property (including, without limitation, changes in zoning) of which the Property Owner, the Borrower, the Member or the Manager receives notice. If at any time while any Loan or Note is outstanding or the Banks have any obligation to make Loans hereunder, any authorization, consent, approval, permit or license from any officer, agency or instrumentality of any government shall become necessary or required in order that the Borrower, the Property Owner, the Member or the Manager may fulfill any of its obligations hereunder, the Borrower will immediately take or cause to be taken all steps necessary to obtain such authorization, consent, approval, permit or license and furnish the Agent and the Banks with evidence thereof. Notwithstanding the foregoing, the Property Owner shall have the right to contest the applicability of any legal requirement subject to the approval of the Mezzanine Mortgagee, so long as Property Owner is in good faith, and by proper legal proceedings, diligently contesting the application thereof, provided no Event of Default shall exist and be continuing hereunder, and the Borrower provides evidence to the Agent that the Property Owner is otherwise fully complying with each of the conditions set forth in the Mezzanine Mortgage Loan Documents or prescribed by the Mezzanine Mortgagee applicable to such contest. The Borrower shall promptly notify the Agent of the commencement of any contest or similar proceeding hereunder. Notwithstanding the foregoing, the Borrower shall cause the Property Owner promptly to comply with any contested legal requirement, and compliance therewith shall not be deferred, if the Property Owner or the Mezzanine Mortgagee may be subject to civil or criminal charges or damages as a result thereof or such noncompliance might place the Mezzanine Property or any part thereof in danger of being forfeited, lost or closed. If such action or proceeding is terminated or discontinued adversely to the Property Owner, then, the Borrower shall, upon written demand, deliver to the Agent reasonable evidence of compliance by the Property Owner with such contested legal requirement. Section 7.11. Use of Proceeds. The Borrower will use the proceeds of the Loans solely to provide short-term financing (a) for the acquisition of fee interests by Borrower in Real Estate which is located in the northeastern corridor of the United States and utilized principally as commercial office space, (b) for Capital Improvement Projects to Real Estate owned by the Borrower, (c) for the repayment of Indebtedness incurred or assumed by the Borrower in connection with the acquisitions and investments described in Section 7.11(a), (d) for the acquisition of the Equity Interests, (e) for reasonable transaction costs related to the transactions referred to in the preceding clause (a) and (d), (f) for Capital Improvement Projects and Leasing Commissions, (g) up to $10,000,000 for general working capital purposes, and (h) for such other purposes as the Majority Banks may approve. Notwithstanding the foregoing, in no event shall the proceeds of the Loan be used to acquire any asset that as a part of such transaction or in a related transaction will be or is to become subject to a lien against such asset other than a lien in favor of the Agent and the Banks under the Loan Documents. Section 7.12. Further Assurances. The Borrower will cooperate with, and will cause the Manager, the Member and the Guarantor to cooperate with, the Agent and the Banks and execute such further instruments and documents as the Banks or the Agent shall reasonably request to carry out to their satisfaction the transactions contemplated by this Agreement and the other Loan Documents. Section 7.13. Management Agreements. The Borrower will provide prompt written notice to the Agent of any termination or material modification or amendment of any Management Agreement, provided that, without the prior consent of the Majority Banks, none of the Management Agreements for the Mortgaged Property shall be modified or amended to increase the fees payable thereunder and provided further that, without the prior consent of the Majority Banks, which consent shall not be unreasonably withheld or delayed, the Borrower shall not permit the Property Owner to terminate, modify or amend any Management Agreement for the Mezzanine Property. The Borrower will not enter into and will not permit the Property Owner to enter into any Management Agreement or otherwise manage any of the Mortgaged Property or the Mezzanine Property except with property and leasing managers having sufficient expertise and resources to manage such properties as Class A office buildings or if such buildings are Non-Stabilized Properties, as Class B office buildings and with respect to the Mezzanine Property are approved by the Agent, and on leasing terms and conditions no less favorable to the Borrower or the Property Owner than are contained in the Management Agreements delivered to the Agent prior to the date hereof or are otherwise on then commercially reasonable terms. Any Management Agreement for the Mezzanine Property shall be in form and substance reasonably satisfactory to the Agent. The Agent hereby approves the Mezzanine Management Agreement. Notwithstanding the foregoing, any manager of the Mezzanine Property shall satisfy any conditions or requirements contained in the Mezzanine Mortgage Loan Documents applicable to such entity acting as the manager of the Mezzanine Property, and in no event shall there be a change to the manager of the Mezzanine Property or any Management Agreement for the Mezzanine Property if the same would constitute a "Default" or "Event of Default" under the Mezzanine Mortgage Loan Documents. Section 7.14. ERISA Compliance. The Borrower will not permit the present value of all employee benefits vested in all Employee Benefit Plans, Multiemployer Plans and Guaranteed Pension Plans maintained by the Borrower and any ERISA Affiliate thereof to exceed the present value of the assets allocable to such vested benefits by an amount greater than $500,000.00 in the aggregate. Neither the Borrower nor any ERISA Affiliate thereof will at any time permit any such Plan maintained by it to engage in any "prohibited transaction" as such term is defined in Section 4975 of the Code or Section 406 of ERISA, incur any "accumulated funding deficiency" as such term is defined in Section 302 of ERISA, whether or not waived, or terminate any such Plan in any manner which could result in the imposition of a lien on the property of the Borrower or the Guarantor pursuant to Section 4068 of ERISA. Section 7.15. Condemnation. In the event that all or any portion of the Mezzanine Property shall be damaged or taken through condemnation (which term shall include any damage or taking by any governmental authority, quasi- governmental authority, any party having the power of condemnation, or any transfer by private sale in lieu thereof), or any such condemnation shall be threatened, the Borrower shall give prompt written notice to the Agent. The Agent and the Banks acknowledge that the Property Owner's rights to any condemnation award is subject to the terms of the Mezzanine Mortgage Loan Documents. The Borrower may not and shall not permit the Property Owner to settle or compromise any claim, action or proceeding relating to such damage or condemnation without the prior written consent of the Agent. Any proceeds, award or damages from such damage or condemnation which are not used to reconstruct or repair the Mezzanine Property, or applied to the balance of the loan evidenced by the Mezzanine Mortgage Loan Documents, shall be paid to the Agent and applied to the payment of the Obligations whether or not then due. Notwithstanding anything contained in the Loan Documents to the contrary, Agent hereby agrees that the Property Owner may use all condemnation proceeds, awards and damages to restore and repair the Mezzanine Property, provided that such use is permitted or required under the terms of the Mezzanine Mortgage Loan Documents. In the event that the Property Owner is permitted pursuant to the terms of the Mezzanine Mortgage Loan Documents to reconstruct, restore or repair the Mezzanine Property following a condemnation of any portion of the Mezzanine Property, the Borrower shall cause the Property Owner to promptly and diligently repair and restore the Mezzanine Property in the manner and within the time periods required by the Mezzanine Mortgage Loan Documents, the Leases and any other agreements affecting the Mezzanine Property. In the event that the Property Owner is permitted pursuant to the terms of the Mezzanine Mortgage Loan Documents to elect not to reconstruct, restore or repair the Mezzanine Property following a condemnation of any portion of the Mezzanine Property, the Borrower shall not permit the Property Owner to elect not to reconstruct, restore or repair the Mezzanine Property without the prior written consent of the Agent. Section 7.16. Intentionally Omitted. Section 7.17. Compliance. The Borrower shall operate its business in compliance with the terms and conditions of this Agreement and the other Loan Documents. Wellsford Commercial shall at all times comply with all requirements of applicable laws necessary to maintain REIT Status. Section wful Intentionally Omitted. Section 7.19. Leasing. The Borrower will take or cause to be taken all reasonable steps within the power of the Borrower to market and lease the leasable area of the Mortgaged Property and the Borrower will cause the Property Owner to take or cause to be taken all reasonable steps within the power of the Property Owner to market and lease the leasable area of each Mezzanine Property, all in accordance with sound and customary leasing and management practices for similar properties. The Borrower will not, and will not allow the Property Owner to, lease all or any portion of the Mortgaged Property or the Mezzanine Property or amend, supplement or otherwise modify, terminate or cancel, or accept the surrender of, or consent to the assignment or subletting of, or grant any concessions to or waive the performance of any obligations of any tenant, lessee or licensee under, any now existing or future Lease without the prior written consent of the Agent; provided, however, with respect to any Lease which covers less than 25,000 square feet or provides less than three percent (3%) of the Net Operating Income of the Mortgaged Property and the Mezzanine Property, whichever is less, the Borrower or the Property Owner may amend, supplement or otherwise modify, terminate or cancel, or accept the surrender of, or consent to the assignment or subletting of, or grant concessions to or waive the performance of any obligations of any tenant, lessee or licensee under any such Lease in the ordinary course of business consistent with sound leasing and management practices for similar properties provided that such action with respect to a Lease for a Mezzanine Property shall not cause (with the passage of time or otherwise) a default under the Mezzanine Mortgage Loan Documents. The Borrower shall furnish or cause the Property Owner to furnish the Agent with executed copies of all Leases hereafter made, and all Leases now or hereafter entered into will be in form and substance subject to the approval of the Agent. Upon the Agent's request, the Borrower shall make a separate and distinct assignment to the Agent as additional security, of all Leases for the Mortgaged Property hereafter made. Notwithstanding the foregoing, following the Agent's approval of the "Leasing Parameters" (as hereinafter defined) for the Mortgaged Property and the Mezzanine Property, then the Borrower or the Property Owner, as applicable, may, without the prior approval of the Agent, enter into any Lease provided that the Lease covers less than 25,000 square feet or provides less than three percent (3%) of the Net Operating Income of the Mortgaged Property and the Mezzanine Property, is a bona fide arm's length lease entered into in the ordinary course of business with a party unaffiliated with the Borrower, the Property Owner, the Member, the Manager or the Guarantor, falls within the Leasing Parameters and is on the standard lease form (without material modification or addition). In connection with any Lease to be approved by the Agent as provided herein, the Borrower shall submit to the Agent for its approval the identity of the tenant and a summary of the major terms of the Lease (which terms shall include without limitation those matters included within the Leasing Parameters) (collectively the "Major Terms"), and Agent's approval shall be limited to the approval of the Major Terms, and provided further that any such terms submitted to the Agent for approval shall be deemed approved by the Agent unless the Agent expressly disapproves the same by written notice delivered to the Borrower (which shall state the reasons for disapproval) within five (5) Business Days after the date of the delivery of such Lease to the Agent for approval and all other information reasonably requested by the Agent in order to make such determination. Following the approval by the Agent of the Major Terms, the Borrower or the Property Owner shall be permitted to enter into a lease to such tenant which falls within the Major Terms. As used herein, "Leasing Parameters" means leasing parameters for the Mortgaged Property and the Mezzanine Property approved by the Agent. Leasing Parameters shall include, without limitation, the minimum and maximum term, the minimum rent, tax and operating stops, tenant standard improvements, tenant allowances and other tenant inducements and leasing commissions, and shall be approved by the Agent prior to the commencement of each calendar year during the term of the Notes. The Borrower will require, and each Lease will require, each tenant of a Mortgaged Property to enter into a Nondisturbance, Attornment and Subordination Agreement and to provide an estoppel certificate satisfactory to the Agent upon the request of the Agent. The Agent shall have the right, and the Borrower hereby authorizes the Agent, to communicate directly with any tenant under a Lease to verify any information delivered to the Agent by the Borrower concerning such tenant or such tenant's Lease. The Borrower shall not collect and shall not permit the Property Owner to collect any rents, issues, profits, revenues, income or other benefits payable under any of the Leases for the Mezzanine Property more than one (1) month in advance (provided that the foregoing shall not prohibit the collection of security deposits). The Borrower shall not, directly or indirectly, cause or permit to exist, or allow the Property Owner to cause or permit to exist, any condition which would result in the termination or cancellation of, or which would relieve the performance of any obligations of any tenant under, any Lease for all or any portion of a Mezzanine Property. Section 7.20. Special Purpose Entity. The Borrower shall conduct its business in full compliance with and shall not violate the terms and conditions of the Operating Agreement. Section 7.21. Plan Assets, etc. The Borrower will do, or cause to be done, all things necessary to ensure that the Borrower, the Property Owner, the Member and the Manager will not be deemed to hold Plan Assets at any time. Each owner of an equity interest in Borrower has certified to Borrower and the Banks, and Borrower shall require each proposed transferee of any equity interest in Borrower, as a condition precedent to such transfer, to certify to Borrower and the Banks, that the source of funds used or to be used by it to acquire its interest in Borrower are not assets of any plan subject to Title I of ERISA or Section 4975 of the Code and are not deemed to be assets of any such plan under the U.S. Department of Labor's plan asset regulations. Borrower has provided the Agent with a copy of each such certification from each owner of an equity interest in Borrower and will promptly provide the Agent with a copy of each such certification from each proposed transferee. Section 7.22. Budgets. The Borrower shall cause the Property Owner to provide to Agent a copy of each Budget that is submitted by the Property Owner to the Mezzanine Mortgagee for approval by the Mezzanine Mortgagee pursuant to the Mezzanine Mortgage Loan Documents, or any revision or amendment thereof, as the same are submitted by the Property Owner to the Mezzanine Mortgagee pursuant to the Mezzanine Mortgage Loan Documents. Section 7.23. Preservation and Maintenance. (a) The Borrower (i) shall not permit or commit waste, impairment, or deterioration of the Mezzanine Property or permit the Property Owner to abandon the Mezzanine Property, (ii) shall cause the Property Owner to restore or repair promptly and in a good and workmanlike manner all or any part of the Mezzanine Property in the event of any damage, injury or loss thereto, to the equivalent of its condition prior to such damage, injury or loss, or such other condition as the Agent may approve in writing, (iii) shall cause the Property Owner to keep the Mezzanine Property, including the Building and any fixtures, equipment, machinery and personal property, in good order, repair and tenantable condition (subject to ordinary wear and tear) and shall replace fixtures, equipment, machinery and personal property on the Mezzanine Property when necessary to keep such items in good order, repair, and tenantable condition, and (iv) shall cause Property Owner to keep all trademarks, tradenames, servicemarks and licenses and permits necessary for the use and occupancy of the Mezzanine Property in good standing and in full force and effect. Subject to the provisions of Section 7.23(b) below, neither the Borrower, the Property Owner nor any tenant or other Person shall remove, demolish or alter any Building now existing or hereafter erected on the Mezzanine Property or any other fixtures, equipment, machinery or personal property in or on the Mezzanine Property except when incident to the replacement of fixtures, equipment, machinery or other personal property with items of like kind and value. The Borrower shall cause the Property Owner to comply with the asbestos operations and maintenance program in effect as of the date hereof (if any) or adopted hereafter with respect to any new Mortgaged Property, and shall not permit the Property Owner to discontinue or materially modify such program without the Agent's prior written consent. In the event that the Property Owner shall remove any asbestos or asbestos- containing materials after the date hereof, such removal shall be performed in accordance with all applicable laws and, upon the request of the Agent, the Borrower shall provide evidence of such compliance to the Agent. (b) Provided that no Event of Default shall have occurred and be continuing hereunder, the Borrower may permit the Property Owner to undertake any alteration, improvement, demolition or removal of the Mezzanine Property or any portion thereof (an "Alteration") so long as such Alteration (i) is performed strictly in compliance with the terms and conditions of the Nomura Mortgages and the other Mezzanine Mortgage Loan Documents, (ii) is permitted by the Leases for such Mezzanine Property, (iii) shall not materially adversely affect the value of the applicable Mezzanine Property or materially reduce the income from the level available immediately prior to commencement of such Alteration, and (iv) shall not have a material adverse effect on the ability of the Property Owner to perform its obligations under the Mezzanine Mortgage Loan Documents and the Leases for the Mezzanine Property or of the Borrower to perform its obligations under the Loan Documents. Any other Alteration shall require the prior written consent of the Agent, such consent not to be unreasonably withheld or delayed. All work performed in connection with any Alteration shall be performed in accordance with all applicable laws. The Borrower shall cause the Property Owner to provide to the Agent such evidence as the Agent may reasonably require to evidence the Property Owner's compliance with the terms of the Mezzanine Mortgage Loan Documents and this Agreement in connection with any Alteration. Section 7.24. Use of Mezzanine Property. Unless required by applicable law or unless the Agent has otherwise agreed in writing, the Borrower shall not allow or permit the Property Owner to allow changes in the nature of the occupancy or use for which the Mezzanine Property was intended at the time this Agreement was executed. The Borrower shall not initiate, permit to occur or acquiesce in or permit the Property Owner to initiate, permit to occur or acquiesce in a change in the zoning classification of the Mezzanine Property or subject the Mezzanine Property to restrictive, negative or other covenants without the Agent's written consent, which consent shall not be unreasonably withheld or delayed. The Borrower shall cause the Property Owner to comply with, observe and perform in all material respects all zoning and other laws affecting the Mezzanine Property, all agreements and other covenants affecting the Mezzanine Property (including without limitation the Mezzanine Mortgage Loan Documents), and all licenses and permits affecting the Mezzanine Property. The Borrower shall cause the Property Owner to take all actions as are necessary to cause the prompt distribution to Agent of all Excess Property Income to Agent as provided in the Cash Collateral Agreement. Section 7.25. Property Owner to Remain a Single-Purpose Entity. The Borrower shall cause the Property Owner to comply with the provisions of Section 4.1(dd) of the Mezzanine Mortgage Loan Agreement, shall cause the Property Owner to do all things necessary to observe limited liability company formalities and to preserve its existence, and will not permit the Property Owner to amend, modify or otherwise change its articles of organization, operating agreement or other organizational documents. Section 7.26. Condominium. (a) The Borrower represents, warrants and covenants that the Condominium Documents and all of the easements and other rights granted thereby are now valid and subsisting. (b) The Borrower will cause the Property Owner to fully and faithfully pay when due and payable the assessments, common charges and other charges mentioned in and made payable by the Property Owner under the Condominium Documents, and shall cause the Property Owner to fully and faithfully perform all obligations on the part of the Property Owner to be performed under the Condominium Documents in the time and manner therein prescribed. (c) The Borrower shall cause the Property Owner to do all things necessary to preserve and keep unimpaired its rights, powers and privileges under the Condominium Documents and to prevent the termination or expiration of the Condominium Documents, or the withdrawal of the Condominium from a condominium form of ownership, to the end that the Property Owner may enjoy all of the rights granted to it as a party to the Condominium Documents. (d) The Borrower will promptly notify Agent of any failure by the Property Owner to comply with the Condominium Documents. (e) The Borrower will (i) promptly notify Agent of the receipt by the Borrower, the Manager, the Member or the Property Owner of any notice asserting or claiming a default by the Property Owner under, or lack of compliance by the Property Owner with, the Condominium Documents, (ii) promptly notify Agent of the receipt by the Borrower, the Manager, the Member or the Property Owner of any notice or request of a termination or purported termination of the Condominium Documents or of the Condominium or of or for the commencement or taking of or intent to commence to take any action to terminate the Condominium or the Condominium Documents or to withdraw the Condominium from the condominium ownership pursuant to applicable law or to seek any action for partition of the Condominium, (iii) promptly notify Agent of the receipt by the Borrower, the Manager, the Member or the Property Owner of any notice or request of a modification or change or proposed modification or change of or to the Condominium Documents, and (iv) promptly cause a copy of each such notice or request received by the Property Owner, the Manager, the Member or the Borrower to be delivered to Agent. The Borrower will promptly notify Agent of the institution of a proceeding to partition the Condominium or withdraw same from condominium ownership pursuant to applicable law, and of the institution of any such partition or withdrawal proceeding. The Borrower will promptly deliver to Agent a copy of each notice, pleading, brief and preliminary, interim and final determination or decision and other papers received by it in each such partition or withdrawal proceeding. (f) The Borrower will not, without the prior consent of Agent, allow or suffer the Property Owner to wholly or partially terminate, modify, subordinate or surrender or suffer or permit in whole or in part any termination, modification, surrender or expiration of any of the Condominium Documents, or withdraw or cause to permit the withdrawal of the Condominium by operation of law or otherwise from condominium ownership pursuant to applicable law, or allow or suffer the Property Owner to commence or prosecute any action or proceeding to partition the Condominium or cause or permit the Condominium to be partitioned pursuant to applicable law or otherwise. (g) The Borrower will, within 30 days after receipt of a written demand from Agent, obtain from the board, association or other Person charged with administering the Condominium Documents and deliver to Agent a duly signed and acknowledged certificate certifying that the Condominium Documents are unmodified and in full force and effect (or, if the same have been modified in compliance with the Mezzanine Mortgage Loan Documents and this Agreement, that the Condominium Documents are in full force and effect as so modified and that there have been no other modifications), stating the dates to which the assessments, common charges and other charges payable under the Condominium Documents have been paid and stating whether to the certifying party's knowledge the Property Owner is in compliance with the Condominium Documents or, if not, specifying each default or failure of compliance of which the certifying party has knowledge. The Borrower will, promptly upon receipt thereof by the Borrower, the Manager, the Member or the Property Owner, furnish Agent with a copy of all notices and statements, however characterized, issued by the board, association or other Person charged with administering the Condominium Documents relating to the Condominium. (h) The Borrower will not permit or suffer the Property Owner to exercise any of the Property Owner's rights under the Condominium Documents, or, to the extent not prohibited by applicable laws, vote at any meeting of the board, association or other Person charged with administering the Condominium Documents, in any way that is inconsistent with its duties or obligations under the Mezzanine Mortgage Loan Documents or this Agreement. Notwithstanding the foregoing, after the occurrence of an Event of Default hereunder and for so long as such Event of Default is continuing, the Borrower will notify Agent of all meetings of the board, association or other Person charged with administering the Condominium Documents, at least five (5) Business Days prior thereto, and, to the extent not prohibited by applicable law, the Borrower will cause the Property Owner to exercise all of its rights under the Condominium Documents, and vote at all meetings of the board, association or other Person charged with administering the Condominium Documents, in accordance with any instructions delivered by Agent to the Borrower. Section 8. CERTAIN NEGATIVE COVENANTS OF THE BORROWER. The Borrower covenants and agrees that, so long as any Loan or Note is outstanding or any of the Banks has any obligation to make any Loans: Section 8.1. Restrictions on Indebtedness. The Borrower will not create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any Indebtedness other than: (a) Indebtedness to the Banks arising under any of the Loan Documents; (b) current liabilities of the Borrower incurred in the ordinary course of business and relating to the Mortgaged Property but not incurred through (i) the borrowing of money, or (ii) the obtaining of credit except for credit on an open account basis customarily extended and in fact extended in connection with normal purchases of goods and services relating to the Mortgaged Property; (c) Indebtedness in respect of taxes, assessments, governmental charges or levies and claims for labor, materials and supplies relating to the Mortgaged Property to the extent that payment therefor shall not at the time be required to be made in accordance with the provisions of Section 7.8; (d) Indebtedness in respect of judgments or awards relating to the operation and maintenance of the Mortgaged Property in accordance with this Agreement that have been in force for less than the applicable period for taking an appeal so long as execution is not levied thereunder or in respect of which the Borrower shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review; or (e) endorsements for collection, deposit or negotiation and warranties of products or services, in each case incurred in the ordinary course of business relating to the Mortgaged Property. Notwithstanding anything in this Section 8.1 to the contrary, the Subsidiaries of the Borrower (other than Member, Manager and Property Owner) shall be permitted to create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to Indebtedness provided that Borrower shall not be liable, contingently or otherwise, therefor; provided, however, that neither Property Owner, Manager or Member shall be permitted to create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any Indebtedness other than Indebtedness of Property Owner, Manager and Member expressly permitted pursuant to Section 8.12(e) or Section 8.13(b), as applicable. Section 8.2. Restrictions on Liens, Etc. Without limiting the terms of Section 8.1, the Borrower will not (a) create or incur or suffer to be created or incurred or to exist any lien, encumbrance, mortgage, pledge, negative pledge, charge, restriction or other security interest of any kind upon any of its property or assets of any character whether now owned or hereafter acquired, or upon the income or profits therefrom; (b) transfer any of its property or assets or the income or profits therefrom for the purpose of subjecting the same to the payment of Indebtedness or performance of any other obligation in priority to payment of its general creditors; (c) acquire, or agree or have an option to acquire, any property or assets upon conditional sale or other title retention or purchase money security agreement, device or arrangement; (d) suffer to exist for a period of more than 30 days after the same shall have been incurred any Indebtedness or claim or demand against it that if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be given any priority whatsoever over its general creditors; (e) sell, assign, pledge or otherwise transfer any accounts, contract rights, general intangibles, chattel paper or instruments, with or without recourse; (f) incur or maintain any obligation to any holder of Indebtedness of the Borrower which prohibits the creation or maintenance of any lien securing the Obligations (collectively "Liens"); or (g) permit either the Member or the Manager to create or incur or suffer to be created or incurred or to exist any Lien upon any of its property or assets of any character whether now owned or hereafter acquired, or upon the income or profits therefrom; provided that the Borrower may create or incur or suffer to be created or incurred or to exist: (i) Leases permitted under this Agreement; (ii) liens on properties to secure taxes, assessments and other governmental charges or claims for labor, material or supplies relating to the Mortgaged Property in respect of obligations not overdue; (iii) deposits or pledges made in connection with, or to secure payment of, worker's compensation, unemployment insurance, old age pensions or other social security obligations; (iv) liens in favor of the Agent and the Banks under the Loan Documents; and (v) liens and encumbrances on a Mortgaged Property, if any, expressly permitted under the terms of the Security Deed relating thereto. Notwithstanding anything in this Section 8.2 to the contrary, Subsidiaries of the Borrower (other than Member, Manager and Property Owner) shall be permitted to create or incur or suffer to be created or incur any Lien other than Liens with respect to the Mortgaged Property, the Mezzanine Property or any other Collateral; provided, however, that Property Owner shall be permitted to create or incur or suffer to be created or incur only those Liens permitted pursuant to Section 8.13(a). Section 8.3. Restrictions on Investments. The Borrower will not, and will not permit Manager, Member or Property Owner to, make or permit to exist or to remain outstanding any Investment except Investments by Borrower and as expressly permitted below, Manager, Member, and Property Owner in: (a) Investments by Borrower in marketable direct or guaranteed obligations of the United States of America that mature within one (1) year from the date of purchase by the Borrower or its Subsidiary; (b) Investments by Borrower in marketable direct obligations of any of the following: Federal Home Loan Mortgage Corporation, Student Loan Marketing Association, Federal Home Loan Banks, Federal National Mortgage Association, Government National Mortgage Association, Bank for Cooperatives, Federal Intermediate Credit Banks, Federal Financing Banks, Export-Import Bank of the United States, Federal Land Banks, or any other agency or instrumentality of the United States of America; (c) Investments by Borrower in demand deposits, certificates of deposit, bankers acceptances and time deposits of United States banks having total assets in excess of $100,000,000; provided, however, that the aggregate amount at any time so invested with any single bank having total assets of less than $1,000,000,000 will not exceed $200,000; (d) Investments by Borrower in securities commonly known as "commercial paper" issued by a corporation organized and existing under the laws of the United States of America or any State which at the time of purchase are rated by Moody's Investors Service, Inc. or by Standard & Poor's Corporation at not less than "P 1" if then rated by Moody's Investors Service, Inc., and not less than "A 1", if then rated by Standard & Poor's Corporation; (e) Investments by Borrower in mortgage-backed securities guaranteed by the Government National Mortgage Association, the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation and other mortgage-backed bonds which at the time of purchase are rated by Moody's Investors Service, Inc. or by Standard & Poor's Corporation at not less than "Aa" if then rated by Moody's Investors Service, Inc. and not less than "AA" if then rated by Standard & Poor's Corporation; (f) Investments by Borrower in repurchase agreements having a term not greater than 90 days and fully secured by securities described in the foregoing subsection (a), (b) or (e) with banks described in the foregoing subsection (c) or with financial institutions or other corporations having total assets in excess of $500,000,000; (g) Investments by Borrower in shares of so-called "money market funds" registered with the SEC under the Investment Company Act of 1940 which maintain a level per-share value, invest principally in investments described in the foregoing subsections (a) through (f) and have total assets in excess of $50,000,000; (h) Investments by Borrower in Mortgaged Property, including earnest money deposits relating thereto and transaction costs; (i) Investments by Borrower in wholly-owned Subsidiaries of Borrower and Investments by wholly-owned Subsidiaries of Borrower (other than Member, Manager and Property Owner) in fee and leasehold interests in properties located in the northeastern United States which are used principally for commercial office purposes or in land or non-income producing land assets, and which leasehold interests are under ground leases having not less than fifty (50) years of the leasehold term remaining at the time of acquisition thereof; (j) Investments by Borrower and its Subsidiaries (other than Member, Manager or Property Owner) in Investment Partnerships which own Investments of the type described in Section 8.3(i); (k) Investments by Borrower in Member provided it is wholly-owned by the Borrower, and by Member in Manager, and by Member and Manager in Property Owner; and (l) Investments by Property Owner in the Mezzanine Property. Section 8.4. Merger, Consolidation. The Borrower will not, and will not permit any of its Subsidiaries to, become a party to any merger, consolidation or other business combination, or agree to effect any asset acquisition, stock acquisition or other acquisition without the prior written consent of the Majority Banks except (i) the merger or consolidation of one or more of the Subsidiaries of the Borrower with and into the Borrower provided that no Default or Event of Default exists or will occur as a result thereof and (ii) the merger or consolidation of two or more Subsidiaries of the Borrower. Section 8.5. Sale and Leaseback; Ground Lease. The Borrower will not, and will not permit the Property Owner to, enter into any arrangement, directly or indirectly, whereby the Borrower or the Property Owner shall sell or transfer any Real Estate owned by it or the Mezzanine Property, as applicable, in order that then or thereafter the Borrower or the Property Owner or any affiliate thereof shall lease back the Mezzanine Property. The Borrower will not permit the Property Owner to enter into a ground lease or similar lease for the Mezzanine Property. Section 8.6. Compliance with Environmental Laws. The Borrower will not do and will not permit the Property Owner or any tenant of the Mortgaged Property or the Mezzanine Property to do any of the following: (a) use any of the Mortgaged Property or Mezzanine Property or any portion thereof as a facility for the handling, processing, storage or disposal of Hazardous Substances, except for small quantities of Hazardous Substances used in the ordinary course of business and in compliance with all applicable Environmental Laws and the presence of asbestos or asbestos-containing materials located in the Building which are to be maintained, contained and removed in accordance with the terms of the Mezzanine Mortgage Loan Documents and the Loan Documents, as applicable, (b) cause or permit to be located on any of the Mortgaged Property or Mezzanine Property any underground tank or other underground storage receptacle for Hazardous Substances except in full compliance with Environmental Laws, (c) generate any Hazardous Substances on any of the Mortgaged Property or Mezzanine Property except in full compliance with Environmental Laws, (d) conduct any activity at any of the Mortgaged Property or Mezzanine Property or use any Mortgaged Property or Mezzanine Property in any manner so as to cause a Release of Hazardous Substances on, upon or into the Mortgaged Property or Mezzanine Property or any surrounding properties or any threatened Release of Hazardous Substances which might give rise to liability under CERCLA or any other Environmental Law, or (e) directly or indirectly transport or arrange for the transport of any Hazardous Substances (except in compliance with all Environmental Laws). The Borrower shall: (i) in the event of any change in Environmental Laws governing the assessment, release or removal of Hazardous Substances, which change would lead a prudent lender to require additional testing to avail itself of any statutory insurance or limited liability, take all action (including, without limitation, the conducting of engineering tests at the sole expense of the Borrower) to confirm that no Hazardous Substances have been Released or disposed of on the Mortgaged Property or Mezzanine Property in violation of any Environmental Laws; and (ii) if any Release or disposal of Hazardous Substances shall occur or shall have occurred on the Mortgaged Property or Mezzanine Property (including without limitation any such Release or disposal occurring prior to the acquisition of such Mortgaged Property or Mezzanine Property by the Borrower or Property Owner, respectively), cause the prompt containment and removal of such Hazardous Substances and remediation of the Mortgaged Property or Mezzanine Property in full compliance with all applicable laws and regulations and to the satisfaction of the Majority Banks; provided, that the Borrower shall be deemed to be in compliance with Environmental Laws for the purpose of this clause (ii) so long as it or a responsible third party with sufficient financial resources is taking reasonable action to remediate or manage any event of noncompliance to the satisfaction of the Majority Banks and no action shall have been commenced by any enforcement agency. The Majority Banks may engage their own Environmental Engineer to review the environmental assessments and the Borrower's compliance with the covenants contained herein. At any time after an Event of Default shall have occurred hereunder, or, whether or not an Event of Default shall have occurred, at any time that the Agent or the Majority Banks shall have reasonable grounds to believe that a Release or threatened Release of Hazardous Substances may have occurred relating to any Mortgaged Property or Mezzanine Property, or that any of the Mortgaged Property or Mezzanine Property is not in compliance with the Environmental Laws, the Agent may at its election and will at the request of the Majority Banks obtain such environmental assessments of such Mortgaged Property or Mezzanine Property prepared by an Environmental Engineer as may be necessary or advisable for the purpose of evaluating or confirming (i) whether any Hazardous Substances are present in the soil or water at or adjacent to such Mortgaged Property or Mezzanine Property and (ii) whether the use and operation of such Mortgaged Property or Mezzanine Property comply with all Environmental Laws. Environmental assessments may include detailed visual inspections of such Mortgaged Property or Mezzanine Property including, without limitation, any and all storage areas, storage tanks, drains, dry wells and leaching areas, and the taking of soil samples, as well as such other investigations or analyses as are necessary or appropriate for a complete determination of the compliance of such Mortgaged Property or Mezzanine Property and the use and operation thereof with all applicable Environmental Laws. All such environmental assessments shall be at the sole cost and expense of the Borrower. Section 8.7. Distributions. (a) The Borrower shall make no Distributions in the event that an Event of Default consisting of a failure to pay principal, interest or fees hereunder shall have occurred and be continuing, or any other Event of Default shall have occurred and be continuing and the maturity of the Obligations has been accelerated. (b) In the event that an Event of Default shall have occurred and be continuing, the Borrower shall not permit the Property Owner, the Member or the Manager to make any Distributions whatsoever, directly or indirectly, from amounts attributable to the Mezzanine Property, the Mezzanine Collateral or its direct or indirect interest in the Property Owner, directly or indirectly, other than such Distributions that are paid to the Agent pursuant to the terms of this Agreement or the other Loan Documents. Section 8.8. Intentionally Omitted. Section 8.9. Development Activity. Neither the Borrower nor any Subsidiary of the Borrower shall, without the prior written consent of the Majority Banks, engage, directly or indirectly, in the "ground-up" development of properties to be used principally for commercial office purposes or otherwise, except that the Borrower, subject to the terms of this Section 8.9, and Subsidiaries of the Borrower (other than Property Owner, Manager and Member) may engage in the "ground up" development of Real Estate to be used principally for commercial office purposes provided that the aggregate costs of acquisition and development of all such properties Under Development (assuming the full cost of developing such property) at any time shall not exceed the greater of (i) ten percent (10%) of WWP's Consolidated Total Assets or (ii) $25,000,000.00. Notwithstanding anything herein to the contrary, except for the Mortgaged Property commonly known as 140 Kendrick Street which may be developed by the Borrower, no "ground up" development shall be performed by the Borrower, Property Owner, Manager or Member. For purposes of this Section 8.9, the term "development" shall include the new construction of an office building or office park, but shall not include Capital Improvement Projects to existing Real Estate which is already used principally for commercial office purposes. Without limiting the foregoing, the Borrower acknowledges that for the purposes of this Agreement, (a) any interest by the Borrower or any Subsidiary in a property which is proposed to be developed, or any interest therein pursuant to which the borrower or any Subsidiary has the right to approve site plans or other plans and specifications or pursuant to which such parties' obligations are conditioned upon the achievement of certain leasing levels, (b) any agreement by the Borrower or any Subsidiary which obligates such party to contribute or otherwise advance funds in connection with or upon completion of the development of a property, or (c) any acquisition of a property which is proposed to be developed or which is under development and lease-up at the time such agreement is entered into, shall be considered a "development" for the purposes of this Section 8.9. The Borrower acknowledges that the decision of the Majority Banks to grant or withhold such consent shall be based on such factors as the Majority Banks deem relevant in their sole discretion, including without limitation, evidence of sufficient funds both from borrowings and equity to complete such development and evidence that such Subsidiary has the resources and expertise necessary to complete such project. Nothing herein shall prohibit the Borrower or any Subsidiary of the Borrower from entering into an agreement to acquire Real Estate which has been developed and initially leased by another Person to the extent not otherwise prohibited by this Agreement. Section 8.10. Intentionally Omitted. Section 8.11. Transfers. The Borrower shall not permit any sale, transfer, disposition, pledge, mortgage, hypothecation or encumbering of (a) any direct interest in Borrower other than a sale, transfer, disposition, pledge, mortgage, hypothecation or encumbrance to or in favor of the Secured Mezzanine Loan Agreement Lenders or (b) any direct or indirect interest (i) of Wellsford Commercial in Borrower, (ii) of Wellsford Real Properties in Wellsford Commercial, (iii) of WHWEL in Borrower, or (iv) of any Person or Persons directly or indirectly holding the ownership interests in WHWEL, provided that sales, transfers or other dispositions (but not pledges, mortgages, hypothecations or encumbrances) of interests in WHWEL shall be permitted if after giving effect thereto the Goldman Group, directly or indirectly, owns and controls at least seventy percent (70%) of the ownership interests in WHWEL. Notwithstanding anything herein to the contrary, (x) WHWEL shall be permitted at any time and from time to time to convert all or any of its interest in the Borrower into an interest in Wellsford Commercial and/or Wellsford Real Properties, and (y) WHWEL and Wellsford Commercial may transfer or pledge their interests in Borrower to one another as may be permitted in the operating agreement of the Borrower. Section 8.12. Additional Covenants with Respect to Indebtedness, Operations, Fundamental Changes. The Borrower represents, warrants and covenants as of the date hereof and until such time as the Obligations are paid in full and the Banks have no further obligations to make any Loans, that each of the Borrower, the Member and the Manager: (a) does not own and will not own any encumbered asset other than the Borrower's ownership of the Collateral; (b) is not engaged and will not engage in any business other than the Borrower's acquisition, ownership, operation and sale of the Collateral and the Member's and the Manager's ownership and operation of its direct or indirect interest in the Property Owner; (c) as to the Member and the Manager only, does not and will not have any Subsidiaries (whether the same would constitute an entity that could be consolidated on any of such Person's financial statements or a minority interest) other than, as to the Member and the Manager, the Property Owner and, as to the Member only, the Manager; (d) will not enter into any contract or agreement with any partner, member, shareholder, principal or affiliate of the Borrower, the Property Owner, the Member, the Manager or the Guarantor, or any affiliate of any such partner, member, shareholder, principal or affiliate, except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties other than an affiliate; (e) as to the Member and the Manager only, has not incurred and will not incur any Indebtedness, other than current liabilities incurred in the ordinary course of business in connection with normal purchases of goods and services but not incurred through the borrowing of money; no other debt or other obligations of any of such Persons may be secured (senior, subordinate or pari passu) by any right or asset of such Person; (f) has not made and will not make any loans or advances to any third party (including the Property Owner, the Borrower, the Member, the Manager, the Guarantor, any affiliate of such Persons or any member, partner or shareholder of such Persons); (g) is and will remain solvent and pay its debts and liabilities (including, without limitation, employment and overhead expenses) from its own assets as the same shall become due; (h) has done or caused to be done and will do all things necessary to observe limited liability company, corporate and partnership formalities (as applicable) and to preserve its existence, and will not, nor will any partner, member or shareholder thereof, amend, modify or otherwise change its partnership agreement, operating agreement, articles of incorporation, by- laws or other organizational documents in a manner which adversely affects such Person's or such partner's, member's or shareholder's existence as a single purpose entity; (i) will conduct and operate its business as presently conducted and operated; (j) will maintain books and records and bank accounts (if any) separate from those of its affiliates, including its partners, members and shareholders; (k) will be, and at all times will hold itself out to the public as, a legal entity separate and distinct from any other entity (including any affiliate thereof, including any partner, member, shareholder or any affiliate of any partner, member or shareholder of the Borrower, the Member or the Manager) and shall maintain and use separate stationery, invoices and checks; (l) will file its own separate tax returns or if such returns are filed jointly, such Persons shall be reflected as separate entities thereon; (m) will maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; (n) will not, nor shall any partner, member, shareholder or affiliate, seek the dissolution or winding up, in whole or in part, of the Borrower, the Property Owner, the Member or the Manager; (o) will not enter into, and will not permit Property Owner to enter into, any transaction of merger, consolidation or other business combination, or acquire by purchase or otherwise all or substantially all of the business or assets of, or any stock or beneficial ownership of, any entity; (p) will not commingle the funds and other assets of the Borrower, the Property Owner, the Member or the Manager, as applicable, with those of any partner, member, shareholder, any affiliate or any other Person; (q) has and will maintain its assets in such a manner that it is not costly or difficult to segregate, ascertain or identify its individual assets from those of any affiliate or any other Person; (r) does not and will not hold itself out to be responsible for the debts or obligations of any other Person; (s) shall comply with the provisions of its partnership agreement, operating agreement, articles of incorporation or bylaws or other organizational documents, as applicable; and (t) with respect to the Manager and the Member, shall be organized and conduct its business so that, and otherwise cause, the assumptions of fact made with respect to the Borrower, the Member, the Manager and the Property Owner in that certain opinion letter dated May 15, 1998 delivered by Robinson Silverman Pearce Aronsohn & Berman LLP with respect to non- consolidation issues to be true and correct, in all material respects at all times. Section impos Additional Restrictions Concerning the Mezzanine Property. (a) Except as expressly provided in Section 5.3 or Section 7.19, the Borrower will not, without the prior written consent of the Agent in each instance, permit the Property Owner, directly or indirectly to: (i) sell, convey, assign, transfer, contribute, option, mortgage, pledge, encumber, charge, hypothecate or dispose of the Mezzanine Property, or any part thereof or interest therein; or any income or profits therefrom, or any other accounts, contract rights, general intangibles, instruments, chattel paper or other assets or claims, whether now owned or hereafter acquired; or (ii) create or suffer to be created or to exist any lien, encumbrance, security interest, mortgage, pledge, restriction, attachment or other charge of any kind upon, or any levy, seizure, attachment or foreclosure of, the Mezzanine Property, or any part thereof or interest therein, or any income or profit therefrom, or any other accounts, contract rights, general intangibles, instruments, chattel paper or other assets or claims, whether now owned or hereafter acquired, except for Permitted Liens. For the purposes of this paragraph, the sale, conveyance, transfer, disposition, alienation, hypothecation or encumbering of all or any portion of any interest in the Property Owner, the Member or the Manager, or the creation or addition of a new member or other owner of any interest in the Property Owner, the Member or the Manager shall be deemed to be a transfer of an interest in the Property Owner, the Member or the Manager. A pledge or transfer by WWP of its interest in the Borrower pursuant to Section 8.11(a) shall not violate the provisions of Section 8.13(a). (b) The Borrower will not permit the Property Owner to create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any Indebtedness other than: (i) Indebtedness arising under the Mezzanine Mortgage Loan Documents (it being acknowledged and agreed that any refinancing of such Indebtedness in connection with an assignment and restatement of the Mezzanine Mortgage Loan Documents shall not constitute permitted Indebtedness); (ii) current liabilities of the Property Owner permitted pursuant to the Approved Budget incurred in the ordinary course of business but not incurred through (A) the borrowing of money, or (B) the obtaining of credit except for credit on an open account basis customarily extended and in fact extended in connection with normal purchases of goods and services; and (iii) Indebtedness in respect of taxes, assessments, governmental charges or levies and claims for labor, materials and supplies to the extent that payment therefor shall not at the time be required to be made in accordance with the provisions of Section 7.8. Section 8.14. Mezzanine Mortgage Loan Documents. The Borrower agrees to cause the Property Owner to deliver immediately to the Agent copies of any notices, certificates, requests, demands or other instruments (including without limitation any notice of default, acceleration or the exercise or threat of exercise of any remedies under the Mezzanine Mortgage Loan Documents) furnished or delivered to or by the Property Owner under or in any way relating to the Mezzanine Mortgage Loan Documents. The Borrower shall not permit the Property Owner to seek nor to obtain additional advances from the holder or holders of the Mezzanine Mortgage Loan Documents (provided that the foregoing shall not be deemed violated in the event that the holder or holders of the Mezzanine Mortgage Loan Documents shall make a protective advance or advances for the payment of taxes, insurance premiums or to protect the Mezzanine Property pursuant to the terms of the Nomura Mortgages, provided that such advance may otherwise constitute a Default or Event of Default hereunder to the extent that such protected advance is made by the Mezzanine Mortgagee as a result of a "Default" or "Event of Default" under the Mezzanine Mortgage Loan Documents), or to modify, amend, terminate, extend or seek a consent or waiver under the Mezzanine Mortgage Loan Documents in any respect without the prior written approval of the Agent. Section 9. FINANCIAL COVENANTS OF BORROWER. The Borrower covenants and agrees that, so long as any Loan or Note is outstanding or any Bank has any obligation to make any Loans it will comply with the following: Section 9.1. Debt Service Coverage Test Amount. The Borrower will not, at the end of any fiscal quarter permit (a) the difference of (i) the Net Operating Income of the Mortgaged Properties and the Mezzanine Properties for any test period of four consecutive fiscal quarters then ended (treated as a single accounting period) (the "Test Period") minus (ii) the Capital Improvement Reserve for such Test Period to be less than (b) the multiple of the Debt Service Coverage Test Amount for the Test Period set forth below: Fiscal Quarter Ending Multiple of Debt Service On or Before: Coverage Test Amount --------------------- -------------------- December 31, 1998 1.35 Thereafter 1.45 In the event that the Borrower shall not have owned any of such Mortgaged Properties or the Mezzanine Properties for four (4) consecutive fiscal quarters, then the Net Operating Income of the Borrower for such Mortgaged Properties and the Mezzanine Properties shall be annualized based upon historical information with respect to such Mortgaged Properties and the Mezzanine Properties in a manner reasonably satisfactory to the Agent. Section 9.2. Designated Collateral Value. The Borrower will not permit the outstanding principal balance of the Loans as of the date of determination to be greater than the Designated Collateral Value as of the date of determination. Section 9.3. WWP Financial Covenants. If and only in the event that the loans contemplated by the Secured Mezzanine Loan Agreement shall be paid in full and the Secured Mezzanine Loan Agreement shall be terminated, then Borrower shall cause WWP to at all times thereafter observe, perform and comply with each and every covenant set forth in Sections 9.1 through 9.5 of the Secured Mezzanine Loan Agreement as set forth in the Secured Mezzanine Loan Agreement as of the date hereof (or as the same may be amended with the approval of the Majority Banks), as if such covenants and any defined terms referred to therein were fully set forth in this Agreement and a part hereof, subject, however, to any applicable period of grace or notice and cure with respect to a failure to comply with such covenants as set forth in the Secured Mezzanine Loan Agreement. Notwithstanding the foregoing, the provisions of this Section 9.3 shall not apply in the event that the Secured Mezzanine Loan Agreement Lenders shall acquire title to the interest of WWP in the Borrower. Section 10. CLOSING CONDITIONS. The obligations of the Agent and the Banks to make the initial Loans shall be subject to the satisfaction of the following conditions precedent on or prior to July 16, 1998. Section 10.1. Loan Documents. Each of the Loan Documents shall have been duly executed and delivered by the respective parties thereto, shall be in full force and effect and shall be in form and substance satisfactory to the Majority Banks. The Agent shall have received a fully executed copy of each such document, except that each Bank shall have received a fully executed counterpart of its Note. The Agent is authorized by the Banks to execute on behalf of the Banks and Agent, as applicable, any amendments to agreements securing or relating to the Original Revolving Credit Agreement and the Original Loan Agreement as Agent deems appropriate. Section 10.2. Certified Copies of Organizational Documents. The Agent shall have received from the Borrower a copy, certified as of a recent date by the appropriate officer of the State in which the Borrower and the Guarantor are organized or in which the Mortgaged Property is located, and by a duly authorized officer of such Person to be true and complete, of the articles of incorporation or other organizational documents of the Borrower and the Guarantor (or a certification satisfactory to the Agent that there have been no changes to the foregoing from those previously provided to the Agent) or their respective qualification to do business, as applicable, as in effect on such date of certification. Section 10.3. Bylaws; Resolutions. All action on the part of the Borrower and the Guarantor necessary for the valid execution, delivery and performance by the Borrower and the Guarantor of the Loan Documents to which it is or is to become a party shall have been duly and effectively taken, and evidence thereof satisfactory to the Agent shall have been provided to the Agent. The Agent shall have received from the Borrower and the Guarantor, as applicable, true copies of its bylaws (or a certification satisfactory to the Agent that there have been no changes to the foregoing from those previously provided to the Agent) and the resolutions adopted by its board of directors or other governing body authorizing the transactions described herein, each certified by its secretary or other duly authorized officer as of a recent date to be true and complete. Section 1it u Incumbency Certificate; Authorized Signers. The Agent shall have received from the Borrower and Guarantor an incumbency certificate, dated as of the Closing Date, signed by a duly authorized officer of the Borrower and Guarantor and giving the name and bearing a specimen signature of each individual who shall be authorized: (a) to sign, in the name and on behalf of the Borrower and the Guarantor, each of the Loan Documents to which the Borrower or the Guarantor is or is to become a party; (b) in the case of the Borrower to make Loan and Conversion Requests; and (c) to give notices and to take other action on behalf of the Borrower under the Loan Documents. Section 10.5. Opinion of Counsel. The Agent shall have received a favorable opinion addressed to the Banks and the Agent and dated as of the Closing Date, in form and substance satisfactory to the Banks and the Agent, from Robinson, Silverman, Pearce, Aronsohn & Berman, and other counsel of the Borrower and the Guarantor, as to such matters as the Agent shall reasonably request. Section 10.6. Payment of Fees. The Borrower shall have paid to the Agent the commitment fee pursuant to Section 4.2. Section 10.7. Appraisals. The Agent shall have received Appraisals of the Mortgaged Property and the Mezzanine Property in form and substance satisfactory to the Majority Banks prior to the Closing Date demonstrating that the initial Collateral has a Designated Collateral Value that is in compliance with the terms of this Agreement. Section 10.8. Environmental Reports. The Agent shall have received environmental site assessment reports for the Mortgaged Property and the Mezzanine Property prepared by an Environmental Engineer, which indicate the condition of the Mortgaged Property, the Mezzanine Property and such other properties and any Buildings thereon and which set forth no qualifications except those that are acceptable to the Majority Banks in their sole discretion, and disclosing that each piece of Mortgaged Property, Mezzanine Property and any Building thereon is free of oil, underground storage tanks, asbestos or asbestos containing material, lead paint and other Hazardous Substances (except to the extent acceptable to the Majority Banks in their sole discretion), and which reports are otherwise in form and substance satisfactory to the Majority Banks). Section 10.9. Insurance. The Agent shall have received duplicate originals or certified copies of all policies of insurance required by this Agreement. Section 10.10. Performance; No Default. The Borrower shall have performed and complied with all terms and conditions herein required to be performed or complied with by it on or prior to the Closing Date, and on the Closing Date there shall exist no Default or Event of Default. Section 10.11. Representations and Warranties. The representations and warranties made by the Borrower and the Guarantor in the Loan Documents or otherwise made by or on behalf of any Borrower and Guarantor, or any Subsidiary thereof, in connection therewith or after the date thereof shall have been true and correct in all material respects when made and shall also be true and correct in all material respects on the Closing Date. Section 10.12. Proceedings and Documents. All proceedings in connection with the transactions contemplated by this Agreement and the other Loan Documents shall be reasonably satisfactory to the Agent and the Agent's Special Counsel in form and substance, and the Agent shall have received all information and such counterpart originals or certified copies of such documents and such other certificates, opinions or documents as the Agent and the Agent's Special Counsel may reasonably require. Section 10.13. Eligible Real Estate Qualification Documents. The Eligible Real Estate Qualification Documents for each parcel of Mortgaged Property and the Mezzanine Collateral included in the Collateral as of the Closing Date shall have been delivered to the Agent. Section 10.14. Compliance Certificate. A Compliance Certificate dated as of the date of the Closing Date demonstrating compliance with each of the covenants calculated therein as of the most recent fiscal quarter end for which the Borrower has provided financial statements under Section 6.4 adjusted in the best good faith estimate of the Borrower dated as of the date of the Closing Date shall have been delivered to the Agent. Section 10.15. Other Documents. To the extent requested by the Agent, executed copies of all material agreements of any nature whatsoever to which the Borrower is a party affecting or relating to the use, operation, development, construction or management of the Mortgaged Property or other Collateral or the Mezzanine Property. Section 10.16. No Condemnation/Taking. The Agent shall have received written confirmation from the Borrower that no condemnation proceedings are pending or to the Borrower's knowledge threatened against any Mortgaged Property, Mezzanine Property or other Collateral or, if any such proceedings are pending or threatened, identifying the same and the Real Estate affected thereby and the Agent shall have determined that none of such proceedings is or will be material to the Mortgaged Property, Mezzanine Property or other Collateral affected thereby. Section 10.17. Governmental Policy. Each Bank shall have determined that there have been no material changes in governmental regulations or policy affecting the Banks, the Borrower or the Guarantor. Section 10.18. Other. The Agent shall have reviewed such other documents, instruments, certificates, opinions, assurances, consents and approvals as the Agent or the Agent's Special Counsel may reasonably have requested. Section 10.19. Satisfaction of Conditions as to Initial Collateral. The parties hereto acknowledge that the requirements of Sections 10.7, 10.8 and 10.13 for the Mezzanine Properties and the Mortgaged Properties as of the date hereof have been satisfied. Section 11. CONDITIONS TO ALL BORROWINGS. The obligations of the Banks to make any Loan, whether on or after the Closing Date, shall also be subject to the satisfaction of the following conditions precedent: Section 11.1. Prior Conditions Satisfied. All conditions set forth in Section 10 shall continue to be satisfied as of the date upon which any Loan is to be made. Section 11.2. Representations True; No Default. Each of the representations and warranties contained in this Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with this Agreement shall be true as of the date as of which they were made and shall also be true at and as of the time of the making of such Loan (except that representations and warranties as to the Guarantor shall not be deemed to have been repeated), with the same effect as if made at and as of that time (except to the extent of changes resulting from transactions contemplated or permitted by this Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and except to the extent that such representations and warranties relate expressly to an earlier date) and no Default or Event of Default shall have occurred and be continuing. Agent shall have received a certificate of the Borrower signed by an authorized officer of the Borrower to such effect. Section 11.3. No Legal Impediment. No change shall have occurred in any law or regulations thereunder or interpretations thereof that in the reasonable opinion of any Bank would make it illegal for such Bank to make such Loan. Section 11.4. Governmental Regulation. Each Bank shall have received such statements in substance and form reasonably satisfactory to such Bank as such Bank shall require for the purpose of compliance with any applicable regulations of the Comptroller of the Currency or the Board of Governors of the Federal Reserve System. Section 11.5. Proceedings and Documents. All proceedings in connection with the Loan shall be satisfactory in substance and in form to the Majority Banks, and the Majority Banks shall have received all information and such counterpart originals or certified or other copies of such documents as the Majority Banks may reasonably request. Section 11.6. Borrowing Documents. In the case of any request for a Loan, the Agent shall have received a copy of each of the request for a Loan required by Section 2.6 in the form of Exhibit B hereto, fully completed. Section 11.7. Endorsement to Title Policy. At such time as the Agent shall determine in its discretion, to the extent available under applicable law, a "date down" endorsement to each Title Policy indicating no change in the state of title and containing no survey exceptions not approved by the Agent, which endorsement shall, expressly or by virtue of a proper "revolving credit" clause or endorsement in the Title Policy, increase the coverage of the Title Policy to the aggregate amount of all Loans advanced and outstanding on or before the effective date of such endorsement, other than the Designated Collateral Value Amount for the Equity Interests, if applicable (provided that the amount of coverage under an individual Title Policy for an individual Mortgaged Property need not equal the aggregate amount of all Loans), or if such endorsement is not available, such other evidence and assurances as the Agent may reasonably require (which evidence may include, without limitation, an affidavit from the Borrower stating that there have been no changes in title from the date of the last effective date of the Title Policy). Section 11.8. Future Advances Tax Payment. As a condition precedent to any Bank's obligations to make any Loans, the Borrower will pay or cause to be paid to the Agent any mortgage, recording, intangible, documentary stamp or other similar taxes and charges which the Agent reasonably determines to be payable as a result of such Loan to any state or any county or municipality thereof in which any of the Mortgaged Property is located and deliver to the Agent such affidavits or other information which the Agent reasonably determines to be necessary in connection with the payment of such tax, in order to insure that the Security Deeds on Mortgaged Property located in such state secure the Borrower's obligation with respect to the Loans then being requested. The provisions of this Section 11.8 shall be without limitation of the Borrower's obligations under other provisions of the Loan Documents, including without limitation Section 15 hereof. Section 12. EVENTS OF DEFAULT; ACCELERATION; ETC. Section 12.1. Events of Default and Acceleration. If any of the following events ("Events of Default" or, if the giving of notice or the lapse of time or both is required, then, prior to such notice or lapse of time, "Defaults") shall occur: (a) the Borrower shall fail to pay any principal of the Loans when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment; (b) the Borrower shall fail to pay any interest on the Loans or any other sums due hereunder or under any of the other Loan Documents, when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment; (c) Intentionally Omitted. (d) Intentionally Omitted. (e) any of the Borrower, the Member, the Manager, the Guarantor or any other party shall fail to, or the Borrower shall fail to cause the Property Owner to, perform any other term, covenant or agreement contained herein or in any of the other Loan Documents (other than those specified in this Section 12.1); (f) any representation or warranty of the Borrower, the Property Owner, the Member, the Manager or any Guarantor in this Agreement or any other Loan Document, or in any report, certificate, financial statement, request for a Loan, or in any other document or instrument delivered pursuant to or in connection with this Agreement, any advance of a Loan or any of the other Loan Documents shall prove to have been false in any material respect upon the date when made or deemed to have been made or repeated; (g) without limiting any other terms of the Loan Documents prohibiting or restricting the ability of such Persons to incur Indebtedness, any of the Borrower, the Property Owner, the Member, the Manager or any Guarantor shall fail to pay at maturity, or within any applicable period of grace, any obligation for borrowed money or credit received or other Indebtedness (which as to the Property Owner only involves such obligations or Indebtedness individually or in the aggregate in excess of $1,000,000.00) or fail to observe or perform any material term, covenant or agreement contained in any agreement by which it is bound (including, without limitation, the Mezzanine Mortgage Loan Documents), evidencing or securing any such borrowed money or credit received or other Indebtedness for such period of time as would permit (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof (which as to the Property Owner only involves such obligations or Indebtedness individually or in the aggregate in excess of $1,000,000.00); provided however that any failure of a Guarantor to pay such amounts or observe or perform such terms, covenants or agreements with respect to a "Loan Document" (as defined in the Secured Mezzanine Loan Agreement) shall not constitute a Default under this Section 12.1(g); (h) any of the Borrower, the Property Owner, the Member, the Manager or the Guarantor (A) shall make an assignment for the benefit of creditors, or admit in writing its general inability to pay or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver of any such Person of any substantial part of the assets of any thereof, (B) shall commence any case or other proceeding relating to any such Person under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or (C) shall take any action to authorize or in furtherance of any of the foregoing; (i) a petition or application shall be filed for the appointment of a trustee or other custodian, liquidator or receiver of any of the Borrower, the Property Owner, the Member, the Manager or the Guarantor or any substantial part of the assets of any thereof, or a case or other proceeding shall be commenced against any such Person under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, and such Person shall indicate its approval thereof, consent thereto or acquiescence therein or such petition, application, case or proceeding shall not have been dismissed within 60 days following the filing or commencement thereof; (j) a decree or order is entered appointing any such trustee, custodian, liquidator or receiver or adjudicating any of the Borrower, the Property Owner, the Member, the Manager or the Guarantor bankrupt or insolvent, or approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of any such Person, in each case of the foregoing in an involuntary case under federal bankruptcy laws as now or hereafter constituted; (k) there shall remain in force, undischarged, unsatisfied and unstayed, for more than 60 days, whether or not consecutive, any uninsured final judgment against any of the Borrower, the Property Owner, the Member, the Manager or the Guarantor that, with other outstanding uninsured final judgments, undischarged, against such Person exceeds in the aggregate $5,000,000.00 with respect to the Borrower or a Guarantor or $1,000,000.00 with respect to the Property Owner, the Manager or the Member; provided that in any event such judgment with respect to the Property Owner, the Manager or the Member shall be sooner removed prior to the commencement of any proceeding of foreclosure, levy or other sale pursuant thereto; and provided further that any such judgment against a Guarantor arising from a failure to perform under a "Loan Document" (as defined in the Secured Mezzanine Loan Agreement) shall not constitute a Default under this Section 12.1(k); (l) if any of the Loan Documents shall be canceled, terminated, revoked or rescinded otherwise than in accordance with the terms thereof or with the express prior written agreement, consent or approval of the Banks, or any action at law, suit in equity or other legal proceeding to cancel, revoke or rescind any of the Loan Documents shall be commenced by or on behalf of any of the Borrower, the Property Owner, the Member, the Manager or the Guarantor or any of their respective holders of Voting Interests, or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or issue a judgment, order, decree or ruling to the effect that, any one or more of the Loan Documents is illegal, invalid or unenforceable in accordance with the terms thereof in any material respect as determined by the Majority Banks; (m) any dissolution, termination, partial or complete liquidation, merger or consolidation of any of the Borrower, the Property Owner, the Member, the Manager or the Guarantor, or any sale, transfer or other disposition of the assets of any such Person, other than as permitted under the terms of this Agreement or the other Loan Documents or otherwise consented to in writing by the Majority Banks; (n) any suit or proceeding shall be filed against any of the Borrower, the Property Owner, the Member, the Manager or the Guarantor or any of the Mortgaged Property, the Mezzanine Property or any other Collateral which in the good faith business judgment of the Majority Banks after giving consideration to the likelihood of success of such suit or proceeding and the availability of insurance to cover any judgment with respect thereto and based on the information available to them, if adversely determined, would have a materially adverse affect on the ability of the Property Owner to perform each and every one of its obligations under and by virtue of the Mezzanine Mortgage Loan Documents or the Borrower or any Guarantor to perform each and every one of their respective obligations under and by virtue of the Loan Documents; provided that any such suit or proceeding against a Guarantor relating to a claim under a "Loan Document" (as defined in the Secured Mezzanine Loan Agreement) shall not constitute a Default under this Section 12.1(n); (o) the Property Owner, the Member or the Manager shall be indicted for a federal crime, a punishment for which could include the forfeiture of any assets of such Person, or the Borrower shall be indicted for a federal crime, a punishment for which could include the forfeiture of any assets of such Person included in the Mortgaged Property or other Collateral; (p) Jeffrey H. Lynford shall cease to be the Chairman of the Board of, or Edward Lowenthal shall cease to be the President of, Wellsford Commercial, and a competent and experienced successor for such Person shall not be approved by the Majority Banks within six (6) months of such event; (q) Any violation of the covenant set forth in Section 8.11 shall occur; (r) with respect to any Guaranteed Pension Plan, an ERISA Reportable Event shall have occurred and the Majority Banks shall have determined in their reasonable discretion that such event reasonably could be expected to result in liability of any of the Borrower, the Property Owner, the Member, the Manager or the Guarantor to the PBGC or such Guaranteed Pension Plan in an aggregate amount exceeding $1,000,000 and such event in the circumstances occurring reasonably could constitute grounds for the termination of such Guaranteed Pension Plan by the PBGC or for the appointment by the appropriate United States District Court of a trustee to administer such Guaranteed Pension Plan; or a trustee shall have been appointed by the United States District Court to administer such Plan; or the PBGC shall have instituted proceedings to terminate such Guaranteed Pension Plan; (s) any Guarantor denies that it has any liability or obligation under the Guaranty or the Indemnity Agreement, or shall notify the Agent or any of the Banks of such Guarantor's intention to attempt to cancel or terminate the Guaranty or the Indemnity Agreement, or shall fail to observe or comply with any term, covenant, condition or agreement under the Guaranty or the Indemnity Agreement; (t) the Borrower, the Member, the Manager or any other Person acting on behalf of any of them shall cause, or the Borrower shall permit the Property Owner to, cause less than all of the Excess Property Income to be deposited with the Agent as and when provided in the Assignment of Interests or the Cash Collateral Agreement and the same is not cured within five (5) days following receipt of written notice of such default; (u) any warranty or representation of the Property Owner, the Manager, the Member or the Borrower in any acknowledgment delivered to the Agent in connection with the Loan shall prove to have been false or misleading in any material respect upon the date when made or deemed to have been made or repeated, or the Property Owner, the Manager, the Member or the Borrower shall fail to perform any term, covenant or agreement contained in any such acknowledgment; or (v) The occurrence of an Event of Default under any of the other Loan Documents; then, and in any such event, the Agent may, and upon the request of the Majority Banks shall, by notice in writing to the Borrower declare all amounts owing with respect to this Agreement, the Notes and the other Loan Documents to be, and they shall thereupon forthwith become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower; provided that in the event of any Event of Default specified in Section 12.1(h), Section 12.1(i) or Section 12.1(j), all such amounts shall become immediately due and payable automatically and without any requirement of notice from any of the Banks or the Agent. Without limiting the terms of this Agreement, the occurrence of a "Default" or "Event of Default" under the Secured Mezzanine Loan Agreement shall not in and of itself constitute a Default or Event of Default under this Agreement or the other Loan Documents. Section 12.lA. Limitation of Cure Periods. Notwithstanding anything contained in Section 12.1 to the contrary, (i) no Event of Default shall exist hereunder upon the occurrence of any failure described in Section 12.1(b) in the event that the Borrower cures such default within five (5) days following receipt of written notice of such default, provided, however, that Borrower shall not be entitled to receive more than two (2) notices in the aggregate pursuant to this clause (i) in any period of 365 days ending on the date of any such occurrence of default, and provided further that no such cure period shall apply to any payments due upon the maturity of the Notes, and (ii) no Event of Default shall exist hereunder upon the occurrence of any failure described in Section 12.1(e) in the event that the Borrower cures such default with thirty (30) days following receipt of written notice of such default, provided that the provisions of this clause (ii) shall not pertain to defaults consisting of a failure to provide insurance as required by Section 7.7, to any default consisting of a failure to comply with Section 7.4(e), Section 8.2(g), Section 8.7(b), Section 8.12 (as to the failure of the Manager, the Member or the Property Owner to comply therewith), Section 8.13, Section 8.14 (as to the failure to deliver any notice of default, acceleration or the exercise or threat of exercise of any remedies under the Mezzanine Mortgage Loan Documents) or to any default excluded from any provision of cure of defaults contained in any other of the Loan Documents; provided, however, that the occurrence of such events under Sections 8.2(g), 8.7(b), 8.12, 8.13 and 8.14 shall be subject to the rights of Borrower pursuant to Paragraph 8(h) of the Assignment of Interests. Section 12.2. Termination of Commitments. If any one or more Events of Default specified in Section 12.1(h), Section 12.1(i) or Section 12.1(j) shall occur, then immediately and without any action on the part of the Agent or any Bank any unused portion of the credit hereunder shall terminate and the Banks shall be relieved of all obligations to make Loans to the Borrower. If any other Event of Default shall have occurred and be continuing, the Agent, upon the election of the Majority Banks, may by notice to the Borrower terminate the obligation to make Loans to the Borrower. No termination under this Section 12.2 shall relieve the Borrower of its obligations to the Banks arising under this Agreement or the other Loan Documents. Section 12.3. Remedies. In case any one or more of the Events of Default shall have occurred and be continuing, and whether or not the Banks shall have accelerated the maturity of the Loans pursuant to Section 12.1, the Agent on behalf of the Banks, may, with the consent of the Majority Banks but not otherwise, proceed to protect and enforce their rights and remedies under this Agreement, the Notes or any of the other Loan Documents by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Agreement and the other Loan Documents or any instrument pursuant to which the Obligations are evidenced, including to the full extent permitted by applicable law the obtaining of the ex parte appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right. No remedy herein conferred upon the Agent or the holder of any Note is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of law. Section 12.4. Distribution of Collateral Proceeds. In the event that, following the occurrence or during the continuance of any Event of Default, any monies are received in connection with the enforcement of any of the Security Documents, or otherwise with respect to the realization upon any of the Collateral, such monies shall be distributed for application as follows: (a) First, to the payment of, or (as the case may be) the reimbursement of, the Agent for or in respect of all reasonable costs, expenses, disbursements and losses which shall have been incurred or sustained by the Agent to protect or preserve the collateral or in connection with the collection of such monies by the Agent, for the exercise, protection or enforcement by the Agent of all or any of the rights, remedies, powers and privileges of the Agent under this Agreement or any of the other Loan Documents or in respect of the Collateral or in support of any provision of adequate indemnity to the Agent against any taxes or liens which by law shall have, or may have, priority over the rights of the Agent to such monies; (b) Second, to all other Obligations in such order or preference as the Majority Banks shall determine; provided, however, that (i) distributions in respect of such Obligations shall be made pari passu among Obligations with respect to the Agent's fee payable pursuant to Section 4.3 and all other Obligations, (ii) in the event that any Bank shall have wrongfully failed or refused to make an advance under Section 2.7 and such failure or refusal shall be continuing, advances made by other Banks during the pendency of such failure or refusal shall be entitled to be repaid as to principal and accrued interest in priority to the other Obligations described in this subsection (b), and (iii) Obligations owing to the Banks with respect to each type of Obligation such as interest, principal, fees and expenses, shall be made among the Banks pro rata; and provided, further, that the Majority Banks may in their discretion make proper allowance to take into account any Obligations not then due and payable; and (c) Third, the excess, if any, shall be returned to the Borrower or to such other Persons as are entitled thereto. Section 12.5. Default under Mezzanine Mortgage Loan Documents. Notwithstanding anything herein to the contrary, the Borrower hereby expressly agrees that any "Event of Default" (as defined in the Mezzanine Mortgage Loan Documents) (which shall be deemed to include maturity of the debt secured by the Mezzanine Mortgage Loan Document or any other occurrence which would give the holder of the Mezzanine Mortgage Loan Documents the right to exercise remedies thereunder) shall constitute and be deemed to be an Event of Default under this Agreement for which no right to cure shall be available; provided, however, that in the event that (a) a court of competent jurisdiction finally determines in an adjudication binding upon the Mezzanine Mortgagee, and sufficient to prohibit or stay any exercise by the Mezzanine Mortgagee of its remedies under the Mezzanine Mortgage Loan Documents, that an "Event of Default" under the Mezzanine Mortgage Loan Documents was in fact not an "Event of Default" thereunder, or (b) the Mezzanine Mortgagee withdraws such notice of the existence of an "Event of Default" (subject to the terms of this Section 12.5 below concerning the approval thereof by the Majority Banks), and in either event the Agent has not foreclosed on the "Member Interests" (as defined in the Assignment of Interests), such "Event of Default" shall no longer constitute an Event of Default hereunder. Without limiting the foregoing, an "Event of Default" under the Mezzanine Mortgage Loan Documents shall conclusively be deemed to have occurred upon the declaration, statement or notice from the Mezzanine Mortgagee as to the existence or occurrence of an "Event of Default" under the Mezzanine Mortgage Loan Documents. The Borrower shall cause the Property Owner to give the Agent immediate notice of default and all other notices or communications received by the Property Owner pursuant to the Mezzanine Mortgage Loan Documents or in connection with the Mezzanine Mortgage Loan. Upon the occurrence of any "Default" (as defined in the Mezzanine Mortgage Loan Documents), the Borrower shall cause the Property Owner to deliver to the Agent within five (5) days after the first to occur of (x) receipt by the Property Owner of notice of such "Default" from the Mezzanine Mortgagee or (y) the date the Property Owner obtains actual knowledge of the occurrence of such "Default", a detailed description of the actions to be taken by the Property Owner to cure such "Default" and the dates by which each such action shall occur. Such schedule shall be subject to the approval of the Majority Banks. The Borrower shall cause the Property Owner to take all such actions as are necessary to cure such "Default" under the Mezzanine Mortgage Loan Documents by the date approved by the Majority Banks, and shall deliver to the Agent not less frequently than weekly thereafter written updates concerning the status of the Property Owner's efforts to cure such "Default". The Agent shall have the right, but not the obligation, to pay any sums or to take any action which the Agent deems necessary or advisable to cure any default or alleged default under the Mezzanine Mortgage Loan Documents (whether or not the Property Owner is undertaking efforts to cure such default or the same is an "Event of Default" under the Mezzanine Mortgage Loan Documents or a Default or Event of Default hereunder), and such payment or such action is hereby authorized by the Borrower, and any sum so paid and any expense incurred by the Agent in taking any such action shall be evidenced by this Agreement and secured by the Security Documents and shall be immediately due and payable by Borrower to the Agent with interest at the rate for overdue amounts set forth in Section 4.12 until paid. The Agent shall be authorized to take such actions upon the assertion by the Mezzanine Mortgagee of the existence of such "Default" or "Event of Default" without any duty to inquire or determine whether such "Default" or "Event of Default" exist. The consent or waiver by the Mezzanine Mortgagee of any "Event of Default" under the Mezzanine Mortgage Loan Documents shall not annul the occurrence of an Event of Default hereunder unless otherwise approved by the Majority Banks; provided, however that if the Mezzanine Mortgagee shall accept the cure of an "Event of Default" under the Mezzanine Mortgage Loan Documents resulting from a failure to pay any amounts due to the Mezzanine Mortgagee thereunder within five (5) days of the occurrence of such event, such acceptance shall not require the consent of the Majority Banks to annul the occurrence of an Event of Default hereunder. The Borrower shall cause the Property Owner to permit Agent to enter upon the Mezzanine Property for the purpose of curing any default or alleged default under the Mezzanine Mortgage Loan Documents or hereunder. The Borrower hereby transfers and assigns any excess proceeds arising from any foreclosure or sale under power pursuant to the Nomura Mortgages or any instrument evidencing the indebtedness secured thereby, and the Borrower hereby authorizes and directs the holder or holders of the Nomura Mortgages to pay such excess proceeds directly to the Agent up to the amount of the Obligations. The provisions of this Section 12.5 shall be subject to the rights of Borrower pursuant to Paragraph 8(h) of the Assignment of Interests. Section 13. SETOFF. Regardless of the adequacy of any collateral, during the continuance of any Event of Default, any deposits (general or specific, time or demand, provisional or final, regardless of currency, maturity, or the branch of where such deposits are held) or other sums credited by or due from any of the Banks to the Borrower or any Guarantor and any securities or other property of the Borrower or any Guarantor in the possession of such Bank may be applied to or set off against the payment of Obligations and any and all other liabilities, direct, or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, of the Borrower or any Guarantor to such Bank. Each of the Banks agrees with each other Bank that if such Bank shall receive from the Borrower or any Guarantor, whether by voluntary payment, exercise of the right of setoff, or otherwise, and shall retain and apply to the payment of the Note or Notes held by such Bank any amount in excess of its ratable portion of the payments received by all of the Banks with respect to the Notes held by all of the Banks, such Bank will make such disposition and arrangements with the other Banks with respect to such excess, either by way of distribution, pro tanto assignment of claims, subrogation or otherwise as shall result in each Bank receiving in respect of the Notes held by it its proportionate payment as contemplated by this Agreement; provided that if all or any part of such excess payment is thereafter recovered from such Bank, such disposition and arrangements shall be rescinded and the amount restored to the extent of such recovery, but without interest. Section 14. THE AGENT. Section 14.1. Authorization. The Agent is authorized to take such action on behalf of each of the Banks and to exercise all such powers as are hereunder and under any of the other Loan Documents and any related documents delegated to the Agent, together with such powers as are reasonably incident thereto, provided that no duties or responsibilities not expressly assumed herein or therein shall be implied to have been assumed by the Agent. The obligations of Agent hereunder are primarily administrative in nature, and nothing contained in this Agreement or any of the other Loan Documents shall be construed to constitute the Agent as a trustee for any Bank or to create any agency or fiduciary relationship. The Borrower and any other Person shall be entitled to conclusively rely on a statement from the Agent that it has the authority to act for and bind the Banks pursuant to this Agreement and the other Loan Documents. Section 14.2. Employees and Agents. The Agent may exercise its powers and execute its duties by or through employees or agents and shall be entitled to take, and to rely on, advice of counsel concerning all matters pertaining to its rights and duties under this Agreement and the other Loan Documents. The Agent may utilize the services of such Persons as the Agent may reasonably determine, and all reasonable fees and expenses of any such Persons shall be paid by the Borrower. Section 14.3. No Liability. Neither the Agent nor any of its shareholders, directors, officers or employees nor any other Person assisting them in their duties nor any agent, or employee thereof, shall be liable for any waiver, consent or approval given or any action taken, or omitted to be taken, in good faith by it or them hereunder or under any of the other Loan Documents, or in connection herewith or therewith, or be responsible for the consequences of any oversight or error of judgment whatsoever, except that the Agent or such other Person, as the case may be, may be liable for losses due to its willful misconduct or gross negligence. Section 14.4. No Representations. The Agent shall not be responsible for the execution or validity or enforceability of this Agreement, the Notes, any of the other Loan Documents or any instrument at any time constituting, or intended to constitute, collateral security for the Notes, or for the value of any such collateral security or for the validity, enforceability or collectability of any such amounts owing with respect to the Notes, or for any recitals or statements, warranties or representations made herein or in any of the other Loan Documents or in any certificate or instrument hereafter furnished to it by or on behalf of the Borrower, the Guarantor, the Property Owner, the Manager or the Member, or be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements herein or in any other of the Loan Documents. The Agent shall not be bound to ascertain whether any notice, consent, waiver or request delivered to it by the Borrower or the Guarantor or any holder of any of the Notes shall have been duly authorized or is true, accurate and complete. The Agent has not made nor does it now make any representations or warranties, express or implied, nor does it assume any liability to the Banks, with respect to the creditworthiness or financial condition of the Borrower, the Property Owner, the Manager, the Member or the Guarantor. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based upon such information and documents as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank, based upon such information and documents as it deems appropriate at the time, continue to make its own credit analysis and decisions in taking or not taking action under this Agreement and the other Loan Documents. Section 14.5. Payments. (a) A payment by the Borrower or the Guarantor to the Agent hereunder or under any of the other Loan Documents for the account of any Bank shall constitute a payment to such Bank. The Agent agrees to distribute to each Bank not later than one Business Day after the Agent's receipt of good funds, determined in accordance with the Agent's customary practices, such Bank's pro rata share of payments received by the Agent for the account of the Banks except as otherwise expressly provided herein or in any of the other Loan Documents. (b) If in the opinion of the Agent the distribution of any amount received by it in such capacity hereunder, under the Notes or under any of the other Loan Documents might involve it in liability, it may refrain from making distribution until its right to make distribution shall have been adjudicated by a court of competent jurisdiction. If a court of competent jurisdiction shall adjudge that any amount received and distributed by the Agent is to be repaid, each Person to whom any such distribution shall have been made shall either repay to the Agent its proportionate share of the amount so adjudged to be repaid or shall pay over the same in such manner and to such Persons as shall be determined by such court. (c) Notwithstanding anything to the contrary contained in this Agreement or any of the other Loan Documents, any Bank that fails (i) to make available to the Agent its pro rata share of any Loan or (ii) to comply with the provisions of Section 13 with respect to making dispositions and arrangements with the other Banks, where such Bank's share of any payment received, whether by setoff or otherwise, is in excess of its pro rata share of such payments due and payable to all of the Banks, in each case as, when and to the full extent required by the provisions of this Agreement, shall be deemed delinquent (a "Delinquent Bank") and shall be deemed a Delinquent Bank until such time as such delinquency is satisfied. A Delinquent Bank shall be deemed to have assigned any and all payments due to it from the Borrower and the Guarantor, whether on account of outstanding Loans, interest, fees or otherwise, to the remaining nondelinquent Banks for application to, and reduction of, their respective pro rata shares of all outstanding Loans. The Delinquent Bank hereby authorizes the Agent to distribute such payments to the nondelinquent Banks in proportion to their respective pro rata shares of all outstanding Loans. A Delinquent Bank shall be deemed to have satisfied in full a delinquency when and if, as a result of application of the assigned payments to all outstanding Loans of the nondelinquent Banks or as a result of other payments by the Delinquent Banks to the nondelinquent Banks, the Banks' respective pro rata shares of all outstanding Loans have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency. Section 14.6. Holders of Notes. Subject to the terms of Article 18, the Agent may deem and treat the payee of any Note as the absolute owner or purchaser thereof for all purposes hereof until it shall have been furnished in writing with a different name by such payee or by a subsequent holder, assignee or transferee. Section 14.7. Indemnity. The Banks ratably agree hereby to indemnify and hold harmless the Agent from and against any and all claims, actions and suits (whether groundless or otherwise), losses, damages, costs, expenses (including any expenses for which the Agent has not been reimbursed by the Borrower as required by Section 15), and liabilities of every nature and character arising out of or related to this Agreement, the Notes, or any of the other Loan Documents or the transactions contemplated or evidenced hereby or thereby, or the Agent's actions taken hereunder or thereunder, except to the extent that any of the same shall be directly caused by the Agent's willful misconduct or gross negligence. Section 14.8. Agent as Bank. In its individual capacity, BKB shall have the same obligations and the same rights, powers and privileges in respect to its Commitment and the Loans made by it, and as the holder of any of the Notes as it would have were it not also the Agent. Section 14.9. Resignation. The Agent may resign at any time by giving 60 days' prior written notice thereof to the Banks and the Borrower. Upon any such resignation, the Majority Banks shall have the right to appoint as a successor Agent any Bank or any bank whose senior debt obligations are rated not less than "A3" or its equivalent by Moody's Investors Service, Inc. or not less than "A" or its equivalent by Standard & Poor's corporation and which has total assets in excess of $10 billion and, so long as the Loan is secured by the Mezzanine Collateral, who is approved by the Rating Agencies pursuant to the Mezzanine Mortgage Loan Agreement. Unless a Default or Event of Default shall have occurred and be continuing, such successor Agent shall be reasonably acceptable to the Borrower. If no successor Agent shall have been so appointed by the Majority Banks and shall have accepted such appointment within 30 days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a Bank or any bank whose debt obligations are rated not less than "A" or its equivalent by Moody's Investors Service, Inc. or not less than "A" or its equivalent by Standard & Poor's Corporation and which has total assets in excess of $10 billion and, so long as the Loan is secured by the Mezzanine Collateral, who is approved by the Rating Agencies pursuant to the Mezzanine Mortgage Loan Agreement. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder as Agent. After any retiring Agent's resignation, the provisions of this Agreement and the other Loan Documents shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. Section 14.10. Duties in the Case of Enforcement. In case one or more Events of Default have occurred and shall be continuing, and whether or not acceleration of the Obligations shall have occurred, the Agent shall, if (a) so requested by the Majority Banks and (b) the Banks have provided to the Agent such additional indemnities and assurances against expenses and liabilities as the Agent may reasonably request, proceed to enforce the provisions of the Security Documents authorizing the sale or other disposition of all or any part of the Collateral and exercise all or any such other legal and equitable and other rights or remedies as it may have in respect of such Collateral. The Majority Banks may direct the Agent in writing as to the method and the extent of any such sale or other disposition, the Banks hereby agreeing to indemnify and hold the Agent harmless from all liabilities incurred in respect of all actions taken or omitted in accordance with such directions, provided that the Agent need not comply with any such direction to the extent that the Agent reasonably believes the Agent's compliance with such direction to be unlawful or commercially unreasonable in any applicable jurisdiction. Section 15. EXPENSES. The Borrower agrees to pay (a) the reasonable costs of producing and reproducing this Agreement, the other Loan Documents and the other agreements and instruments mentioned herein, (b) any taxes (including any interest and penalties in respect thereto) payable by the Agent or any of the Banks (other than taxes based upon the Agent's or any Bank's gross or net income, except that the Agent and the Banks shall be entitled to indemnification for any and all amounts paid by them in respect of taxes based on income or other taxes assessed by any State in which Mortgaged Property or other Collateral is located, such indemnification to be limited to taxes due solely on account of the granting of Collateral under the Security Documents and to be net of any credit allowed to the indemnified party from any other State on account of the payment or incurrence of such tax by such indemnified party), including any recording, mortgage, documentary or intangibles taxes in connection with the Security Deeds and other Loan Documents, or other taxes payable on or with respect to the transactions contemplated by this Agreement, including any such taxes payable by the Agent or any of the Banks after the Closing Date (the Borrower hereby agreeing to indemnify the Agent and each Bank with respect thereto), (c) all title insurance premiums, appraisal fees, engineer's fees, reasonable internal charges of the Agent (determined in good faith and in accordance with the Agent's internal policies applicable generally to its customers) for commercial finance exams and engineering and environmental reviews and the reasonable fees, expenses and disbursements of the counsel to the Agent, counsel for the Majority Banks and any local counsel to the Agent incurred in connection with the preparation, administration or interpretation of the Loan Documents and other instruments mentioned herein (excluding, however, the preparation of agreements evidencing participations granted under Section 18.4), the review of any additional or substitute Collateral, the addition of any guarantor, each closing hereunder, and amendments, modifications, approvals, consents or waivers hereto or hereunder, (d) the reasonable fees, expenses and disbursements of the Agent incurred by the Agent in connection with the preparation, administration or interpretation of the Loan Documents and other instruments mentioned herein, and the making of each advance hereunder, (e) all reasonable out-of-pocket expenses (including reasonable attorneys' fees and costs, which attorneys may be employees of any Bank or the Agent and the fees and costs of appraisers, engineers, investment bankers or other experts retained by any Bank or the Agent) incurred by any Bank or the Agent in connection with (i) the enforcement of or preservation of rights under any of the Loan Documents against the Borrower or any Guarantor or the administration thereof after the occurrence of a Default or Event of Default and (ii) any litigation, proceeding or dispute whether arising hereunder or otherwise, in any way related to the Agent's or any of the Bank's relationship with the Borrower or any Guarantor, (f) all reasonable fees, expenses and disbursements of any Bank or the Agent incurred in connection with U.C.C. searches, U.C.C. filings, title rundowns, title searches or mortgage recordings, and (g) all reasonable fees and expenses (including reasonable attorney's fees and costs) incurred by BankBoston and Goldman in connection with the assignment of Commitments and interests in the Loans pursuant to Section 18.1. The covenants of this Section 15 shall survive payment or satisfaction of payment of amounts owing with respect to the Notes. Section 16. INDEMNIFICATION. The Borrower agrees to indemnify and hold harmless the Agent and the Banks and each director, officer, employee, agent and Person who controls the Agent or any Bank from and against any and all claims, actions and suits, whether groundless or otherwise, and from and against any and all liabilities, losses, damages and expenses of every nature and character arising out of or relating to this Agreement or any of the other Loan Documents or the transactions contemplated hereby and thereby including, without limitation, (a) any leasing fees and any brokerage, finders or similar fees asserted against any Person indemnified under this Section 16 based upon any agreement, arrangement or action made or taken, or alleged to have been made or taken, by the Borrower or Guarantor, (b) any condition, use, operation or occupancy of the Mortgaged Property, the Mezzanine Property or other Collateral, (c) any actual or proposed use by the Borrower of the proceeds of any of the Loans, (d) any actual or alleged infringement of any patent, copyright, trademark, service mark or similar right of the Borrower, the Property Owner, the Manager, the Member or Guarantor comprised in the Collateral, (e) the Borrower and the Guarantor entering into or performing this Agreement or any of the other Loan Documents, (f) any actual or alleged violation of any law, ordinance, code, order, rule, regulation, approval, consent, permit or license relating to the Mortgaged Property or the Mezzanine Property, (g) with respect to the Borrower, the Property Owner, the Manager, the Member or Guarantor and their respective properties and assets, the violation of any Environmental Law, the Release or threatened Release of any Hazardous Substances or any action, suit, proceeding or investigation brought or threatened with respect to any Hazardous Substances (including, but not limited to claims with respect to wrongful death, personal injury or damage to property), (h) the Mezzanine Mortgage Loan Documents or the Member Organizational Agreements, the Property Owner Organizational Agreements and the Manager Organizational Agreements, (i) matters for which the Mezzanine Mortgagee is indemnified pursuant to Section 9.2 of the Mezzanine Mortgage Loan Agreement to the same extent provided therein, (j) in the event that the Agent or any nominee of the Agent and the Banks shall foreclose or otherwise obtain title to all or any portion of the Mezzanine Collateral, any obligations, duties or liabilities of the Property Owner, the Borrower, the Manager or the Member other than those pursuant to Leases for the Mezzanine Property entered into in compliance with this Agreement, the Mezzanine Mortgage Loan Documents (subject to the terms of the Loan Documents) or the Approved Budget, or (k) the exercise by the Agent of the rights and remedies set forth in Section 32, in each case including, without limitation, the reasonable fees and disbursements of counsel and allocated costs of internal counsel incurred in connection with any such investigation, litigation or other proceeding; provided, however, that the Borrower shall not be obligated under this Section 16 to indemnify any Person for liabilities arising from such Person's own gross negligence or willful misconduct. In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in Section 9.2(b) or (c) of the Mezzanine Mortgage Loan Agreement is for any reason held to be unenforceable by an indemnified party in respect of any claims, expenses, losses, damages, obligations or liabilities (or action in respect thereof) referred to therein which would otherwise be indemnifiable under Section 16(i) above the Borrower shall contribute to the amount paid or payable by the Agent or the Banks as a result of such claims, expenses, losses, damages, obligations or liabilities (or action in respect thereof); provided, however, that no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act of 1933) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. In determining the amount of contribution to which the respective parties are entitled, the following factors shall be considered: (i) the Agent's, the Banks' and the Borrower's (or the Borrower's predecessors) relative knowledge and access to information concerning the matter with respect to which claim was asserted; (ii) the opportunity to correct and prevent any statement or omission; and (iii) any other equitable considerations appropriate in the circumstances. Agent and the Borrower hereby agree that it may not be equitable if the amount of such contribution were determined by pro rata or per capita allocation. In litigation, or the preparation therefor, the Banks and the Agent shall be entitled to select a single law firm as their own counsel and, in addition to the foregoing indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses of such counsel. If, and to the extent that the obligations of the Borrower under this Section 16 are unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment in satisfaction of such obligations which is permissible under applicable law. The provisions of this Section 16 shall survive the repayment of the Loans and the termination of the obligations of the Banks hereunder. Section 17. SURVIVAL OF COVENANTS, ETC. All covenants, agreements, representations and warranties made herein, in the Notes, in any of the other Loan Documents or in any documents or other papers delivered by or on behalf of the Borrower, the Property Owner, the Manager, the Member or any Guarantor pursuant hereto or thereto shall be deemed to have been relied upon by the Banks and the Agent, notwithstanding any investigation heretofore or hereafter made by any of them, and shall survive the making by the Banks of any of the Loans, as herein contemplated, and shall continue in full force and effect so long as any amount due under this Agreement or the Notes or any of the other Loan Documents remains outstanding or any Bank has any obligation to make any Loans. The indemnification obligations of the Borrower provided herein and the other Loan Documents shall survive the full repayment of amounts due and the termination of the obligations of the Banks hereunder and thereunder to the extent provided herein and therein. All statements contained in any certificate or other paper delivered to any Bank or the Agent at any time by or on behalf of the Borrower, the Property Owner, the Manager, the Member or any Guarantor pursuant hereto or in connection with the transactions contemplated hereby shall constitute representations and warranties by such Person hereunder. Section 18. ASSIGNMENT AND PARTICIPATION. Section 18.1. Conditions to Assignment by Banks. Except as provided herein, each Bank may assign to one or more banks or other entities all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitment Percentage and Commitment and the same portion of the Loans at the time owing to it, and the Notes held by it); provided that (a) the Agent shall have given its prior written consent to such assignment, which consent shall not be unreasonably withheld (provided that such consent shall not be required for any assignment to another Bank, to a bank which is under common control with the assigning Bank or to a wholly-owned Subsidiary of such Bank provided that such assignee shall remain a wholly-owned Subsidiary of such Bank), (b) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Bank's rights and obligations under this Agreement, (c) the parties to such assignment shall execute and deliver to the Agent, for recording in the Register (as hereinafter defined), a notice of such assignment, together with any Notes subject to such assignment, (d) in no event shall any voting, consent or approval rights of a Bank be assigned to any Person controlling, controlled by or under common control with, or which is not otherwise free from influence or control by, the Borrower, the Property Owner, the Manager, the Member or any Guarantor, which rights shall instead be allocated pro rata among the other remaining Banks, (e) such assignee shall have a net worth as of the date of such assignment of not less than $500,000,000 and (f) such assignee shall acquire an interest in the Loans of not less than $10,000,000.00. No such assignment shall be made without the prior consent of the Borrower, which consent shall not be unreasonably withheld or delayed; provided that such consent shall not be required in the event that a Default or Event of Default shall have occurred. Upon such execution, delivery, acceptance and recording, of such notice of assignment, (i) the assignee thereunder shall be a party hereto and all other Loan Documents executed by the Banks and, to the extent provided in such assignment, have the rights and obligations of a Bank hereunder, (ii) the assigning Bank shall, to the extent provided in such assignment and upon payment to the Agent of the registration fee referred to in Section 18.2, be released from its obligations under this Agreement, and (iii) the Agent may unilaterally amend Schedule 1.1 to reflect such assignment. In connection with each assignment, the assignee shall represent and warrant to the Agent, the assignor and each other Bank as to whether such assignee is controlling, controlled by, under common control with or is not otherwise free from influence or control by, the Borrower, the Property Owner, the Manager, the Member or any Guarantor. Notwithstanding anything herein to the contrary, in the event that BKB shall at any time hold a Commitment equal to or less than $20,000,000, then BKB shall promptly provide written notice thereof to the Banks and the Majority Banks shall have the right, to be exercised within fifteen (15) days of delivery of such notice by BKB, to elect to remove BKB as Agent and replace BKB as Agent, subject to the terms of Section 14.9 Section 18.2. Register. The Agent shall maintain a copy of each assignment delivered to it and a register or similar list (the "Register") for the recordation of the names and addresses of the Banks and the Commitment Percentages of, and principal amount of the Loans owing to the Banks from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Agent and the Banks may treat each Person whose name is recorded in the Register as a Bank hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and the Banks at any reasonable time and from time to time upon reasonable prior notice. Upon each such recordation, the assigning Bank agrees to pay to the Agent a registration fee in the sum of $2,000. Section 18.3. New Notes. Upon its receipt of an assignment executed by the parties to such assignment, together with each Note subject to such assignment, the Agent shall (a) record the information contained therein in the Register, and (b) give prompt notice thereof to the Borrower and the Banks (other than the assigning Bank). Within five Business Days after receipt of such notice, the Borrower, at its own expense, shall execute and deliver to the Agent, in exchange for each surrendered Note, a new Note to the order of such assignee in an amount equal to the amount assumed by such assignee pursuant to such assignment and, if the assigning Bank has retained some portion of its obligations hereunder, a new Note to the order of the assigning Bank in an amount equal to the amount retained by it hereunder, and shall cause the Guarantor to deliver to Agent an acknowledgment in form and substance satisfactory to the Agent to the effect that the Guaranty extends and is applicable to each new Note. Such new Notes shall provide that they are replacements for the surrendered Notes, shall be in an aggregate principal amount equal to the aggregate principal amount of the surrendered Notes, shall be dated the effective date of such assignment and shall otherwise be in substantially the form of the assigned Notes. The surrendered Notes shall be canceled and returned to the Borrower. Section 18.4. Participations. Each Bank may sell participations to one or more banks or other entities in all or a portion of such Bank's rights and obligations under this Agreement and the other Loan Documents with the prior written consent of the Agent (after giving due regard to the limitations in Section 18.8); provided that (a) any such sale or participation shall not affect the rights and duties of the selling Bank hereunder to the Borrower, (b) such sale and participation shall not entitle such participant any rights or privileges under this Agreement or the Loan Documents (including, without limitation, the right to approve waivers, amendments or modifications), (c) such participant shall have no direct rights against the Borrower or the Guarantor except the rights granted to the Banks pursuant to Section 13, (d) such sale is effected in accordance with all applicable laws, and (e) such participant shall not be a Person controlling, controlled by or under common control with, or which is not otherwise free from influence or control by, the Borrower, the Property Owner, the Manager, the Member or any Guarantor. Section 18.5. Pledge by Bank. Any Bank may at any time pledge all or any portion of its interest and rights under this Agreement (including all or any portion of its Note) to any of the twelve Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or the enforcement thereof shall release the pledgor Bank from its obligations hereunder or under any of the other Loan Documents. Section 18.6. No Assignment by Borrower. The Borrower shall not assign or transfer any of its rights or obligations under any of the Loan Documents without the prior written consent of each of the Banks. Section 18.7. Disclosure. The Borrower agrees that in addition to disclosures made in accordance with standard institutional lending practices any Bank may disclose information obtained by such Bank pursuant to this Agreement to assignees or participants and potential assignees or participants hereunder. Section 18.8. Additional Restrictions on Assignments and Participations. Notwithstanding anything to the contrary set forth in this Agreement or in any of the other Loan Documents, so long as the Conditional Guaranty remains in effect, no interest in the Loan may be assigned, transferred or participated, unless in each case the additional requirements set forth in clauses (a) through (e) below are satisfied: (a) the entity to which any interest in the Loan is assigned, transferred or participated is an Eligible Transferee (as defined below), (b) the minimum denomination assigned, transferred or participated shall not be less than $10,000,000.00, (c) assignments, transfers and participations may not be made to more than thirty (30) Eligible Transferees in the aggregate, (d) assignments, transfers and participations may not be made without the consent of Whitehall Street Real Estate Limited Partnership V, Whitehall Street Real Estate Limited Partnership VI, Whitehall Street Real Estate Limited Partnership VII and Whitehall Street Real Estate Limited Partnership VIII, which consent shall not be unreasonably withheld, delayed or conditioned, and (e) assignments, transfers and participations may not be made unless the prospective assignee, transferee or participant executes and delivers a fully completed certificate in the form of Exhibit E hereto confirming that such assignee, transferee or participant is an Eligible Transferee. "Eligible Transferee" means a "qualified purchaser" as defined in Section 2(a)(51)(A) of the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder. Section 19. NOTICES. Each notice, demand, election or request provided for or permitted to be given pursuant to this Agreement (hereinafter in this Section 19 referred to as "Notice"), but specifically excluding to the maximum extent permitted by law any notices of the institution or commencement of foreclosure proceedings, must be in writing and shall be deemed to have been properly given or served by personal delivery or by sending same by overnight courier or by depositing same in the United States Mail, postpaid and registered or certified, return receipt requested, or as expressly permitted herein, by telegraph, telecopy, telefax or telex, and addressed as follows: If to the Agent or BKB: BankBoston, N.A. 100 Federal Street Boston, Massachusetts 02110 Attn: Real Estate Division With a copy to: BankBoston, N.A. 115 Perimeter Center Place, N.E. Suite 500 Atlanta, Georgia 30346 Attn: Mr. Jay Johns Telecopy No.: 770/390-8434 If to the Borrower: Wellsford/Whitehall Holdings, L.L.C. 610 Fifth Avenue 7th Floor New York, New York 10020 Attn: Mr. Gregory F. Hughes With a copy to: Alan S. Pearce, Esq. Robinson Silverman Pearce Aronsohn & Berman LLP 1290 Avenue of the Americas New York, New York 10104 if to another Bank now a party to this Agreement, to the address set forth on the signature page hereto, and to each other Bank which may hereafter become a party to this Agreement at such address as may be designated by such Bank. Each Notice shall be effective upon being personally delivered or upon being sent by overnight courier or upon being deposited in the United States Mail as aforesaid. The time period in which a response to such Notice must be given or any action taken with respect thereto (if any), however, shall commence to run from the date of receipt if personally delivered or sent by overnight courier, or if so deposited in the United States Mail, the earlier of three (3) Business Days following such deposit or the date of receipt as disclosed on the return receipt. Rejection or other refusal to accept or the inability to deliver because of changed address for which no notice was given shall be deemed to be receipt of the Notice sent. By giving at least fifteen (15) days prior Notice thereof, the Borrower, a Bank or Agent shall have the right from time to time and at any time during the term of this Agreement to change their respective addresses and each shall have the right to specify as its address any other address within the United States of America. Section 20. RELATIONSHIP. Neither the Agent nor any Bank has any fiduciary relationship with or fiduciary duty to Borrower arising out of or in connection with this Agreement or the other Loan Documents, or the transactions contemplated hereunder or thereunder, and the relationship between each Bank and the Borrower is solely that of a lender and borrower, and nothing contained herein or in any of the other Loan Documents shall in any manner be construed as making the parties hereto partners, joint venturers or any other relationship other than lender and borrower. Section 21. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE. THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN, ARE CONTRACTS UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SUCH STATE (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN Section 19. THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT. Section 22. HEADINGS. The captions in this Agreement are for convenience of reference only and shall not define or limit the provisions hereof. Section 23. COUNTERPARTS. This Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. Section 24. ENTIRE AGREEMENT, ETC. The Loan Documents and any other documents executed in connection herewith or therewith express the entire understanding of the parties with respect to the transactions contemplated hereby. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated, except as provided in Section 27. Section law WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT AND THE BANKS HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY NOTE OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. THE BORROWER (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY BANK OR THE AGENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH BANK OR THE AGENT WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT THE AGENT AND THE BANKS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH THEY ARE PARTIES BY, AMONG OTHER THINGS, THE WAIVER AND CERTIFICATIONS CONTAINED IN THIS Section 25. Section 26. DEALINGS WITH THE BORROWER. The Banks and their affiliates may accept deposits from, extend credit to and generally engage in any kind of banking, trust or other business with the Borrower, its Subsidiaries or the Guarantor or any of their affiliates regardless of the capacity of the Bank hereunder. Section 27. CONSENTS, AMENDMENTS, WAIVERS, ETC. Except as otherwise expressly provided in this Agreement, any consent or approval required or permitted by this Agreement may be given, and any term of this Agreement or of any other instrument related hereto or mentioned herein may be amended, and the performance or observance by the Borrower or the Guarantor of any terms of this Agreement or such other instrument or the continuance of any Default or Event of Default may be waived (either generally or in a particular instance and either retroactively or prospectively) with, but only with, the written consent of the Majority Banks. Notwithstanding the foregoing, none of the following may occur without the written consent of each Bank: a change in the rate of interest on and the term of the Notes; a change in the amount of the Commitments of the Banks; a forgiveness, reduction or waiver of the principal of any unpaid Loan or any interest thereon or fee payable under the Loan Documents; a change in the amount of any fee payable to a Bank hereunder; the postponement of any date fixed for any payment of principal of or interest on the Loan; an extension of the Maturity Date (except as provided in Section 2.8); a change in the manner of distribution of any payments to the Banks or the Agent; the release of the Borrower or the Guarantor or any Collateral except as otherwise provided herein; an amendment of the definition of Majority Banks or of any requirement for consent by all of the Banks; any modification to require a Bank to fund a pro rata share of a request for an advance of the Loan made by the Borrower other than based on its Commitment Percentage; an amendment to this Section 27; an amendment of the definition of Majority Banks; or an amendment of any provision of this Agreement or the Loan Documents which requires the approval of all of the Banks or the Majority Banks to require a lesser number of Banks to approve such action. The amount of the Agent's fee payable for the Agent's account and the provisions of Section 14 may not be amended without the written consent of the Agent. No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of the Agent or any Bank in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon the Borrower shall entitle the Borrower to other or further notice or demand in similar or other circumstances. Section 28. SEVERABILITY. The provisions of this Agreement are severable, and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Agreement in any jurisdiction. Section 29. LIMITATION ON LIABILITY. NO OBLIGATION OR LIABILITY WHATSOEVER OF THE BORROWER WHICH MAY ARISE AT ANY TIME UNDER THIS AGREEMENT OR ANY OBLIGATION OR LIABILITY WHICH MAY BE INCURRED BY IT PURSUANT TO ANY OTHER LOAN DOCUMENT SHALL BE PERSONALLY BINDING UPON, NOR SHALL RESORT FOR THE ENFORCEMENT THEREOF BE HAD TO, THE PRIVATE PROPERTY OF ANY OF THE BORROWER'S MEMBERS REGARDLESS OF WHETHER SUCH OBLIGATION OR LIABILITY IS IN THE NATURE OF CONTRACT, TORT OR OTHERWISE; PROVIDED, HOWEVER, NOTHING HEREIN SHALL DIMINISH OR IMPAIR THE RIGHTS OF AGENT AND THE BANKS TO PURSUE ANY REMEDY AGAINST ANY ASSETS OF THE BORROWER OR RELIEVE, REDUCE OR IMPAIR ANY OBLIGATION OF ANY GUARANTOR UNDER ITS GUARANTY OR INDEMNITY AGREEMENT. Section 30. NO UNWRITTEN AGREEMENTS. THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES. Section 31. TIME OF THE ESSENCE. Time is of the essence with respect to each and every covenant, agreement and obligation of the Borrower under this Agreement and the other Loan Documents. Section 32. BANKRUPTCY. (a) Material Inducement. Each of the Borrower, the undersigned Guarantor, the Member and the Manager, jointly and severally, acknowledges and agrees that the representations, warranties, covenants and agreements contained in this Section 32 constitute a material inducement to the Agent and the Banks to enter into this Agreement, the other Loan Documents and the transactions contemplated hereby and thereby and that without the inclusion of this Section 32 herein the Agent and the Banks would not have entered into this Agreement and the other Loan Documents. (b) No Fraudulent Intent. Each of the Borrower, the undersigned Guarantor, the Member and the Manager, jointly and severally, hereby acknowledges, warrants, represents and agrees that neither the execution and delivery of this Agreement and the other Loan Documents nor the performance of any actions required hereunder or thereunder is being consummated by the Borrower, the Property Owner, the Guarantor, the Member or the Manager with or as a result of any actual intent by such Persons, or any of them, to hinder, delay or defraud any entity to which such Persons, or any of them, are now or will hereafter become indebted. (c) No Bankruptcy Intent. Each of the Borrower, the undersigned Guarantor, the Member and the Manager, jointly and severally, hereby represents, covenants and agrees that none of the Borrower, the Property Owner, the Guarantor, the Member or the Manager has any intent (1) to file any voluntary petition in bankruptcy under any Chapter of the Bankruptcy Code or in any manner to seek relief, protection, reorganization, liquidation, dissolution or similar relief for debtors under any local, state, federal or other insolvency laws or laws providing for relief of debtors, or in equity, or directly or indirectly to cause any of the other of such Persons to file any such petition or to seek any such relief, either at the present time, or at any time hereafter, or (2) directly or indirectly to cause any involuntary petition under any Chapter of the Bankruptcy Code to be filed against any of such Persons or directly or indirectly to cause any of such Persons to become the subject of any dissolution, liquidation or insolvency proceeding or any other proceeding pursuant to any local, state, federal, or other insolvency laws or laws providing for relief of debtors, or in equity, either at the present time, or at any time hereafter, or (3) directly or indirectly to cause the Mezzanine Property, the Mezzanine Collateral, any other Collateral or any portion thereof or any interest of such Persons in the Mezzanine Property, the Mezzanine Collateral or any other Collateral to become the property of any bankruptcy estate or the subject of any local, state, federal or other bankruptcy, dissolution, liquidation or insolvency proceedings, either at the present time or at any time hereafter. (d) Agreement in Best Interests of Parties; Consideration. Each of the Borrower, the undersigned Guarantor, the Member and the Manager, jointly and severally, hereby acknowledges and agrees that (1) the transactions evidenced by this Agreement and the other Loan Documents are in the best interests of such Persons and the creditors of such Persons, and (2) the benefit to inure to such Persons pursuant to this Agreement and the other Loan Documents constitute substantially more than "reasonable equivalent value" (as such term is used in Section 548 of the Bankruptcy Code) and "fair consideration" (as such term is defined and used in the New York Debtor and Creditor Law Sections 272-279), in exchange for the benefits to be provided by such Persons to the Agent and the Banks pursuant to this Agreement and the other Loan Documents. (e) Subsequent Bankruptcy; Waiver of Automatic Stay. (1) It is expressly agreed and understood by the parties hereto that, in the event the Property Owner, the Borrower, the Guarantor, the Member, the Manager, the Mezzanine Property or other Mezzanine Collateral, or any portion thereof, shall be or become the subject of any bankruptcy proceeding or the property of any bankruptcy estate, the United States Bankruptcy Court for the Southern District of New York (hereinafter referred to as the "Bankruptcy Court") shall have the sole and exclusive jurisdiction of such bankruptcy proceeding. The parties hereto hereby further acknowledge and agree that any voluntary bankruptcy petition filed by any of the Property Owner, the Borrower, the Guarantor, the Member or the Manager, or any involuntary bankruptcy petition caused to be filed by any of the Property Owner, the Borrower, Guarantor, the Member, the Manager or any affiliate thereof against any of the Property Owner, the Borrower, the Member, the Guarantor or the Manager (any such bankruptcy filing being hereinafter referred to as a "Bad Faith Filing"), or any other action by the Borrower or such Persons, or any of them, to attempt in any manner to hinder, delay, impede, stay, void, rescind or nullify any lawful action taken by Agent to exercise its rights and remedies under this Agreement or any of the other Loan Documents, or at law or in equity, from and after the date hereof, or pursuant to any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar proceedings, would be in bad faith and contrary to the purposes of the bankruptcy laws, would be for the sole purpose of delaying, inhibiting or interfering with the exercise by Agent of its rights and remedies under this Agreement and the Loan Documents and would, in and of itself, constitute "cause" for relief from the automatic stay pursuant to the provisions of Section 362(d)(1) of the Bankruptcy Code. Without limitation of the foregoing, the parties hereto hereby further acknowledge and agree that, in the event of any Bad Faith Filing by or against any of the Property Owner, the Borrower, Guarantor, the Member or the Manager, or their respective successors, successors-in-interest or assigns, Agent shall be entitled to obtain upon ex parte application therefor, and without further notice or action of any kind or nature whatsoever, (A) an order from the Bankruptcy Court prohibiting the use of Agent's "cash collateral" (as such term is defined in Section 363 of the Bankruptcy Code) in connection with the Loan, and (B) an order from the Bankruptcy Court granting immediate relief from the automatic stay pursuant to Section 362 of the Bankruptcy Code so as to permit Agent to exercise all of its rights and remedies pursuant to the Mezzanine Loan Documents, and at law and in equity. (2) The Borrower, the undersigned Guarantor, the Member and the Manager covenant not to directly or indirectly oppose or otherwise defend against Agent's effort to obtain relief from the stay pursuant to Section 32(e)(1), above, and covenant and agree that Agent shall be entitled to the lifting of the stay pursuant to Section 32(e)(1), above, without the necessity of an evidentiary hearing and without the necessity or requirement that Agent establish or prove the value of the Mezzanine Collateral or any other Collateral, the lack of adequate protection of Agent's interest in the Mezzanine Collateral or any other Collateral, the lack of any reasonable prospect of reorganization with respect either to the Property Owner, the Borrower, the Guarantor, the Member, the Manager, or the Mezzanine Collateral or any other Collateral, or the Borrower's, the Guarantor's, the Member's or the Manager's lack of equity in the Mezzanine Collateral. (3) The waiver by the Borrower, the undersigned Guarantor, the Member and the Manager of the Section 362 automatic stay contained in the Bankruptcy Code pursuant to Section 32(e)(1) and (2), above, and the waiver of the Section 362 automatic and Section 105 supplemental stay contained in the Bankruptcy Code pursuant to Section 32(f), below, shall be unconditional and absolute, and each of the Borrower, the Member, the Manager and the Guarantor hereby agree never to directly or indirectly maintain before any court that such waiver of the automatic stay and supplemental stay should not be strictly enforced. (f) Waiver of Automatic and Supplemental Stays. Each of the Borrower, the undersigned Guarantor, the Member and the Manager, on behalf of itself only, hereby represents, covenants and agrees, in the event of the filing of any voluntary or involuntary petition in bankruptcy by or against any of the Property Owner, the Borrower, the Guarantor, the Member or the Manager, not to assert or request any other party to assert that the automatic stay provided by Section 362 of the Bankruptcy Code shall operate or be interpreted to stay, interdict, condition, reduce or inhibit the ability of Agent to enforce any rights it has by virtue of the Mezzanine Loan Documents, or any other rights Agent has, whether now or hereafter acquired, against any of the Property Owner, the Borrower, the Guarantor, the Member, the Manager or against any Mezzanine Collateral; and further, in the event of the filing of any voluntary or involuntary petition in bankruptcy by or against any of the Property Owner, the Borrower, the Guarantor, the Member or the Manager, not to seek a supplemental stay or any other relief, whether injunctive or otherwise, pursuant to Section 105 of the Bankruptcy Code or any other provision of the Bankruptcy Code, to stay, interdict, condition, reduce or inhibit the ability of Agent to enforce any rights it has by virtue of the Mezzanine Loan Documents, or at law or in equity, or any other rights Agent has, whether now or hereafter acquired against the Property Owner, the Borrower, the Guarantor, the Member, the Manager or against any Mezzanine Collateral. The parties hereto acknowledge that the waivers in this Section 32(f) with respect to an involuntary petition shall not be effective until the occurrence of an Event of Default provided that none of the Borrower, the Guarantor, the Member, the Manager or the Property Owner directly or indirectly causes such petition to be filed against any of them. (g) Approval Rights Regarding Bankruptcy Proceeding. Upon the occurrence and during the continuance of any Event of Default, all rights of the Borrower, the Guarantor, the Member and the Manager to exercise their Voting Interests in the Property Owner, the Manager, or the Member, as the case may be, shall automatically terminate and cease to exist and all such rights shall thereupon be automatically vested in the Agent who shall thereupon have the sole and exclusive right to exercise such Voting Interests. Without limiting the foregoing, in the event of a Bad Faith Filing or any other voluntary or involuntary bankruptcy filing or any other insolvency proceeding of any kind under local, state, federal or other insolvency laws involving the Property Owner, the Borrower, the Guarantor, the Member or the Manager, or all of them, or any of their properties (collectively the "Bankruptcy Filings"), the Borrower, the undersigned Guarantor, the Member and the Manager, each acknowledge and agree to recognize the rights and powers granted to the Agent in this Section 32(g) and agree not to oppose or object on any basis whatsoever to the exercise by the Agent of such rights in connection with the Bankruptcy Filings. Further, upon the commencement of one or more Bankruptcy Filings, the Borrower, the undersigned Guarantor, the Member and the Manager, jointly and severally, covenant and agree: (1) not to propose, approve, vote for, or acquiesce in a plan of reorganization concerning the Property Owner, the Borrower, the Guarantor, the Member, the Manager, or all of them, as it directly or indirectly relates to the Property Owner, the Manager, the Member, the Mezzanine Property or the Mezzanine Collateral, without the consent of Agent; (2) not to challenge or object on any basis whatsoever to the standing of Agent to be recognized as a creditor and/or party-in-interest in the Bankruptcy Filings; and (3) not to violate or breach any of the covenants or agreements contained in this Agreement and any of the Loan Documents. (h) Miscellaneous Representations. Each of the Borrower, the undersigned Guarantor, the Member and the Manager warrant and represent to Agent and the Banks that, other than Agent and the Banks, applicable taxing authorities, and as to the Borrower only, the Indebtedness permitted by this Agreement, the Borrower, the Guarantor, the Member and the Manager have no creditors; that none of such Persons has any employees; that each of such Persons other than the Borrower are single asset entities such that each of such Persons does not own or hold any beneficial interest in any property of any kind or nature whatsoever other than their respective direct or indirect interests in the Property Owner; and that any dispute which may arise between Agent, the Banks, the Borrower (arising from its interest in the Mezzanine Collateral), any Guarantor (arising from its interest in the Mezzanine Collateral), Member or Manager, or any of them, would be, for all intents and purposes, a dispute, involving only Agent and the Banks and the Borrower, such Guarantor, the Member or the Manager, or any of them, as applicable. (i) Covenant of Noninterference and Cooperation. (1) The Borrower, the undersigned Guarantor, the Member and the Manager, jointly and severally, covenant and agree that, except for a "Permitted Defense" (as defined in the Conditional Guaranty), none of them shall take any action of any kind or nature whatsoever, either directly or indirectly, to oppose, impede, obstruct, hinder, frustrate, enjoin or otherwise interfere with the exercise by Agent of any of Agent's rights and remedies against or with respect to the Mezzanine Collateral, the Mezzanine Property or the Mezzanine Loan Documents, including specifically, but without limitation, those rights and remedies contained in this Section 32, at law or in equity, and shall not, either directly or indirectly cause any other Person to take any of the foregoing actions. (2) The Borrower, the undersigned Guarantor, the Member and the Manager, jointly and severally, covenant and agree, except with respect to a Permitted Defense, to cooperate fully and completely with the exercise by Agent of any of Agent's rights and remedies against or with respect to the Mezzanine Collateral or the Mezzanine Loan Documents, including specifically, but without limitation, those rights and remedies contained in this Section 32. (3) The Borrower, the undersigned Guarantor, the Member and the Manager, jointly and severally covenant and agree that any violation of either Section 32(i)(1) or (2), above, or the occurrence of any "Triggering Event" (as defined in the Conditional Guaranty), will constitute an act of bad faith undertaken with intent to hinder, delay and defraud Agent. IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as a sealed instrument as of the date first set forth above. WELLSFORD/WHITEHALL HOLDINGS, L.L.C., a Delaware limited liability company By: Wellsford/Whitehall Properties II, L.L.C., a Delaware limited liability company, its managing member By: Wellsford Commercial Properties Trust, a Maryland real estate investment trust, its manager By:/s/ Gregory F. Hughes ---------------------------- Name Gregory F. Hughes Title CFO & Treasurer BANKBOSTON, N.A., a national banking association, individually and as Agent By:/s/ Mark E. Basham --------------------------------- Name: Mark E. Basham Title: Managing Director [BANK SEAL] GOLDMAN SACHS MORTGAGE COMPANY, a New York limited partnership, individually and as Co-Arranger and Co-Syndication Agent By: Goldman Sachs Real Estate Funding Corp., general partner By:/s/ Robert R. Foley ----------------------------- Name: Robert R. Foley Title: Authorized Signatory [CORPORATE SEAL] Goldman Sachs Mortgage Company 85 Broad Street New York, New York 10004 Attn: Mr. Roger Boone BHF-BANK AKTIENGESELLSCHAFT By: /s/ Sylvia Gross ------------------------------- Title: Vice President By: /s/ Nichols Nouvel ------------------------------- Title: Vice President BHF-BANK AKTIENGESELLSCHAFT 590 Madison Avenue New York, New York 10022 Attn: Mr. Johnathan Oh COMERICA BANK By: /s/ Charles Weddell ------------------------------ Title: Vice President Comerica Bank Comerica Tower, 7th Floor 500 Woodward Avenue Detroit, Michigan 48226-3256 Attn: Mr. Charles Weddell HARTFORD LIFE AND ANNUITY INSURANCE COMPANY By: Hartford Investment Services, Inc., its Agent and Attorney-in-Fact By: /s/ Dennis F. Kraft -------------------------------- Dennis F. Kraft -------------------------------- [Print Name] Its: Senior Vice President -------------------------------- [Title] Hartford Life and Annuity Insurance Company c/o Hartford Life Insurance Companies c/o Investment Department - ABS/CMBS Sector P. O. Box 1744 Hartford, Connecticut 06114-1744 PACIFIC LIFE INSURANCE COMPANY By: /s/ Tony Premer --------------------------------- Title: Assistant Vice President By: /s/ C.S. Dillon --------------------------------- Title: Assistant Secretary Pacific Life Insurance Company 700 Newport Center Drive Newport Beach, California 92660-6397 Attn: Mr. Tony Premer WEBSTER BANK By: /s/ Bill Chamberland ----------------------------- Title: Senior Vice President Webster Bank City Place II, 185 Asylum Street Hartford, Connecticut 06103 Attn: Mr. Bill Chamberland The undersigned Member, Manager and Guarantor hereby join in this Agreement for the purpose of being bound to the provisions of Section 32 of this Agreement. MEMBER: WELLS AVENUE HOLDINGS L.L.C., a Delaware limited liability company By: Wellsford/Whitehall Holdings, L.L.C., a Delaware limited liability company, its sole member By: Wellsford/Whitehall Properties II, L.L.C., a Delaware limited liability company, its managing member By: Wellsford Commercial Properties Trust, a Maryland real estate investment trust, its manager By:/s/ Gregory F. Hughes ---------------------------- Name: Gregory F. Hughes Title: CFO & Treasurer MANAGER: WASH MANAGER L.L.C., a Delaware limited liability company By: Wells Avenue Holdings L.L.C., a Delaware limited liability company, its sole member By: Wellsford/Whitehall Holdings, L.L.C., a Delaware limited liability company, its sole member By: Wellsford/Whitehall Properties II, L.L.C., a Delaware limited liability company, its managing member By: Wellsford Commercial Properties Trust, a Maryland real estate investment trust, its manager By:/s/ Gregory F. Hughes ----------------------- Name: Gregory F. Hughes Title: CFO & Treasurer GUARANTOR: WELLSFORD COMMERCIAL PROPERTIES TRUST, a Maryland real estate investment trust By: /s/ Gregory F. Hughes -------------------------------- Name: Gregory F. Hughes Title: CFO & Treasurer WHWEL REAL ESTATE LIMITED PARTNERSHIP By: WHATR Gen-Par, Inc., General Partner By: /s/ Alan S. Kava ------------------------------- Name: Alan S. Kava Title: Vice President EXHIBIT A FORM OF NOTE $______________ _______________ FOR VALUE RECEIVED, the undersigned WELLSFORD/WHITEHALL HOLDINGS, L.L.C., a Delaware limited liability company, hereby promises to pay to ___________________ _____________ or order, in accordance with the terms of that certain First Amended and Restated Loan Agreement dated as of July __, 1998 (the "Loan Agreement"), as from time to time in effect, among the undersigned, BankBoston, N.A., for itself and as Agent, Goldman Sachs Mortgage Company, and such other Banks as may be from time to time named therein, to the extent not sooner paid, on or before the Maturity Date, the principal sum of _______________ _________________________ DOLLARS ($______________), or such amount as may be advanced by the payee hereof under the Loan Agreement with daily interest from the date hereof, computed as provided in the Loan Agreement, on the principal amount hereof from time to time unpaid, at a rate per annum on each portion of the principal amount which shall at all times be equal to the rate of interest applicable to such portion in accordance with the Loan Agreement, and with interest on overdue principal and, to the extent permitted by applicable law, on overdue installments of interest and late charges at the rates provided in the Loan Agreement. Interest shall be payable on the dates specified in the Loan Agreement, except that all accrued interest shall be paid at the stated or accelerated maturity hereof or upon the prepayment in full hereof. Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Loan Agreement. Payments hereunder shall be made to BankBoston, N.A., as Agent for the payee hereof, 100 Federal Street, Boston, Massachusetts 02110. This Note is one of one or more Notes evidencing borrowings under and is entitled to the benefits and subject to the provisions of the Loan Agreement. The principal of this Note may be due and payable in whole or in part prior to the maturity date stated above and is subject to mandatory prepayment in the amounts and under the circumstances set forth in the Loan Agreement, and prepayment is permitted or prohibited in whole or from time to time in part, all as set forth in the Loan Agreement. Notwithstanding anything in this Note to the contrary, all agreements between the Borrower and the Banks and the Agent, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of any of the Obligations or otherwise, shall the interest contracted for, charged or received by the Banks exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, interest would otherwise be payable to the Banks in excess of the maximum lawful amount, the interest payable to the Banks shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance the Banks shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal balance of the Obligations and to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal of the Obligations, such excess shall be refunded to the Borrower. All interest paid or agreed to be paid to the Banks shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal of the Obligations (including the period of any renewal or extension thereof) so that the interest thereon for such full period shall not exceed the maximum amount permitted by applicable law. This paragraph shall control all agreements between the Borrower and the Banks and the Agent. In case an Event of Default shall occur, the entire principal amount of this Note may become or be declared due and payable in the manner and with the effect provided in said Loan Agreement. This Note shall be governed by and construed in accordance with the laws of the State of New York (without giving effect to the conflict of laws rules of any jurisdiction). The undersigned maker and all guarantors and endorsers, hereby waive presentment, demand, notice, protest, notice of intention to accelerate the indebtedness evidenced hereby, notice of acceleration of the indebtedness evidenced hereby and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, except as specifically otherwise provided in the Loan Agreement, and assent to extensions of time of payment or forbearance or other indulgence without notice. IN WITNESS WHEREOF the undersigned has by its duly authorized officers, executed this Note under seal as of the day and year first above written. WELLSFORD/WHITEHALL HOLDINGS, L.L.C., a Delaware limited liability company By: Wellsford/Whitehall Properties II, L.L.C., a Delaware limited liability company, its managing member By: Wellsford Commercial Properties Trust, a Maryland real estate investment trust, its manager By: ___________________________ Name Title EXHIBIT B FORM OF REQUEST FOR LOAN BankBoston, N.A.,as Agent 115 Perimeter Center Place, N.E. Suite 500 Atlanta, Georgia 30346 Attn: Mr. Jay Johns Ladies and Gentlemen: Pursuant to the provisions of Section 2.6 of the First Amended and Restated Loan Agreement dated July __, 1998, as from time to time in effect (the "Loan Agreement"), among Wellsford/Whitehall Holdings, L.L.C. (the "Borrower"), BankBoston, N.A., for itself and as Agent, Goldman Sachs Mortgage Company, and the other Banks from time to time party thereto, the Borrower hereby requests and certifies as follows: 1. Loan. The Borrower hereby requests a Loan under Section 2.1 of the Loan Agreement: Principal Amount: $ Type (Eurodollar, Base Rate): Drawdown Date: _____________, 19__ Interest Period: by credit to the general account of the Borrower with the Agent at the Agent's Head Office. 2. Use of Proceeds. Such Loan shall be used for the following purposes permitted by Section 7.11 of the Loan Agreement: [Describe] 3. Capital Improvement Project. In the event that such Loan relates to any Capital Improvement Project or portion thereof, the Borrower represents and warrants that such Loan will reimburse the Borrower for or pay costs incurred for work on the Capital Improvement Project identified above, which work covered by this request is in place or is for stored materials which are properly secured. The Borrower further certifies that all materialmen, laborers, subcontractors and any other parties who might or could claim statutory or common law liens and are furnishing or have furnished material or labor to the Mortgaged Property in connection with such Capital Improvement Project have been paid (or will be paid from the proceeds of the requested advance) all amounts due for such labor and materials. 4. No Default. The undersigned chief financial or chief accounting officer of the Borrower certifies that the Borrower is and will be in compliance with all covenants under the Loan Documents after giving effect to the making of the Loan requested hereby. No condemnation proceedings are pending or to the Borrower's knowledge threatened against any Mortgaged Property or other Collateral. 5. Representations True. Each of the representations and warranties made by or on behalf of the Borrower and the Guarantor contained in the Loan Agreement, in the other Loan Documents or in any document or instrument delivered pursuant to or in connection with the Loan Agreement was true as of the date as of which it was made and shall also be true at and as of the Drawdown Date for the Loan requested hereby (except that representations as to the Guarantor shall not be deemed to have been repeated), with the same effect as if made at and as of such Drawdown Date (except to the extent of changes resulting from transactions contemplated or permitted by the Loan Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and except to the extent that such representations and warranties relate expressly to an earlier date) and no Default or Event of Default has occurred and is continuing. 6. Other Conditions. All other conditions to the making of the Loan requested hereby set forth in Section 11 of the Loan Agreement have been satisfied. (Reference title insurance "date down", if applicable.) 7. Drawdown Date. Except to the extent, if any, specified by notice actually received by the Agent prior to the Drawdown Date specified above, the foregoing representations and warranties shall be deemed to have been made by the Borrower on and as of such Drawdown Date. 8. Definitions. Terms defined in the Loan Agreement are used herein with the meanings so defined. IN WITNESS WHEREOF, I have hereunto set my hand this _____ day of _______________, 199___. WELLSFORD/WHITEHALL HOLDINGS, L.L.C., a Delaware limited liability company By: Wellsford/Whitehall Properties II, L.L.C., a Delaware limited liability company, its managing member By: Wellsford Commercial Properties Trust, a Maryland real estate investment trust, its manager By: ___________________________ Name_______________________ Title______________________ EXHIBIT C FORM OF COMPLIANCE CERTIFICATE BankBoston, N.A., for itself and as Agent 115 Perimeter Center Place, N.E. Suite 500 Atlanta, Georgia 30346 Attn: Mr. Jay Johns Ladies and Gentlemen: Reference is made to the First Amended and Restated Loan Agreement dated as of July __, 1998 (the "Loan Agreement") by and among Wellsford/Whitehall Holdings, L.L.C. (the "Borrower"), BankBoston, N.A., for itself and as Agent, Goldman Sachs Mortgage Company, and the other Banks from time to time party thereto. Terms defined in the Loan Agreement and not otherwise defined herein are used herein as defined in the Loan Agreement. Pursuant to the Loan Agreement, the Borrower is furnishing to you herewith (or has most recently furnished to you) the financial statements of the Borrower for the fiscal period ended _______________ (the "Balance Sheet Date"). Such financial statements have been prepared in accordance with generally accepted accounting principles and present fairly the financial position of the Borrower covered thereby at the date thereof and the results of their operations for the periods covered thereby, subject in the case of interim statements only to normal year-end audit adjustments. This certificate is submitted in compliance with requirements of Section 2.6(iii), Section 5.3(a)(ii), Section 5.3(b)(ii), Section 7.4(d) or Section 10.14 of the Loan Agreement. If this Certificate is provided under a provision other than Section 7.4(d), the calculations provided below are made using the financial statements of the Borrower as of the Balance Sheet Date adjusted in the best good-faith estimate of the Borrower to give effect to the making of a Loan, extension of the Maturity Date, acquisition or disposition of property or other event that occasions the preparation of this certificate; and the nature of such event and the Borrower's estimate of its effects are set forth in reasonable detail in an attachment hereto. The undersigned officer of the Borrower is its chief financial or chief accounting officer. The undersigned officer has caused the provisions of the Loan Agreement to be reviewed and has no knowledge of any Default or Event of Default. (Note: If the signer does have knowledge of any Default or Event of Default, the form of certificate should be revised to specify the Default or Event of Default, the nature thereof and the actions taken, being taken or proposed to be taken by the Borrower with respect thereto.) The Borrower is providing the following information to demonstrate compliance as of the date hereof with the following covenants: I. Section 9.1 Debt Service Coverage Test Amount. A. Net Operating Income Net Income for most recent quarter from $____________ Mortgaged Properties and Mezzanine Properties Plus depreciation and amortization $____________ Plus Capital Expenditures (including tenant $____________ improvements and leasing commissions) Plus/Minus Rent Adjustments $____________ Minus Rents included in Net Income from ($___________) tenants delinquent in excess of 60 days Net Operating Income for three prior quarters: Quarter ended __________ $____________ Quarter ended __________ $____________ Quarter ended __________ $____________ Total $____________ B. Capital Improvement Reserve for $____________ Mortgaged Properties and Mezzanine Properties C. Debt Service Coverage Test Amount $____________ [A minus B must equal or exceed 1.35 times C for the period ending on or before December 31, 1998; A minus B must equal or exceed 1.45 times C thereafter] II Section 9.2 Designated Collateral Value. (Attach separate worksheet for each Mortgaged Property and the Mezzanine Property) A. Aggregate of all Designated $____________ Collateral Values (per attached worksheet) B. Total outstanding principal balance $____________ of Loans (after giving effect to any Loan Request) III Section 8.9 Development. A. Aggregate cost of Real Estate $____________ Under Development B. WWP Consolidated Total Assets $____________ A may not exceed the greater of $25,000,000.00 or 10% of B. B may not exceed A IN WITNESS WHEREOF, I have hereunto set may hand this __ day ____________, _______. WELLSFORD/WHITEHALL HOLDINGS, L.L.C., a Delaware limited liability company By: Wellsford/Whitehall Properties II, L.L.C., a Delaware limited liability company, its managing member By: Wellsford Commercial Properties Trust, a Maryland real estate investment trust, its manager By: ___________________________ Name_______________________ Title______________________ EXHIBIT D FORM OF REQUEST FOR EXTENSION OF LOAN BankBoston, N.A., as Agent 115 Perimeter Center Place, N.E. Suite 500 Atlanta, Georgia 30346 Attn: Jay Johns Ladies and Gentlemen: Pursuant to the provisions of Section 2.8 of the First Amended and Restated Loan Agreement dated July __, 1998, as from time to time in effect (the "Loan Agreement"), among Wellsford/Whitehall Holdings, L.L.C. (the "Borrower"), BankBoston, for itself and as Agent, Goldman Sachs Mortgage Company, and the other Banks from time to time party thereto, the Borrower hereby requests and certifies as follows: 1. Extension Request. The Borrower hereby irrevocably requests that the Maturity Date be extended as provided in Section 2.8 of the Loan Agreement. 2. Extension Fee. The Borrower undertakes to pay the extension fee as required by Section 2.8 (b)(i) of the Loan Agreement as required therein. 3. No Default. The undersigned chief financial or chief accounting officer of the Borrower certifies that the Borrower is and will be in compliance with all covenants under the Loan Documents after giving effect to the extension requested hereby. 4. Representations True. Each of the representations and warranties made by or on behalf of the Borrower, the Property Owner, the Manager, the Member and the Guarantor contained in the Loan Agreement, in the other Loan Documents or in any document or instrument delivered pursuant to or in connection with the Loan Agreement was true and correct in all material respect as of the date as of which it was made and (other than representations as to the Guarantor) shall also be true and correct in all material respects at and as of the Maturity Date (without regard to such extension request) with the same effect as if made at and as of the Maturity Date (without regard to such extension request) (except to the extent of changes occurring in the ordinary course of business that have not had any materially adverse affect on the business of such Person). 5. Other Conditions. All other conditions to the extension to the Loan requested hereby set forth in Section 2.8 of the Loan Agreement have been satisfied. 6. Date. Except to the extent, if any, specified by notice actually received by the Agent prior to the Maturity Date (without regard to such extension request) specified above, the foregoing representations and warranties shall be deemed to have been made by the Borrower on and as of the Maturity Date (without regard to such extension request). 7. Definitions. Terms defined in the Loan Agreement are used herein with the meanings so defined. IN WITNESS WHEREOF, I have hereunto set my hand this _____ day of ______________, 199__. WELLSFORD/WHITEHALL HOLDINGS, L.L.C., a Delaware limited liability company By: Wellsford/Whitehall Properties II, L.L.C., a Delaware limited liability company, its managing member By: Wellsford Commercial Properties Trust, a Maryland real estate investment trust, its manager By: ___________________________ Name _________________________ Title_________________________ EXHIBIT E CERTIFICATE In connection with the purchase being made by the undersigned of a participation interest in or assignment of the loan (the "Loan") made by the "Banks" (as defined in the Loan Agreement referred to below) to Wellsford/Whitehall Holdings, L.L.C. (the "Borrower") pursuant to a First Amended and Restated Loan Agreement dated July __, 1998 (the "Loan Agreement"), the undersigned represents, warrants and covenants as follows: (1) The undersigned either: (a) is a "qualified institutional buyer" as defined in paragraph (a) of Rule 144A under the Securities Act of 1933, acting for its own account, the account of another "qualified institutional buyer", or the account of a "qualified purchaser" as defined in paragraph (b)(i)(2) below; provided that if the undersigned is a dealer described in paragraph (a)(1)(ii) of Rule 144A, the undersigned owns and invests on a discretionary basis at least $25,000,000 in securities of issuers that are not affiliated persons of such dealer, all within the meaning of Rule 2a51-1(g)(1) under the Investment Company Act of 1940 (the "Act"). (For purposes of making this determination, a plan referred to in paragraph (a)(1)(i)(D) or (a)(1)(i)(E) of Rule 144A, or a trust fund referred to in paragraph (a)(1)(i)(F) of Rule 144A that holds the assets of such a plan, is not deemed to be acting for its own account if investment decisions with respect to the plan are made by the beneficiaries of the plan, except with respect to investment decisions made solely by the fiduciary, trustee or sponsor of such plan.) OR (b) (i)(1) is acting for its own account or (2) is acting for the account of individuals or entities each of which is a "qualified purchaser" as defined in Section 2(a)(51)(A) of the Act and the rules promulgated thereunder; and (ii) owns and invests on a discretionary basis at least $25,000,000 in "investments" (as defined in Section 2(a)(51)(A) of the Act), after deducting the amount of any outstanding indebtedness incurred to acquire or for the purpose of acquiring such investments. OR (c) is a company (other than a trust formed for the specific purpose of acquiring an interest in the Loan) all the securities of which are beneficially owned by "qualified purchasers" as defined in paragraph (b)(i)(2) above. (2) The undersigned acknowledges and agrees that the interest in the Loan is being purchased by the undersigned for its own account and not pursuant to a public offering and that such interest may only be sold or transferred in a manner that does not constitute a public offering to another entity that can deliver to the Borrower a certification to the effect set forth in paragraphs 1(a), (b) or (c) and 2 of this Certificate and otherwise in accordance with the Loan Agreement. [name of proposed transferee] By: ____________________________________ Name: Title: SCHEDULE 1.1 BANKS AND COMMITMENTS Name and Address Commitment Commitment Percentage - ---------------- ---------- --------------------- BankBoston, N.A. $77,500,000.00 25.8333% 100 Federal Street Boston, Massachusetts 02110 Attn: Real Estate Division Eurodollar Lending Office Same as above Goldman Sachs Mortgage Company $87,500,000.00 29.1667% 85 Broad Street New York, New York 10004 Attn: Mr. Roger Boone Eurodollar Lending Office Same as above Pacific Life Insurance Company $50,000,000.00 16.6667% 700 Newport Center Drive Newport Beach, California 92660-6397 Attn: Mr. Tony Premer Eurodollar Lending Office Same as above Hartford Life and Annuity Insurance $35,000,000.00 11.6667% Company c/o Hartford Life Insurance Companies Investment Operations c/o Portfolio Support, 9th Floor P. O. Box 1744 Hartford, Connecticut 06114-1744 Eurodollar Lending Office Same as above Comerica Bank $20,000,000.00 6.6667% Comerica Tower, 7th Floor 500 Woodward Avenue Detroit, Michigan 48226-3256 Attn: Mr. Charles Weddell Eurodollar Lending Office Same as above BHF-Bank Aktiengesellschaft $10,000,000.00 3.3333% 590 Madison Avenue New York, New York 10022 Attn: Mr. Johnathan Oh Eurodollar Lending Office Same as above Webster Bank $10,000,000.00 3.3333% City Place II, 185 Asylum Street Hartford, Connecticut 06103 Attn: Mr. Bill Chamberland Eurodollar Lending Office Same as above First American Bank Texas, SSB $10,000,000.00 3.3333% 14651 Dallas Parkway Suite 400 Dallas, Texas 75240 Attn: Amy Haws _______________ ____ Total Commitment $300,000,000.00 100% Percentages may not equal 100% due to rounding. SCHEDULE 5.3 DESCRIPTION OF GREENBROOK CORPORATE CENTER AND POINT VIEW VACANT LAND SCHEDULE 6.3 TITLE TO PROPERTIES None. SCHEDULE 6.4 ALL-IN ACQUISITION COST, DESIGNATED COLLATERAL VALUE, STABILIZED PROPERTIES AND RELEASE PRICES EQUITY INTERESTS Stabilized Property/ Designated Non-Stabilized Release Property Acquisition Cost Collateral Value Property Price -------- ---------------- ---------------- -------- --------- Wells Research (75/85/95) $________ $________ $________ 128 Technology $________ $________ $________ Dedham Place $________ $________ $________ 7/57 Wells $________ $________ $________ 201 University $________ $________ $________ Norfolk Place $________ $________ $________ MORTGAGED PROPERTY SCHEDULE 6.7 LITIGATION None. SCHEDULE 6.17 ERISA PLANS None. SCHEDULE 6.21 SUBSIDIARIES Wells Avenue Holdings L.L.C. WASH Manager L.L.C. Wells Avenue Senior Holdings LLC WEL/WH Convention Managers, L.L.C. SCHEDULE 6.24 AGREEMENTS NONE SCHEDULE 6.31-1 MEZZANINE MORTGAGE LOAN DOCUMENTS SCHEDULE 6.31-2 ALLOCATION OF MEZZANINE MORTGAGE LOAN Property Allocated Loan Amount Percentage ------- --------------------- ---------- 128 Tech Center $17,666,917 25.60% Waltham, Massachusetts 7/57 Wells Avenue $ 6,937,010 10.05% Newton, Massachusetts 75/85/95 Wells Avenue $19,497,301 28.26% Newton, Massachusetts 201 University Avenue $ 7,656,783 11.10% Westwood Massachusetts Dedham Place $14,148,837 20.51% Dedham, Massachusetts Norfolk Place (333 Elm Street) $ 3,093,152 4.48% Dedham, Massachusetts __________ ____ $69,000,000 100.0% EX-10.34 3 FORM OF NOTE $50,000,000.00 July 16, 1998 - -------------- ------------- FOR VALUE RECEIVED, the undersigned WELLSFORD/WHITEHALL HOLDINGS, L.L.C., a Delaware limited liability company, hereby promises to pay to PACIFIC LIFE INSURANCE COMPANY or order, in accordance with the terms of that certain First Amended and Restated Loan Agreement dated as of July 16, 1998 (the "Loan Agreement"), as from time to time in effect, among the undersigned, BankBoston, N.A., for itself and as Agent, Goldman Sachs Mortgage Company, and such other Banks as may be from time to time named therein, to the extent not sooner paid, on or before the Maturity Date, the principal sum of FIFTY MILLION and no/100 DOLLARS ($50,000,000.00), or such amount as may be advanced by the payee hereof under the Loan Agreement with daily interest from the date hereof, computed as provided in the Loan Agreement, on the principal amount hereof from time to time unpaid, at a rate per annum on each portion of the principal amount which shall at all times be equal to the rate of interest applicable to such portion in accordance with the Loan Agreement, and with interest on overdue principal and, to the extent permitted by applicable law, on overdue installments of interest and late charges at the rates provided in the Loan Agreement. Interest shall be payable on the dates specified in the Loan Agreement, except that all accrued interest shall be paid at the stated or accelerated maturity hereof or upon the prepayment in full hereof. Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Loan Agreement. Payments hereunder shall be made to BankBoston, N.A., as Agent for the payee hereof, 100 Federal Street, Boston, Massachusetts 02110. This Note is one of one or more Notes evidencing borrowings under and is entitled to the benefits and subject to the provisions of the Loan Agreement. The principal of this Note may be due and payable in whole or in part prior to the maturity date stated above and is subject to mandatory prepayment in the amounts and under the circumstances set forth in the Loan Agreement, and prepayment is permitted or prohibited in whole or from time to time in part, all as set forth in the Loan Agreement. Notwithstanding anything in this Note to the contrary, all agreements between the Borrower and the Banks and the Agent, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of any of the Obligations or otherwise, shall the interest contracted for, charged or received by the Banks exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, interest would otherwise be payable to the Banks in excess of the maximum lawful amount, the interest payable to the Banks shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance the Banks shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal balance of the Obligations and to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal of the Obligations, such excess shall be refunded to the Borrower. All interest paid or agreed to be paid to the Banks shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal of the Obligations (including the period of any renewal or extension thereof) so that the interest thereon for such full period shall not exceed the maximum amount permitted by applicable law. This paragraph shall control all agreements between the Borrower and the Banks and the Agent. In case an Event of Default shall occur, the entire principal amount of this Note may become or be declared due and payable in the manner and with the effect provided in said Loan Agreement. This Note shall be governed by and construed in accordance with the laws of the State of New York (without giving effect to the conflict of laws rules of any jurisdiction). The undersigned maker and all guarantors and endorsers, hereby waive presentment, demand, notice, protest, notice of intention to accelerate the indebtedness evidenced hereby, notice of acceleration of the indebtedness evidenced hereby and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, except as specifically otherwise provided in the Loan Agreement, and assent to extensions of time of payment or forbearance or other indulgence without notice. IN WITNESS WHEREOF the undersigned has by its duly authorized officers, executed this Note under seal as of the day and year first above written. WELLSFORD/WHITEHALL HOLDINGS, L.L.C., a Delaware limited liability company By: Wellsford/Whitehall Properties II, L.L.C., a Delaware limited liability company, its managing member By: Wellsford Commercial Properties Trust, a Maryland real estate investment trust, its manager By: /s/ Gregory F. Hughes ------------------------- Name: Gregory F. Hughes ------------------- Title: CFO & Treasurer ----------------- EX-10.35 4 AMENDED AND RESTATED ASSIGNMENT OF MEMBER'S INTEREST THIS AMENDED AND RESTATED ASSIGNMENT OF MEMBER'S INTEREST (this "Assignment"), made as of the 16th day of July, 1998, by WELLSFORD/WHITEHALL HOLDINGS, L.L.C., a Delaware limited liability company ("Assignor"), to BANKBOSTON, N.A., a national banking association ("BKB"), as Agent for itself and the other Banks from time to time party to the Credit Agreement (as hereinafter defined) (BKB, in its capacity as Agent, is hereinafter referred to as "Agent"). W I T N E S S E T H: WHEREAS, Wellsford/Whitehall Properties, L.L.C. ("WWP"), BKB, the other lenders a party thereto and Agent have entered into that certain Revolving Credit Agreement dated as of December 15, 1997 (the "Original Credit Agreement"); and WHEREAS, WWP was the sole member of Wells Avenue Holdings L.L.C., a limited liability company formed under the laws of the State of Delaware (the "Member"); and WHEREAS, the Member is presently governed by that certain Certificate of Formation filed on April 2, 1998 with the Delaware Secretary of State, and that certain Operating Agreement for Wells Avenue Holdings L.L.C., a Delaware limited liability company, dated as of May 15, 1998 (collectively the "Member Organizational Agreements"); and WHEREAS, WWP has merged with and into Assignor, with Assignor being the surviving entity, and as a result thereof, Assignor has succeeded to the interest of WWP in the Member; and WHEREAS, Assignor, BKB, the other lenders a party thereto and Agent have entered into that certain First Amended and Restated Loan Agreement dated of even date herewith (as the same may be varied, extended, supplemented, consolidated, amended, replaced, renewed or modified or restated, the "Credit Agreement"), which in part amends and restates the Original Credit Agreement, and pursuant to which the Banks a party to the Credit Agreement have agreed to provide a loan to the Assignor in the amount of up to $300,000,000.00 (the "Loan"), which Loan is evidenced by those certain Notes made by Assignor to the order of the Banks in the aggregate principal face amount of $300,000,000.00 (such notes, together with such other Notes as may be issued pursuant to the Credit Agreement, as the same may be varied, extended, supplemented, consolidated, amended, replaced, renewed, modified or restated, are hereinafter referred to collectively as the "Note"); and WHEREAS, WWP and Agent have entered into that certain Assignment of Member's Interest dated as of May 15, 1998 (the "Original Assignment"), pursuant to which WWP assigned to Agent its interests in the Member; and WHEREAS, in connection with the merger of WWP into Assignor, and the amendment and restatement of the Original Credit Agreement, the parties desire to amend and restate the Original Assignment; NOW, THEREFORE, for and in consideration of the sum of Ten and No/100 Dollars ($10.00), and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby amend and restate the Original Assignment and covenant and agree as follows: 33. Definitions. Capitalized terms used herein that are not otherwise defined herein shall have the meaning set forth in the Credit Agreement. 34. Grant of Security Interest. As security for the payment and performance by Assignor of each and all of Assignor's duties, responsibilities and obligations under this Assignment, the Credit Agreement, the Note and any and all agreements evidencing, securing or otherwise relating to the obligations evidenced by the Note and the Credit Agreement (this Assignment, the Credit Agreement, the Note and such other agreements, together with any and all renewals, modifications, consolidations and extensions thereof, are hereinafter referred to collectively as the "Loan Documents"; and said duties, responsibilities and obligations of Assignor are hereinafter referred to collectively as the "Obligations"), Assignor does hereby transfer, assign, pledge, convey and grant to Agent, and does hereby grant a security interest to Agent in, all of Assignor's right, title and interest in and to the following: (a) All right, title, interest, claims or rights of Assignor now or hereafter in, to or against the Member (including, without limitation, Assignor's membership interest in the Member, the interest of Assignor in and to the Member Organizational Agreements, the capital of the Member, and the property and assets of the Member and any rights pertaining thereto) which interest is evidenced by Certificate No. 2 (the "Certificate"), together with any and all other securities, cash, certificates or other property, option or right in respect of, in addition to or substitution or exchange for the Certificate, or other property at any time and from time to time receivable or otherwise distributed in respect of or in exchange for all or any thereof; and (b) All right, title and interest of Assignor in and to the Contribution Agreement, and all claims, choses in action or things in action now or hereafter arising thereunder, to the extent relating to all or any part of the Mezzanine Property; (c) Any and all profits, proceeds, accounts, income, distributions, payments upon dissolution or liquidation of the Member or the sale, financing or refinancing of any of the property or assets of the Member, proceeds of a casualty or condemnation, return of capital, repayment of loans, and payments of any kind or nature whatsoever, now or hereafter distributable or payable by the Member to Assignor, by reason of Assignor's interest in the Member or otherwise, or now or hereafter distributable or payable to Assignor from any other source by reason of Assignor being a member in the Member, or on account of any interest in or claim or rights against the Member held by Assignor, or by reason of services performed by Assignor for or on behalf of the Member or with respect to the assets of the Member, and any and all proceeds from any transfer, assignment or pledge of any interest of Assignor in, or claim or right against, the Member (regardless of whether such transfer, assignment or pledge is permitted under the terms hereof or the other Loan Documents), and all claims, choses in action, or things in action or rights as a creditor now or hereafter arising against the Member; and (d) All accounts, contract rights and general intangibles now or hereafter arising from any of the foregoing; and (e) All notes or other documents or instruments now or hereafter evidencing or securing any of the foregoing; and (f) All right of Assignor to collect and enforce payments distributable or payable by the Member to Assignor pursuant to the terms of the Member Organizational Agreements; and (g) All documents, writings, leases, books, files, records, computer tapes, programs, ledger books and ledger pages arising from or used in connection with any of the foregoing; and (h) All renewals, extensions, additions, substitutions or replacements of any of the foregoing; and (i) All powers, options, rights, privileges and immunities pertaining to any of the foregoing; and (j) All proceeds of any of the foregoing and all cash, security or other property distributed on account of any of the foregoing. All of the foregoing described in this paragraph 2 are hereinafter referred to collectively as the "Collateral". The items described in (a), above, are sometimes hereinafter referred to as the "Member Interests"; and the items described in (c) - (j), above, are sometimes hereinafter referred to collectively as the "Distributions." 35. Obligations Secured. This Assignment secures the payment and performance by Assignor of the Obligations. The amount that may be borrowed by Assignor with respect to the direct and indirect interests in the Property Owner shall not exceed $24,509,000.00; provided that the foregoing shall not alter, diminish or impair the agreement of Assignor that the Collateral secures all of the Obligations. 36. Collection of Distributions. (a) It is acknowledged and agreed by the parties hereto that Agent shall have sole and exclusive possession of the Distributions and that this Assignment constitutes a present, absolute and current assignment of all the Distributions and is effective upon the execution and delivery hereof. Payments under or with respect to the Distributions shall be made as follows: (1) Except as otherwise specifically provided in this Paragraph 4, Assignor shall have no right to receive payments made under or with respect to the Distributions (including without limitation any Distributions from or relating to any sale, transfer, assignment, conveyance, option or other disposition of, or any pledge, mortgage, encumbrance, financing or refinancing of, or casualty to or condemnation of, any of the Collateral or the Mezzanine Property regardless of whether such event is permitted under the terms of the Loan Documents), and all such payments shall be delivered directly by the Member to Agent for application by Agent in satisfaction of the Obligations in such order as Agent in its sole and absolute discretion shall determine. (2) Except as otherwise specifically provided in this Paragraph 4, if Assignor shall receive any payments made under or with respect to the Distributions (including without limitation any Distributions from or relating to any sale, transfer, assignment, conveyance, option or other disposition of, or any pledge, mortgage, encumbrance, financing or refinancing of, or casualty to or condemnation of, any of the Collateral or the Mezzanine Property regardless of whether such event is permitted under the terms of the Loan Documents), Assignor shall hold all such payments in trust for Agent, will not co- mingle such payments with other funds of Assignor, and will immediately pay and deliver in kind, all such payments directly to Agent (with such endorsements and assignments as may be necessary to transfer title to Agent) for application by Agent in satisfaction of the Obligations in such order as Agent in its sole and absolute discretion shall determine. (3) Assignor hereby agrees for the benefit of the Member that all payments actually received by Agent shall be deemed payments to Assignor by the Member. Agent shall apply any and all such payments actually received by Agent in satisfaction of the Obligations in such order as Agent in its sole and absolute discretion shall determine. Agent shall return to Assignor that portion of any payments actually received by Agent from the Member which Agent determines, in the exercise of its sole and absolute discretion but in good faith is not needed to repay the Obligations. (4) In furtherance of the foregoing, Assignor does hereby notify and direct the Member and its members that all payments under or with respect to the Distributions shall be made directly to Agent at the address of Agent set forth in the Credit Agreement. (b) Assignor shall cause the Property Owner, the Manager and the Member promptly to distribute all net proceeds of the sale, transfer, assignment, conveyance, option or other disposition of, or any mortgage, hypothecation, encumbrance, financing or refinancing of, or casualty to or condemnation of, any of its assets or properties, and any and all other Distributions distributable or payable by the Property Owner, the Manager or the Member or any member thereof under the terms of the Property Owner Organizational Agreements, the Manager Organizational Agreements or the Member Organizational Agreements, as applicable. (c) Assignor hereby irrevocably designates and appoints Agent its true and lawful attorney-in-fact, which appointment is coupled with an interest, either in the name of Agent, or in the name of Assignor, at Assignor's sole cost and expense, and regardless of whether Agent becomes a member in the Member or not, to take any or all of the following actions: (1) to ask, demand, sue for, attach, levy, settle, compromise, collect, compound, recover, receive and give receipt and acquittances for any and all Collateral and to take any and all actions as Agent may deem necessary or desirable in order to realize upon the Collateral, or any portion thereof, including, without limitation, making any statements and doing and taking any actions on behalf of Assignor which are otherwise required of Assignor under the terms of any agreement as conditions precedent to the payment of the Distributions, and the right and power to receive, endorse, assign and deliver, in the name of Assignor, any checks, notes, drafts, instruments or other evidences of payment received in payment of or on account of all or any portion of the Collateral, and Assignor hereby waives presentment, demand, protest and notice of demand, protest and non-payment of any instrument so endorsed; and (2) to institute one or more actions against the Member or any member thereof in connection with the collection of the Distributions, to prosecute to judgment, settle or dismiss any such actions, and to make any compromise or settlement deemed desirable, in Agent's sole and absolute discretion, with respect to such Distributions, to extend the time of payment, arrange for payment in installments or otherwise modify the terms of the Member Organizational Agreements with respect to the Distributions or release the Member or any member thereof from their respective obligations to pay any Distribution, without incurring responsibility to, or affecting any liability of, Assignor under the Member Organizational Agreements; it being specifically understood and agreed, however, that Agent shall not be obligated in any manner whatsoever to give any notices of default (except as may be specifically required herein or the other Loan Documents) or to exercise any such power or authority or be in any way responsible for the preservation, maintenance, collection of or realizing upon the Collateral, or any portion thereof, or any of Assignor's rights therein. Notwithstanding anything contained in this Paragraph 4 to the contrary, provided no Event of Default has occurred and is continuing, Assignor shall have a license (revocable upon the occurrence and during the continuance of an Event of Default) to receive Excess Property Income attributable to (A) rents, issues and profits paid under Leases for any of the Mezzanine Property not more than one (1) month in advance, (B) excess proceeds from a sale of a Mezzanine Property that has been released in accordance with Section 5.3(b) of the Credit Agreement, (c) proceeds from a casualty permitted to be paid to Assignor pursuant to Section 7.7(k) of the Credit Agreement, (D) excess amounts released from the reserves maintained under Sections 7.2, 7.3, 7.4 and 7.5 of the Mezzanine Mortgage Loan Agreement, and (E) rebates or refunds of property taxes paid with respect to the Mezzanine Property. The foregoing appointment is irrevocable and continuing and any such rights, powers and privileges shall be exclusive in Agent, its successors and assigns until this Assignment terminates as provided in Paragraph 13, below. 37. Warranties and Covenants. Assignor does hereby warrant and represent to, and covenant and agree with, Agent and the Banks as follows: (a) Performance. All duties, obligations and responsibilities required to be performed by Assignor, Member and Manager as of the date hereof under the Member Organizational Agreements, the Manager Organizational Agreements and the Property Owner Organizational Agreements, as applicable, have been performed, and no default or condition which with the passage of time or the giving of notice, or both, would constitute a default exists under the Member Organizational Agreements, the Manager Organizational Agreements and the Property Owner Organizational Agreements, as applicable. (b) Organizational Agreements. A true, correct and complete copy of the Member Organizational Agreements, the Manager Organizational Agreements and the Property Owner Organizational Agreements together with all amendments thereto, are attached hereto as Exhibit "A-1", "A-2" and "A-3". The Member Organizational Agreements, the Manager Organizational Agreements and the Property Owner Organizational Agreements have been duly authorized, executed and delivered by the parties thereto and are in full force and effect. Except for the Loan Documents and the Mezzanine Mortgage Loan Documents, neither the Member nor Assignor is a party to or is bound by any indenture, contract or other agreement which purports to prohibit, restrict, limit, or control the transfer or pledge of the Collateral, the exercise of voting rights with respect to the Member or the management of the Member. (c) Title. Assignor is and shall remain the sole, lawful, beneficial and record owner of the Member Interests and the Distributions, free and clear of all liens, restrictions, claims, pledges, encumbrances, charges, claims or rights of third parties and rights of set-off or recoupment whatsoever (other than those in favor of Agent hereunder), and Assignor has the full and complete right, power and authority to create a security interest in the Collateral in favor of Agent, in accordance with the terms and provisions of this Assignment. The Certificate has been duly authorized and validly issued, and is fully paid and non-assessable. Assignor is not and will not become a party to or otherwise be bound by any agreement, other than the Loan Documents and the Mezzanine Mortgage Loan Documents, which restricts in any manner the rights of any present or future holder of the Certificate with respect thereto. Except for the right of first offer with respect to a sale of 201 University Avenue, as set forth in that certain lease between Dominic J. Saraceno, as landlord, and Cullinane Database Systems, Inc. (formerly d/b/a Cullinet Software and now known as Computer Associates), no Person has any option, right of first refusal, right of first offer or other right to acquire all or any portion of the Collateral. (d) Sole Member. Assignor is the sole member of the Member, and no other Person owns any legal, equitable or beneficial interest in the Member or, except for the voting rights of the independent manager as set forth in the Member Organizational Agreements and the Manager Organizational Agreements, has any right to vote or exercise control over the Member or its management. The Member Interests are not represented or otherwise evidenced by any certificate or other document other than the Certificate. (e) Priority. Upon the delivery of the Certificate to Agent, this Assignment creates a valid and binding first priority security interest in the Collateral securing the payment and performance of the Obligations and the performance by Assignor of the Obligations, and upon the filing of UCC Financing Statements with the Secretary of State of New York, the Office of the Register of the City of New York and the Massachusetts Secretary of State, all filings and other actions necessary to perfect and protect such security interests shall have been duly made and taken. Neither Assignor nor the Member has performed or will perform any acts which might prevent Agent from enforcing any of the terms and conditions of this Agreement or which would limit Agent in any such enforcement. (f) Notes. All original notes and other documents or instruments (if any) evidencing, constituting, guaranteeing or securing any of the Distributions or any right to receive the Distributions have been endorsed to and delivered to Agent. (g) Principal Place of Business. For the purposes of Article 9-401 of the New York Uniform Commercial Code, the principal place of business of Assignor is located in New York County, New York. In the event that Assignor has more than one place of business in the State of New York, its chief executive office is located in New York County, New York. In order to perfect the pledge and security interests granted herein against Assignor, U.C.C. Financing Statements must be filed with the Secretary of State of New York, the Office of the Register of the City of New York, New York County and the Massachusetts Secretary of State. (h) Securities Laws. The transactions contemplated by this Assignment do not violate and do not require that any filing, registration or other act be taken with respect to any and all laws pertaining to the registration or transfer of securities, including without limitation the Securities Act of 1933, the Securities and Exchange Act of 1934, and any and all rules and regulations promulgated thereunder or any similar federal, state or local law, rule, regulation or orders (collectively the "Applicable Law") hereafter enacted or analogous in effect, as the same are amended and in effect from time to time (such Act and any similar laws as from time to time being in effect being referred to as the "Federal Securities Laws"). Assignor shall at all times comply with Applicable Law and the Federal Securities Laws as the same pertain to all or any portion of the Collateral or any of the transactions contemplated by this Assignment (provided that the foregoing shall not apply to assignments by the Banks of interests in the Loan pursuant to the Credit Agreement). (i) No Transfer Tax. No transfer tax, deed tax, conveyance tax or similar tax may be payable as a result of a transfer of the Collateral (whether by foreclosure, conveyance in lieu of foreclosure or otherwise) by Assignor to Agent. (j) Contribution Agreement. Assignor has delivered to the Agent a true, correct and complete copy of the Contribution Agreement and any amendments thereto or other agreements relating thereto as of the date hereof. Assignor is not materially in default thereunder and, to the best of Assignor's knowledge, there are no defaults on the part of the "contributors" thereunder. (k) Destruction of Old Certificate. Certificate No. 1 of the member interest of WWP in Member (the "Old Certificate") has been replaced by the Certificate. The Old Certificate shall be destroyed and Assignor shall cause the books and records of Member to reflect the foregoing. 38. General Covenants. Assignor covenants and agrees that, so long as this Assignment is continuing: (a) No Further Encumbrance. Except as expressly permitted by Section 5.3(b) of the Credit Agreement, Assignor shall not, without the prior written consent of Agent, which consent may be withheld by Agent in its sole and absolute discretion, directly, indirectly or by operation of law, sell, transfer, assign, dispose of, pledge, convey, option, mortgage, hypothecate or encumber any of the Collateral, nor shall there occur, directly, indirectly or by operation of law, without the prior written consent of Agent in each instance, which consent may be withheld by Agent in its sole and absolute discretion, any sale, assignment, transfer, conveyance, disposition, option, mortgage, hypothecation, pledge or other encumbrance of (i) any direct or indirect interests, rights or claims of Member in and to the Manager or (ii) any direct or indirect interests, rights or claims of the Member and the Manager in and to the Property Owner. The foregoing shall not be deemed to restrict the transfer of interests in Assignor itself, which transfers shall be governed by the terms of the Credit Agreement. (b) Defense of Collateral. Assignor shall at all times defend the Collateral against all claims and demands of all persons at any time claiming any interest in the Collateral adverse to Agent's interest in the Collateral as granted hereunder. (c) Modification of Organizational Agreements. So long as this Assignment remains in effect, Assignor shall not modify, amend, cancel, release, surrender, terminate or permit the modification, amendment, cancellation, release, surrender or termination of, the Member Organizational Agreements, the Property Owner Organizational Agreements or the Manager Organizational Agreements, or dissolve, liquidate, redeem, cancel, wind-up or permit the dissolution, liquidation, redemption, cancellation, winding-up or expiration of the Member, the Manger or the Property Owner or the Member Organizational Agreements, the Property Owner Organizational Agreements or the Manager Organizational Agreements, or seek or permit the partition of any of the assets of the Member, the Manager or the Property Owner, without in each instance the prior written consent of Agent, which consent may be withheld by Agent in its sole and absolute discretion; provided, however, that Agent shall not unreasonably withhold its consent to any modification or amendment of the Property Owner Organizational Agreements, the Member Organizational Agreements or the Manager Organizational Agreements which does not affect or have an impact on the management of the Property Owner, the Manager or the Member, as applicable, any voting rights, the rights to receive distributions, any provisions of the Property Owner Organizational Agreements, the Member Organizational Agreements or the Manager Organizational Agreements, as applicable, concerning actions that the Property Owner, the Manager or the Member, as applicable, is either authorized to do or that are ultra vires, or otherwise materially affect the Property Owner, the Manager or the Member, as applicable, the Collateral or the rights and benefits afforded to Agent and the Banks pursuant to this Assignment and the other Loan Documents (such modifications or amendments described in the foregoing proviso are hereinafter referred to as the "Minor Amendments"). (d) Performance of Duties. (1) Assignor shall perform all of its duties, responsibilities and obligations under the Member Organizational Agreements and with respect to the Collateral, and shall diligently and in good faith protect the value of the Collateral. Assignor shall cause Member and Manager to perform all of their respective duties, responsibilities and obligations under the Manager Organizational Agreements and the Property Owner Organizational Agreements, respectively. (2) Assignor shall not, without the prior written consent of Agent, which consent may be withheld by Agent in its sole and absolute discretion, take or permit to be taken any action which could result in the sale, reduction, cancellation, dilution, diminution, conversion or withdrawal of any interest of Assignor in the Member, of the Member in the Manager, or of the Member or the Manager in the Property Owner, or omit to take any action necessary to prevent any such sale, reduction, cancellation, dilution, diminution, conversion or withdrawal, or otherwise take any action or omit to take any action that would, in the exercise of Agent's judgment, jeopardize or diminish the security interests or rights and benefits afforded to Agent by the Collateral. Without limiting the foregoing, Assignor shall not consent to or permit to occur the admission of any new member in the Member, the Manager or the Property Owner, the creation of any new class of interest in the Member, the Manager or the Property Owner, or the issuance, directly or indirectly, of any other equity or beneficial interest in the Member, the Manager or the Property Owner. (e) Payment of Taxes. Assignor shall pay all taxes and other charges against the Collateral, shall not use the Collateral illegally, and shall not suffer to exist any loss, theft, damage or destruction of the Collateral and shall suffer to exist no levy, seizure or attachment of the Collateral. (f) Enforcement of Organizational Agreements. Assignor, at the request of Agent, shall take such actions as Agent may reasonably require to enforce the terms of the Member Organizational Agreements, the Property Owner Organizational Agreements and the Manager Organizational Agreements, respectively, or any other contract, agreement or instrument included in, giving rise to, creating, establishing, evidencing or relating to the Collateral or to collect or enforce any claim for payment or other right or privilege assigned to Agent hereunder. (g) Further Assurances. Assignor authorizes Agent, at the expense of Assignor, to execute and file any financing statement or statements deemed necessary by Agent to perfect its security interest in any of the Collateral. Any such financing statement may be signed by Agent alone. Assignor will sign and deliver any financing statements and other documents, and perform such other acts as Agent may deem necessary or desirable from time to time to establish and maintain in favor of Agent, valid and perfected security interests in the Collateral, free of all other liens, encumbrances, security interests and claims other than as permitted by the terms of this Assignment. Assignor shall do anything else Agent may reasonably require from time to time to establish a valid security interest in and to further protect and perfect its security interest in the Collateral. (h) Location of Collateral. Except for those items of the Collateral that are delivered to Agent as provided herein, the Collateral, and all records of Assignor relative to the Collateral, are and will be kept at the office of Assignor located in New York County, New York. Assignor shall give Agent not fewer than thirty (30) days prior written notice of any proposed change in the name of Assignor or the Member and any proposed change in the location of the Collateral or of such records, and Assignor will not, without the prior written consent of Agent, move the Collateral or such records to a location outside of New York County, New York or keep duplicate records with respect to the Collateral at any address outside such county. Notwithstanding the foregoing, Agent acknowledges and agrees that the property records for the Mezzanine Property (including leases, service contracts and the like) will be kept at the office of the managing agent in Newton, Massachusetts. Nothing contained in this subparagraph shall be construed so as to prevent Assignor from keeping material abstracted from the books and records described herein at any of its offices as necessity or convenience dictates. Assignor shall permit the Agent or any representative designated by the Agent, at the Agent's expense and upon reasonable advance notice (which may be oral), to examine the books and accounts of the Assignor (and to make copies thereof and extracts therefrom) and to discuss the affairs, finances and accounts of the Assignor with, and to be advised as to the same by, its members and officers, all at such reasonable times and intervals as the Agent may reasonably request. The Agent shall use good faith efforts to coordinate such visits and inspections so as to minimize the interference with and disruption to Assignor's normal business operations. (i) Evidence of Indebtedness. Without limiting any other terms of the Loan Documents prohibiting or restricting the ability of the Member to incur Indebtedness, if any amounts are due from the Member to Assignor and the obligations to repay such amount is to be evidenced by a separate document or instrument, then as evidence of such obligations, Assignor shall cause the Member to issue Assignor, as the evidence of any obligations of the Member to pay Distributions to Assignor in the future, a promissory note bearing the legend attached hereto as Exhibit "B" and which note shall provide that all payments due under such promissory note are to be paid directly to Agent as required by and applied as provided in the Loan Documents until the Obligations are paid in full or this Assignment is otherwise terminated as provided herein. No other evidence of such obligations shall be executed by the Member to Assignor. (j) Delivery of Notes. Assignor shall promptly deliver to Agent any note or other document or instrument entered into after the date hereof which evidences, constitutes, guarantees or secures any of the Distributions or any right to receive a Distribution, which notes or other documents and instruments shall be accompanied by such endorsements or assignments as Agent may require to transfer title to Agent. (k) Assignor Remains Liable. Anything herein to the contrary notwithstanding, (1) Assignor shall remain liable under the Member Organizational Agreements and all other contracts, agreements and instruments included in, giving rise to, creating, establishing, evidencing or relating to the Collateral to the extent set forth therein to perform all of its duties and obligations (including, without limitation, the making of any contributions to the capital of the Member or the payment of any other sum to or on behalf of the Member) to the same extent as if this Assignment had not been executed, (2) the exercise by Agent of any of its rights hereunder shall not release Assignor from any of its duties or obligations under the Member Organizational Agreements or any such contracts, agreements and instruments, and (3) Agent shall not have any obligation or liability under the Member Organizational Agreements, the Property Owner Organizational Agreements or the Manager Organizational Agreements or any such contract, agreement or instrument by reason of this Assignment, nor shall Agent be obligated to perform any of the obligations or duties of Assignor thereunder or to take any action to collect or enforce any claim for payment or other right or privilege assigned to Agent hereunder. (l) Substitutions or Exchanges. If Assignor shall at any time be entitled to receive or shall receive any cash, certificate or other property, option or right, upon, in respect of, as an addition to, or in substitution or exchange for any of the Collateral, whether for value paid by Assignor or otherwise, Assignor agrees that the same shall be deemed to be Collateral and shall be delivered directly to Agent in each case, accompanied by proper instruments of assignment duly executed by Assignor in such a form as may be required by Agent, to be held by Agent subject to the terms hereof, as further security for the Obligations (except as otherwise provided herein with respect to the application of the foregoing to the Obligations). If Assignor receives any of the foregoing directly, Assignor agrees to hold such cash or other property in trust for the benefit of Agent, and to surrender such cash or other property to Agent immediately. (m) Additional Interests in Member. In the event that Assignor purchases or otherwise acquires or obtains any additional interest in the Member or any rights or options to acquire such interest, all such interest, rights and options shall automatically be deemed to be a part of the Collateral. All certificates, if any, representing such member interest shall be promptly delivered to Agent, together with assignments related thereto, or other instruments appropriate to transfer a certificate representing any Member interest, duly executed in blank. t u Events of Default. An Event of Default shall exist hereunder upon the occurrence of any of the following: (a) Any warranty, representation or statement made by or on behalf of Assignor in this Assignment proves untrue or misleading in any material respect upon the date when made or deemed to have been made or repeated; or (b) Assignor shall fail to duly and fully comply with any covenant, condition or agreement in Paragraphs 6(a), 6(c), 6(d)(2), 6(i), 6(j) or 6(l) of this Assignment; or (c) Any of the Assignor, Member or the Manager shall fail to, or the Assignor shall fail to cause the Property Owner to, duly and fully comply with any other covenant, condition or agreement of this Assignment (other than those specified in this Paragraph 7 or any default excluded from any provision of cure of defaults contained in any other of the Loan Documents) and the same is not cured within thirty (30) days following receipt of written notice of such default; or (d) The occurrence of any "Triggering Event" (as defined in the Conditional Guaranty); or (e) The occurrence of an Event of Default under any of the other Loan Documents. 40. Remedies. (a) Upon the occurrence and during the continuance of any Event of Default, Agent may take any action deemed by Agent to be necessary or appropriate to the enforcement of the rights and remedies of Agent under this Assignment and the Loan Documents, including, without limitation, the exercise of its rights and remedies with respect to any or all of the Member Interests. The remedies of Agent shall include, without limitation, all rights and remedies specified in the Loan Documents and this Assignment, all remedies of Agent under applicable general or statutory law, and the remedies of a secured party under the Uniform Commercial Code as enacted in the State of New York, regardless of whether the Uniform Commercial Code has been enacted or enacted in that form in any other jurisdiction in which such right or remedy is asserted. Any notice required by law, including, but not limited to, notice of the intended disposition of all or any portion of the Collateral, shall be reasonably and properly given in the manner prescribed for the giving of notice herein, and, in the case of any notice of disposition, if given at least ten (10) calendar days prior to such disposition. Agent may require Assignor to assemble the Collateral and make it available to Agent at any place to be designated by Agent which is reasonably convenient to both parties. It is expressly understood and agreed that Agent shall be entitled to dispose of the Collateral at any public or private sale, without recourse to judicial proceedings and without either demand, appraisement, advertisement or notice of any kind, all of which are expressly waived, and that Agent shall be entitled to bid and purchase at any such sale. In the event that Agent is the successful bidder at any public or private sale of any note or other document or instrument evidencing Assignor's right to receive a Distribution, Agent shall be entitled to credit the amount bid by Agent against the obligations evidenced by such note, document or instrument rather than the obligations evidenced by the Note. To the extent the Collateral consist of marketable securities, Agent shall not be obligated to sell such securities for the highest price obtainable, but shall sell them at the market price available on the date of sale. Agent shall not be obligated to make any sale of the Collateral if it shall determine not to do so regardless of the fact that notice of sale of the Collateral may have been given. Agent may, without notice or publication, adjourn any public sale from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. Each such purchaser at any such sale shall hold the Collateral sold absolutely free from claim or right on the part of Assignor. In the event that any consent, approval or authorization of any governmental agency or commission will be necessary to effectuate any such sale or sales, Assignor shall execute all such applications or other instruments as Agent may deem reasonably necessary to obtain such consent, approval or authorization. Agent may notify any account debtor or obligor with respect to the Collateral to make payment directly to Agent, and may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose or realize upon the Collateral as Agent may determine whether or not the Obligations or the Collateral are due, and for the purpose of realizing Agent's rights therein, Agent may receive, open and dispose of mail addressed to Assignor and endorse notes, checks, drafts, money orders, documents of title or other evidences of payment, shipment or storage of any form of Collateral on behalf and in the name of Assignor, as its attorney-in-fact. In addition, Assignor hereby irrevocably designates and appoints Agent its true and lawful attorney-in-fact either in the name of Agent or Assignor to (i) sign Assignor's name on any Collateral, drafts against account debtors, assignments, any proof of claim in any bankruptcy or other insolvency proceeding involving any account debtor, any notice of lien, claim of lien or assignment or satisfaction of lien, or on any financing statement or continuation statement under the Uniform Commercial Code; (ii) send verifications of accounts receivable to any account debtor; and (iii) in connection with a transfer of the Collateral as described above, sign in Assignor's name any documents necessary to transfer title to the Collateral to Agent or any third party. All acts of said power of attorney are hereby ratified and approved and Agent shall not be liable for any mistake of law or fact made in connection therewith. This power of attorney is coupled with an interest and shall be irrevocable so long as any amounts remain unpaid on any of the Obligations. All remedies of Agent shall be cumulative to the full extent provided by law, all without liability except to account for property actually received, but the Agent shall have no duty to exercise such rights and shall not be responsible for any failure to do so or delay in so doing. Pursuit by Agent of certain judicial or other remedies shall not abate nor bar other remedies with respect to the Obligations or to other portions of the Collateral. Agent may exercise its rights to the Collateral without resorting or regard to other collateral or sources of security or reimbursement for the Obligations. In the event that any transfer tax, deed tax, conveyance tax or similar tax is payable in connection with the foreclosure, conveyance in lieu of foreclosure or otherwise of the Member Interests, the Borrower shall pay such amount to agent upon demand and if Borrower fails to pay such amount on demand, Agent may advance such amount on behalf of Borrower and the amount thereof shall become a part of the Obligations and bear interest at the rate for overdue amounts under the Credit Agreement until paid. (b) If Assignor fails to perform any agreement or covenant contained in this Assignment beyond any applicable period for notice and cure, Agent may itself perform, or cause to be performed, any agreement or covenant of Assignor contained in this Assignment which Assignor shall fail to perform, and the cost of such performance, together with any reasonable expenses, including reasonable attorneys' fees actually incurred (including attorneys' fees incurred in any appeal) by Agent in connection therewith, shall be payable by Assignor upon demand and shall constitute a part of the Obligations and shall bear interest at the rate for overdue amounts as set forth in the Credit Agreement. (c) Whether or not an Event of Default has occurred and whether or not Agent is the absolute owner of the Collateral, Agent may take such action as Agent may deem necessary to protect the Collateral or its security interest therein, Agent being hereby authorized to pay, purchase, contest and compromise any encumbrance, charge or lien which in the judgment of Agent appears to be prior or superior to its security interest, and in exercising any such powers and authority to pay necessary expenses, employ counsel and pay reasonable attorney's fees. Any such advances made or expenses incurred by Agent shall be deemed advanced under the Loan Documents, shall increase the indebtedness evidenced and secured thereby, shall be payable upon demand and shall bear interest at the rate for overdue payments set forth in the Credit Agreement. (d) Any certificates or securities held by Agent as Collateral hereunder may, at any time, and at the option of Agent, be registered in the name of Agent or its nominee, endorsed or assigned in blank or in the name of any nominee and Agent may deliver any or all of the Collateral to the issuer or issuers thereof for the purpose of making denominational exchanges or registrations or transfer or for such other purposes in furtherance of this Agreement as Agent may deem desirable. Until the occurrence of an Event of Default, Assignor shall retain the right to vote any of the Collateral or exercise limited liability company membership rights, in a manner not inconsistent with the terms of this Agreement and the other Loan Documents, and Agent hereby grants to Assignor its proxy to enable Assignor to so vote any of the Collateral or exercise such limited liability company member rights (except that Assignor shall not have any right to exercise any such power or right if the exercise thereof would violate or result in a violation of any of the terms of this Agreement or any of the other Loan Documents). At any time after the occurrence and during the continuance of any Event of Default, Agent or its nominee shall, without notice or demand, automatically have the sole and exclusive right to give all consents, waivers and ratifications in respect of the Collateral and exercise all voting and other membership, management, approval or other rights at any meeting of the members of the Member (and the right to call such meetings) or otherwise (and to give written consents in lieu of voting thereon), and exercise any and all rights of conversion, exchange, subscription or any of the rights, privileges or options pertaining to the Collateral and otherwise act with respect thereto and thereunder as if it were the absolute owner thereof (all of such rights of the Assignor ceasing to exist and terminating upon the occurrence of an Event of Default) including, without limitation, the right to exchange, at its discretion, any and all of the Collateral upon the merger, consolidation, reorganization, recapitalization or the readjustment of the issuer thereof, all without liability except to account for property actually received and in such manner as Agent shall determine in its sole and absolute discretion, but Agent shall have no duty to exercise any of the aforesaid rights, privileges or options and shall not be responsible for the failure to do so or delay in so doing. The exercise by Agent of any of its rights and remedies under this paragraph shall not be deemed a disposition of collateral under Article 9 of the UCC nor an acceptance by Agent of any of the Collateral in satisfaction of the Obligations. (e) Upon the occurrence and during the continuance of any Event of Default, the Agent may direct the Assignor in writing to, and the Assignor shall cause the Property Owner to, replace the existing property manager and leasing agent for the Mezzanine Property with a property manager and leasing agent approved by the Agent, subject to any conditions in the Mezzanine Mortgage Loan Documents to the qualifications and approval of such manager and leasing agent and the form and terms of any new property management and/or leasing agreement. The Assignor hereby irrevocably constitutes and appoints the Agent its true and lawful attorney-in-fact, with full power of substitution, to execute, acknowledge and deliver any instruments and to do and perform any acts which are referred to in this Paragraph 8(e), in the name and on behalf of the Assignor. The power vested in such attorney-in- fact is, and shall be deemed to be, coupled with an interest and irrevocable. (f) Upon the written demand of the Agent following the occurrence of and during the continuance of an Event of Default, the Assignor shall deliver or cause to be delivered to the Agent or the Agent's designee all books, records, contracts, Leases, files and other correspondence relating to the Mezzanine Property. In addition, upon the occurrence and during the continuance of an Event of Default, the Assignor shall upon the written demand of the Agent cause all tenant security deposits (whether in the form of cash, letter of credit or otherwise) and other refundable deposits paid to or held by or on behalf of the Property Owner in connection with the Leases to be delivered to the Agent, subject to the rights of the Mezzanine Mortgagee under the Mezzanine Mortgage Loan Documents. (g) Notwithstanding anything in this Assignment or any other Loan Document to the contrary, any reference in this Assignment or any other Loan Document to "the continuance of a default" or "the continuance of an Event of Default" or any similar phrase shall not create or be deemed to create any right on the part of Assignor or any other party to cure any default following the expiration of any applicable grace or notice and cure period. (h) In the event that there shall occur any Default or Event of Default under this Assignment which Default or Event of Default arises solely as a result of the failure of Assignor or any other Person to perform an obligation with respect to the Mezzanine Collateral or the Mezzanine Property, then within five (5) Business Days after receipt of notice of such Default or Event of Default Assignor may elect to cure such Default or Event of Default by reducing the outstanding Loans in an amount equal to the amount that would be payable pursuant to Section 5.3(b)(iv) of the Credit Agreement upon the release by Assignor of all of the remaining Mezzanine Property pursuant to the terms of Section 5.3(b) of the Credit Agreement. In the event of such payment, this Assignment shall terminate and the amount available to be borrowed against the collateral for the Loans remaining after such release shall be reduced by an amount equal to twenty percent (20%) of the Designated Collateral Value of the Collateral so released without reducing the Designated Collateral Value of such remaining collateral for the purposes of calculating release prices. 41. Duties of Agent. The powers conferred on Agent hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Agent's duty with reference to the Collateral shall be solely to use slight care in the custody and preservation of the Collateral, which shall not include any steps necessary to preserve rights against prior parties. Agent shall have no responsibility or liability for the collection of any Collateral or by reason of any invalidity, lack of value or uncollectability of any of the payments received by it. 42. Indemnification. wfu It is specifically understood and agreed that this Assignment shall not operate to place any responsibility or obligation whatsoever upon Agent, or cause Agent to be, or to be deemed to be, a member in the Member and that in accepting this Assignment, Agent neither assumes nor agrees to perform at any time whatsoever any obligation or duty of Assignor relating to the Collateral or under the Member Organizational Agreements or any other mortgage, indenture, contract, agreement or instrument to which the Member is a party or to which it is subject, all of which obligations and duties shall be and remain with and upon Assignor; provided, however, that Assignor shall not be liable for the performance of any liabilities or duties under the Organizational Agreements of Member, Manager or Property Owner which may result from written amendments thereof made by Agent after the occurrence of an Event of Default. (b) Assignor upon receipt of written demand shall pay to Agent the amount of any and all reasonable expenses, including, without limitation, the reasonable fees and disbursements of counsel actually incurred (including those incurred in any appeal), and of any experts and agents, which Agent may incur in connection with (i) the administration of this Assignment, (ii) the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of Agent hereunder, or (iv) the failure by Assignor to perform or observe any of the provisions hereof beyond any applicable period for notice and cure. 43. Security Interest Absolute. All rights of Agent, and the security interests hereunder, and all of the obligations secured hereby, shall be absolute and unconditional, irrespective of: (a) Any lack of validity or enforceability of the Loan Documents or any other agreement or instrument relating thereto; (b) Any change in the time (including the extension of the maturity date of the Note), manner or place of payment of, or in any other term of, all or any of the Obligations or any other amendment or waiver of or any consent to any departure from the Loan Documents; (c) Any exchange, release or nonperfection of any other collateral for the Obligations, or any release or amendment or waiver of or consent to departure from any of the Loan Documents with respect to all or any part of the Obligations; or (d) Any other circumstance (other than payment of the Obligations in full) that might otherwise constitute a defense available to, or a discharge of, Assignor or any third party for the Obligations or any part thereof. 44. Amendments and Waivers. No amendment or waiver of any provision of this Assignment nor consent to any departure therefrom shall in any event be effective unless the same shall be in writing and signed by Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No delay or omission of Agent to exercise any right, power or remedy accruing upon any Event of Default shall exhaust or impair any such right, power or remedy or shall be construed to be a waiver of any such Event of Default, or acquiescence therein; and every right, power and remedy given by this Assignment to Agent may be exercised from time to time and as often as may be deemed expedient by Agent. Failure on the part of Agent to complain of any act or failure to act which constitutes an Event of Default, irrespective of how long such failure continues, shall not constitute a waiver by Agent of Agent's rights hereunder or impair any rights, powers or remedies consequent on any Event of Default. Assignor hereby waives to the extent permitted by law all rights which Assignor has or may have under and by virtue of the Uniform Commercial Code as enacted in the State of New York, and any federal, state, county or municipal statute, regulation, ordinance, Constitution or charter, now or hereafter existing, similar in effect thereto providing any right of Assignor to notice and to a judicial hearing prior to seizure by Agent of any of the Collateral. Assignor hereby waives and renounces for itself, its heirs, successors and assigns, presentment, demand, protest, advertisement or notice of any kind (except for any notice required by law or the Loan Documents) and all rights to the benefits of any statute of limitations and any moratorium, reinstatement, marshaling, forbearance, valuation, stay, extension, homestead, redemption and appraisement now provided or which may hereafter be provided by the Constitution and laws of the United States and of any state thereof, both as to itself and in and to all of its property, real and personal, against the enforcement of this Assignment and the collection of any of the Obligations. 45. Continuing Security Interest; Transfer of Note; Release of Collateral. This Assignment shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until the indefeasible payment in full of the Obligations and the termination of the obligation of the Banks to make Loans to Assignor, (b) be binding upon Assignor and its permitted successors and assigns, and (c) inure, together with the rights and remedies of Agent hereunder, to the benefit of Agent and the Banks and their respective successors, transferees and assigns. Upon the indefeasible payment in full of the Obligations and the termination of the obligation of the Banks to make Loans to Assignor, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to Assignor. Upon any such termination, Agent will at Assignor's expense execute and deliver to Assignor such documents as Assignor shall reasonably request to evidence such termination. 46. Modifications, Etc. Assignor hereby consents and agrees that Agent and the Banks may at any time and from time to time, without notice to or further consent from Assignor, either with or without consideration, surrender any property or other security of any kind or nature whatsoever held by it or by any person, firm or corporation on its behalf or for its account, securing the Obligations; substitute for any Mezzanine Collateral so held by it, other collateral of like kind; agree to modification of the terms of the Loan Documents; extend or renew the Loan Documents for any period; grant releases, compromises and indulgences with respect to the Loan Documents for any period; grant releases, compromises and indulgences with respect to the Loan Documents to any persons or entities now or hereafter liable thereunder or hereunder; release any guarantor, endorser or any other Person liable with respect to the Obligations; or take or fail to take any action of any type whatsoever; and no such action which Agent shall take or fail to take in connection with the Loan Documents, or any of them, or any security for the payment of the Obligations or for the performance of any obligations or undertakings of Assignor, nor any course of dealing with Assignor or any other person, shall release Assignor's obligations hereunder, affect this Assignment in any way or afford Assignor any recourse against Agent. 47. Securities Act. In view of the position of Assignor in relation to the Collateral, or because of other current or future circumstances, a question may arise under Applicable Law or the Federal Securities Laws with respect to any disposition of the Collateral permitted hereunder. Assignor understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of Agent if Agent were to attempt to dispose of all or any part of the Collateral in accordance with the terms hereof, and might also limit the extent to which or the manner in which any subsequent transferee of any Collateral could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Agent in any attempt to dispose of all or part of the Collateral in accordance with the terms hereof under applicable Blue Sky or other state securities laws or similar Applicable Law analogous in purpose or effect. Assignor recognizes that in light of the foregoing restrictions and limitations Agent may, with respect to any sale of the Collateral, limit the purchasers to those who will agree, among other things, to acquire such Collateral for their own account, for investment, and not with a view to the distribution or resale thereof. Assignor acknowledges and agrees that in light of the foregoing restrictions and limitations, the Agent in its sole and absolute discretion may, in accordance with Applicable Law, (a) proceed to make such a sale whether or not a registration statement for the purpose of registering such Collateral or part thereof shall have been filed under the Federal Securities Laws and (b) approach and negotiate with a single potential purchaser to effect such sale. Assignor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller if such sale were a public sale without such restrictions. In the event of any such sale, Agent shall incur no responsibility or liability for selling all or any part of the Collateral in accordance with the terms hereof at a price that Agent, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached. The provisions of this paragraph will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Agent sells. 48. Governing Law; Terms. THIS ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE INTERNAL LAWS OF THE STATE OF NEW YORK. 49. Notices. Each notice, demand, election or request provided for or permitted to be given pursuant to this Assignment shall be deemed to have been properly given or served if given in the manner provided in the Credit Agreement. 50. No Unwritten Agreements. THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 51. Miscellaneous. Time is of the essence of this Assignment. Title or captions of paragraphs hereof are for convenience only and neither limit nor amplify the provisions hereof. References to a particular paragraph refer to that paragraph of this Assignment unless otherwise indicated. If, for any circumstances whatsoever, fulfillment of any provision of this Assignment shall involve transcending the limit of validity presently prescribed by applicable law, the obligation to be fulfilled shall be reduced to the limit of such validity; and if any clause or provision herein operates or would prospectively operate to invalidate this Assignment, in whole or in part, then such clause or provision only shall be held for naught, as though not herein contained, and the remainder of this Assignment shall remain operative and in full force and effect. IN WITNESS WHEREOF, Assignor and Agent have executed this Assignment on the date first above written. AGENT: BANKBOSTON, N.A., as Agent By: /s/ Mark E. Basham ------------------------------ Mark E. Basham, Managing Director ASSIGNOR: WELLSFORD/WHITEHALL HOLDINGS, L.L.C., a Delaware limited liability company, by its managing member By: Wellsford/Whitehall Properties II, L.L.C., a Delaware limited liability company By: Wellsford Commercial Properties Trust, a Maryland real estate investment trust, its manager By: /s/ Gregory F. Hughes ------------------------ Name: Gregory F. Hughes Title: CFO & Treasurer EXHIBIT "A" ORGANIZATIONAL AGREEMENTS EXHIBIT "B" PROMISSORY NOTE LEGEND "THIS NOTE HAS BEEN PLEDGED BY WELLSFORD/WHITEHALL HOLDINGS, L.L.C. ("ASSIGNOR") TO BANKBOSTON, N.A., AS AGENT ("AGENT") PURSUANT TO AN AMENDED AND RESTATED ASSIGNMENT OF MEMBER'S INTEREST DATED AS OF JULY __, 1998 (THE "ASSIGNMENT"). ALL AMOUNTS PAYABLE TO ASSIGNOR PURSUANT TO THIS NOTE SHALL BE PAID DIRECTLY TO AGENT AS REQUIRED BY THE ASSIGNMENT." EX-10.36 5 AMENDED AND RESTATED CASH COLLATERAL AGREEMENT THIS AMENDED AND RESTATED CASH COLLATERAL AGREEMENT (this "Agreement"), dated as of July 16th, 1998, by and among WELLSFORD/WHITEHALL HOLDINGS, L.L.C., a Delaware limited liability company ("Borrower"), WASH MANAGER L.L.C., a Delaware limited liability company ("Manager"), WELLS AVENUE HOLDINGS L.L.C., a Delaware limited liability company ("Member"; the Borrower, Manager and Member are sometimes hereinafter referred to as the "Borrower Parties" ), and BANKBOSTON, N.A., a national banking association ("BKB") as Agent for itself and the other Banks from time to time party to the Credit Agreement (as hereinafter defined) (BKB, in its capacity as Agent, is hereinafter referred to as "Agent"). W I T N E S S E T H: WHEREAS, Wellsford/Whitehall Properties, L.L.C. ("WWP"), BKB, the other Banks a party thereto and Agent entered into that certain Revolving Credit Agreement dated December 15, 1997 (the "Original Credit Agreement"); and WHEREAS, WWP has merged with and into Borrower, with Borrower being the surviving entity, and pursuant thereto all of the assets and liabilities of WWP have been transferred to and assumed by Borrower; and WHEREAS, the Banks and the Agent have consented to such merger and transfer of assets and liabilities; and WHEREAS, Wells Avenue Senior Holdings LLC (the "Property Owner") is the owner of the "Mezzanine Property" (as defined in the Credit Agreement); and WHEREAS, Manager and Member are the sole members of the Property Owner; and WHEREAS, Borrower is the sole member of Member; and WHEREAS, Borrower, BKB, the other Banks a party thereto and Agent have entered into that certain First Amended and Restated Loan Agreement dated of even date herewith (as the same may be varied, extended, supplemented, consolidated, amended, replaced, renewed, modified or restated, the "Credit Agreement"), which in part amends and restates the Original Credit Agreement, and pursuant to which the Banks have agreed to provide a loan to Borrower of up to $300,000,000.00 (the "Loan"), which Loan is evidenced by those certain Notes made by Borrower to the order of the Banks in the aggregate principal face amount of $300,000,000.00 (such Notes, together with such other Notes as may be issued pursuant to the Credit Agreement, as the same may be varied, extended, supplemented, consolidated, amended, replaced, renewed, modified or restated, are hereinafter referred to collectively as the "Note"); and WHEREAS, WWP, Manager, Member and Agent have entered into that certain Cash Collateral Agreement dated as of May 15, 1998 (the "Original Cash Collateral Agreement"); and WHEREAS, in connection with the execution of the Credit Agreement, the Borrower and the Agent desire to amend and restate the Original Cash Collateral Agreement; NOW, THEREFORE, in consideration of the mutual covenants, promises, and agreements set forth hereinbelow, and for other good and valuable consideration, the receipt, adequacy, and sufficiency of which are hereby acknowledged, and as a material inducement to the Banks and Agent to advance a portion of the Loan to Borrower relating to the Mezzanine Property, the parties hereto amend and restate the Original Cash Collateral Agreement in its entirety and covenant and agree as follows: 1. Defined Terms. Capitalized terms used in this Agreement, but which are not otherwise expressly defined in this Agreement, shall have the respective meanings given thereto in the Credit Agreement. In addition, the following terms shall have the following meanings: Accounts Depository Bank: Such bank or institution as may now or hereafter hold funds pursuant to the accounts and sub-accounts created under the Mezzanine Mortgage Loan Agreement or the Deposit Account Agreement. Clearing Account. See Paragraph 4(e). Collateral: See Paragraph 2. Deposit Account: The "Deposit Account" as defined in the Mezzanine Mortgage Loan Agreement. Event of Default: See Paragraph 6. Excess Property Income. All funds or other amounts from time to time deposited in or credited to the Property Owner's Subaccount or are otherwise distributed, paid or released to Property Owner pursuant to the Mezzanine Mortgage Loan Documents. Instruction Letter: As defined in the Assignment of Interests. Property Owner's Subaccount: The subaccount of the Deposit Account referred to as the "Borrower's Subaccount" in the Deposit Account Agreement. Rents. As defined in the Mezzanine Mortgage Loan Agreement. 2. Security for Obligations. To secure the full and punctual payment and performance by the Borrower of all duties, responsibilities and obligations under this Agreement, the Credit Agreement, the Note and the other Loan Documents (such duties, responsibilities and obligations are hereinafter referred to as the "Obligations"), Borrower hereby sells, assigns, conveys, grants, pledges, hypothecates and transfers to Agent a first-in-lien-priority continuing security interest in and to the following property of Borrower, in each case whether certificated or uncertificated, whether now owned or existing or hereafter acquired or arising and regardless of where located (all of the same, collectively, the "Collateral"): (a) all right, title and interest of Borrower in and to any and all Excess Property Income from time to time, now or hereafter available in the Deposit Account or otherwise and required or permitted, by the terms of the Mezzanine Mortgage Loan Documents, to be disbursed to or on behalf of Property Owner or is required, by the terms of the Instruction Letter, this Agreement or the other Loan Documents, to be paid by the Mezzanine Mortgagee, the Account Depository Bank or any other Person to Agent, and all rights of the Borrower to receive such Excess Property Income under the Mezzanine Mortgage Loan Documents or otherwise; (b) all right, title and interest of Borrower in and to cash, checks, drafts, certificates, passbooks, instruments and other amounts, if any, from time to time (whether by physical possession, book entry or otherwise) evidencing the Excess Property Income; (c) all right, title and interest of Borrower in and to all interest, dividends, cash, instruments and other property from time to time held (whether by physical possession, book entry or otherwise) in, received, receivable, or otherwise payable in respect of, or in exchange for, any or all of the foregoing; (d) all right, title and interest of Borrower in and to all accounts, contract rights, general intangibles and other rights and interests pertaining to any of the foregoing, all replacements, substitutions, renewals or proceeds of any of the foregoing, and all powers, options, rights, privileges and immunities pertaining thereto (including the right to make withdrawals therefrom); and (e) to the extent not covered by clauses (a), (b), (c) or (d), above, all proceeds of any or all of the foregoing. 3. Collection of Collateral. (a) It is acknowledged and agreed by the parties hereto that Agent shall have sole and exclusive possession of the Collateral and that this Agreement constitutes a present, absolute and current assignment of all the Collateral and is effective upon the execution and delivery hereof. Payments under or with respect to the Collateral shall be made as follows: (i) Except as otherwise specifically provided in this Paragraph 3, Borrower shall have no right to receive payments made under or with respect to the Collateral (including without limitation any Collateral from or relating to any sale, transfer, assignment, conveyance, option or other disposition of, or any pledge, mortgage, encumbrance, financing or refinancing of, or casualty to or condemnation of, any of the Collateral, the Mezzanine Collateral or the Mezzanine Property regardless of whether such event is permitted under the terms of the Loan Documents), and all such payments shall be delivered directly by the Property Owner to Agent for application by Agent in satisfaction of the Obligations in such order as Agent in its sole and absolute discretion shall determine. (ii) Except as otherwise specifically provided in this Paragraph 3, if Borrower shall receive any payments made under or with respect to the Collateral (including without limitation any Collateral from or relating to any sale, transfer, assignment, conveyance, option or other disposition of, or any pledge, mortgage, encumbrance, financing or refinancing of, or casualty to or condemnation of, any of the Collateral, the Mezzanine Collateral or the Mezzanine Property regardless of whether such event is permitted under the terms of the Loan Documents), Borrower shall hold all such payments in trust for Agent, will not co-mingle such payments with other funds of Borrower, and will immediately pay and deliver in kind, all such payments directly to Agent (with such endorsements and assignments as may be necessary to transfer title to Agent) for application by Agent in satisfaction of the Obligations in such order as Agent in its sole and absolute discretion shall determine. (b) Each of Borrower, Manager and Member shall cause the Property Owner, the Manager and the Member promptly to distribute all net proceeds of the sale, transfer, assignment, conveyance, option or other disposition of, or any mortgage, hypothecation, encumbrance, financing or refinancing of, or casualty to or condemnation of, any of its assets or properties, and any and all other Distributions distributable or payable by the Property Owner, the Manager or the Member or any member thereof under the terms of the Property Owner Organizational Agreements, the Manager Organizational Agreements or the Member Organizational Agreements, as applicable. (c) Each of Borrower, Manager and Member hereby irrevocably designates and appoints Agent its true and lawful attorney-in-fact, which appointment is coupled with an interest, either in the name of Agent, or in the name of Borrower, Manager or Member, as applicable, at Borrower's sole cost and expense, and to take any or all of the following actions: (i) to ask, demand, sue for, attach, levy, settle, compromise, collect, compound, recover, receive and give receipt and acquittances for any and all Collateral and to take any and all actions as Agent may deem necessary or desirable in order to realize upon the Collateral, or any portion thereof, including, without limitation, making any statements and doing and taking any actions on behalf of such Person which are otherwise required of such Person under the terms of any agreement as conditions precedent to the payment of the Collateral, and the right and power to receive, endorse, assign and deliver, in the name of such Person any checks, notes, drafts, instruments or other evidences of payment received in payment of or on account of all or any portion of the Collateral, and each of Borrower, Manager and Member hereby waives presentment, demand, protest and notice of demand, protest and non-payment of any instrument so endorsed; and (ii) to institute one or more actions against the Property Owner, any member thereof or any other Person in connection with the collection of the Collateral to prosecute to judgment, settle or dismiss any such actions, and to make any compromise or settlement deemed desirable, in Agent's sole and absolute discretion, with respect to such Collateral to extend the time of payment, arrange for payment in installments or otherwise modify the terms of any agreements with respect to the Collateral or release the Property Owner, any member thereof or any other Person from their respective obligations to pay any Collateral, without incurring responsibility to, or affecting any liability of, Borrower under any such agreements; it being specifically understood and agreed, however, that Agent shall not be obligated in any manner whatsoever to give any notices of default (except as may be specifically required herein or the other Loan Documents) or to exercise any such power or authority or be in any way responsible for the preservation, maintenance, collection of or realizing upon the Collateral, or any portion thereof, or any of Borrower's rights therein. Notwithstanding anything in this Paragraph 3 to the contrary, provided no Event of Default has occurred and is continuing, Borrower shall have a license (revocable upon the occurrence of an Event of Default) to receive and retain Excess Property Income attributable to (A) rents, issues and profits paid under Mezzanine Leases not more than one (1) month in advance, (B) excess proceeds from a sale of a Mezzanine Property that has been released in accordance with Section 5.3(b) of the Credit Agreement, (C) proceeds from a casualty permitted to be paid to Borrower pursuant to Section 7.7(k) of the Credit Agreement, (D) excess amounts released from the reserves maintained under Sections 7.2, 7.3, 7.4 and 7.5 of the Mezzanine Mortgage Loan Agreement, and (E) rebates or refunds of property taxes paid with respect to the Mezzanine Property. The foregoing appointment is irrevocable and continuing and any such rights, powers and privileges shall be exclusive in Agent, its successors and assigns until this Agreement terminates as provided in Paragraph 12, below. (d) Notwithstanding anything contained in this Agreement or any of the other Loan Documents to the contrary, all Excess Property Income released to Borrower in accordance with the terms of the Loan Documents (including without limitation the terms of this Paragraph 3) (i) shall be the property of Borrower, (ii) shall not constitute a part of the Collateral and (iii) may be further distributed by Borrower to its members or otherwise pursuant to the terms of its organizational agreements. 4. Warranties and Covenants. Borrower hereby warrants and represents to, and covenants and agrees with, Agent as follows: (a) Borrower is and shall remain the sole, lawful, beneficial and record owner of the Collateral, free and clear of all liens, restrictions, claims, pledges, encumbrances, charges, claims of third parties and rights of set-off or recoupment whatsoever (other than those in favor of Agent hereunder), and Borrower has the full and complete right, power and authority to create a security interest in the Collateral in favor of Agent, in accordance with the terms and provisions of this Agreement. (b) This Agreement creates a valid and binding first-in-lien priority pledge and assignment of and security interest in the Collateral securing the payment and performance of the Obligations, and upon the filing of UCC Financing Statements in the office of the Register of the City of New York, New York County, the New York Secretary of State, the City of Boston, the City of Newton and the Massachusetts Secretary of State, all filings and other actions necessary to perfect and protect such pledge and security interests shall have been duly made and taken. The Borrower has not performed and will not perform any acts which might prevent Agent from enforcing any of the terms and conditions of this Agreement or which would limit Agent in any such enforcement. (c) The taxpayer identification number of the Borrower is 13- 3962862. (d) For the purposes of Article 9-401 of the New York Uniform Commercial Code, the principal place of business of Borrower is in New York County, New York. If Borrower has more than one place of business in New York, its chief executive office is located in New York County, New York. In order to perfect the pledge and security interests granted herein against Borrower to the extent the same can be perfected by filing a financing statement, UCC Financing Statements must be filed with the Secretary of State of New York, the office of the Register of the City of New York, New York County, the City of Boston, the City of Newton and the Massachusetts Secretary of State. (e) The Property Owner, the Mezzanine Mortgagee and the Account Depository Bank have executed and delivered the Mezzanine Mortgage Loan Agreement and the Deposit Account Agreement, as applicable, and the Central Account and the other sub-accounts described in the Mezzanine Mortgage Loan Agreement have been created. Other than the bank account described on Exhibit "A" hereto (the "Clearing Account"), there are no other accounts maintained by any of the Borrower Parties, the Property Owner or any manager of the Mezzanine Property for the collection of Rents with respect to the ownership and operation of the Mezzanine Property and that, so long as any of the Obligations shall be outstanding or any Bank shall have an obligation to advance proceeds of the Loan to Borrower, none of the Borrower Parties shall, nor shall any of the Borrower Parties permit the Property Owner or any manager of the Mezzanine Property to, open any account for the collection of Rents with respect to the Mezzanine Property other than those created pursuant to the Mezzanine Mortgage Loan Agreement and shall deposit all Rents in the Deposit Account as required therein. 5. General Covenants. The Borrower covenants and agrees that, so long as any of the Obligations are outstanding or have not been paid or performed or any Bank shall have an obligation to advance proceeds of the Loan to Borrower: (a) Borrower, without the prior written consent of Agent, which consent may be withheld by Agent in its sole and absolute discretion, shall not directly, indirectly or by operation of law sell, transfer, assign, dispose of, pledge, convey, option, mortgage, hypothecate or encumber any of the Collateral. (b) Borrower shall at all times defend the Collateral against all claims and demands of all persons at any time claiming any interest in the Collateral adverse to Agent's interest in the Collateral as granted hereunder. (c) Borrower shall pay all taxes and other charges imposed against the Collateral, shall not use the Collateral illegally, and shall not suffer to exist any loss, theft, damage or destruction of the Collateral and shall suffer to exist no levy, seizure or attachment of the Collateral. (d) Borrower authorizes Agent, at the expense of Borrower, to execute and file any financing statement or statements reasonably deemed necessary by Agent to perfect its security interest in any of the Collateral. Any such financing statement may be signed by Agent alone. Borrower will sign and deliver any financing statements and other documents, and perform such other acts as Agent reasonably may deem necessary or desirable from time to time to establish and maintain in favor of Agent, valid and perfected security interests in the Collateral, free of all other liens, encumbrances, security interests and claims other than as permitted by the terms of this Agreement. Borrower shall also furnish to Agent such evidence as it reasonably may require to confirm the value of the Collateral, and shall do anything else Agent may reasonably require from time to time to establish a valid security interest in and to further protect and perfect its security interest in the Collateral. (e) Except for those items of the Collateral that are delivered to Agent as provided herein, all records of Borrower relative to the Collateral are and will be kept either at the office of Borrower located in New York County, New York or at the offices of Borrower's managing agent in Newton, Middlesex County, Massachusetts. Borrower shall give Agent not fewer than thirty (30) days prior written notice of any proposed change in Borrower's name and any proposed change in the location of such records, and Borrower will not, without the prior written consent of Agent, move such records to a location outside of New York County, New York or Newton, Middlesex County, Massachusetts or keep duplicate records with respect to the Collateral at any address outside such county or township, as the case may be. Nothing contained in this subparagraph shall be construed so as to prevent Borrower from keeping material abstracted from the books and records described herein at any of its offices as necessity or convenience dictates. (f) The Borrower shall cause the Property Owner and any manager of the Mezzanine Property to deposit all amounts into the Deposit Account that are required to be deposited therein pursuant to the Mezzanine Mortgage Loan Agreement and the Deposit Account Agreement and to utilize such funds in accordance with and as and to the extent required by the Mezzanine Mortgage Loan Agreement and the Deposit Account Agreement. The Borrower shall promptly notify the Agent of any change in the Account Depository Bank, and upon the request of the Agent, shall cause such new Account Depository Bank to execute and deliver to Agent an Instruction Letter in substantially the form delivered to Agent on the date hereof. (g) By execution hereof, the Borrower, Manager and Member hereby irrevocably direct that the Property Owner, the Manager and Member cause all Excess Property Income to be paid to Agent hereunder, and the Borrower, Manager and Member hereby agree for the benefit of the Property Owner, the Manager and Member that all such payments actually received by Agent pursuant thereto shall be deemed payments to Manager and Member by the Property Owner, payments to Member by Manager, and payments to Borrower by Member. By execution hereof, Property Owner, the Manager and Member acknowledges such direction and the terms of this Agreement. By execution hereof, Property Owner, Manager and Member acknowledge and agree that neither Property Owner, Manager, Member nor any other Person has any right, title or interest in and to any amounts now or hereafter deposited in the Property Owner's Subaccount or any other Excess Property Income or any interest earned thereon and that all such amounts are the property of the Borrower, subject to the security interests in favor of the Agent hereunder. (h) The Property Owner and Agent, by their execution of the Instruction Letter and by their delivery thereof to the Mezzanine Mortgagee and the Account Depository Bank, have irrevocably directed and authorized the Mezzanine Mortgagee and the Account Depository Bank, and hereby reiterate and reaffirm such direction and authorization to the Mezzanine Mortgagee and the Account Depository Bank, when and as required from time to time by the Mezzanine Mortgage Loan Documents and the Instruction Letter upon notice from Agent to transfer immediately from the Deposit Account to Agent any and all Excess Property Income remaining in the Deposit Account which pursuant to the terms of the Mezzanine Mortgage Loan Documents is required to be disbursed to Property Owner or the manager of the Property, and any and all other amounts which are required pursuant to the Mezzanine Mortgage Loan Documents to be disbursed to Property Owner or the manager of the Mezzanine Property as and when permitted under the terms of the Mezzanine Mortgage Loan Documents. Agent shall not deliver a further notice to the Mezzanine Mortgagee and the Account Depository Bank pursuant to the Instruction Letter demanding that all Excess Property Income be paid to Agent until the occurrence of an Event of Default. Subject to the terms of this Agreement and the Assignment of Interests, Borrower shall further cause the Property Owner or any manager of the Mezzanine Property to pay to the Agent any and all Excess Property Income or any other amounts which are required pursuant to the Mezzanine Mortgage Loan Documents to be disbursed to the Property Owner or the manager of the Mezzanine Property in the event that such amounts are disbursed to such Person. 6. Events of Default. An Event of Default shall exist hereunder upon the occurrence of any of the following: (a) Any warranty, representation or statement made by or on behalf of the Borrower in this Agreement proves untrue or misleading in any material respect upon the date when made or deemed to have been made or repeated; or (b) Borrower shall fail to duly and fully comply with any covenant, condition or agreement in Paragraphs 4(e), 5(a), 5(f), 5(g) or 5(h) of this Agreement (provided that as to a failure to comply with paragraphs 5(f), 5(g) or 5(h) only, the same is not cured within five (5) days following receipt of notice of such default); or (c) Borrower shall fail to duly and fully comply with any other covenant, condition or agreement of this Agreement (other than those specified above in this Paragraph 6) and the same is not cured within thirty (30) days following receipt of written notice of such default; or (d) The occurrence of an Event of Default under any of the Loan Documents. 7. Remedies. (a) Upon the occurrence and during the continuance of an Event of Default, Agent, without limitation, may: (i) without notice to Borrower, except as required by law, and at any time or from time to time, charge, set-off, and otherwise apply all or any part of the Collateral against the Obligations or any part thereof; (ii) in its sole discretion, at any time and from time to time, exercise any and all rights and remedies available to it under this Agreement, and/or as a secured party under the Uniform Commercial Code; and (iii) demand, collect, take possession of, receipt for, settle, compromise, adjust, sue for, foreclose, or otherwise realize upon the Collateral (or any portion thereof) as Agent may determine in its sole discretion. (b) The Borrower hereby expressly waives, to the fullest extent permitted by law, presentment, demand, protest or any notice of any kind in connection with this Agreement or the Collateral except as otherwise specifically provided herein or in any of the Loan Documents. Agent may take any action deemed by Agent to be necessary or appropriate to the enforcement of the rights and remedies of Agent under this Agreement, and/or under any of the other Loan Documents. The remedies of Agent shall include, without limitation, all rights and remedies specified this Agreement and the other Loan Documents, all remedies of Agent under applicable general or statutory law, and the remedies of a secured party under the Uniform Commercial Code as enacted in the State of New York, regardless of whether the Uniform Commercial Code has been enacted or enacted in that form in any other jurisdiction in which such right or remedy is asserted. In addition to such other remedies as may exist from time to time, whether by way of set-off, banker's lien, consensual security interest or otherwise, upon the occurrence and during the continuance of an Event of Default, Agent is authorized at any time and from time to time, without notice to or demand upon the Borrower (any such notice or demand being expressly waived by the Borrower) to charge any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by Agent to or for the credit of or the account of the Borrower against any and all of the Obligations, irrespective of whether or not Agent shall have made any demand for payment and although the Obligations may be unmatured. Any notice required by law, including, but not limited to, notice of the intended disposition of all or any portion of the Collateral, shall be reasonable and properly given in the manner prescribed for the giving of notice herein, and, in the case of any notice of disposition, if given at least ten (10) days prior to such disposition. Agent may require the Borrower to assemble the Collateral and make it available to Agent at any place to be designated by Agent which is reasonably convenient to the parties hereto. It is expressly understood and agreed that Agent shall be entitled to dispose of the Collateral at any public or private sale, without recourse to judicial proceedings and without either demand, appraisement, advertisement or notice of any kind, all of which are expressly waived, and that Agent shall be entitled to bid and purchase at any such sale. In the event that Agent is the successful bidder at any public or private sale of any note or other document or instrument evidencing Borrower's right to receive the Collateral, Agent shall be entitled to credit the amount bid by Agent against the obligations evidenced by such note, document or instrument rather than the obligations evidenced by the Note. To the extent the Collateral consists of marketable securities, Agent shall not be obligated to sell such securities for the highest price obtainable, but shall sell them at the market price available on the date of sale. Agent shall not be obligated to make any sale of the Collateral if it shall determine not to do so regardless of the fact that notice of sale of the Collateral may have been given. Agent may, without notice or publication, adjourn any public sale from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. Each such purchaser at any such sale shall hold the Collateral sold absolutely free from claim or right on the part of Borrower. In the event that any consent, approval or authorization of any governmental agency or commission will be necessary to effectuate any such sale or sales, Borrower shall execute all such applications or other instruments as Agent may deem reasonably necessary to obtain such consent, approval or authorization. Agent may notify any account debtor or obligor with respect to the Collateral to make payment directly to Agent, and may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose or realize upon the Collateral as Agent may determine whether or not the Obligations or the Collateral are due, and for the purpose of realizing Agent's rights therein, Agent may receive, open and dispose of mail addressed to Borrower and endorse notes, checks, drafts, money orders, documents of title or other evidences of payment, shipment or storage or any other form of Collateral on behalf and in the name of Borrower, as its attorney-in-fact. In addition, Borrower hereby irrevocably designates and appoints Agent its true and lawful attorney-in- fact either in the name of Agent or Borrower to (i) sign Borrower's name on any Collateral, drafts against account debtors, assignments, any proof of claim in any bankruptcy or other insolvency proceeding involving any account debtor, any notice of lien, claim of lien or assignment or satisfaction of lien, or on any financing statement or continuation statement under the Uniform Commercial Code relating to the Collateral; (ii) send verifications of accounts receivable to any account debtor; and (iii) in connection with a transfer of the Collateral as described above, sign in Borrower's name any documents necessary to transfer title to the Collateral to Agent or any third party. All acts of said power of attorney are hereby ratified and approved and Agent shall not be liable for any mistake of law or fact made in connection therewith. This power of attorney is coupled with an interest and shall be irrevocable so long as any amounts remain unpaid on any of the Obligations. All remedies of Agent shall be cumulative to the full extent provided by law, all without liability except to account for property actually received, but the Agent shall have no duty to exercise such rights and shall not be responsible for any failure to do so or delay in so doing. Pursuit by Agent of certain judicial or other remedies shall not abate nor bar other remedies with respect to the Obligations or to other portions of the Collateral. Agent may exercise its rights to the Collateral without resorting or regard to other collateral or sources of security or reimbursement for the Obligations. (c) If a Borrower Party fails to perform any agreement or covenant contained in this Agreement beyond any applicable period for notice and cure, Agent may itself perform, or cause to be performed, any agreement or covenant of such Borrower Party contained in this Agreement which such Person shall fail to perform, and the cost of such performance, together with any reasonable expenses, including reasonable attorneys' fees actually incurred (including reasonable attorneys' fees incurred in any appeal) by Agent in connection therewith, shall be payable by Borrower upon demand and shall constitute a part of the Obligations and shall bear interest at the rate for overdue amounts as set forth in the Credit Agreement. Notwithstanding the Agent's right to perform, at its sole discretion, certain obligations of the Borrower Parties, Agent's exercise of any of its rights or remedies hereunder, under any of the other Loan Documents, or otherwise at law or in equity, Agent shall not be deemed to be a mortgagee-in-possession, nor shall Agent be subject to any liability with respect to the Mezzanine Property, the Collateral, or otherwise based upon any claim of lender liability. (d) Whether or not an Event of Default has occurred and whether or not Agent is the absolute owner of the Collateral, Agent may take such action as Agent may deem necessary to protect the Collateral or its security interest therein, Agent being hereby authorized to pay, purchase, contest and compromise any encumbrance, charge or lien which in the judgment of Agent appears to be prior or superior to its security interest, and in exercising any such powers and authority to pay necessary expenses, employ counsel and pay reasonable attorney's fees. Any such advances made or expenses incurred by Agent shall be deemed advanced under the Loan Documents, shall increase the indebtedness evidenced and secured thereby, shall be payable upon demand and shall bear interest at the rate for overdue payments set forth in the Credit Agreement. 8. Duties of Agent. The powers conferred on Agent hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Agent's duty with reference to the Collateral shall be solely to use slight care in the custody and preservation of the Collateral, which shall not include any steps necessary to preserve rights against prior parties. Agent shall have no responsibility or liability for the collection of any Collateral or by reason of any invalidity, lack of value or uncollectability of any of the payments received by it. 9. Indemnification. (a) It is specifically understood and agreed that this Agreement shall not operate to place any responsibility or obligation whatsoever upon Agent, or cause Agent to be, or to be deemed to be, a member in the Property Owner, the Manager or the Member and that in accepting this Agreement, Agent neither assumes nor agrees to perform at any time whatsoever any obligation or duty of Borrower relating to the Collateral or any other mortgage, indenture, contract, agreement or instrument to which the Property Owner, the Manager or the Member is a party or to which it is subject, all of which obligations and duties shall be and remain with and upon Borrower; provided, however, that Borrower shall not be liable for the performance of any liabilities or duties under the Organizational Agreements of Member, Manager or Property Owner which may result from written amendments thereof made by Agent after the occurrence of an Event of Default. (b) Borrower agrees to indemnify, defend and hold Agent and the Banks harmless from and against any and all claims, expenses, losses and liabilities growing out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement) or acts taken or omitted by Agent hereunder or in connection herewith, except claims, expenses, losses or liabilities resulting from Agent's or such Bank's gross negligence or wilful misconduct. (c) Borrower upon receipt of written demand shall pay to Agent the amount of any and all reasonable expenses, including, without limitation, the reasonable fees and disbursements of counsel actually incurred (including those incurred in any appeal), and of any experts and agents, which Agent may incur in connection with (i) the administration of this Agreement, (ii) the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of Agent hereunder, or (iv) the failure by Borrower to perform or observe any of the provisions hereof beyond any applicable period for notice and cure. 10. Security Interest Absolute. All rights of Agent, and the security interests hereunder, and all of the obligations secured hereby, shall be absolute and unconditional, irrespective of: (a) Any lack of validity or enforceability of the Loan Documents or any other agreement or instrument relating thereto; (b) Any change in the time (including the extension of the maturity date of the Note), manner or place of payment of, or in any other term of, all or any of the Obligations or any other amendment or waiver of or any consent to any departure from the Loan Documents; (c) Any exchange, release or nonperfection of any other collateral for the Obligations, or any release or amendment or waiver of or consent to departure from any of the Loan Documents with respect to all or any part of the Obligations; or (d) Any other circumstance (other than payment of the Obligations in full) that might otherwise constitute a defense available to, or a discharge of, Borrower or any third party for the Obligations or any part thereof. 11. Amendments and Waivers. No amendment or waiver of any provision of this Agreement nor consent to any departure therefrom shall in any event be effective unless the same shall be in writing and signed by Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No delay or omission of Agent to exercise any right, power or remedy accruing upon any Event of Default shall exhaust or impair any such right, power or remedy or shall be construed to be a waiver of any such Event of Default, or acquiescence therein; and every right, power and remedy given by this Agreement to Agent may be exercised from time to time and as often as may be deemed expedient by Agent. Failure on the part of Agent to complain of any act or failure to act which constitutes an Event of Default, irrespective of how long such failure continues, shall not constitute a waiver by Agent of Agent's rights hereunder or impair any rights, powers or remedies consequent on any Event of Default. Borrower hereby waives to the extent permitted by law all rights which Borrower has or may have under and by virtue of the Uniform Commercial Code as enacted in the State of New York, and any federal, state, county or municipal statute, regulation, ordinance, Constitution or charter, now or hereafter existing, similar in effect thereto providing any right of Borrower to notice and to a judicial hearing prior to seizure by Agent of any of the Collateral. Borrower hereby waives and renounces for itself, its heirs, successors and assigns, presentment, demand, protest, advertisement or notice of any kind (except for any notice required by law or the Loan Documents) and all rights to the benefits of any statute of limitations and any moratorium, reinstatement, marshaling, forbearance, valuation, stay, extension, homestead, redemption and appraisement now provided or which may hereafter be provided by the Constitution and laws of the United States and of any state thereof, both as to itself and in and to all of its property, real and personal, against the enforcement of this Agreement and the collection of any of the Obligations. 12. Continuing Security Interest; Transfer of Note; Release of Collateral. This Agreement shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until the indefeasible payment in full of the Obligations and the termination of the obligation of the Banks to make Loans to Borrower or the earlier termination of the Assignment of Interests in accordance with its terms, (b) be binding upon Borrower and its permitted successors and assigns, and (c) inure, together with the rights and remedies of Agent hereunder, to the benefit of Agent and the Banks and their respective successors, transferees and assigns. Upon the indefeasible payment in full of the Obligations and the termination of the obligation of the Banks to make Loans to Borrower or the earlier termination of the Assignment of Interests in accordance with its terms, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to Borrower; provided, however, that in the event that a Mezzanine Property is released in accordance with the terms of the Credit Agreement, this Assignment shall also terminate as to the Mezzanine Property so released. Upon any such termination, Agent will at Borrower's expense execute and deliver to Borrower such documents as Borrower shall reasonably request to evidence such termination and the release of any lien created by this Agreement. 13. Modifications, Etc. Borrower hereby consents and agrees that Agent and the Banks may at any time and from time to time, without notice to or further consent from Borrower, either with or without consideration, surrender any property or other security of any kind or nature whatsoever held by it or by any person, firm or corporation on its behalf or for its account, securing the Obligations; substitute for any Collateral so held by it, other collateral of like kind; agree to modification of the terms of the Loan Documents; extend or renew the Loan Documents for any period; grant releases, compromises and indulgences with respect to the Loan Documents for any period; grant releases, compromises and indulgences with respect to the Loan Documents to any persons or entities now or hereafter liable thereunder or hereunder; release any guarantor, endorser or any other Person liable with respect to the Obligations; or take or fail to take any action of any type whatsoever; and no such action which Agent shall take or fail to take in connection with the Loan Documents, or any of them, or any security for the payment of the Obligations or for the performance of any obligations or undertakings of Borrower, nor any course of dealing with Borrower or any other person, shall release Borrower's obligations hereunder, affect this Agreement in any way or afford Borrower any recourse against Agent. 14. Governing Law; Terms. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE INTERNAL LAWS OF THE STATE OF NEW YORK. 15. Notices. Each notice, demand, election or request provided for or permitted to be given pursuant to this Agreement shall be deemed to have been properly given or served if given in the manner provided in the Credit Agreement. 16. No Unwritten Agreements. THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 17. Cash Collateral. In the event that the Borrower becomes the subject of a proceeding under the Bankruptcy Code, the parties hereto agree that the Collateral shall constitute "cash collateral" of Agent under Section 363 of the Bankruptcy Code. 18. Miscellaneous. Time is of the essence of this Agreement. Title or captions of paragraphs hereof are for convenience only and neither limit nor amplify the provisions hereof. If, for any circumstances whatsoever, fulfillment of any provision of this Agreement shall involve transcending the limit of validity presently prescribed by applicable law, the obligation to be fulfilled shall be reduced to the limit of such validity; and if any clause or provision herein operates or would prospectively operate to invalidate this Agreement, in whole or in part, then such clause or provision only shall be held for naught, as though not herein contained, and the remainder of this Agreement shall remain operative and in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above written. AGENT: BANKBOSTON, N.A., as Agent By: /s/ Mark E. Basham ------------------------------- Mark E. Basham, Managing Director BORROWER: WELLSFORD/WHITEHALL HOLDINGS, L.L.C., a Delaware limited liability company, by its managing member By: Wellsford/Whitehall Properties II, L.L.C., a Delaware limited liability company, managing member By: Wellsford Commercial Properties Trust, a Maryland real estate investment trust, its manager By: /s/ Gregory F. Hughes ------------------------------- Name: Gregory F. Hughes Title: CFO & Treasurer MEMBER: WELLS AVENUE HOLDINGS L.L.C., a Delaware limited liability company, by its sole member By: Wellsford/Whitehall Holdings, L.L.C., a Delaware limited liability company, its managing member By: Wellsford/Whitehall Properties II, L.L.C., a Delaware limited liability company, managing member By: Wellsford Commercial Properties Trust, a Maryland real estate investment trust, manager By: /s/ Gregory F. Hughes ----------------------------- Name: Gregory F. Hughes Title: CFO & Treasurer MANAGER: WASH MANAGER L.L.C., a Delaware limited liability company, by its sole member By: Wells Avenue Holdings L.L.C., a Delaware limited liability company, by its sole member By: Wellsford/Whitehall Holdings, L.L.C., a Delaware limited liability company, by its managing member By: Wellsford/Whitehall Properties II, L.L.C., a Delaware limited liability company, by its managing member By: Wellsford Commercial Properties Trust, a Maryland real estate investment trust, manager By: /s/ Gregory F. Hughes ----------------------------- Name: Gregory F. Hughes Title: CFO & Treasurer Property Owner joins in the execution of this Agreement for the purposes of acknowledging the provisions of Paragraphs 4(e), 5(g) and 5(h) above. By acceptance of this Agreement, Agent acknowledges that a failure by Property Owner to honor its agreements pursuant to this Agreement shall not give rise to a monetary claim (whether in damages or otherwise) by Agent against Property Owner. WELLS AVENUE SENIOR HOLDINGS LLC, a Massachusetts limited liability company, by its managing member By: WASH Manager L.L.C., a Delaware limited liability company, by its sole member By: Wells Avenue Holdings L.L.C., a Delaware limited liability company, by its sole member By: Wellsford/Whitehall Holdings, L.L.C., a Delaware limited liability company, by its managing member By: Wellsford/Whitehall Properties II, L.L.C., a Delaware limited liability company, by its managing member By: Wellsford Commercial Properties Trust, a Maryland real estate investment trust, manager By: /s/ Gregory F. Hughes --------------------------- Name: Gregory F. Hughes Title: CFO & Treasurer EXHIBIT "A" CLEARING ACCOUNT Account Name: Wells Avenue Senior Holdings LLC c/o Saracen Companies 57 Wells Avenue Newton, MA 02159 Account Number: 01-96-02642 ABA Number: 2113-70574 EX-10.37 6 INDEMNITY AGREEMENT REGARDING HAZARDOUS MATERIALS ($300,000,000.00 Loan) THIS INDEMNITY AGREEMENT (this "Agreement"), is made as of this 16th day of July, 1998, by WELLSFORD/WHITEHALL HOLDINGS, L.L.C., a Delaware limited liability company ("Borrower"), WELLSFORD COMMERCIAL PROPERTIES TRUST, a Maryland real estate investment trust ("Trust"), and WHWEL REAL ESTATE LIMITED PARTNERSHIP ("WHWEL") (Trust and WHWEL, collectively "Guarantor"), for the benefit of BANKBOSTON, N.A., a national banking association ("BankBoston"), as Administrative Agent for itself, Goldman Sachs Mortgage Company and certain other lenders which may now or hereafter become parties to the "Loan Agreement" (as hereinafter defined) (BankBoston and such other lenders are hereinafter referred to collectively as the "Lenders"). W I T N E S S E T H: WHEREAS, Borrower is the owner of certain real property more particularly described in Exhibit A attached hereto and incorporated herein by this reference (the "Borrower Land"; together with all improvements now or hereafter located in, on or under the Borrower Land, collectively, the "Borrower Property"); WHEREAS, Wells Avenue Senior Holdings LLC, a Massachusetts limited liability company (the "Property Owner"), is the owner of certain real property more particularly described on Exhibit B attached hereto and incorporated herein by this reference (the "Nomura Land," the Land, together with all improvements now or hereafter located in, on or under the Nomura Land, collectively, the "Nomura Property"; the Borrower Property and the Nomura Property are hereinafter referred to collectively as the "Property"); WHEREAS, Wells Avenue Holdings L.L.C., a Delaware limited liability company ("Member"), and WASH Manager, L.L.C, a Delaware limited liability company ("Manager") are the sole members of the Property Owner; WHEREAS, Borrower is the sole member of Member; WHEREAS, Lenders have agreed to provide to Borrower a loan in the amount of up to $300,000,000.00 (the "Loan") pursuant to that certain First Amended and Restated Loan Agreement, dated of even date herewith, between Lenders, Borrower, Goldman Sachs Mortgage Company, as Co-Arranger and Co-Syndication Agent, and BankBoston, as Administrative Agent, Co-Arranger and Co- Syndication Agent (the "Loan Agreement"), which Loan is evidenced by those certain Notes dated of even date herewith, made by Borrower to the order of Lenders in the aggregate principal face amount of $300,000,000.00 as described in the Loan Agreement (collectively, together with all amendments, modifications, consolidations, increases, supplements and extensions thereof, the "Note"), and secured by, among other things, those certain Mortgage and Security Agreements and Deeds of Trust from Borrower to BankBoston as Administrative Agent (the "Agent"), as amended by those certain First Amendments to Mortgage and Security Agreement and other Collateral Documents and those certain First Amendments to Deed of Trust Assignment of Rents, Security Agreement and Fixture Filing and other Collateral Documents dated of even date herewith from Borrower to Agent conveying the Borrower Property and to be recorded in the appropriate public records of the jurisdictions in which the Borrower Property is located (collectively, together with all amendments, modifications, consolidations, increases, supplements and extensions thereof, the "Security Deed"); WHEREAS, the Loan is further secured by that certain Amended and Restated Assignment of Member's Interest of even date from Borrower pledging Borrower's membership interest in Member (collectively, together with all amendments or modifications thereof, the "Assignment"); WHEREAS, as a condition to making the Loan, Lenders require Borrower and Guarantor to provide certain indemnities concerning Hazardous Materials (as hereinafter defined) presently upon, in or under the Property, or hereafter placed or otherwise located thereon or therein; WHEREAS, to induce Lenders to make the Loan to Borrower, Borrower and Guarantor have agreed to provide this Agreement for Lenders' benefit. NOW, THEREFORE, for and in consideration of the sum of Ten and No/100 ($10.00) Dollars and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lenders, by their acceptance of delivery hereof, and Borrower and Guarantor hereby agree as follows: 19. Definitions. The definitions set forth below shall apply for purposes of this Agreement. Capitalized terms used herein and not otherwise defined herein shall have the meaning set forth in the Credit Agreement: (a) "Environmental Law" shall mean any federal, state or local statute, regulation or ordinance or any judicial or administrative decree or decision, whether now existing or hereinafter enacted, promulgated or issued, with respect to any Hazardous Materials, drinking water, groundwater, wetlands, landfills, open dumps, storage tanks, underground storage tanks, solid waste, waste water, storm water run-off, waste emissions or wells. Without limiting the generality of the foregoing, the term shall encompass each of the following statutes, and regulations promulgated thereunder, and amendments and successors to such statutes and regulations, as may be enacted and promulgated from time to time: (i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (codified in scattered sections of 26 U.S.C.; 33 U.S.C.; 42 U.S.C. and 42 U.S.C. Section 9601 et seq.); (ii) the Resource Conservation and Recovery Act of 1976 (42 U.S.C. Section 6901 et seq.); (iii) the Toxic Substances Control Act (15 U.S.C. et seq.); (iv) the Clean Water Act (33 U.S.C. Section 1251 et seq.); (v) the Clean Air Act (42 U.S.C. Section 7401 et seq.); (vi) the Safe Drinking Water Act (21 U.S.C. Section 349; 42 U.S.C. Section 201 and Section 300f et seq.); (vii) the National Environmental Policy Act of 1969 (42 U.S.C. Section 4321); (viii) the Superfund Amendment and Reauthorization Act of 1986 (codified in scattered sections of 10 U.S.C., 29 U.S.C., 33 U.S.C. and 42 U.S.C.); (ix) the Uncontrolled Hazardous Substance Sites Law, 38 M.R.S.A. Section 1361 et seq., as applicable; (x) the Hazardous Matter Control Law, 38 M.R.S.A. Section 1317, et seq., as applicable; (xi) the Maine Hazardous Waste, Septage and Solid Waste Management Act, 38 M.R.S.A. Section 1301 et seq., as applicable; (xii) the Reduction of Toxics Use, Waste and Release Law, 38 M.R.S.A. Section 2301 et seq., as applicable; and (xiii) the Site Location of Development Law, 38 M.R.S.A. Section 481 et seq., as applicable. (b) "Hazardous Materials" shall mean each and every element, compound, chemical mixture, contaminant, pollutant, material, waste or other substance which is defined, determined or identified as hazardous or toxic under any Environmental Law. Without limiting the generality of the foregoing, the term shall mean and include: (i) "hazardous substances" as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Superfund Amendment and Reauthorization Act of 1986, or Title III of the Superfund Amendment and Reauthorization Act, each as amended, and regulations promulgated thereunder; (ii) "hazardous waste" as defined in the Resource Conservation and Recovery Act of 1976, as amended, and regulations promulgated thereunder; (iii) "hazardous materials" as defined in the Hazardous Materials Transportation Act, as amended, and regulations promulgated thereunder; and (iv) "chemical substance or mixture" as defined in the Toxic Substances Control Act, as amended, and regulations promulgated thereunder. (c) "Indemnified Parties" shall mean each of the Lenders, their respective parents, subsidiaries and affiliates, each of their respective shareholders, directors, officers, employees and agents, and the successors and assigns of any of them; and "Indemnified Party" shall mean any one of the Indemnified Parties. (d) "Release" shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, storing, escaping, leaching, dumping, or discarding, burying, abandoning, or disposing into the environment. (e) "Threat of Release" shall mean a substantial likelihood of a Release which requires action to prevent or mitigate damage to the environment which may result from such Release. 20. Indemnity Agreement. Borrower and Guarantor, each jointly and severally, covenant and agree, at their sole cost and expense, to indemnify, defend (at trial and appellate levels and with attorneys, consultants and experts acceptable to Lenders) and hold each Indemnified Party harmless against and from any and all liens, damages, losses, liabilities, obligations, settlement payments, penalties, assessments, citations, directives, claims, litigation, demands, defenses, judgments, suits, proceedings, costs, disbursements or expenses of any kind or of any nature whatsoever (including, without limitation, reasonable attorneys', consultants' and experts' fees and disbursements incurred in investigating, defending against, settling or prosecuting any claim, litigation or proceeding) which may at any time be imposed upon, incurred by or asserted or awarded against such Indemnified Party or the Property and, and arising directly or indirectly from or out of: (A) the Release or Threat of Release of any Hazardous Materials on, in, under or affecting all or any portion of the Property or any surrounding areas, regardless of whether or not caused by or within the control of Borrower, first occurring prior to the payment in full of the Obligations; (B) the violation of any Environmental Laws relating to or affecting the Property or the Borrower, whether or not caused by or within the control of Borrower, first occurring prior to the payment in full of the Obligations; (C) the failure of Borrower or Guarantor to comply fully with the terms and conditions of this Agreement; (D) the violation of any Environmental Laws in connection with other real property of Borrower which gives or may give rise to any rights whatsoever in any party with respect to the Property by virtue of any Environmental Laws, first occurring prior to the payment in full of the Obligations; or (E) the enforcement of this Agreement, including, without limitation, (i) the costs of assessment, containment and/or removal of any and all Hazardous Materials from all or any portion of the Property or any surrounding areas, (ii) the costs of any actions taken in response to a Release or Threat of Release of any Hazardous Materials on, in, under or affecting all or any portion of the Property or any surrounding areas to prevent or minimize such Release or Threat of Release so that it does not migrate or otherwise cause or threaten danger to present or future public health, safety, welfare or the environment, and (iii) costs incurred to comply with the Environmental Laws in connection with all or any portion of the Property or any surrounding areas. Borrower's and Guarantor's obligations hereunder are separate and distinct from Borrower's and Guarantor's obligations under the "Loan Documents" (as hereinafter defined), and Lenders' and the other Indemnified Parties' rights under this Agreement shall be in addition to all rights of Agent and Lenders under the Security Deed, the Assignment, the Note, the Loan Agreement, the Guaranty and under any other documents or instruments evidencing, securing or relating to the Loan (the Security Deed, the Assignment, the Note, the Loan Agreement, the Guaranty and such other documents or instruments, as amended or modified from time to time, being herein referred to as the "Loan Documents"), and payments by Borrower or Guarantor under this Agreement shall not reduce Borrower's or Guarantor's obligations and liabilities under any of the Loan Documents. un Survival. (a) The indemnity set forth above in Paragraph 2 shall survive the repayment of the Loan and any exercise of any remedies under the Security Documents, including without limitation, the power of sale, or any other remedy in the nature of foreclosure, and shall not merge with any deed or assignment given by Borrower to Agent or Lenders in lieu of foreclosure or any deed under a power of sale. (b) It is agreed and intended by Borrower, Guarantor and Lenders that the indemnity set forth above in Paragraph 2 may be assigned or otherwise transferred by each Lender to its successors and assigns and to any subsequent purchaser of all or any portion of the Property or the Collateral by, through or under Agent or Lenders, without notice to Borrower or Guarantor and without any further consent of Borrower or Guarantor. To the extent consent of any such assignment or transfer is required by law, advance consent to any such assignment or transfer is hereby given by Borrower and Guarantor in order to maximize the extent and effect of the indemnity given hereby. 22. No Waiver. The liabilities of Borrower and Guarantor under this Agreement shall in no way be limited or impaired by, and Borrower and Guarantor hereby consent to and agree to be bound by, any amendment or modification of the provisions of the Loan Documents to or with Lenders by Borrower or Guarantor or any person who succeeds Borrower or Property Owner as owner of any of the Property or the Collateral. In addition, notwithstanding any terms of any of the Loan Documents to the contrary, the liability of Borrower and Guarantor under this Agreement shall in no way be limited or impaired by: (i) any extensions of time for performance required by any of the Loan Documents; (ii) any sale, assignment or foreclosure of the Note or the Security Documents or any sale or transfer of all or part of the Property or the Collateral; (iii) any exculpatory provision in any of the Loan Documents limiting Lenders' recourse to property encumbered by the Security Documents or to any other security, or limiting Lenders' rights to a deficiency judgment against Borrower; (iv) the accuracy or inaccuracy of the representations and warranties made by Borrower or Guarantor under any of the Loan Documents; (v) the release of Borrower or Guarantor or any other person from performance or observance of any of the agreements, covenants, terms or conditions contained in the Loan Documents by operation of law, Lenders' voluntary act, or otherwise; (vi) the release or substitution, in whole or in part, of any security for the Note; or (vii) Lenders' failure to record the Security Documents or file any UCC-1 financing statements (or Lenders' improper recording or filing of any thereof) or to otherwise perfect, protect, secure or insure any security interest or lien given as security for the Note; and, in any such case, whether with or without notice to Borrower or Guarantor and with or without consideration. 23. Waiver by Borrower. BORROWER AND GUARANTOR WAIVE ANY RIGHT OR CLAIM OF RIGHT TO CAUSE A MARSHALING OF BORROWER'S OR GUARANTOR'S ASSETS OR TO CAUSE LENDERS TO PROCEED AGAINST ANY OF THE SECURITY FOR THE LOAN BEFORE PROCEEDING UNDER THIS AGREEMENT AGAINST BORROWER AND GUARANTOR OR TO PROCEED AGAINST BORROWER AND GUARANTOR IN ANY PARTICULAR ORDER. BORROWER AND GUARANTOR AGREE THAT ANY PAYMENTS REQUIRED TO BE MADE HEREUNDER SHALL BECOME DUE ON DEMAND. BORROWER AND GUARANTOR EXPRESSLY WAIVE AND RELINQUISH ALL RIGHTS AND REMEDIES (INCLUDING ANY RIGHTS OF SUBROGATION) ACCORDED BY APPLICABLE LAW TO INDEMNITORS. 24. Delay. No delay on Lenders' part in exercising any right, power or privilege under any of the Loan Documents shall operate as a waiver of any privilege, power or right hereunder. or Releases. Any one or more of Borrower and Guarantor or any other party liable upon or in respect of this Agreement or the Loan may be released without affecting the liability of any party not so released. 26. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original. Said counterparts shall constitute but one and the same instrument and shall be binding upon each of the undersigned individually as fully and completely as if all had signed but one instrument so that the joint and several liability of each of the undersigned hereunder shall be unaffected by the failure of any of the undersigned to execute any or all of the said counterparts. 27. Notices. Each notice, demand, election or request provided for or permitted to be given pursuant to this Agreement shall be given in the manner provided in the Loan Agreement. 28. Amendments. No provision of this Agreement may be changed, waived, discharged or terminated orally, by telephone or by any other means except by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought. 29. Binding Effect. Except as herein provided, this Agreement shall be binding upon Borrower and Guarantor and their respective successors, successors-in-title and assigns, and shall inure to the benefit of Lenders, the other Indemnified Parties, and their respective successors and assigns. Notwithstanding the foregoing, Borrower and Guarantor, without the prior written consent of Lenders in each instance, may not assign, transfer or set over to another, in whole or in part, all or any part of its or their benefits, rights, duties and obligations hereunder, including, but not limited to, performance of and compliance with conditions hereof. imp GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, AND INTERPRETED AND DETERMINED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). BORROWER AND GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY (A) SUBMIT TO PERSONAL JURISDICTION IN THE STATE OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND (B) WAIVE ANY AND ALL PERSONAL RIGHTS UNDER THE LAWS OF ANY STATE (I) TO THE RIGHT, IF ANY, TO TRIAL BY JURY, OR (II) TO OBJECT TO JURISDICTION WITHIN THE STATE OF NEW YORK OR VENUE IN ANY PARTICULAR FORUM (INCLUDING FEDERAL) WITHIN THE STATE OF NEW YORK. BORROWER AND GUARANTOR AGREE THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO BORROWER AND GUARANTOR AT THE ADDRESSES SET FORTH IN THE LOAN AGREEMENT, AND SERVICE SO MADE SHALL BE COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL BE SO MAILED. NOTHING CONTAINED HEREIN, HOWEVER, SHALL PREVENT LENDERS FROM BRINGING ANY SUIT, ACTION OR PROCEEDING OR EXERCISING ANY RIGHTS AGAINST ANY SECURITY AND AGAINST BORROWER OR GUARANTOR PERSONALLY, AND AGAINST ANY PROPERTY OF BORROWER, WITHIN ANY OTHER STATE. INITIATING SUCH SUIT, ACTION OR PROCEEDING OR TAKING SUCH ACTION IN ANY STATE SHALL IN NO EVENT CONSTITUTE A WAIVER OF THE AGREEMENT CONTAINED HEREIN THAT THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE RIGHTS AND OBLIGATIONS OF BORROWER, AND GUARANTOR AND LENDERS HEREUNDER OR OF THE SUBMISSION HEREIN MADE BY BORROWER AND GUARANTOR TO PERSONAL JURISDICTION WITHIN THE STATE OF NEW YORK. 31. Recourse. Notwithstanding anything to the contrary contained herein or in any other Loan Document, the obligations of WHWEL Real Estate Limited Partnership under this Agreement whether arising under this Agreement or otherwise in connection with any of the Loan Documents, shall be without recourse to any limited partner of WHWEL Real Estate Limited Partnership and no such person shall have any liability with respect thereto. IN WITNESS WHEREOF, Borrower and Guarantor have caused this Agreement to be executed under seal as of the day and year first written above. BORROWER: WELLSFORD/WHITEHALL HOLDINGS, L.L.C., a Delaware limited liability company By: Wellsford/Whitehall Properties II, L.L.C., a Delaware limited liability company, its managing member By: Wellsford Commercial Properties Trust, a Maryland real estate investment trust, its manager By:/s/ Gregory F. Hughes ------------------------------------- Name: Gregory F. Hughes Title: CFO and Treasurer GUARANTOR: WELLSFORD COMMERCIAL PROPERTIES TRUST, a Maryland real estate investment trust By:/s/ Gregory F. Hughes --------------------------------------- Name: Gregory F. Hughes Title: CFO and Treasurer WHWEL REAL ESTATE LIMITED PARTNERSHIP By: WHATR Gen-Par, Inc., General Partner By:/s/ Alan S. Kava ---------------------------------- Name: Alan S. Kava Title: Vice President EX-10.38 7 CONDITIONAL GUARANTY OF PAYMENT ------------------------------- ($300,000,000 Loan) FOR AND IN CONSIDERATION OF the sum of Ten and No/100 Dollars ($10.00) and other good and valuable consideration paid or delivered to the undersigned WELLSFORD COMMERCIAL PROPERTIES TRUST, a Maryland real estate investment trust ("WCPT"), WHWEL REAL ESTATE LIMITED PARTNERSHIP ("WHWEL"), WELLSFORD REAL PROPERTIES, INC., a Maryland corporation ("WRPI"), WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP V ("Whitehall V"), WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP VI ("Whitehall VI"), WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP VII ("Whitehall VII"), and WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP VIII ("Whitehall VIII", and together with Whitehall V, Whitehall VI and Whitehall VII, collectively, "Whitehall"), each a Delaware limited partnership (WCPT, WHWEL, WRPI and Whitehall are hereinafter referred to collectively as "Guarantor"), the receipt and sufficiency whereof is hereby acknowledged by Guarantor, and for the purpose of seeking to induce BANKBOSTON, N.A. ("BKB"), and GOLDMAN SACHS MORTGAGE COMPANY ("Goldman Sachs"; BKB and Goldman Sachs are hereinafter referred to collectively as "Lender", which term shall also include each other Bank which may now or hereafter become party to the "Credit Agreement" (as hereinafter defined) and shall also include any such individual Bank acting as agent for all of the Banks), to extend credit or otherwise provide financial accommodations to WELLSFORD/WHITEHALL HOLDINGS, L.L.C., a Delaware limited liability company (hereinafter referred to as "Borrower"), which extension of credit and provision of financial accommodations will be to the direct interest, advantage and benefit of Guarantor, Guarantor does hereby, jointly and severally, absolutely and irrevocably guarantee to Lender: (a) subject to the provisions of Paragraphs 24 and 25, below, the full and prompt payment when due, whether by acceleration or otherwise, either before or after maturity thereof, of those certain Notes dated July 16, 1998 made by Borrower to the order of the Banks in the aggregate principal face amount of Three Hundred Million and No/100 Dollars ($300,000,000.00) (hereinafter referred to collectively as the "Bank Notes"), together with interest as provided in the Bank Notes, together with any replacements, supplements, renewals, modifications, consolidations, restatements and extensions thereof; and (b) subject to the provisions of Paragraphs 24 and 25, below, the full and prompt payment when due, whether by acceleration or otherwise, either before or after maturity thereof, of each other note as may be issued under that certain First Amended and Restated Loan Agreement dated July 16, 1998 among Borrower, BKB, for itself and as agent, Goldman Sachs, and the other lenders now or hereafter a party thereto (hereinafter referred to as the "Credit Agreement"), together with interest as provided in each such note, together with any replacements, supplements, renewals, modifications, consolidations, restatements and extensions thereof (the Bank Notes and each of the notes described in this subparagraph (b) is hereinafter referred to collectively as the "Note"); and (c) subject to the terms of Paragraphs 24 and 25 below, the full and prompt payment of all other monetary obligations of Borrower to Lender under the terms of the Credit Agreement, together with any replacements, supplements, renewals, modifications, consolidations, restatements and extensions thereof; and (d) subject to the terms of Paragraphs 24 and 25 below, the full and prompt payment of any and all other monetary obligations of Borrower to Lender under the Security Documents, together with any replacements, supplements, renewals, modifications, consolidations, restatements and extensions thereof; and (e) subject to the terms of Paragraphs 24 and 25 below, the full and prompt payment of any and all other monetary obligations of Borrower to Lender under any other agreements, documents or instruments now or hereafter evidencing, securing or otherwise relating to the indebtedness evidenced by the Note or the Credit Agreement (the Note, the Security Documents, the Credit Agreement and said other agreements, documents and instruments, are hereinafter collectively referred to as the "Loan Documents" and individually referred to as a "Loan Document"). All terms used herein and not otherwise defined herein shall have the meanings set forth in the Credit Agreement. 1. Agreement to Pay; Costs of Collection. Guarantor does hereby agree that, subject to the terms of Paragraphs 24 and 25 below, below, if the Note is not paid by Borrower in accordance with its terms (including all applicable grace periods), or if any and all sums which are now or may hereafter become due from Borrower to Lender under the Loan Documents are not paid by Borrower in accordance with their terms (including all applicable grace periods), Guarantor will immediately make such payments. Guarantor further agrees to pay Lender on demand all reasonable costs and expenses (including court costs and reasonable attorneys' fees and disbursements) paid or incurred by Lender in endeavoring to enforce this Guaranty, and until paid to Lender, such sums shall bear interest at the default rate set forth in the Credit Agreement unless collection from Guarantor of interest at such rate would be contrary to applicable law, in which event such sums shall bear interest at the highest rate which may be collected from Guarantor under applicable law. 2. Reinstatement of Refunded Payments. If, for any reason, any payment to Lender of any of the obligations guaranteed hereunder is required to be refunded by Lender to Borrower, or paid or turned over by Lender to any other person, including, without limitation, by reason of the operation of bankruptcy, reorganization, receivership or insolvency laws or similar laws of general application relating to creditors' rights and remedies now or hereafter enacted, Guarantor agrees to pay the amount so required to be refunded, paid or turned over (hereinafter referred to as the "Turnover Payment"), the obligations of Guarantor shall not be treated as having been discharged by the original payment to Lender giving rise to the Turnover Payment, and this Guaranty shall be treated as having remained in full force and effect for any such Turnover Payment so made by Lender, as well as for any amounts not theretofore paid to Lender on account of such obligations, but only to the extent that Guarantor otherwise would have been liable for the payment of the same hereunder. 3. Rights of Lender to Deal with Collateral, Borrower and Other Persons. Guarantor hereby consents and agrees that Lender may at any time, and from time to time, without thereby releasing Guarantor from any liability hereunder and without notice to or further consent from Guarantor, either with or without consideration: release or surrender any lien or other security of any kind or nature whatsoever held by it or by any person, firm or corporation on its behalf or for its account, securing any indebtedness or liability hereby guaranteed; substitute for any collateral so held by it, other collateral of like kind, or of any kind; modify the terms of the Note or the Loan Documents; extend or renew the Note for any period; grant releases, compromises and indulgences with respect to the Note or the Loan Documents and to any persons or entities now or hereafter liable thereunder or hereunder; release any other Guarantor, surety, endorser or accommodation party of the Note, the Security Documents or any other Loan Documents; or take or fail to take any action of any type whatsoever. No such action which Lender shall take or fail to take in connection with the Note or the Loan Documents, or any of them, or any security for the payment of the indebtedness of Borrower to Lender or for the performance of any obligations or undertakings of Borrower, nor any course of dealing with Borrower or any other person, shall release Guarantor's obligations hereunder, affect this Guaranty in any way or afford Guarantor any recourse against Lender. The provisions of this Guaranty shall extend and be applicable to all replacements, supplements, renewals, amendments, extensions, consolidations, restatements and modifications of the Note and the Loan Documents, and any and all references herein to the Note and the Loan Documents shall be deemed to include any such replacements, supplements, renewals, extensions, amendments, consolidations, restatements or modifications thereof. 4. No Contest with Lender; Subordination. So long as any obligation hereby guaranteed remains unpaid or undischarged, Guarantor will not, by paying any sum recoverable hereunder (whether or not demanded by Lender) or by any means or on any other ground, claim any set-off or counterclaim against Borrower in respect of any liability of Guarantor to Borrower or, in proceedings under federal bankruptcy law or insolvency proceedings of any nature, prove in competition with Lender in respect of any payment hereunder or be entitled to have the benefit of any counterclaim or proof of claim or dividend or payment by or on behalf of Borrower or the benefit of any other security for any obligation hereby guaranteed which, now or hereafter, Lender may hold or in which it may have any share. Guarantor hereby expressly waives any right of contribution from or indemnity against Borrower, whether at law or in equity, arising from any payments made by Guarantor pursuant to the terms of this Guaranty, and Guarantor acknowledges that Guarantor has no right whatsoever to proceed against Borrower for reimbursement of any such payments. In connection with the foregoing, Guarantor expressly waives any and all rights of subrogation to Lender against Borrower, and Guarantor hereby waives any rights to enforce any remedy which Lender may have against Borrower and any rights to participate in any collateral for Borrower's obligations under the Loan Documents. Guarantor hereby subordinates any and all indebtedness of Borrower now or hereafter owed to Guarantor to all indebtedness of Borrower to Lender, and agrees with Lender that (a) Guarantor shall not demand or accept any payment from Borrower on account of such indebtedness, (b) Guarantor shall not claim any offset or other reduction of Guarantor's obligations hereunder because of any such indebtedness, and (c) Guarantor shall not take any action to obtain any interest in any of the security described in and encumbered by the Loan Documents because of any such indebtedness; provided, however, that, if Lender so requests, such indebtedness shall be collected, enforced and received by Guarantor as trustee for Lender and be paid over to Lender on account of the indebtedness of Borrower to Lender, but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty except to the extent the principal amount of such outstanding indebtedness shall have been reduced by such payment. 5. Waiver of Defenses. Guarantor hereby agrees that its obligations hereunder shall not be affected or impaired by, and hereby waives and agrees not to assert or take advantage of any defense based on: (a) the incapacity or lack of authority of Borrower or any other person or entity, the death or disability of Borrower or any Guarantor or any other person or entity, or the failure of Lender to file or enforce a claim against the estate (either in administration, bankruptcy or in any other proceeding) of Borrower or any Guarantor or any other person or entity; (b) the dissolution or termination of existence of Borrower or any other Person; (c) the voluntary or involuntary liquidation, sale or other disposition of all or substantially all of the assets of Borrower or any other Person; (d) the voluntary or involuntary receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, assignment, composition, or readjustment of, or any similar proceeding affecting Borrower, any Guarantor, Property Owner, Manager, Member, or any of Borrower's, any Guarantor's, Property Owner's, Manager's or Member's properties or assets; (e) the damage, destruction, condemnation, foreclosure or surrender of all or any part of the Mezzanine Property or any Collateral; (f) the failure of Lender to give notice of the existence, creation or incurring of any new or additional indebtedness or obligation or of any action or nonaction on the part of any other person whomsoever in connection with any obligation hereby guaranteed; (g) any failure or delay of Lender to commence an action against Borrower or any other Person, to assert or enforce any remedies against Borrower under the Note or the Loan Documents, or to realize upon any security; (h) any failure of any duty on the part of Lender to disclose to Guarantor any facts it may now or hereafter know regarding Borrower, the Property Owner or any other Person, or the Mezzanine Property or the property encumbered by the Security Documents, whether such facts materially increase the risk to Guarantor or not; (i) failure to accept or give notice of acceptance of this Guaranty by Lender; (j) failure to make or give notice of presentment and demand for payment of any of the indebtedness or performance of any of the obligations hereby guaranteed; (k) failure to make or give protest and notice of dishonor or of default to Guarantor or to any other party with respect to the indebtedness or performance of obligations hereby guaranteed; (l) any and all other notices whatsoever to which Guarantor might otherwise be entitled; (m) any lack of diligence by Lender in collection, protection or realization upon any collateral securing the payment of the indebtedness or performance of obligations hereby guaranteed; (n) the invalidity or unenforceability of the Note or any of the Loan Documents; (o) the compromise, settlement, release or termination of any or all of the obligations of Borrower under the Note or the Loan Documents; (p) any transfer by Borrower or any other Person of all or any part of the security encumbered by the Loan Documents; (q) the failure of Lender to perfect any security or to extend or renew the perfection of any security; or (r) to the fullest extent permitted by law, any other legal, equitable or surety defenses whatsoever to which Guarantor might otherwise be entitled, it being the intention that the obligations of Guarantor hereunder are absolute, unconditional (subject to the terms of Paragraphs 24 and 25, below) and irrevocable. 6. Guaranty of Payment and Not of Performance or Collection. This is a Guaranty of payment and not of performance or collection. Subject to the terms of Paragraphs 24 and 25, below, the liability of Guarantor under this Guaranty shall be primary, direct and immediate and not conditional or contingent upon the pursuit of any remedies against Borrower or any other person, nor against securities or liens available to Lender, its successors, successors in title, endorsees or assigns. Guarantor hereby waives any right to require that an action be brought against Borrower or any other person or to require that resort be had to any security or to any balance of any deposit account or credit on the books of Lender in favor of Borrower or any other person. 7. Rights and Remedies of Lender. In the event of an Event of Default under the Note or the Loan Documents, or any of them, Lender shall have the right to enforce its rights, powers and remedies thereunder or hereunder or under any other agreement, document or instrument now or hereafter evidencing, securing or otherwise relating to the indebtedness evidenced by the Note or secured by the Loan Documents, in any order, and all rights, powers and remedies available to Lender in such event shall be nonexclusive and cumulative of all other rights, powers and remedies provided thereunder or hereunder or by law or in equity. Accordingly, Guarantor hereby authorizes and empowers Lender upon the occurrence of any Event of Default under the Note or the Loan Documents, at its sole discretion, and without notice to Guarantor, to exercise any right or remedy which Lender may have, including, but not limited to, judicial foreclosure, exercise of rights of power of sale, acceptance of an assignment in lieu of foreclosure, appointment of a receiver, exercise of remedies against personal property, or enforcement of any assignment of leases, as to any security, whether real, personal or intangible. At any public or private sale of any security or collateral for any indebtedness or any part thereof guaranteed hereby, whether by foreclosure or otherwise, Lender may, in its discretion, purchase all or any part of such security or collateral so sold or offered for sale for its own account and may apply against the amount bid therefor all or any part of the balance due it pursuant to the terms of the Note or Security Documents or any other Loan Document without prejudice to Lender's remedies hereunder against Guarantor for deficiencies. If the indebtedness guaranteed hereby is partially paid by reason of the election of Lender to pursue any of the remedies available to Lender, or if such indebtedness is otherwise partially paid, this Guaranty shall nevertheless remain in full force and effect, and Guarantor shall remain liable for the entire balance of the indebtedness guaranteed hereby (subject, however, to the provisions of Paragraphs 24 and 25 below) even though any rights which Guarantor may have against Borrower may be destroyed or diminished by the exercise of any such remedy. 8. Application of Payments. Guarantor hereby authorizes Lender, without notice to Guarantor, to apply all payments and credits received from Borrower or from Guarantor or realized from any security in such manner and in such priority as set forth in the Credit Agreement. 9. Business Failure, Bankruptcy or Insolvency. In the event of the business failure of a Guarantor or if there shall be pending any bankruptcy or insolvency case or proceeding with respect to a Guarantor under federal bankruptcy law or any other applicable law or in connection with the insolvency of a Guarantor, or if a liquidator, receiver, or trustee shall have been appointed for a Guarantor or a Guarantor's properties or assets, Lender may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of Lender allowed in any proceedings relative to such Guarantor, or any of such Guarantor's properties or assets, and, irrespective of whether the indebtedness or other obligations of Borrower guaranteed hereby or the obligations of such Guarantor hereunder shall then be due and payable, by declaration or otherwise, Lender shall be entitled and empowered to file and prove a claim for the whole amount of any sum or sums owing by such Guarantor with respect to the indebtedness or other obligations of Borrower guaranteed hereby, and to collect and receive any moneys or other property payable or deliverable on any such claim. Guarantor covenants and agrees that upon the commencement of a voluntary or involuntary bankruptcy proceeding by or against Borrower, Guarantor shall not seek a supplemental stay or otherwise pursuant to Section 105 of the Bankruptcy Code or any other provision of the Bankruptcy Code, or any other debtor relief law (whether statutory, common law, case law, or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may be or become applicable, to stay, interdict, condition, reduce or inhibit the ability of Lender to enforce any rights of Lender against Guarantor by virtue of this Guaranty or otherwise. 10. Financial Statements and Other Information. Each Guarantor hereby independently represents and warrants to Lender that all financial statements heretofore delivered by it to Lender are true and correct in all material respects, have been prepared in accordance with generally accepted accounting principles consistently applied, and fairly present its financial condition as of the date thereof; that no material adverse change has occurred in its assets or financial condition as reflected therein since the date thereof; and that it has no liabilities or known contingent liabilities involving material amounts which are not reflected in such financial statements or referred to in the notes thereto other than its obligations under this Guaranty. Each Guarantor independently agrees that until all indebtedness guaranteed hereby has been completely repaid and all obligations and undertakings of Borrower and Guarantor under, by reason of, or pursuant to the Note and the Loan Documents have been completely performed and no Lender has any further obligation to make Loans to Borrower (or until the Assignment of Interests has been terminated as provided therein, provided that no "Triggering Event" (as hereinafter defined" has occurred), it will promptly deliver to Lender upon written (but not more often than quarterly) demand its then most recent financial statements readily available (provided that such financial statements shall be prepared and updated not less frequently than annually) detailing its assets and liabilities certified by it, in form and substance reasonably acceptable to Lender. The financial statements and other reports and information delivered by Guarantor to Lender hereunder will be treated as confidential by each Lender, and each assignee and participant hereunder and each potential assignee or participant hereunder, and such parties for themselves agree not to disclose such information to any Person, provided that such information may be disclosed to any of the following in connection with their participation in the transactions contemplated by the Loan Documents: directors, officers, employees, representatives, legal counsel, accountants and prospective investors of any of such Persons, it being understood that such Persons shall be informed of the confidential nature of such information and shall agree to treat such information confidentially. Notwithstanding the foregoing, such Persons shall be permitted to disclose such information (a) to the extent required by law, (b) to the extent such confidential information becomes publicly available other than as a result of the breach of this Guaranty, (c) to the extent such information becomes available to any of such Persons on a non-confidential basis, or (d) to the extent necessary to enforce the Loan Documents (provided that Lender shall use reasonable efforts to cause such financial statements, reports and information to remain confidential). 11. Covenants of Guarantor. Each Guarantor independently hereby covenants and agrees with Lender that until all indebtedness guaranteed hereby has been completely repaid and all obligations and undertakings of Borrower and Guarantor under, by reason of, or pursuant to the Note and the Loan Documents have been completely performed, and the Lenders have no further obligations to make Loans to Borrower (or until the Assignment of Interests has been terminated as provided therein, provided that no "Triggering Event" (as hereinafter defined) has occurred): (a) it will cause to be done all things necessary to preserve and keep in full force and effect its legal existence, rights and franchises, to effect and maintain all required foreign qualifications, licensing, domestication or authorization, and to comply in all material respects with all applicable laws and regulations with respect to the foregoing; (b) it will keep complete, proper and accurate records and books of account in which full, true and correct entries will be made in accordance with generally accepted accounting principles consistent with the preparation of the financial statements heretofore delivered to Lender and will maintain adequate accounts and reserves for all taxes (including income taxes), all depreciation and amortization of its properties, all other contingencies, and all other proper reserves in the same manner, and to the same extent, that it has, to the extent applicable, kept and maintained it records and books and maintained accounts and reserves for the foregoing; and (c) it will not make or permit to be made, by voluntary or involuntary means, any transfer or encumbrance of its direct or indirect interest in Borrower, or any dilution of its direct or indirect interest in Borrower, which would violate the provisions of Section 8.11 of the Credit Agreement. 12. [Intentionally Omitted]. 13. Changes in Writing; No Revocation. This Guaranty may not be changed orally, and no obligation of Guarantor can be released or waived by Lender except by a writing signed by a duly authorized officer of Lender. This Guaranty shall be irrevocable by Guarantor until all indebtedness guaranteed hereby has been completely repaid and the Lenders have no further obligation to advance Loans to Borrower. Notwithstanding anything contained in this Guaranty or any of the Loan Documents to the contrary, this Guaranty shall terminate and be of no further force or effect upon the earlier to occur of (i) payment to Lender by Guarantor of the "Allocable Loan Amount" (as hereinafter defined) and (ii) any termination of the Assignment of Interests either pursuant to the terms thereof or by mutual agreement of Borrower and Lender provided that no "Triggering Event" (as hereinafter defined) has occurred. 14. Notices. All notices, demands or requests provided for or permitted to be given pursuant to this Guaranty (hereinafter in this paragraph referred to as "Notice") must be in writing and shall be deemed to have been properly given or served by personal delivery or by sending same by overnight courier or by depositing the same in the United States Mail, postpaid and registered or certified, return receipt requested, at the addresses set forth below. Each Notice shall be effective upon being delivered personally or upon being sent by overnight courier or upon being deposited in the United States Mail as aforesaid. The time period in which a response to any such Notice must be given or any action taken with respect thereto, however, shall commence to run from the date of receipt if personally delivered or sent by overnight courier or, if so deposited in the United States Mail, the earlier of three (3) business days following such deposit and the date of receipt as disclosed on the return receipt. Rejection or other refusal to accept or the inability to deliver because of changed address of which no Notice was given shall be deemed to be receipt of the Notice sent. By giving at least fifteen (15) days prior Notice thereof, Guarantor or Lender shall have the right from time to time and at any time during the term of this Guaranty to change their respective addresses and each shall have the right to specify as its address any other address within the United States of America. For the purposes of this Guaranty: The Address of Lender is: BankBoston, N.A. 100 Federal Street Boston, Massachusetts 02110 Attn: Real Estate Division with a copy to: BankBoston, N.A. 115 Perimeter Center Place, N.E. Suite 500 Atlanta, Georgia 30346 Attn: Jay Johns and a copy to each other Lender which may now or hereafter become a party to the Credit Agreement at such address as may be designated by such Lender. The Address of Guarantor is: Wellsford Commercial Properties Trust 610 Fifth Avenue, Seventh Floor New York, New York 10020 Attn: Greg Hughes and Wellsford Real Properties, Inc. 610 Fifth Avenue, Seventh Floor New York, New York 10020 Attn: Greg Hughes with a copy to: Robinson Silverman Pearce Aronsohn & Berman, LLP 1290 Avenue of the Americas New York, New York 10104 Attn: Alan S. Pearce, Esq. and WHWEL Real Estate Limited Partnership 85 Broad Street, 19th Floor New York, New York 10004 Attn: Chief Financial Officer and Whitehall Street Real Estate Limited Partnership V Whitehall Street Real Estate Limited Partnership VI Whitehall Street Real Estate Limited Partnership VII Whitehall Street Real Estate Limited Partnership VIII 85 Broad Street, 19th Floor New York, New York 10004 Attn: Chief Financial Officer with a copy to: Sullivan & Cromwell 125 Broad Street New York, New York 10004 Attn: Anthony J. Colletta, Esq. 15. Governing Law. Guarantor acknowledges and agrees that this Guaranty and the obligations of Guarantor hereunder shall be governed by and interpreted and determined in accordance with the internal laws of the State of New York (excluding the laws applicable to conflicts or choice of law). 16. CONSENT TO JURISDICTION; WAIVERS. GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY (A) SUBMITS TO PERSONAL JURISDICTION IN THE STATE OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY, AND (B) WAIVES ANY AND ALL PERSONAL RIGHTS UNDER THE LAWS OF ANY STATE (I) TO THE RIGHT, IF ANY, TO TRIAL BY JURY, AND (II) TO OBJECT TO JURISDICTION WITHIN THE STATE OF NEW YORK OR VENUE IN ANY PARTICULAR FORUM WITHIN THE STATE OF NEW YORK. NOTHING CONTAINED HEREIN, HOWEVER, SHALL PREVENT LENDER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING OR EXERCISING ANY RIGHTS AGAINST ANY SECURITY AND AGAINST GUARANTOR PERSONALLY, AND AGAINST ANY PROPERTY OF GUARANTOR, WITHIN ANY OTHER STATE. INITIATING SUCH SUIT, ACTION OR PROCEEDING OR TAKING SUCH ACTION IN ANY STATE SHALL IN NO EVENT CONSTITUTE A WAIVER OF THE AGREEMENT CONTAINED HEREIN THAT THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE RIGHTS AND OBLIGATIONS OF GUARANTOR AND LENDER HEREUNDER OR OF THE SUBMISSION HEREIN MADE BY GUARANTOR TO PERSONAL JURISDICTION WITHIN THE STATE OF NEW YORK. 17. Successors and Assigns. The provisions of this Guaranty shall be binding upon Guarantor and its heirs, successors, successors in title, legal representatives, executors, estate and assigns, and shall inure to the benefit of Lender, its successors, successors in title, legal representatives and assigns. 18. Assignment by Lender. Subject to the terms of Section 18.8 of the Credit Agreement, this Guaranty is assignable by Lender in whole or in part in conjunction with any assignment of the Note or portions thereof, and any such assignment hereof or any transfer or assignment of the Note or portions thereof by Lender shall operate to vest in any such assignee the rights and powers, in whole or in part, as appropriate, herein conferred upon and granted to Lender. 19. Severability. If any term or provision of this Guaranty shall be determined to be illegal or unenforceable, all other terms and provisions hereof shall nevertheless remain effective and shall be enforced to the fullest extent permitted by law. 20. Disclosure. Guarantor agrees that in addition to disclosures made in accordance with standard banking practices, any Lender may disclose information obtained by such Lender pursuant to this Guaranty to assignees or participants and potential assignees or participants hereunder, subject to the terms of Paragraph 10 above. 21. No Unwritten Agreements. THIS GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 22. Time of the Essence. Time is of the essence with respect to each and every covenant, agreement and obligation of Guarantor under this Guaranty. 23. [Intentionally Omitted.] 24. Triggering Event. (a) LENDER ACKNOWLEDGES AND AGREES THAT, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS GUARANTY, THE PAYMENT BY GUARANTOR OF ITS OBLIGATIONS UNDER THIS GUARANTY SHALL BE DUE ONLY IN THE EVENT THAT, AND GUARANTOR SHALL HAVE NO LIABILITY HEREUNDER UNLESS AND UNTIL, ONE OR MORE "TRIGGERING EVENTS" (AS THAT TERM IS HEREINAFTER DEFINED) SHALL OCCUR AND, WITH RESPECT TO THE ITEMS DESCRIBED IN CLAUSES (iv) THROUGH (ix) BELOW, ANY OF THE EVENTS DESCRIBED THEREIN IS NOT CURED WITHIN FIVE (5) DAYS AFTER RECEIPT BY GUARANTOR OF WRITTEN NOTICE FROM AGENT OF THE OCCURRENCE OF ANY SUCH EVENT (PROVIDED, HOWEVER, THAT SUCH CURE BY GUARANTOR SHALL NOT BE DEEMED A CURE OF ANY EVENT OF DEFAULT). (b) For the purposes of this Guaranty, the term "Triggering Event" shall mean the occurrence of any one or more of the following events: (i) Any of the Guarantor, the Borrower, the Manager, the Member or the Property Owner shall file any voluntary petition under any Chapter of the Bankruptcy Code, or shall in any manner seek any relief, protection, reorganization, liquidation, dissolution or similar relief for debtors under any local, state, federal or other insolvency laws or other laws providing for the relief of debtors, or in equity, or directly or indirectly cause any of the other of such Persons to file any such petition or to seek any such relief; or (ii) Any of the Guarantor, the Borrower, the Manager, the Member or the Property Owner (A) shall file, or, directly or indirectly, cause to be filed, any involuntary petition under any Chapter of the Bankruptcy Code against any of such Persons, whether or not any of such Persons joins in such petition, or (B) shall, directly or indirectly, cause any of such Persons to become the subject of any dissolution, liquidation or insolvency proceeding or any other proceeding pursuant to any local, state, federal or other insolvency laws or other laws providing for the relief of debtors, or in equity; (iii) Any of the Guarantor, the Borrower, the Manager, the Member or the Property Owner shall, directly or indirectly, cause the Mezzanine Property or the Mezzanine Collateral, or any portion thereof or interest therein, or any interest of such Persons in the Mezzanine Property or the Mezzanine Collateral, to become the property of any bankruptcy, dissolution, liquidation or insolvency proceeding; or (iv) Guarantor, Borrower, the Manager, the Member, the Property Owner, or any of them, shall take any action of any kind or nature whatsoever, either directly or indirectly, to oppose, impede, obstruct, hinder, frustrate, enjoin or otherwise interfere with the exercise by Lender of any of Lender's rights and remedies under the Mezzanine Loan Documents, or at law or in equity, other than a "Permitted Defense" (as hereinafter defined) or shall, either directly or indirectly, cause any other person to take any action which, if taken by Guarantor, the Borrower, the Manager, the Member or the Property Owner, would constitute a Triggering Event. For the purposes hereof, a "Permitted Defense" shall mean (A) the defense of payment in full of the obligations guaranteed hereby, (B) a defense made in good faith that a Triggering Event has not occurred, or (C) a defense that an Event of Default has not occurred or as to the improper exercise of the remedies of the Lenders under the Loan Documents, provided that (1) the primary purpose of raising such defense is not to delay, inhibit or interfere with the exercise by Lender of its rights and remedies under the Mezzanine Loan Documents, (2) Agent's rights under the Assignment of Interests to exercise all voting and other membership, management, approval or other rights with respect to the Member shall not be opposed, impeded, obstructed, hindered, frustrated, enjoined or otherwise interfered with, and (3) all Excess Property Income and "Distributions" (as defined in the Assignment of Interests) are paid to Agent for application in accordance with the terms of the Credit Agreement; or (v) Except as expressly permitted in Section 5.3 of the Credit Agreement, there shall occur, whether voluntarily, involuntary or by operation of law, a sale, transfer, assignment, conveyance, option or other disposition of, or any mortgage, hypothecation, encumbrance, financing or refinancing of (A) any assets or properties of the Property Owner, except for (1) the Mezzanine Mortgage Loan, (2) releases of the Mezzanine Property in accordance with the terms of the Credit Agreement, and except as provided in Section 7.23(a) with respect to the replacement of fixtures, equipment, machinery and other personal property by the Property Owner in connection with the operation of the Mezzanine Property in the ordinary course of business, (3) a condemnation of all or any portion of the Mezzanine Property, or (4) a foreclosure of the Mezzanine Property by the Mezzanine Mortgagee, (B) any of the Mezzanine Collateral or any of the Borrower's, the Member's or the Manager's direct or indirect interests, rights or claims in and to the Property Owner (including without limitation any rights to receive distributions from the Property Owner, the Manager or the Member), (C) any other assets or properties of the Manager or the Member, (D) any direct or indirect interests, rights or claims of either Borrower, the Manager or the Member in the Property Owner, (E) any direct or indirect interests, rights or claims of Borrower in the Member, or (F) any direct or indirect interests, rights or claims of the Member in the Manager; or (vi) The Property Owner shall seek or obtain additional advances from the holder or holders of the Mezzanine Mortgage Loan Documents (provided that the foregoing shall not be deemed violated in the event that the holder or holders of the Mezzanine Mortgage Loan Documents shall make a protective advance or advances for the payment of taxes, insurance premiums or to protect the Mezzanine Property pursuant to the terms of the Nomura Mortgages), or the Property Owner shall modify, amend, terminate, extend or seek a consent or waiver under the Mezzanine Mortgage Loan Documents in any respect without the prior written approval of the Lender (other than an amendment or waiver that would reduce the obligations of the Property Owner to pay principal, interest, loan fees, default interest, late charges, prepayment fees or similar payments thereunder or a waiver of an "Event of Default" under the Mezzanine Mortgage Loan Documents or other occasional waiver of compliance with a term of any of the Mezzanine Mortgage Loan Documents which waiver in each case is not a waiver of future compliance with such term or tantamount to an amendment of the Mezzanine Mortgage Loan Documents, and which waiver does not have a material adverse effect on any of the Borrower, Lender, Property Owner, Manager, Member, the Mezzanine Collateral or the Mezzanine Property); or (vii) Any of Borrower, Member, Manager or Property Owner shall modify, amend, cancel, release, surrender, terminate or permit the modification, amendment, cancellation, release, surrender or termination of the Member Organizational Agreements, the Manager Organizational Agreements or the Property Owner Organizational Agreements other than "Minor Amendments" (as such term is defined in the Assignment of Interests), or dissolve, liquidate, redeem, cancel, wind-up or permit the dissolution, liquidation, redemption, cancellation, winding-up or expiration of the Property Owner, the Manager or the Member or the Member Organizational Agreements, the Manager Organizational Agreements or the Property Owner Organizational Agreements, or seek or permit the partition of any of the assets of any of such Persons; or (viii) Any of Borrower, the Manager or the Member shall take any action which results in the sale, reduction, cancellation, dilution, diminution, conversion or withdrawal of any direct or indirect interest of such Person in the Property Owner, the Manager or the Member, as applicable, or omit to take any action necessary to prevent any such sale, cancellation, reduction, dilution, diminution, conversion or withdrawal, or, without limiting the foregoing, consent to or permit to occur the admission of any new member of the Property Owner, Manager or Member, the creation of any new class of interest in the Property Owner, the Manager or the Member, or the issuance, directly or indirectly, any other equity or beneficial interest in the Property Owner, the Manager or the Member; or (ix) The Borrower shall breach any of its covenants or agreements contained in Paragraphs 6(i) or 6(j) of the Assignment of Interests, to the full extent of any losses, damages and expenses of Lender on account thereof. (c) No consent or approval which may be given by the Lender pursuant to Section 32(g) of the Credit Agreement shall be deemed to release, diminish or otherwise impair the obligations of Guarantor under this Guaranty or to otherwise affect the determination of whether a Triggering Event has occurred. (d) For the purposes of this Guaranty, in order to determine any loss, damage or expense of Lender, Lender shall not be required to have sold or otherwise disposed of any of the Mezzanine Collateral or any other Collateral. 25. Limitation of Recovery. Without modifying or limiting any provision of this Guaranty or any agreement contained herein, except as Guarantor's liability is otherwise limited as specifically provided in Paragraph 24, above, it is hereby agreed that the amount recoverable from Guarantor under this Guaranty (but not the scope or extent of the liabilities and obligations guaranteed under this Guaranty) shall be limited to (a) the principal balance of the Notes not to exceed an amount equal to $5,939,184.00 (such sum of $5,939,184.00 being hereinafter referred to as the "Allocable Principal Amount"), (b) interest accrued on the principal portion of the Notes described in Paragraph 25(a), (c) any payments or advances of funds made by Lender pursuant to any one or more of the Loan Documents relating directly or indirectly to the Mezzanine Property, the Mezzanine Collateral or the Mezzanine Mortgage Loan, and (d) all expenses (including, but not limited to, reasonable attorneys' fees) paid or incurred by Lender in endeavoring to enforce this Guaranty (such amounts set forth in clauses (a) through (d) inclusive above are hereinafter referred to collectively as the "Allocable Loan Amount"). In the event of any foreclosure sale of the Mezzanine Collateral, the amount recoverable against the Guarantors with respect to any of the Triggering Events, which pursuant to the terms of any subparagraph of Paragraph 24(b) the liability of Guarantors is not specifically limited to the terms thereof, shall be reduced by an amount equal to the amount paid at such foreclosure sale, for the Mezzanine Collateral or portion thereof so sold at the time of such foreclosure sale (Guarantor remaining liable at such foreclosure sale for the deficiency up to the extent of any remaining liability of Guarantor hereunder). 26. Reduction of the Allocable Principal Amount. (a) Notwithstanding anything contained in this Guaranty to the contrary, if and to the extent that one or more of the Mezzanine Properties are released from the lien of the Nomura Mortgage and such Mezzanine Property is released in accordance with the terms of Section 5.3 of the Credit Agreement (including without limitation the payment to Lender of the requisite release price allocable to such portion of the Mezzanine Collateral pursuant to the provisions of Section 5.3 of the Credit Agreement), then the Allocable Principal Amount shall be automatically reduced by an amount equal to one hundred percent (100%) of the Designated Collateral Value allocable to such portion of the Mezzanine Collateral. (b) If and to the extent that any "Rents" (as defined in the Cash Collateral Agreement), "Distributions" (as defined in the Assignment of Interests) or other sums generated by any one or more of the Mezzanine Properties (including, without limitation, any condemnation awards and/or casualty insurance proceeds) are received by Agent under the Loan Documents after the occurrence and during the continuance of an Event of Default, and are applied by Lender in reduction of the outstanding principal balance of the Notes, then the Allocable Principal Amount shall be automatically reduced by a like amount. 27. Joint and Several Liability. Notwithstanding anything to the contrary herein, the representations, warranties, covenants and agreements made by each of the Persons comprising Guarantor herein, and the liability of each of the Persons comprising Guarantor hereunder, is joint and several subject to the terms of this Paragraph 27; provided, however, that the maximum liability of WRPI and WCPT (collectively, the "Wellsford Entities") on a joint and several basis shall be fifty percent (50%) of the Allocable Loan Amount, and the maximum liability of Whitehall and WHWEL on a joint and several basis shall be fifty percent (50%) of the Allocable Loan Amount; and provided further that, in the event that a Triggering Event shall occur solely as a result of any of the events described in Paragraph 24(b)(i), (ii) or (iii) as to only one or more of the Wellsford Entities, on the one hand, or only one or more of the Whitehall Entities, on the other hand, then the Whitehall Entities shall have no liability hereunder as a result of any such action on the part of any Wellsford Entity, and none of the Wellsford Entities shall have any liability hereunder as a result of any such action on the part of any of the Whitehall Entities. 28. Statement of Discharge. Upon the payment in full of the indebtedness guaranteed hereby and upon the termination of Lender's obligations to advance Loans to Borrower, the Lender shall, upon the written request of any of Whitehall, WRPI or the Borrower, deliver a statement to the Guarantor that the Guarantor's obligations under this Guaranty have been discharged and satisfied and that this Guaranty is terminated (subject to reinstatement as provided herein). IN WITNESS WHEREOF, Guarantor has executed this Guaranty under seal as of the 16th day of July, 1998. WELLSFORD COMMERCIAL PROPERTIES TRUST, a Maryland real estate investment trust By: /s/ Gregory F. Hughes ---------------------------------- Name: Gregory F. Hughes Title: CFO & Treasurer [SEAL] WELLSFORD REAL PROPERTIES, INC., a Maryland corporation By: /s/ Gregory F. Hughes ---------------------------------- Name: Gregory F. Hughes Title: CFO & Treasurer [SIGNATURES CONTINUED ON NEXT PAGE] WHWEL REAL ESTATE LIMITED PARTNERSHIP By: WHATR Gen-Par, Inc., General Partner By: /s/ Alan S. Kava ------------------------------ Name: Alan S. Kava Title: Vice President Attest: /s/ Ralph F. Rosenberg -------------------------- Name: Ralph F. Rosenberg Title: Assistant Secretary WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP V By: WH Advisors, L.P. V By: WH Advisors, Inc. V By: /s/ Alan S. Kava ---------------------------- Name: Alan S. Kava Title: Vice President WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP VI By: WH Advisors, L.P. VI By: WH Advisors, Inc. VI By: /s/ Alan S. Kava ----------------------------- Name: Alan S. Kava Title: Vice President WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP VII By: WH Advisors, L.P. VII By: WH Advisors, Inc. VII By: /s/ Alan S. Kava ------------------------------ Name: Alan S. Kava Title: Vice President WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP VIII By: WH Advisors, L.P. VIII By: WH Advisors, Inc. VIII By: /s/ Alan S. Kava ---------------------------- Name: Alan S. Kava Title: Vice President EX-10.39 8 INDEMNITY AND GUARANTY AGREEMENT ($300,000,000.00 Loan) THIS INDEMNITY AND GUARANTY AGREEMENT (this "Agreement"), made as of the 16th day of July, 1998, by WELLSFORD COMMERCIAL PROPERTIES TRUST, a Maryland real estate investment trust, and WHWEL REAL ESTATE LIMITED PARTNERSHIP, jointly and severally (said entities being collectively referred to herein as "Indemnitor"), whose address is 610 Fifth Avenue, Seventh Floor, New York, New York 10020, in favor of BANKBOSTON, N.A., a national banking association, individually and as Agent for itself and the other banks which may become parties to the "Loan Agreement" (as hereinafter defined), GOLDMAN SACHS MORTGAGE COMPANY, and each other lender which may now or hereafter become party to the Loan Agreement (together, "Lender"). W I T N E S S E T H: WHEREAS, Wellsford/Whitehall Holdings, L.L.C. ("Borrower"), has obtained loan in the principal amount of up to Three Hundred Million and No/100 Dollars ($300,000,000.00) (the "Loan") from Lender; WHEREAS, the Loan has been made pursuant to the terms and conditions of that certain First Amended and Restated Loan Agreement, of even date herewith, by and between Borrower, Agent and Lender (the "Loan Agreement"); WHEREAS, the Loan is evidenced by one or more promissory notes (collectively, the "Note"), and executed by Borrower and payable to the order of Lender and is secured by among other things, the "Security Documents" (as defined in the Loan Agreement and being referred to herein as the "Security Documents"), encumbering the "Collateral" (as defined in the Loan Agreement and being herein referred to as the "Collateral") (the Note, the Security Documents and all other documents and instruments evidencing or securing the Loan, as the same may from time to time be amended, consolidated, restated, extended, renewed or replaced (including without limitation any notes delivered by Borrower pursuant to Section 18.3 of the Loan Agreement), being collectively referred to herein as the "Loan Documents"); and WHEREAS, as a condition to making the Loan to Borrower, Lender has required that Indemnitor indemnify Lender from and against and guarantee payment to Lender of certain matters as set forth herein; and WHEREAS, each of the parties comprising Indemnitor is a direct or indirect owner of a beneficial interest in Borrower, the extension of the Loan to Borrower is of substantial benefit to Indemnitor and, therefore, Indemnitor desires to indemnify Lender from and against and guarantee payment to Lender of such matters. NOW, THEREFORE, to induce Lender to extend the Loan to Borrower and in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Indemnitor hereby covenants and agrees for the benefit of Lender, as follows: 1. Indemnity and Guaranty. Indemnitor hereby assumes liability for, hereby guarantees payment to Lender of, hereby agrees to pay, protect, defend and save Lender harmless from and against, and hereby indemnifies Lender from and against any and all liabilities, obligations, losses, damages, costs and expenses (including, without limitation, attorneys' fees), causes of action, suits, claims, demands and judgments of any nature or description whatsoever (collectively, "Costs") which may at any time be imposed upon, incurred by or awarded against Lender as a result of: (a) Proceeds paid under any insurance policies (or paid as a result of any other claim or cause of action against any person or entity) by reason of damage, loss or destruction to all or any portion of the Collateral (including without limitation the Mezzanine Collateral) or the Mezzanine Property, to the full extent of such proceeds not previously delivered to Lender, but which, under the terms of the Loan Documents, should have been delivered to Lender; (b) Proceeds or awards resulting from the condemnation or other taking in lieu of condemnation of all or any portion of the Collateral (including without limitation the Mezzanine Collateral) or the Mezzanine Property, to the full extent of such proceeds or awards not previously delivered to Lender, but which, under the terms of the Loan Documents, should have been delivered to Lender; (c) All tenant security deposits or other refundable deposits paid to or held by Borrower, Property Owner or any other person or entity in connection with leases, license agreements, booking agreements and all other similar agreements entered into for the use and occupancy of all or any portion of the Collateral or the Mezzanine Property which are not applied in accordance with the terms of the applicable lease or other agreement; (d) Rent, accounts, accounts receivables, fees and other payments received from tenants or any other person or entity under leases, license agreements, booking agreements and all other similar agreements entered into for the use and occupancy of all or any portion of the Collateral or the Mezzanine Property paid more than one month in advance; (e) Rents, issues, profits, revenues, accounts, accounts receivable and fees of all or any portion of the Collateral received or applicable to a period after any notice of Default from Lender under the Loan Documents in the event of any Default by Borrower thereunder which are not either applied to the ordinary and necessary expenses of owning and operating the Collateral or paid to Lender; (f) Rents, issues, profits, revenues and distributions of all or any portion of the Mezzanine Collateral received or applicable to a period after any notice of Default from Lender under the Loan Documents in the event of any Default by Borrower thereunder which are not paid to Lender as required by the Loan Documents; (g) Damage to the Collateral (including without limitation the Mezzanine Collateral) or the Mezzanine Property as a result of the intentional misconduct or gross negligence of Borrower, Manager, Member, Property Owner or any of their respective principals, officers, members or general partners, or any property manager that controls, is controlled by or is under common control with any of such persons, or any removal of the Collateral (including without limitation the Mezzanine Collateral) or the Mezzanine Property in violation of the terms of the Loan Documents, to the full extent of the losses or damages incurred by Lender on account of such damage or removal; (h) Borrower, Manager, Member or Property Owner retaining funds directly or indirectly or making distributions to their respective members as a result of which Borrower, Manager, Member or Property Owner is unable to pay any valid taxes, assessments, mechanic's liens, materialmen's liens or other liens which could create liens on any portion of the Mezzanine Property, the assets of Manager or Member or which could create liens on any portion of the Collateral (including without limitation the Mezzanine Collateral) which would be superior to the lien or security title of the Security Documents or the other Loan Documents thereon; and (i) Fraud or intentional misrepresentation by Borrower, Manager, Member, Property Owner or any of their respective principals, members, officers or general partners, any guarantor, any indemnitor or any agent, employee or other person authorized or apparently authorized to make statements or representations on behalf of Borrower, Manager, Member, Property Owner, any principal, officer, member or partner of Borrower, Manager, Member, Property Owner, or any guarantor or any indemnitor, to the full extent of any losses, damages and expenses of Lender on account thereof. This is a guaranty of payment and performance of the matters within the scope of this Agreement and not of collection. The liability of Indemnitor under this Agreement shall be direct and immediate and not conditional or contingent upon the pursuit of any remedies against Borrower or any other person (including, without limitation, other guarantors, if any), nor against the collateral for the Loan. Indemnitor waives any right to require that an action be brought against Borrower or any other person or to require that resort be had to any collateral for the Loan or to any balance of any deposit account or credit on the books of Lender in favor of Borrower or any other person. In the event, on account of the Bankruptcy Reform Act of 1978, as amended, or any other debtor relief law (whether statutory, common law, case law or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may be or become applicable, Borrower shall be relieved of or fail to incur any debt, obligation or liability as provided in the Loan Documents which is the subject matter of this Agreement, Indemnitor shall nevertheless be fully liable therefor to the extent provided in this Agreement. In the event of a default under the Loan Documents which is not cured within any applicable grace or cure period, Lender shall have the right to enforce its rights, powers and remedies (including, without limitation, foreclosure of all or any portion of the collateral for the Loan) thereunder or hereunder, in any order, and all rights, powers and remedies available to Lender in such event shall be non-exclusive and cumulative of all other rights, powers and remedies provided thereunder or hereunder or by law or in equity. If the indebtedness and obligations guaranteed hereby are partially paid or discharged by reason of the exercise of any of the remedies available to Lender, this Agreement shall nevertheless remain in full force and effect, and Indemnitor shall remain liable for all remaining indebtedness and obligations guaranteed hereby to the extent provided in this Agreement, even though any rights which Indemnitor may have against Borrower may be destroyed or diminished by the exercise of any such remedy. Terms used in this Agreement that are not otherwise defined herein shall have the meanings set forth in the Loan Agreement. 2. Indemnification Procedures. (a) If any action shall be brought against Lender based upon any of the matters for which Lender is indemnified hereunder, Lender shall notify Indemnitor in writing thereof and Indemnitor shall promptly assume the defense thereof, including, without limitation, the employment of counsel reasonably acceptable to Lender and the negotiation of any settlement; provided, however, that any failure of Lender to notify Indemnitor of such matter shall not impair or reduce the obligations of Indemnitor hereunder. Lender shall have the right, at the expense of Indemnitor (which expense shall be included in Costs in the event that Lender shall conclude in good faith that a conflict of interest exists), to employ separate counsel in any such action and to participate in the defense thereof. In the event Indemnitor shall fail to discharge or undertake to defend Lender against any claim, loss or liability for which Lender is indemnified hereunder, Lender may, at its sole option and election, defend or settle such claim, loss or liability. The liability of Indemnitor to Lender hereunder shall be conclusively established by such settlement, provided such settlement is made in good faith, the amount of such liability to include both the settlement consideration and the costs and expenses, including, without limitation, attorneys' fees and disbursements, incurred by Lender in effecting such settlement. In such event, such settlement consideration, costs and expenses shall be included in Costs and Indemnitor shall pay the same as hereinafter provided. (b) Indemnitor shall not, without the prior written consent of Lender: (i) settle or compromise any action, suit, proceeding or claim or consent to the entry of any judgment that does not include as an unconditional term thereof the delivery by the claimant or plaintiff to Lender of a full and complete written release of Lender (in form, scope and substance reasonably satisfactory to Lender in its sole discretion) from all liability in respect of such action, suit, proceeding or claim and a dismissal with prejudice of such action, suit, proceeding or claim; or (ii) settle or compromise any action, suit, proceeding or claim in any manner that may adversely affect Lender or obligate Lender to pay any sum or perform any obligation as determined by Lender in its sole discretion. (c) All Costs shall be immediately reimbursable to Lender when and as incurred and, in the event of any litigation, claim or other proceeding, without any requirement of waiting for the ultimate outcome of such litigation, claim or other proceeding, and Indemnitor shall pay to Lender any and all Costs within ten (10) Business Days after written notice from Lender itemizing the amounts thereof incurred to the date of such notice. In addition to any other remedy available for the failure of Indemnitor to periodically pay such Costs, such Costs, if not paid within said ten-day period, shall bear interest at the rate for overdue payments in the Loan Agreement. 3. Reinstatement of Obligations. If at any time all or any part of any payment made by Indemnitor or received by Lender from Indemnitor under or with respect to this Agreement is or must be rescinded or returned for any reason whatsoever (including, but not limited to, the insolvency, bankruptcy or reorganization of Indemnitor or Borrower), then the obligations of Indemnitor hereunder shall, to the extent of the payment rescinded or returned, be deemed to have continued in existence, notwithstanding such previous payment made by Indemnitor, or receipt of payment by Lender, and the obligations of Indemnitor hereunder shall continue to be effective or be reinstated, as the case may be, as to such payment, all as though such previous payment by Indemnitor had never been made. 4. Waivers by Indemnitor. To the extent permitted by law and with respect to matters relating to liabilities arising under this Agreement, Indemnitor hereby waives and agrees not to assert or take advantage of: (a) Any right to require Lender to proceed against Borrower or any other person or to proceed against or exhaust any security held by Lender at any time or to pursue any other remedy in Lender's power or under any other agreement before proceeding against Indemnitor hereunder; (b) Any defense that may arise by reason of the incapacity, lack of authority, death or disability of any other person or persons or the failure of Lender to file or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of any other person or persons; (c) Demand, presentment for payment, notice of nonpayment, protest, notice of protest and all other notices of any kind, or the lack of any thereof, including, without limiting the generality of the foregoing, notice of the existence, creation or incurring of any new or additional indebtedness or obligation or of any action or non-action on the part of Borrower, Lender, any endorser or creditor of Borrower or of Indemnitor or on the part of any other person whomsoever under this or any other instrument in connection with any obligation or evidence of indebtedness held by Lender; (d) Any defense based upon an election of remedies by Lender; (e) Any right or claim or right to cause a marshaling of the assets of Indemnitor; (f) Any principle or provision of law, statutory or otherwise, which is or might be in conflict with the terms and provisions of this Agreement; (g) Any duty on the part of Lender to disclose to Indemnitor any facts Lender may now or hereafter know about Borrower or the Collateral, regardless of whether Lender has reason to believe that any such facts materially increase the risk beyond that which Indemnitor intends to assume or has reason to believe that such facts are unknown to Indemnitor or has a reasonable opportunity to communicate such facts to Indemnitor, it being understood and agreed that Indemnitor is fully responsible for being and keeping informed of the financial condition of Borrower, of the condition of the Collateral and of any and all circumstances bearing on the risk that liability may be incurred by Indemnitor hereunder; (h) Any lack of notice of disposition or of manner of disposition of any collateral for the Loan; (i) Any invalidity, irregularity or unenforceability, in whole or in part, of any one or more of the Loan Documents; (j) Any deficiencies in the collateral for the Loan or any deficiency in the ability of Lender to collect or to obtain performance from any persons or entities now or hereafter liable for the payment and performance of any obligation hereby guaranteed; (k) An assertion or claim that the automatic stay provided by 11 U.S.C. Section 362 (arising upon the voluntary or involuntary bankruptcy proceeding of Borrower) or any other stay provided under any other debtor relief law (whether statutory, common law, case law or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may be or become applicable, shall operate or be interpreted to stay, interdict, condition, reduce or inhibit the ability of Lender to enforce any of its rights, whether now or hereafter required, which Lender may have against Indemnitor or the collateral for the Loan; (l) Any modifications of the Loan Documents or any obligation of Borrower relating to the Loan by operation of law or by action of any court, whether pursuant to the Bankruptcy Reform Act of 1978, as amended, or any other debtor relief law (whether statutory, common law, case law or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, or otherwise; and (m) Any action, occurrence, event or matter consented to by Indemnitor under Section 5(h) hereof, under any other provision hereof, or otherwise. 5. General Provisions. (a) Fully Recourse. All of the terms and provisions of this Agreement are recourse obligations of Indemnitor and not restricted by any limitation on personal liability. Notwithstanding anything to the contrary contained herein or in any other Loan Document, the obligations of WHWEL Real Estate Limited Partnership under this Agreement whether arising under this Agreement or otherwise in connection with any of the Loan Documents, shall be without recourse to any limited partner of WHWEL Real Estate Limited Partnership and no such person shall have any liability with respect thereto. (b) Unsecured Obligations. Indemnitor hereby acknowledges that Lender's appraisal of the Collateral is such that Lender is not willing to accept the consequences of the inclusion of Indemnitor's indemnity set forth herein among the obligations secured by the Security Documents and the other Loan Documents and that Lender would not make the Loan but for the unsecured personal liability undertaken by Indemnitor herein. (c) Survival. This Agreement shall be deemed to be continuing in nature and shall remain in full force and effect with respect to the matters covered by this Agreement and shall survive the exercise of any remedy by Lender under the Security Documents or any of the other Loan Documents, including, without limitation, any foreclosure or deed in lieu thereof, even if, as a part of such remedy, the Loan is paid or satisfied in full. (d) No Subrogation; No Recourse Against Lender. Notwithstanding the satisfaction by Indemnitor of any liability hereunder, Indemnitor shall not have any right of subrogation, contribution, reimbursement or indemnity whatsoever or any right of recourse to or with respect to the assets or property of Borrower or to any collateral for the Loan. In connection with the foregoing, Indemnitor expressly waives any and all rights of subrogation to Lender against Borrower, and Indemnitor hereby waives any rights to enforce any remedy which Lender may have against Borrower and any right to participate in any collateral for the Loan. In addition to and without in any way limiting the foregoing, Indemnitor hereby subordinates any and all indebtedness of Borrower now or hereafter owed to Indemnitor to all indebtedness of Borrower to Lender, and agrees with Lender that Indemnitor (i) from and after the occurrence and during the continuance of an Event of Default shall not demand or accept any payment of principal or interest from Borrower, (ii) shall not claim any offset or other reduction of Indemnitor's obligations hereunder because of any such indebtedness and (iii) shall not take any action to obtain any of the collateral from the Loan. Further, Indemnitor shall not have any right of recourse against Lender by reason of any action Lender may take or omit to take under the provisions of this Agreement or under the provisions of any of the Loan Documents. law Reservation of Rights. Nothing contained in this Agreement shall prevent or in any way diminish or interfere with any rights or remedies, including, without limitation, the right to contribution, which Lender may have against Borrower, Indemnitor or any other party under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (codified at Title 42 U.S.C. Section 9601 et seq.), as it may be amended from time to time, or any other applicable federal, state or local laws, all such rights being hereby expressly reserved. (f) Financial Statements. Indemnitor hereby agrees, as a material inducement to Lender to make the Loan to Borrower, to furnish to Lender promptly upon demand by Lender current and dated financial statements detailing the assets and liabilities of Indemnitor certified by Indemnitor, in form and substance acceptable to Lender. Indemnitor hereby warrants and represents unto Lender that any and all balance sheets, net worth statements and other financial data which have heretofore been given or may hereafter be given to Lender with respect to Indemnitor did or will at the time of such delivery fairly and accurately present the financial condition of Indemnitor in all material respects. (g) Rights Cumulative; Payments. Lender's rights under this Agreement shall be in addition to all rights of Lender under the Note, the Security Documents and the other Loan Documents. FURTHER, PAYMENTS MADE BY INDEMNITOR UNDER THIS AGREEMENT SHALL NOT REDUCE IN ANY RESPECT BORROWER'S OBLIGATIONS AND LIABILITIES UNDER THE NOTE, THE SECURITY DOCUMENTS AND THE OTHER LOAN DOCUMENTS SHOULD SUCH PAYMENT BE EVER RESCINDED OR RETURNED BY LENDER FOR ANY REASON WHATSOEVER (INCLUDING, BUT NOT LIMITED TO, THE INSOLVENCY, BANKRUPTCY OR REORGANIZATION OF INDEMNITOR). (h) No Limitation on Liability. Indemnitor hereby consents and agrees that Lender may at any time and from time to time without further consent from Indemnitor do any of the following events, and the liability of Indemnitor under this Agreement shall be unconditional and absolute and shall in no way be impaired or limited by any of the following events, whether occurring with or without notice to Indemnitor or with or without consideration: (i) any extensions of time for performance required by any of the Loan Documents or extension or renewal of the Note; (ii) any sale, assignment or foreclosure of the Note, the Security Documents or any of the other Loan Documents or any sale or transfer of the Collateral; (iii) any change in the composition of Borrower, including, without limitation, the withdrawal or removal of Indemnitor from any current or future position of ownership, management or control of Borrower; (iv) the accuracy or inaccuracy of the representations and warranties made by Indemnitor herein or by Borrower in any of the Loan Documents; (v) the release of Borrower or of any other person or entity from performance or observance of any of the agreements, covenants, terms or conditions contained in any of the Loan Documents by operation of law, Lender's voluntary act or otherwise; (vi) the release or substitution in whole or in part of any security for the Loan; (vii) Lender's failure to record the Security Documents or to file any financing statement (or Lender's improper recording or filing thereof) or to otherwise perfect, protect, secure or insure any lien or security interest given as security for the Loan; (viii) the modification of the terms of any one or more of the Loan Documents; or (ix) the taking or failure to take any action of any type whatsoever. No such action which Lender shall take or fail to take in connection with the Loan Documents or any collateral for the Loan, nor any course or dealing with Borrower or any other person, shall limit, impair or release Indemnitor's obligations hereunder, effect this Agreement in any way or afford Indemnitor any recourse against Lender. Nothing contained in Section shall be construed to require Lender to take or refrain from taking any action referred to herein. (i) Entire Agreement; Amendment; Severability. This Agreement contains the entire agreement between the parties respecting the matters herein set forth and supersedes all prior agreements, whether written or oral, between the parties respecting such matters. Any amendments or modifications hereto, in order to be effective, shall be in writing and executed by the parties hereto. A determination that any provision of this Agreement is unenforceable or invalid shall not affect the enforceability or validity of any other provision, and any determination that the application of any provision of this Agreement to any person or circumstance is illegal or unenforceable shall not affect the enforceability or validity of such provision as it may apply to any other persons or circumstances. (j) Governing Law; Binding Effect; Waiver of Acceptance. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, except to the extent that the applicability of any of such laws may now or hereafter be preempted by Federal law, in which case such Federal law shall so govern and be controlling. This Agreement shall bind Indemnitor and the heirs, personal representatives, successors and assigns of Indemnitor and shall inure to the benefit of Lender and the officers, directors, shareholders, agents and employees of Lender and their respective heirs, successors and assigns. Without limiting the foregoing, this Agreement is assignable by Lender in whole or in part in conjunction with any assignment of the Note or portions thereof, and any assignment hereof or any transfer or assignment of the Note or portions thereof by Lender shall operate to vest in any such assignee the rights and powers, in whole or in part, as appropriate, herein conferred upon and granted to Lender. Notwithstanding the foregoing, Indemnitor shall not assign any of its rights or obligations under this Agreement without the prior written consent of Lender, which consent may be withheld by Lender in its sole discretion. Indemnitor hereby waives any acceptance of this Agreement by Lender, and this Agreement shall immediately be binding upon Indemnitor. (k) Notice. All notices, demands, requests or other communications to be sent by one party to the other hereunder or required by law shall be in writing and shall be deemed to have been validly given or served by delivery of the same in person to the intended addressee, or by depositing the same with Federal Express or another reputable private courier service for next business day delivery to the intended addressee at its address set forth on the first page of this Agreement or at such other address as may be designated by such party as herein provided, or by depositing the same in the United States mail, postage prepaid, registered or certified mail, return receipt requested, addressed to the intended addressee at its address set forth on the first page of this Agreement or at such other address as may be designated by such party as herein provided. All notices, demands and requests shall be effective upon such personal delivery, or one (1) business day after being deposited with the private courier service, or two (2) business days after being deposited in the United States mail as required above. Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given as herein required shall be deemed to be receipt of the notice, demand or request sent. By giving to the other party hereto at least fifteen (15) days' prior written notice thereof in accordance with the provisions hereof, the parties hereto shall have the right from time to time to change their respective addresses and each shall have the right to specify as its address any other address within the United States of America. (l) No Waiver; Time of Essence; Business Day. The failure of any party hereto to enforce any right or remedy hereunder, or to promptly enforce any such right or remedy, shall not constitute a waiver thereof nor give rise to any estoppel against such party nor excuse any of the parties hereto from their respective obligations hereunder. Any waiver of such right or remedy must be in writing and signed by the party to be bound. This Agreement is subject to enforcement at law or in equity, including actions for damages or specific performance. Time is of the essence hereof. (m) Captions for Convenience. The captions and headings of the sections and paragraphs of this Agreement are for convenience of reference only and shall not be construed in interpreting the provisions hereof. (n) Attorneys' Fees. In the event it is necessary for Lender to retain the services of an attorney or any other consultants in order to enforce this Agreement, or any portion thereof, Indemnitor agrees to pay to Lender any and all reasonable costs and expenses, including, without limitation, reasonable attorneys' fees, incurred by Lender as a result thereof and such costs, fees and expenses shall be included in Costs. (o) Successive Actions. A separate right of action hereunder shall arise each time Lender acquires knowledge of any matter indemnified or guaranteed by Indemnitor under this Agreement. Separate and successive actions may be brought hereunder to enforce any of the provisions hereof at any time and from time to time. No action hereunder shall preclude any subsequent action, and Indemnitor hereby waives and covenants not to assert any defense in the nature of splitting of causes of action or merger of judgments. (p) Reliance. Lender would not make the Loan to Borrower without this Agreement. Accordingly, Indemnitor intentionally and unconditionally enters into the covenants and agreements as set forth above and understands that, in reliance upon and in consideration of such covenants and agreements, the Loan shall be made and, as part and parcel thereof, specific monetary and other obligations have been, are being and shall be entered into which would not be made or entered into but for such reliance. (q) SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. (1) INDEMNITOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, (A) SUBMITS TO PERSONAL JURISDICTION IN THE STATE OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THIS AGREEMENT, (B) AGREES THAT ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT IN THE STATE OF NEW YORK OR ANY FEDERAL COURT OF COMPETENT JURISDICTION SITTING THEREIN, (C) SUBMITS TO THE JURISDICTION OF SUCH COURTS, AND, (D) TO THE FULLEST EXTENT PERMITTED BY LAW, AGREES THAT NEITHER OF THEM WILL BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM (BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER TO BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER PROPER FORUM). INDEMNITOR FURTHER CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO THE INDEMNITOR AT THE ADDRESS FOR NOTICES DESCRIBED IN SECTION 5(k) HEREOF, AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY LAW). (2) INDEMNITOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES AND FOREVER FORGOES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THIS AGREEMENT OR ANY CONDUCT, ACT OR OMISSION OF LENDER OR INDEMNITOR, OR ANY OF THEIR DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR INDEMNITOR, IN EACH OR THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. (r) Waiver by Indemnitor. Indemnitor covenants and agrees that, upon the commencement of a voluntary or involuntary bankruptcy proceeding by or against Borrower, Indemnitor shall not seek or cause Borrower or any other person or entity to seek a supplemental stay or other relief, whether injunctive or otherwise, pursuant to 11 U.S.C. Section 105 or any other provision of the Bankruptcy Reform Act of 1978, as amended, or any other debtor relief law, (whether statutory, common law, case law or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may be or become applicable, to stay, interdict, condition, reduce or inhibit the ability of Lender to enforce any rights of Lender against Indemnitor by virtue of this Agreement or otherwise. (s) Joint and Several Liability. Notwithstanding anything to the contrary herein, the representations, warranties, covenants and agreements made by each of the persons comprising Indemnitor herein, and the liability of each of the persons comprising Indemnitor hereunder, is joint and several. IN WITNESS WHEREOF, Indemnitor has executed this Indemnity Agreement under seal as of the day and year first above written. WELLSFORD COMMERCIAL PROPERTIES TRUST, a Maryland real estate investment trust By: /s/ Gregory F. Hughes -------------------------------- Name: Gregory F. Hughes Title: CFO & Treasurer [SIGNATURES CONTINUED ON NEXT PAGE] WHWEL REAL ESTATE LIMITED PARTNERSHIP By: WHATR Gen-Par, Inc., General Partner By: /s/ Alan S. Kava ---------------------------- Name: Alan S. Kava Title: Vice President EX-10.40 9 MEZZANINE LOAN AGREEMENT DATED AS OF JULY 16, 1998 among WELLSFORD/WHITEHALL PROPERTIES II, L.L.C., as Borrower and BANKBOSTON, N.A., GOLDMAN SACHS MORTGAGE COMPANY, THE OTHER BANKS WHICH ARE PARTIES TO THIS AGREEMENT, and OTHER BANKS WHICH MAY BECOME PARTIES TO THIS AGREEMENT, as Banks and BANKBOSTON, N.A., AS ADMINISTRATIVE AGENT AND CO-ARRANGER AND CO-SYNDICATION AGENT and GOLDMAN SACHS MORTGAGE COMPANY AS CO-ARRANGER AND CO-SYNDICATION AGENT TABLE OF CONTENTS Page Section 1. DEFINITIONS AND RULES OF INTERPRETATION. . . . . . . . . . . .-1- Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . .-1- Section 1.2. Rules of Interpretation . . . . . . . . . . . . . . . -22- Section 2. THE FACILITY.. . . . . . . . . . . . . . . . . . . . . . . . -23- Section 2.1. Commitment to Lend. . . . . . . . . . . . . . . . . . -23- Section 2.2. Facility Fee. . . . . . . . . . . . . . . . . . . . . -23- Section 2.3. Reduction of Commitment . . . . . . . . . . . . . . . -24- Section 2.4. Notes . . . . . . . . . . . . . . . . . . . . . . . . -24- Section 2.5. Interest on Loans . . . . . . . . . . . . . . . . . . -25- Section 2.6. Requests for Loans. . . . . . . . . . . . . . . . . . -25- Section 2.7. Funds for Loans . . . . . . . . . . . . . . . . . . . -26- Section 2.8. Extension of Maturity Date. . . . . . . . . . . . . . -27- Section 2.9. Termination of Advances.. . . . . . . . . . . . . . . -28- Section 3. REPAYMENT OF THE LOANS.. . . . . . . . . . . . . . . . . . . -28- Section 3.1. Stated Maturity . . . . . . . . . . . . . . . . . . . -28- Section 3.2. Mandatory Prepayments . . . . . . . . . . . . . . . . -29- Section 3.3. Optional Prepayments. . . . . . . . . . . . . . . . . -30- Section 3.4. Partial Prepayments . . . . . . . . . . . . . . . . . -30- Section 3.5. Effect of Prepayments . . . . . . . . . . . . . . . . -30- Section 4. CERTAIN GENERAL PROVISIONS.. . . . . . . . . . . . . . . . . -31- Section 4.1. Conversion Options. . . . . . . . . . . . . . . . . . -31- Section 4.2. Closing Fee . . . . . . . . . . . . . . . . . . . . . -32- Section 4.3. Agent's Fee . . . . . . . . . . . . . . . . . . . . . -32- Section 4.4. Funds for Payments. . . . . . . . . . . . . . . . . . -32- Section 4.5. Computations. . . . . . . . . . . . . . . . . . . . . -32- Section 4.6. Inability to Determine Eurodollar Rate. . . . . . . . -33- Section 4.7. Illegality. . . . . . . . . . . . . . . . . . . . . . -33- Section 4.8. Additional Interest . . . . . . . . . . . . . . . . . -33- Section 4.9. Additional Costs, Etc.. . . . . . . . . . . . . . . . -33- Section 4.10. Capital Adequacy. . . . . . . . . . . . . . . . . . . -35- Section 4.11. Indemnity of Borrower . . . . . . . . . . . . . . . . -35- Section 4.12. Interest on Overdue Amounts; Late Charge. . . . . . . -35- Section 4.13. Intentionally Omitted . . . . . . . . . . . . . . . . -35- Section 4.14. Certificate . . . . . . . . . . . . . . . . . . . . . -36- Section 4.15. Limitation on Interest. . . . . . . . . . . . . . . . -36- Section 4.16. Certain Provisions Relating to Increased Costs. . . . -36- Section 5. COLLATERAL SECURITY. . . . . . . . . . . . . . . . . . . . . -37- Section 5.1. Collateral. . . . . . . . . . . . . . . . . . . . . . -37- Section 5.2. Appraisals. . . . . . . . . . . . . . . . . . . . . . -37- Section 5.3. Release of Property . . . . . . . . . . . . . . . . . -38- Section 5.4. Additional Collateral . . . . . . . . . . . . . . . . -40- Section 5.5. Holdback. . . . . . . . . . . . . . . . . . . . . . . -41- Section 5.6. Disbursement of Tenant Improvement Reserve. . . . . . -42- Section 6. REPRESENTATIONS AND WARRANTIES.. . . . . . . . . . . . . . . -43- Section 6.1. Corporate Authority, Etc. . . . . . . . . . . . . . . -44- Section 6.2. Governmental Approvals. . . . . . . . . . . . . . . . -45- Section 6.3. Title to Properties; Leases . . . . . . . . . . . . . -45- Section 6.4. Financial Statements. . . . . . . . . . . . . . . . . -45- Section 6.5. No Material Adverse Changes . . . . . . . . . . . . . -46- Section 6.6. Franchises, Patents, Copyrights, Etc. . . . . . . . . -46- Section 6.7. Litigation. . . . . . . . . . . . . . . . . . . . . . -46- Section 6.8. No Materially Adverse Contracts, Etc. . . . . . . . . -47- Section 6.9. Compliance with Other Instruments, Laws, Etc. . . . . -47- Section 6.10. Tax Status. . . . . . . . . . . . . . . . . . . . . . -47- Section 6.11. No Event of Default . . . . . . . . . . . . . . . . . -47- Section 6.12. Holding Company and Investment Company Acts . . . . . -47- Section 6.13. Absence of UCC Financing Statements, Etc. . . . . . . -48- Section 6.14. Setoff, Etc.. . . . . . . . . . . . . . . . . . . . . -48- Section 6.15. Certain Transactions. . . . . . . . . . . . . . . . . -48- Section 6.16. Employee Benefit Plans. . . . . . . . . . . . . . . . -48- Section 6.17. ERISA Taxes . . . . . . . . . . . . . . . . . . . . . -49- Section 6.18. Plan Payments . . . . . . . . . . . . . . . . . . . . -49- Section 6.19. Regulations U and X . . . . . . . . . . . . . . . . . -49- Section 6.20. Environmental Compliance. . . . . . . . . . . . . . . -49- Section 6.21. Subsidiaries. . . . . . . . . . . . . . . . . . . . . -51- Section 6.22. Leases. . . . . . . . . . . . . . . . . . . . . . . . -51- Section 6.23. Loan Documents. . . . . . . . . . . . . . . . . . . . -51- Section 6.24. Mortgaged Property and Mezzanine Property . . . . . . -51- Section 6.25. Brokers . . . . . . . . . . . . . . . . . . . . . . . -55- Section 6.26. Fair Consideration. . . . . . . . . . . . . . . . . . -55- Section 6.27. Solvency. . . . . . . . . . . . . . . . . . . . . . . -55- Section 6.28. No Bankruptcy Filing. . . . . . . . . . . . . . . . . -55- Section 6.29. No Fraudulent Intent. . . . . . . . . . . . . . . . . -55- Section 6.30. Other Debt. . . . . . . . . . . . . . . . . . . . . . -56- Section 6.31. Ownership . . . . . . . . . . . . . . . . . . . . . . -56- Section 6.32. Special Purpose Entity. . . . . . . . . . . . . . . . -57- Section 6.33. Obligations as Members. . . . . . . . . . . . . . . . -57- Section 6.34. Mortgage Loan Documents. . . . . . . . . . . . . . . -57- Section 7. AFFIRMATIVE COVENANTS OF THE BORROWER. . . . . . . . . . . . -58- Section 7.1. Punctual Payment. . . . . . . . . . . . . . . . . . . -58- Section 7.2. Maintenance of Office . . . . . . . . . . . . . . . . -58- Section 7.3. Records and Accounts. . . . . . . . . . . . . . . . . -58- Section 7.4. Financial Statements, Certificates and Information. . -58- Section 7.5. Notices . . . . . . . . . . . . . . . . . . . . . . . -61- Section 7.6. Existence; Maintenance of Properties. . . . . . . . . -63- Section 7.7. Insurance . . . . . . . . . . . . . . . . . . . . . . -64- Section 7.8. Taxes . . . . . . . . . . . . . . . . . . . . . . . . -65- Section 7.9. Inspection of Properties and Books. . . . . . . . . . -66- Section 7.10. Compliance with Laws, Contracts, Licenses, and Permits . . . . . . . . . . . . . . . . . . . . . -66- Section 7.11. Use of Proceeds . . . . . . . . . . . . . . . . . . . -67- Section 7.12. Further Assurances. . . . . . . . . . . . . . . . . . -68- Section 7.13. Management Agreements . . . . . . . . . . . . . . . . -68- Section 7.14. ERISA Compliance. . . . . . . . . . . . . . . . . . . -68- Section 7.15. Condemnation. . . . . . . . . . . . . . . . . . . . . -69- Section 7.16. Distribution of Income to the Borrower. . . . . . . . -69- Section 7.17. More Restrictive Agreements . . . . . . . . . . . . . -70- Section 7.18. Compliance. . . . . . . . . . . . . . . . . . . . . . -70- Section 7.19. Leasing . . . . . . . . . . . . . . . . . . . . . . . -70- Section 7.20. Plan Assets, etc. . . . . . . . . . . . . . . . . . . -71- Section 7.21. Preservation and Maintenance. . . . . . . . . . . . . -72- Section 7.22. Use of Mortgaged Property and Mezzanine Property. . . -73- Section 7.23. Property Owner to Remain a Single-Purpose Entity. . . -73- Section 8. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.. . . . . . . . . -73- Section 8.1. Restrictions on Indebtedness. . . . . . . . . . . . . -73- Section 8.2. Restrictions on Liens, Etc. . . . . . . . . . . . . . -75- Section 8.3. Restrictions on Investments . . . . . . . . . . . . . -77- Section 8.4. Merger, Consolidation . . . . . . . . . . . . . . . . -78- Section 8.5. Sale and Leaseback; Ground Lease. . . . . . . . . . . -79- Section 8.6. Compliance with Environmental Laws. . . . . . . . . . -79- Section 8.7. Distributions . . . . . . . . . . . . . . . . . . . . -81- Section 8.8. Asset Sales . . . . . . . . . . . . . . . . . . . . . -81- Section 8.9. Development Activity. . . . . . . . . . . . . . . . . -81- Section 8.10. Sources of Capital. . . . . . . . . . . . . . . . . . -82- Section 8.11. Transfers . . . . . . . . . . . . . . . . . . . . . . -82- Section 8.12. Additional Restrictions Concerning the Mortgaged Property and the Mezzanine Property . . . . . . . . . -82- Section 8.13. Mortgage Loan Documents . . . . . . . . . . . . . . . -84- Section 9. FINANCIAL COVENANTS OF BORROWER. . . . . . . . . . . . . . . -84- Section 9.1. Liabilities to Assets Ratio . . . . . . . . . . . . . -84- Section 9.2. Consolidated Operating Cash Flow Coverage . . . . . . -85- Section 9.3. Minimum Shareholders Equity . . . . . . . . . . . . . -85- Section 9.4. Real Estate Assets. . . . . . . . . . . . . . . . . . -86- Section 9.5. Required Equity . . . . . . . . . . . . . . . . . . . -86- Section 10. CLOSING CONDITIONS.. . . . . . . . . . . . . . . . . . . . . -86- Section 10.1. Loan Documents. . . . . . . . . . . . . . . . . . . . -86- Section 10.2. Certified Copies of Organizational Documents. . . . . -86- Section 10.3. Bylaws; Resolutions . . . . . . . . . . . . . . . . . -87- Section 10.4. Incumbency Certificate; Authorized Signers. . . . . . -87- Section 10.5. Opinion of Counsel. . . . . . . . . . . . . . . . . . -87- Section 10.6. Payment of Fees . . . . . . . . . . . . . . . . . . . -87- Section 10.7. Appraisals. . . . . . . . . . . . . . . . . . . . . . -87- Section 10.8. Environmental Reports . . . . . . . . . . . . . . . . -87- Section 10.9. Insurance . . . . . . . . . . . . . . . . . . . . . . -88- Section 10.10. Performance; No Default . . . . . . . . . . . . . . . -88- Section 10.11. Representations and Warranties. . . . . . . . . . . . -88- Section 10.12. Proceedings and Documents . . . . . . . . . . . . . . -88- Section 10.13. Eligible Real Estate Qualification Documents. . . . . -88- Section 10.14. Compliance Certificate. . . . . . . . . . . . . . . . -88- Section 10.15. Other Documents . . . . . . . . . . . . . . . . . . . -88- Section 10.16. No Condemnation/Taking. . . . . . . . . . . . . . . . -88- Section 10.17. Governmental Policy . . . . . . . . . . . . . . . . . -89- Section 10.18. Other . . . . . . . . . . . . . . . . . . . . . . . . -89- Section 10.19. Satisfaction of Conditions as to Initial Collateral. -89- Section 11. CONDITIONS TO ALL BORROWINGS.. . . . . . . . . . . . . . . . -89- Section 11.1. Prior Conditions Satisfied. . . . . . . . . . . . . . -89- Section 11.2. Representations True; No Default. . . . . . . . . . . -89- Section 11.3. No Legal Impediment . . . . . . . . . . . . . . . . . -89- Section 11.4. Governmental Regulation . . . . . . . . . . . . . . . -89- Section 11.5. Proceedings and Documents . . . . . . . . . . . . . . -90- Section 11.6. Borrowing Documents . . . . . . . . . . . . . . . . . -90- Section 12. EVENTS OF DEFAULT; ACCELERATION; ETC.. . . . . . . . . . . . -90- Section 12.1. Events of Default and Acceleration. . . . . . . . . . -90- Section 12.1A. Limitation of Cure Periods. . . . . . . . . . . . . . -93- Section 12.2. Termination of Commitments. . . . . . . . . . . . . . -94- Section 12.3. Remedies. . . . . . . . . . . . . . . . . . . . . . . -94- Section 12.4. Distribution of Collateral Proceeds . . . . . . . . . -95- Section 12.5. Default under Mortgage Loan Documents or Mezzanine Mortgage Loan Documents . . . . . . . . . . . . . . . -95- Section 13. SETOFF.. . . . . . . . . . . . . . . . . . . . . . . . . . . -97- Section 14. THE AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . -97- Section 14.1. Authorization . . . . . . . . . . . . . . . . . . . . -97- Section 14.2. Employees and Agents. . . . . . . . . . . . . . . . . -98- Section 14.3. No Liability. . . . . . . . . . . . . . . . . . . . . -98- Section 14.4. No Representations. . . . . . . . . . . . . . . . . . -98- Section 14.5. Payments. . . . . . . . . . . . . . . . . . . . . . . -99- Section 14.6. Holders of Notes. . . . . . . . . . . . . . . . . . . -99- Section 14.7. Indemnity . . . . . . . . . . . . . . . . . . . . . .-100- Section 14.8. Agent as Bank . . . . . . . . . . . . . . . . . . . .-100- Section 14.9. Resignation; Removal. . . . . . . . . . . . . . . . .-100- Section 14.10. Duties in the Case of Enforcement . . . . . . . . . .-100- Section 15. EXPENSES.. . . . . . . . . . . . . . . . . . . . . . . . . .-101- Section 16. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . .-102- Section 17. SURVIVAL OF COVENANTS, ETC.. . . . . . . . . . . . . . . . .-103- Section 18. ASSIGNMENT AND PARTICIPATION.. . . . . . . . . . . . . . . .-104- Section 18.1. Conditions to Assignment by Banks . . . . . . . . . .-104- Section 18.2. Register. . . . . . . . . . . . . . . . . . . . . . .-104- Section 18.3. New Notes . . . . . . . . . . . . . . . . . . . . . .-105- Section 18.4. Participations. . . . . . . . . . . . . . . . . . . .-105- Section 18.5. Pledge by Bank. . . . . . . . . . . . . . . . . . . .-105- Section 18.6. No Assignment by Borrower . . . . . . . . . . . . . .-105- Section 18.7. Disclosure. . . . . . . . . . . . . . . . . . . . . .-106- Section 18.8. Additional Restrictions on Assignments and Participations. . . . . . . . . . . . . . . . . .-106- Section 19. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . .-106- Section 20. RELATIONSHIP.. . . . . . . . . . . . . . . . . . . . . . . .-108- Section 21. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE.. . . . .-108- Section 22. HEADINGS.. . . . . . . . . . . . . . . . . . . . . . . . . .-108- Section 23. COUNTERPARTS.. . . . . . . . . . . . . . . . . . . . . . . .-108- Section 24. ENTIRE AGREEMENT, ETC. . . . . . . . . . . . . . . . . . . .-109- Section 25. WAIVER OF JURY TRIAL.. . . . . . . . . . . . . . . . . . . .-109- Section 26. DEALINGS WITH THE BORROWER.. . . . . . . . . . . . . . . . .-109- Section 27. CONSENTS, AMENDMENTS, WAIVERS, ETC.. . . . . . . . . . . . .-109- Section 28. SEVERABILITY.. . . . . . . . . . . . . . . . . . . . . . . .-110- Section 29. LIMITATION ON LIABILITY. . . . . . . . . . . . . . . . . . .-110- Section 30. NO UNWRITTEN AGREEMENTS. . . . . . . . . . . . . . . . . . .-110- Section 31. TIME OF THE ESSENCE. . . . . . . . . . . . . . . . . . . . .-111- Section 32. BANKRUPTCY.. . . . . . . . . . . . . . . . . . . . . . . . .-111- EXHIBIT A FORM OF NOTE EXHIBIT B FORM OF REQUEST FOR LOAN EXHIBIT C FORM OF COMPLIANCE CERTIFICATE EXHIBIT D FORM OF REQUEST FOR EXTENSION OF LOAN EXHIBIT E FORM OF CERTIFICATE SCHEDULE 1.1 BANKS AND COMMITMENTS SCHEDULE 5.3 DESCRIPTIONS OF GREENBROOK CORPORATE CENTER AND POINT VIEW VACANT LAND SCHEDULE 6.3 TITLE TO PROPERTIES SCHEDULE 6.4 ALL-IN ACQUISITION COST, DESIGNATED COLLATERAL VALUE, STABILIZED PROPERTIES AND RELEASE PRICES SCHEDULE 6.7 LITIGATION SCHEDULE 6.17 ERISA PLANS SCHEDULE 6.21 SUBSIDIARIES OF THE BORROWER SCHEDULE 6.30-1 MEZZANINE MORTGAGE LOAN DOCUMENTS SCHEDULE 6.30-2 MORTGAGE LOAN DOCUMENTS SCHEDULE 6.30-3 ALLOCATION OF MEZZANINE MORTGAGE LOAN MEZZANINE LOAN AGREEMENT THIS MEZZANINE LOAN AGREEMENT is made as of the 16th day of July, 1998, by and among WELLSFORD/WHITEHALL PROPERTIES II, L.L.C., a Delaware limited liability company, having its principal place of business at 610 Fifth Avenue, 7th Floor, New York, New York 10020 ("Borrower"), BANKBOSTON, N.A., a national banking association, GOLDMAN SACHS MORTGAGE COMPANY, a New York limited partnership, the other lending institutions which are parties to this Agreement as "Banks", and the other lending institutions which may become parties hereto pursuant to Section 18 (collectively, the "Banks"), and BANKBOSTON, N.A., as Agent for the Banks and Arranger and Syndication Agent (the "Agent"), and GOLDMAN SACHS MORTGAGE COMPANY, as Co-Arranger and Co- Syndication Agent. RECITALS WHEREAS, Wellsford/Whitehall Properties, L.L.C. ("Revolver Borrower"), BankBoston, N.A., Goldman Sachs Mortgage Company and Agent have entered into that certain Revolving Credit Agreement dated as of December 15, 1997 (the "Original Revolving Credit Agreement"); and WHEREAS, Revolver Borrower has merged into and with "Property Owner" (as hereinafter defined), with Property Owner being the surviving entity, and accordingly, the assets and liabilities of Revolver Borrower have been assumed by the Property Owner; and WHEREAS, Agent, Borrower and the Banks desire to continue to provide to Borrower a portion of the credit facility provided to Revolver Borrower pursuant to the Original Revolving Credit Agreement; NOW, THEREFORE, in consideration of the recitals herein and the mutual covenants contained herein, the parties hereto hereby covenant and agree as follows: Section 1. DEFINITIONS AND RULES OF INTERPRETATION. Section 1.1. Definitions. The following terms shall have the meanings set forth in this Section l or elsewhere in the provisions of this Agreement referred to below: Acknowledgments. The Acknowledgments executed by the Property Owner, WASH, WASH Manager and Wells Avenue Holdings, respectively, in favor of the Agent. Agent. BankBoston, N.A., a national banking association, its successors and assigns, acting as agent for the Banks. Advance Termination Date. March 31, 2000. Agent's Head Office. The Agent's head office located at 100 Federal Street, Boston, Massachusetts 02110, or at such other location as the Agent may designate from time to time by notice to the Borrower and the Banks. Agent's Special Counsel. Long Aldridge & Norman LLP or such other counsel as may be approved by the Agent. Agreement. This Mezzanine Loan Agreement, including the Schedules and Exhibits hereto. Agreement Regarding Fees. The Amended and Restated Agreement Regarding Fees dated of even date herewith among Borrower, BKB and Goldman. Appraisal. An MAI appraisal of the value of a parcel of Mortgaged Property or Mezzanine Property, determined on an "as-is" fair market value basis, performed by an independent appraiser selected by the Agent who is not an employee of the Borrower, any Subsidiary of the Borrower, the Agent or a Bank, the form and substance of such appraisal and the identity of the appraiser to be in accordance with regulatory laws and policies (both regulatory and internal) applicable to the Banks, including, without limitation, FIRREA, and otherwise acceptable to the Majority Banks. Appraised Value. The fair market value of a parcel of Mortgaged Property or Mezzanine Property, determined by the most recent Appraisal of such parcel or update obtained pursuant to Section 5.2 or Section 10.7, subject, however, to such changes or adjustments to the value determined thereby as may be required by the appraisal departments of the Majority Banks in their good faith business judgment. Assignment of Interests. The Assignment of Member's Interest of even date herewith from Borrower to the Agent, as the same may be modified or amended, pursuant to which there shall be assigned to the Agent for the benefit of the Banks a security interest in the Equity Interests, such assignment to be in form and substance satisfactory to the Agent. Balance Sheet Date. May 31, 1998. Bankruptcy Code. Title 11, U.S.C.A., as amended from time to time or any successor statute thereto. Banks. BKB, Goldman, the other lending institutions which are a party hereto and any other Person who becomes an assignee of any rights of a Bank pursuant to Section 18 (but not including any Participant, as defined in Section 18). Base Rate. The higher of (a) the annual rate of interest announced from time to time by BKB at its head office in Boston, Massachusetts as its "base rate", and (b) one-half of one percent (0.5%) above the Federal Funds Effective Rate (rounded upwards, if necessary, to the next one-eighth of one percent). Any change in the rate of interest payable hereunder resulting from a change in the Base Rate shall become effective as of the opening of business on the day on which such change in the Base Rate becomes effective. Base Rate Loans. Those Loans bearing interest calculated by reference to the Base Rate. BKB. BankBoston, N.A., a national banking association. Borrower. As defined in the preamble hereto. Building. All of the buildings, structures and improvements now or hereafter located on any Mortgaged Property or Mezzanine Property. Building Service Equipment. All apparatus, fixtures and articles of personal property owned by the Property Owner or WASH, now or hereafter attached to or used or procured for use in connection with the operation or maintenance of any building, structure or other improvement located on or included in the Mortgaged Property or Mezzanine Property, including, but without limiting the generality of the foregoing, all engines, furnaces, boilers, stokers, pumps, heaters, tanks, dynamos, motors, generators, switchboards, electrical equipment, heating, plumbing, lifting and ventilating apparatus, air-cooling and air-conditioning apparatus, gas and electric fixtures, elevators, escalators, fittings, and machinery and all other equipment of every kind and description, used or procured for use in the operation of a Building (except apparatus, fixtures or articles of personal property belonging to lessees or other occupants of such building or to persons other than the Property Owner or WASH, unless the same be abandoned by any such lessee or other occupant or person and shall become the Property Owner's or WASH's property by reason of such abandonment), together with any and all replacements thereof and additions thereto. Business Day. Any day on which banking institutions in the city in which the Agent's Head Office is located are open for the transaction of banking business and, in the case of Eurodollar Rate Loans, which also is a Eurodollar Business Day. Capital Improvement Project. With respect to any Real Estate now or hereafter owned by the Property Owner, which is utilized principally as commercial office space, capital improvements consisting of rehabilitation, refurbishment, replacement and improvements (including Tenant Improvement Projects and Leasing Commissions) to the existing Buildings on such Real Estate which may be properly capitalized under generally accepted accounting principles. Capital Improvement Reserve. For any period an amount equal to seventy- five cents ($0.75) per annum multiplied by the weighted average of rentable square footage of the Real Estate owned by Borrower and its Subsidiaries (including WASH) during such period. CERCLA. See Section 6.20. Closing Date. The first date on which all of the conditions set forth in Section 10 and Section 11 have been satisfied. Co-Agent. Goldman. Code. The Internal Revenue Code of 1986, as amended. Collateral. All of the property, rights and interests of the Borrower which are or are intended to be subject to the security interests and liens created by the Security Documents, including, without limitation, the Equity Interests. Commitment. With respect to each Bank, the amount set forth on Schedule 1.1 hereto as the amount of such Bank's Commitment to make or maintain Loans to the Borrower, as the same may be reduced from time to time in accordance with the terms of this Agreement; provided that from and after the Advance Termination Date, the Commitment of each Bank shall equal its Commitment Percentage of the aggregate principal amount of the Loans from time to time outstanding. Commitment Percentage. With respect to each Bank, the percentage set forth on Schedule 1.1 hereto as such Bank's percentage of the aggregate Commitments of all of the Banks. Compliance Certificate. See Section 7.4(d). Condominium. As defined in the Mortgage Loan Agreement. Condominium Documents. As defined in the Mortgage Loan Agreement. Consolidated or combined. With reference to any term defined herein, that term as applied to the accounts of the Borrower and its Subsidiaries, consolidated or combined in accordance with generally accepted accounting principles. Consolidated Operating Cash Flow. With respect to any Test Period, an amount equal to the Operating Cash Flow of the Borrower and its Subsidiaries for such period consolidated in accordance with generally accepted accounting principles. The Consolidated Operating Cash Flow of the Borrower and its Subsidiaries on the consolidated financial statements of the Borrower and its Subsidiaries shall be adjusted to reflect the Borrower's allocable share of such Consolidated Operating Cash Flow for the relevant period or as of the date of determination. Consolidated Tangible Net Worth. The amount by which Consolidated Total Assets exceeds Consolidated Total Liabilities. Consolidated Total Assets. With respect to the Borrower and its Subsidiaries, the sum of (a) an amount equal to (i) an amount equal to the difference of (A) the Net Operating Income of the Stabilized Properties of WWP and its Subsidiaries for the period covered by the four previous consecutive fiscal quarters (treated as a single accounting period) minus (B) the Capital Improvement Reserve for such Stabilized Properties for such period divided by (ii) a nine and one-fourth percent (9.25%) capitalization rate, (b) the sum of (i) the Appraised Value of the Non-Stabilized Properties that are Mortgaged Properties and Mezzanine Properties plus (ii) the historic cost of capital improvements to such Non-Stabilized Properties (including Tenant Improvement Projects and Leasing Commissions) from the date of the most recent Appraisal thereof pursuant to this Agreement, (c) the sum of (i) the all-in acquisition cost (including reasonable closing costs) of the Non- Stabilized Properties of WWP and its Subsidiaries that are not Mortgaged Properties or Mezzanine Properties plus (ii) the historic cost of capital improvements to such Non-Stabilized Properties (if this clause (c) is applicable thereto) from the date of acquisition thereof (provided that the Agent shall have the right to obtain at Borrower's expense an Appraisal with respect to any of such Non-Stabilized Properties, and the Appraised Value determined from such Appraisal shall be substituted for the amount in clause (c)(i) for the applicable property for the purposes of such calculation), (d) the historic cost of investments in Investment Partnerships; and (e) the aggregate cash and Short-term Investments of such Person; provided that prior to such time as the Borrower or a Subsidiary has owned and operated any Stabilized Property for four full fiscal quarters, the Net Operating Income with respect to such Stabilized Property shall be annualized in such manner as the Agent shall approve, such approval not to be unreasonably withheld. Notwithstanding anything herein to the contrary, Leasing Commissions shall only be included for the purposes of clause (b)(ii) after and only for so long as the tenant under the applicable Lease takes occupancy and is paying rent in accordance with the terms of the Lease approved pursuant to Section 5.6. The assets of the Borrower and its Subsidiaries shall be adjusted to reflect Borrower's allocable share of such assets for the relevant period or as of the date of determination. Consolidated Total Liabilities. All liabilities of the Borrower and its Subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles and all Indebtedness of the Borrower and its Subsidiaries, whether or not so classified. In the event that the Borrower or its Subsidiaries has an ownership or other equity interest in any other Person, which investment is not consolidated in accordance with generally accepted accounting principles (that is, such interest is a "minority interest"), then the liabilities of the Borrower and its Subsidiaries shall include the Borrower's or its Subsidiaries', as applicable, allocable share of all indebtedness of such Person in which a minority interest is owned based on the Borrower's or its Subsidiary's respective ownership interest in such other Person. Such liabilities of the Borrower and its Subsidiaries shall be adjusted to reflect the Borrower's and its Subsidiaries' allocable share of such liabilities for the relevant period or as of the date of determination. For the purposes hereof, such liabilities and Indebtedness shall include the liabilities and Indebtedness of the Property Owner and WASH. Construction Inspector. A firm of professional engineers or architects selected by the Agent and reasonably acceptable to the Borrower. Conversion Request. A notice given by the Borrower to the Agent of its election to convert or continue a Loan in accordance with Section 4.1. Debt Offering. The issuance and sale by the Borrower or the Guarantor of any debt securities of the Borrower or the Guarantor. Debt Service. For any period of four consecutive fiscal quarters, the sum of actual interest expense (including capitalized interest) and mandatory or scheduled principal payments due and payable during such period with respect to all Indebtedness of the Borrower and its Subsidiaries, excluding any balloon payments due upon maturity of any Indebtedness and any amortization of loan fees paid on or prior to the Closing Date. For the initial twelve (12) months following the Closing Date, Debt Service shall be determined by annualizing the Debt Service from and after such date in a manner as reasonably determined by the Borrower and reasonably acceptable to the Agent (provided that in the event that as of the date of any determination such amounts shall not have been determined as so provided, then such amount shall be annualized in a manner reasonably acceptable to the Agent). Default. See Section 12.1. Designated Collateral Value. At the relevant time of reference thereto, the sum of (a) the lesser of (i) fifteen percent (15%) of the sum of (x) the all-in acquisition cost (including reasonable closing costs) of a Mortgaged Property accepted as a Mortgaged Property pursuant to this Agreement plus (y) the historic cost of capital improvements (including any Tenant Improvement Projects and Leasing Commissions) to such Mortgaged Property after the date of such acceptance and (ii) fifteen percent (15%) of the sum of (x) the Appraised Value of a Mortgaged Property accepted as a Mortgaged Property pursuant to this Agreement as determined in connection with the acceptance of such Mortgaged Property pursuant to this Agreement or as most recently determined pursuant to Section 2.8 of this Agreement, subject to the terms of Section 5.4, plus (y) the historic cost of Tenant Improvement Projects and Leasing Commissions to such Mortgaged Property after the date of such acceptance, plus (b) the current value of cash and Short-term Investments, if any, at the time pledged to the Agent as Collateral pursuant to a Pledge Agreement, plus (c) an amount equal to the sum of (i) seventy- five percent (75%) of the Appraised Value of the Mezzanine Property as determined in connection with the acceptance of the Mezzanine Collateral or as most recently determined pursuant to Section 2.8 of this Agreement, subject to the terms of Section 5.4, minus (ii) the principal Indebtedness of WASH as of the date of the acquisition by Property Owner of the equity interests in Wells Avenue Holdings (such amount being $68,340,815.57), minus (iii) the maximum amount available to be borrowed against the Mezzanine Property pursuant to the Mortgage Loan Agreement as of the date hereof (such amount being $5,939,184.00), plus (d) the current value determined in a manner agreed to by the Majority Banks of Collateral accepted by the Majority Banks under clause (iv) of Section 5.1. Notwithstanding anything herein to the contrary, Leasing Commissions shall only be included for the purposes of clauses (a)(i)(y) and (a)(ii)(y) after and only for so long as the tenant under the applicable Lease takes occupancy and is paying rent in accordance with the terms of the Lease approved pursuant to Section 5.6. For the purposes of clause (a) above, the lesser of the amount determined pursuant to clause (a)(i) and (a)(ii) above shall be the Designated Collateral Value for each such Mortgaged Property subject thereto, and the aggregate of the amounts determined for each Mortgaged Property subject thereto shall be the Designated Collateral Value for all such Mortgaged Properties; provided however, that with respect to the Mortgaged Properties listed on Schedule 6.4 hereto, the initial Designated Collateral Value for such properties is as set forth on Schedule 6.4; provided further that in the event that the Maturity Date is extended pursuant to Section 2.8, the Designated Collateral Value for each of such Mortgaged Properties listed on Schedule 6.4 shall be the lesser of the amount determined pursuant to clause (a)(i) and (a)(ii) above. The initial Designated Collateral Values for the Mortgaged Property and the Mezzanine Property is set forth in Schedule 6.4 hereto. Distribution. The declaration or payment of any dividend or distribution on or in respect of any shares of the Borrower, other than dividends or distributions payable solely in equity securities of the Borrower; the purchase, redemption, exchange or other retirement of any shares of the Borrower, directly or indirectly through a Subsidiary of the Borrower or otherwise; the return of capital by the Borrower to its shareholders as such; or any other distribution on or in respect of any shares of the Borrower. Dollars or $. Dollars in lawful currency of the United States of America. Domestic Lending Office. Initially, the office of each Bank designated as such in Schedule 1.1 hereto; thereafter, such other office of such Bank, if any, located within the United States that will be making or maintaining Base Rate Loans. Drawdown Date. The date on which any Loan is made or is to be made, and the date on which any Loan is converted or combined in accordance with Section 4.1. Eligible Real Estate. Real Estate: (a) which is owned in fee by the Property Owner; (b) which is located within the northeastern United States, excluding those States which prescribe a "single-action" or similar rule limiting the rights of creditors secured by real property, except to the extent such exclusion is waived in writing by the Majority Banks with respect to a specific parcel of Real Estate; (c) which is utilized principally for commercial office purposes; (d) which is approved by the Majority Banks after the date hereof in their sole judgment; (e) as to which all of the representations set forth in Section 6 of this Agreement concerning Mortgaged Property are true and correct; and (f) as to which the Agent has received all Eligible Real Estate Qualification Documents, so long as all of such documents remain in full force and effect. Eligible Real Estate Qualification Documents. With respect to any parcel of Real Estate proposed to be included in the Eligible Real Estate each of the following: (a) Survey and Taxes. The Survey of such Real Estate, together with the Surveyor Certification and evidence of payment of all real estate taxes, assessments and municipal charges on such Real Estate which on the date of determination are required to have been paid under Section 7.8. (b) Title Insurance; Title Exception Documents. The Title Policy covering such Real Estate, including all endorsements thereto, and together with proof of payment of all fees and premiums for such policy, and true and accurate copies of all documents listed as exceptions under such policy. (c) UCC Certification. A certification from the Title Insurance Company or counsel satisfactory to the Agent that a search of the public records designated by the Agent disclosed no conditional sales contracts, security agreements, chattel mortgages, leases of personalty, financing statements or title retention agreements which affect any property, rights or interests of the Property Owner that are or are intended to be subject to the security interest, assignments, and mortgage liens created by the Mortgage Loan Documents relating to such Real Estate except to the extent that the same are discharged and removed prior to or simultaneously with the inclusion of such Real Estate in the collateral for the Mortgage Loan. (d) Management Agreement. A true copy of the Management Agreement relating to such Real Estate. (e) Leases. True and correct copies of all Leases for such Real Estate and any lease summaries prepared by Borrower with respect thereto, together with the forms of Lease to be used by the Property Owner in connection with future leasing of such Mortgaged Property, such forms of Lease to be in form and substance satisfactory to the Agent. (f) Estoppel Certificates. Estoppel certificates from each tenant of such parcel of Real Estate as required by Agent, such certificates to be dated not more than sixty (60) days prior to the inclusion of such Real Estate in the collateral for the Mortgage Loan and to be satisfactory in form and substance to the Agent. (g) Certificates of Insurance. Each of (i) a current certificate of insurance as to the insurance maintained on such Real Estate (including flood insurance if necessary) from the insurer or an independent insurance broker dated as of the date of determination, identifying insurers, types of insurance, insurance limits, and policy terms; (ii) certified copies of all policies evidencing such insurance (or certificates therefor signed by the insurer or an agent authorized to bind the insurer); and (iii) such further information and certificates from the Borrower, its insurers and insurance brokers as the Agent may reasonably request, all of which shall be in compliance with the requirements of this Agreement. (h) Hazardous Substance Assessments. A hazardous waste site assessment report concerning Hazardous Substances and asbestos on such Real Estate dated or updated not more than three months prior to the inclusion of such Real Estate in the collateral for the Mortgage Loan unless otherwise approved by the Agent, from an Environmental Engineer, such report to contain no qualifications except those that are acceptable to the Majority Banks in their sole discretion and to otherwise be in form and substance satisfactory to the Majority Banks. (i) Certificate of Occupancy. A copy of the certificate(s) of occupancy issued to the Property Owner for such parcel of Real Estate permitting the use and occupancy of the Building thereon (or evidence that any previously issued certificate(s) of occupancy is not required to be reissued to the Property Owner), or a legal opinion reasonably satisfactory to the Agent that no certificates of occupancy are necessary to the use and occupancy thereof. (j) Appraisal. An Appraisal of such Real Estate, in form and substance satisfactory to the Majority Banks and dated not more than three months prior to the inclusion of such Real Estate in the collateral for the Mortgage Loan. (j) Zoning and Land Use Opinion of Counsel. A favorable opinion concerning the Real Estate addressed to the Agent and dated the date of the inclusion of such Real Estate in the collateral for the Mortgage Loan, in form and substance satisfactory to the Agent, from counsel approved by the Agent admitted to practice in the State in which such parcel is located, as to zoning and land use compliance, or such other evidence regarding zoning and land use compliance as the Agent may approve in its reasonable discretion. (k) Construction Inspector Report. A report or written confirmation from the Construction Inspector satisfactory in form and content to the Majority Banks, dated or updated not more than three months prior to the inclusion of such Real Estate in the collateral for the Mortgage Loan, addressing such matters as the Majority Banks may reasonably require, including without limitation that the Construction Inspector has reviewed the plans and specifications or other available materials for all Buildings on the Real Estate, that the condition of the Buildings is good, that all Buildings were constructed and completed in a good and workmanlike manner, that the Buildings satisfy all applicable building, zoning, handicapped access and Environmental Laws applicable thereto, and whether or not the Real Estate and the Buildings thereon are a conforming use under applicable zoning laws. (l) Permit and Legal Compliance Assurances. Evidence satisfactory to the Agent that all activities being conducted on such Real Estate which require federal, state or local licenses or permits have been duly licensed and that such licenses or permits are in full force and effect, and that the Real Estate, the Buildings and the use and occupancy thereof are in compliance in all material respects with all applicable federal, state or local laws, ordinances or regulations. (m) Operating Statements. Operating statements for such Real Estate in the form of such statements delivered to the Banks under Section 6.4(b) covering each of the four fiscal quarters ending immediately prior to the addition of such Mortgaged Property to the collateral for the Mortgage Loan. (n) Additional Documents. Such other documents, certificates, reports or assurances as the Agent or the Majority Banks may reasonably require in their discretion. Employee Benefit Plan. Any employee benefit plan within the meaning of Section 3(3) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate, other than a Multiemployer Plan. Environmental Engineer. A firm of independent professional engineers or other scientists generally recognized as expert in the detection, analysis and remediation of Hazardous Substances and related environmental matters and reasonably acceptable to the Agent. Environmental Laws. See Section 6.20(a). Equity Interests. One hundred percent (100%) of the direct legal, equitable and beneficial interests of the Borrower in and to the Property Owner. Equity Offering. The issuance and sale by the Borrower or the Guarantor of any of its equity securities. ERISA. The Employee Retirement Income Security Act of 1974, as amended and in effect from time to time. ERISA Affiliate. Any Person which is treated as a single employer with the Borrower under Section 414 of the Code. ERISA Reportable Event. A reportable event with respect to a Guaranteed Pension Plan within the meaning of Section 4043 of ERISA and the regulations promulgated thereunder as to which the requirement of notice has not been waived. Eurocurrency Reserve Rate. For any day with respect to a Eurodollar Rate Loan, the maximum rate (expressed as a decimal) at which any lender subject thereto would be required to maintain reserves under Regulation D of the Board of Governors of the Federal Reserve System (or any successor or similar regulations relating to such reserve requirements) against "Eurocurrency Liabilities" (as that term is used in Regulation D or any successor or similar regulation), if such liabilities were outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on and as of the effective date of any change in the Eurocurrency Reserve Rate. Eurodollar Business Day. Any day on which commercial banks are open for international business (including dealings in Dollar deposits) in London or such other Eurodollar interbank market as may be selected by the Agent and the Banks in their sole discretion acting in good faith. Eurodollar Lending Office. Initially, the office of each Bank designated as such in Schedule 1.1 hereto; thereafter, such other office of such Bank, if any, that shall be making or maintaining Eurodollar Rate Loans. Eurodollar Rate. For any Interest Period with respect to a Eurodollar Rate Loan, the rate per annum equal to the quotient (rounded upwards to the nearest 1/16 of one percent) of (a) the rate at which the Reference Bank's Eurodollar Lending Office is offered Dollar deposits two Eurodollar Business Days prior to the beginning of such Interest Period in whatever interbank Eurodollar market may be selected by the Reference Bank in its sole discretion, acting in good faith, for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of the Eurodollar Rate Loan to which such Interest Period applies, divided by (b) a number equal to 1.00 minus the Eurocurrency Reserve Rate. Eurodollar Rate Loans. Loans bearing interest calculated by reference to a Eurodollar Rate. Event of Default. See Section 12.1. Federal Funds Effective Rate. For any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent. Generally accepted accounting principles. Principles that are (a) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, as in effect from time to time and (b) consistently applied with past financial statements of the Borrower adopting the same principles; provided that a certified public accountant would, insofar as the use of such accounting principles is pertinent, be in a position to deliver an unqualified opinion (other than a qualification regarding changes in generally accepted accounting principles) as to financial statements in which such principles have been properly applied. Goldman. Goldman Sachs Mortgage Company. Goldman Group. Collectively, the partners of WHWEL as of any date that are affiliates of The Goldman Sachs Group L.P. Guaranteed Pension Plan. Any employee pension benefit plan within the meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate the benefits of which are guaranteed on termination in full or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer Plan. Guarantor. Collectively, the WWP Members and any other Person which is now or may hereafter become a party to a Guaranty, and individually any one of them. Guaranty. Collectively, the Indemnity and Guaranty Agreement by the WWP Members in favor of Agent and the Banks, the Mezzanine Conditional Guaranty, the Nomura Conditional Guaranty, the WWP Member Indemnity Agreement and each other guaranty which may hereafter be delivered to the Agent and the Banks in connection with the Loan, each in form and substance satisfactory to Agent in its sole discretion. Hazardous Substances. See Section 6.20(b). Holdback. See Section 5.5. Indebtedness. All obligations, contingent and otherwise, that in accordance with generally accepted accounting principles should be classified upon the obligor's balance sheet as liabilities, or to which reference should be made by footnotes thereto, including in any event and whether or not so classified: (a) all debt and similar monetary obligations, whether direct or indirect (including, without limitation, all obligations evidenced by bonds, debentures, notes or similar debt instruments and subordinated indebtedness); (b) all liabilities secured by any mortgage, pledge, security interest, lien, charge or other encumbrance existing on property owned or acquired subject thereto, whether or not the liability secured thereby shall have been assumed; and (c) all guarantees, interest rate and currency swap obligations, endorsements and other contingent obligations whether direct or indirect in respect of indebtedness of others, including contingent obligations that in accordance with generally accepted accounting principles are required to be footnoted on the Borrower's consolidated balance sheets and any obligation to supply funds to or in any manner to invest directly or indirectly in a Person, to purchase indebtedness, or to assure the owner of indebtedness against loss through an agreement to purchase goods, supplies or services for the purpose of enabling the debtor to make payment of the indebtedness held by such owner or otherwise, and the obligation to reimburse the issuer in respect of any letter of credit; (d) any obligation as a lessee or an obligor under a capitalized lease; and (e) the Borrower's or any of its Subsidiaries' pro rata share of any of the above-described obligations of its unconsolidated subsidiaries. Indemnity Agreement. Collectively, the Indemnity Agreements Regarding Hazardous Materials made by the Borrower and the WWP Members in favor of the Agent and the Banks, pursuant to which such parties agree to indemnify the Agent and the Banks with respect to Hazardous Substances and Environmental Laws, such Indemnity Agreement to be in form and substance satisfactory to the Agent. Interest Payment Date. (a) As to each Loan, the first day of each January, April, July and October during the term of such Loan, and (b) also as to each Eurodollar Rate Loan, the last day of the Interest Period relating thereto. Interest Period. With respect to each Eurodollar Rate Loan: (a) initially, the period commencing on the Drawdown Date of such Loan and ending one, two or three months thereafter; and (b) thereafter, each period commencing on the day following the last day of the next preceding Interest Period applicable to such Loan and ending on the last day of one of the periods set forth above, as selected by the Borrower in a Conversion Request; provided that all of the foregoing provisions relating to Interest Periods are subject to the following: (A) if any Interest Period with respect to a Eurodollar Rate Loan would otherwise end on a day that is not a Eurodollar Business Day, that Interest Period shall end and the next Interest Period shall commence on the next preceding or succeeding Eurodollar Business Day as determined conclusively by the Reference Bank in accordance with the then current bank practice in the applicable Eurodollar interbank market; (B) if the Borrower shall fail to give notice as provided in Section 4.1, the Borrower shall be deemed to have requested a conversion of the affected Eurodollar Rate Loan to a Base Rate Loan on the last day of the then current Interest Period with respect thereto; and (C) no Interest Period relating to any Eurodollar Rate Loan shall extend beyond the Maturity Date. Notwithstanding anything herein to the contrary, each Interest Period selected by the Borrower hereunder shall be for the same duration selected by Property Owner for the corresponding advance under the Mortgage Loan Agreement, or conversion or continuation thereof. Investment Partnerships. Investments in joint ventures, general partnerships, limited partnerships, limited liability companies or any other business association formed for the purpose of acquiring fee interests in income-producing commercial office properties, provided that Borrower shall have sufficient Voting Interests or other rights to veto or block any major actions to be taken by any other Person owning an interest in such Investment Partnership. Any wholly-owned Subsidiary of the Borrower and the Property Owner shall not be deemed to be an Investment Partnership. Investments. With respect to any Person, all shares of capital stock, evidences of Indebtedness and other securities issued by any other Person, all loans, advances, or extensions of credit to, or contributions to the capital of, any other Person, all purchases of the securities or business or integral part of the business of any other Person and commitments and options to make such purchases, all interests in real property, and all other investments; provided, however, that the term "Investment" shall not include (i) equipment, inventory and other tangible personal property acquired in the ordinary course of business, or (ii) current trade and customer accounts receivable for services rendered in the ordinary course of business and payable in accordance with customary trade terms. In determining the aggregate amount of Investments outstanding at any particular time: (a) there shall be included as an Investment all interest accrued with respect to Indebtedness constituting an Investment unless and until such interest is paid; (b) there shall be deducted in respect of each such Investment any amount received as a return of capital (but only by repurchase, redemption, retirement, repayment, liquidating dividend or liquidating distribution); (c) there shall not be deducted in respect of any Investment any amounts received as earnings on such Investment, whether as dividends, interest or otherwise, except that accrued interest included as provided in the foregoing clause (a) may be deducted when paid; and (d) there shall not be deducted from the aggregate amount of Investments any decrease in the value thereof. Leases. Leases, licenses and agreements whether written or oral, relating to the use or occupation of space in or on the Building or on the Mortgaged Property or the Mezzanine Property. Leasing Commissions. Reasonable and customary commissions paid to a licensed real estate broker in connection with a Lease for all or any portion of the Mortgaged Properties commonly known as Point View, 15 Broad, Mountain Heights, Morris Technology Center and the Polaroid Buildings, approved pursuant to Section 5.6, pursuant to commission agreements containing such terms and provisions as are then prevailing between third party, unaffiliated owners and brokers for comparable leases of space at properties similar to such Mortgaged Property in the market area in which such Mortgaged Property is located. Liens. See Section 8.2. Loan Documents. This Agreement, the Notes, the Security Documents, the Guaranty, the Acknowledgments and all other documents, instruments or agreements executed or delivered by or on behalf of the Borrower, the Guarantor, Property Owner, WASH, WASH Manager, Wells Avenue Holdings or the parties to the WWP Member Indemnity Agreement evidencing or securing the Loans. Loan Request. See Section 2.6. Loans. The aggregate Loans to be made by the Banks hereunder. Majority Banks. As of any date, the Bank or Banks whose aggregate Commitment Percentage is equal to or greater than sixty-six and two-thirds percent (66.67%). Management Agreements. Agreements, whether written or oral, providing for the management of the Mortgaged Property, the Mezzanine Property or any of them. Maturity Date. December 15, 2000, as the same may be extended as provided in Section 2.8, or such earlier date on which the Loans shall become due and payable pursuant to the terms hereof. Mezzanine Collateral. As defined in the Mortgage Loan Agreement. Mezzanine Conditional Guaranty. The Mezzanine Conditional Guaranty of Payment made by Wellsford Commercial, WHWEL, Wellsford Real Properties, Whitehall Street Real Estate Limited Partnership V, Whitehall Street Real Estate Limited Partnership VI, Whitehall Street Real Estate Limited Partnership VII and Whitehall Street Real Estate Limited Partnership VIII, in favor of the Agent and the Banks, as the same may be modified or amended. Mezzanine Management Agreement. As defined in the Mortgage Loan Agreement. Mezzanine Mortgage Loan. As defined in the Mortgage Loan Agreement. Mezzanine Mortgage Loan Agreement. As defined in the Mortgage Loan Agreement. Mezzanine Mortgage Loan Documents. As defined in the Mortgage Loan Agreement. Mezzanine Mortgagee. As defined in the Mortgage Loan Agreement. Mezzanine Property. Collectively, the real property owned by WASH and commonly known as 128 Tech Center, 7/57 Wells Avenue, 75/85/95 Wells Avenue, 201 University Avenue, Dedham Place and Norfolk Place (333 Elm Street), for so long as such properties shall be owned by WASH and the Property Owner's interests therein shall be collateral for the Mortgage Loan. Mortgaged Property. The Eligible Real Estate from time to time owned by the Property Owner which is conveyed to and accepted by the Mortgagee as security for the indebtedness evidenced by the Mortgage Loan Documents, for so long as such property remains as security for such indebtedness. Mortgagee. The Mortgage Loan Banks and any agent acting on behalf of the Mortgage Loan Banks, as the case may be. Mortgage Loan. The first mortgage loan to the Property Owner, in the original principal amount of up to $300,000,000.00. Mortgage Loan Agreement. The First Amended and Restated Loan Agreement dated of even date herewith between the Property Owner, the Mortgage Loan Banks and BKB as Agent, as same may be amended, modified or restated. Mortgage Loan Banks. The "Banks" from time to time under the Mortgage Loan Agreement. Mortgage Loan Documents. Collectively, the Mortgages and other documents listed on Schedule 6.30-2 attached hereto and made a part hereof. Mortgages. The Mortgages, Deeds to Secure Debt and Deeds of Trust from the Property Owner to the Mortgagee (or to trustees named therein acting on behalf of the Mortgagee) pursuant to which the Property Owner has conveyed a Mortgaged Property as security for the obligations evidenced by the Mortgage Loan Documents. Multiemployer Plan. Any multiemployer plan within the meaning of Section 3(37) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate. Negative Carry. See Section 5.5. Net Income (or Deficit). With respect to any Person (or any asset of any Person) for any fiscal period, the net income (or deficit) of such Person (or attributable to such asset), after deduction of all expenses, taxes and other proper charges, determined in accordance with generally accepted accounting principles. Net Operating Income. With respect to any Person for any period, an amount equal to the sum of (a) the Net Income of such Person (attributable to the Mortgaged Properties and the Mezzanine Properties for such period) plus (b) depreciation, amortization and interest deducted in calculating such Net Income plus (c) any extraordinary or non-recurring losses deducted in calculating such Net Income plus/minus (d) Rent Adjustments with respect to Leases for the Mortgaged Properties and the Mezzanine Properties minus (e) any income included in calculating such Net Income from the Mortgaged Properties or the Mezzanine Properties from tenants which are 60 or more days delinquent in the payment of any rent minus (f) any extraordinary or non- recurring gains included in calculating such Net Income. Net Operating Income shall be determined in a manner consistent with the manner in which it has previously been calculated and provided to the Banks. Nomura Conditional Guaranty. The Nomura Conditional Guaranty of Payment made by Wellsford Commercial, WHWEL, Wellsford Real Properties, Whitehall Street Real Estate Limited Partnership V, Whitehall Street Real Estate Limited Partnership VI, Whitehall Street Real Estate Limited Partnership VII and Whitehall Street Real Estate Limited Partnership VIII, in favor of the Agent and the Banks, as the same may be modified or amended. Nomura Mortgages. As defined in the Mortgage Loan Agreement. Non-Recourse Indebtedness. Indebtedness of the Borrower or a Subsidiary which is secured by one or more parcels of Real Estate and related personal property or interests therein and is not a general obligation of the Borrower or any Subsidiary, the holder of such Indebtedness having recourse solely to the parcels of Real Estate securing such Indebtedness, the improvements and leases thereon and the rents and profits thereof securing such Indebtedness, subject to such exceptions for fraud, misapplication of rents, environmental issues and other customary matters as Agent may reasonably approve. Non-Stabilized Property. Any Real Estate owned by the Borrower or its Subsidiaries which is not a Stabilized Property. Notes. See Section 2.4. Notice. See Section 19. Obligations. All indebtedness, obligations and liabilities of the Borrower to any of the Banks and the Agent, individually or collectively, under this Agreement or any of the other Loan Documents or in respect of any of the Loans or the Notes, or other instruments at any time evidencing any of the foregoing, whether existing on the date of this Agreement or arising or incurred hereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise. Operating Cash Flow. With respect to any Person (or any asset of any Person) for any period, an amount equal to the sum of (a) the Net Income of such Person (or attributable to such asset) for such period plus (b) depreciation and amortization, interest expense, and any extraordinary or non-recurring losses deducted in calculating such Net Income minus (c) any extraordinary or nonrecurring gains included in calculating such Net Income plus/minus (d) Rent Adjustments minus (e) any income included in calculating such Net Income from tenants which are 60 or more days delinquent in the payment of any rent. Outstanding. With respect to the Loans, the aggregate unpaid principal thereof as of any date of determination. PBGC. The Pension Benefit Guaranty Corporation created by Section 4002 of ERISA and any successor entity or entities having similar responsibilities. Permitted Liens. Liens, security interests and other encumbrances permitted by Section 8.2. When such term is used with respect to a Mortgaged Property, "Permitted Liens" shall mean only those liens and encumbrances as are shown in the Title Policy with respect to such Mortgaged Property. When such term is used with respect to the Mezzanine Property, "Permitted Liens" shall mean only those liens and encumbrances as are shown in the Pro Forma Marked Owner's Title Insurance Commitment #9851-00015 issued by Chicago Title Insurance Company in connection with the acquisition by the Property Owner of the direct and indirect interests in WASH. Person. Any individual, corporation, partnership, limited liability company, trust, unincorporated association, business, or other legal entity, and any government or any governmental agency or political subdivision thereof. Plan Assets. Assets of any employee benefit plan subject to Part 4, Subtitle A, Title I of ERISA. Pledge Agreement. Each agreement from time to time in effect in form and substance satisfactory to the Agent pursuant to which the Borrower or the Guarantor may pledge cash, Short-term Investments or other property referred to in clause (iv) of Section 5.1 as part of the Collateral securing the Obligations. Property Owner. Wellsford/Whitehall Holdings, L.L.C., a Delaware limited liability company. Property Owner Organizational Agreements. That certain Amended and Restated Limited Liability Company Operating Agreement of Wellsford/Whitehall Holdings, L.L.C., dated as of July 16, 1998. Rating Agencies. Collectively, the "Rating Agencies" as defined in the Mezzanine Mortgage Loan Documents. Real Estate. All real property at any time owned or leased (as lessee or sublessee) by the Borrower or any of its Subsidiaries. REIT Status. With respect to Wellsford Commercial, its status as a real estate investment trust as defined in Section 856(a) of the Code. Record. The record, including computer records, maintained by the Agent with respect to any Loan referred to in the Notes. Reference Bank. BKB. Register. See Section 18.2. Release. See Section 6.20(c)(iii). Rent Adjustments. For any Person, straight line adjustments to rent payable under Leases, as determined in accordance with generally accepted accounting principles. Rent Roll. A report prepared by the Borrower showing for each tenant its occupancy status, lease expiration date, market rent, lease rent and other information in such form as may have been approved by the Agent, such approval not to be unreasonably withheld. Reportable Event. Any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder. Revolving Credit Termination Date. December 31, 1998. SEC. The federal Securities and Exchange Commission. Security Documents. Collectively, the Indemnity Agreement, the Guaranty, the Assignment of Interests, any further collateral assignments to the Agent for the benefit of the Banks, and each Pledge Agreement, including, without limitation, U.C.C.-1 financing statements executed and delivered in connection therewith. Shareholders' Equity. At any date, the total consolidated shareholders' equity of the Borrower and its Subsidiaries determined in accordance with generally accepted accounting principles. Short-term Investments. Investments described in subsections (a) through (g), inclusive, of Section 8.3. For all purposes of this Agreement and the other Loan Documents, the value of Short-term Investments at any time shall be the current market value thereof determined in a manner reasonably satisfactory to the Agent. Stabilized Property. Each parcel of Eligible Real Estate (a) which is fully operational; (b) which is eighty percent (80%) leased and occupied pursuant to bona-fide arm's length leases to third parties unaffiliated with Borrower, any Guarantor or any of the Subsidiaries of the Borrower; (c) no more than thirty-five percent (35%) of the Leases (based on the ratio of the rentable square footage of such Real Estate that is occupied under such Leases to the total rentable square footage of such Real Estate) for such Real Estate are scheduled to expire (without regard to any extension options not exercised) within two (2) years of the acceptance of such Real Estate as a Mortgaged Property or the inclusion of the equity interests in the Mezzanine Property as collateral for the Mortgage Loan (whether under the Mortgage Loan Agreement, the "Original Loan Agreement" (as such term is defined in the Mortgage Loan Agreement) or the Original Revolving Credit Agreement; (d) less than all of the Leases for such Real Estate are scheduled to expire (without regard to any extension options not exercised) within five (5) years of the date of the acceptance of such Real Estate as a Mortgaged Property or the inclusion of the equity interests in the Mezzanine Property as collateral for the Mortgage Loan (whether under this Agreement, the Original Loan Agreement or the Original Revolving Credit Agreement); and (e) such Real Estate shall have a projected annual return to Borrower of not less than 9% on acquisition cost based upon cash flows in place as of the date of determination. The determination of whether a property is a Stabilized Property for the purposes of determining the Designated Collateral Value shall be made at such time as it is accepted as a Mortgaged Property or the inclusion of the equity interests in the Mezzanine Property as collateral for the Mortgage Loan as provided above, as applicable; provided that a property may be later determined to be a Stabilized Property for the purposes of determining Consolidated Total Assets at such time as a property satisfies the requirements for a Stabilized Property set forth in this definition. State. A state of the United States of America. Subsidiary. Any corporation, association, partnership, limited liability company, trust, or other business or other legal entity of which the designated parent shall at any time own directly or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of votes or controlling interests) of the outstanding Voting Interests. Survey. An instrument survey of a Mortgaged Property or a Mezzanine Property prepared by a registered land surveyor which shall show the location of all buildings, structures, easements and utility lines on such property, shall be sufficient to remove the standard survey exception from the Title Policy, shall show that all buildings and structures are within the lot lines of the Mortgaged Property or the Mezzanine Property and shall not show any encroachments by others (or to the extent any encroachments are shown, such encroachments shall be acceptable to the Agent in its sole discretion), shall show rights of way, adjoining sites, establish building lines and street lines, the distance to, and names of the nearest intersecting streets and such other details as the Agent may reasonably require; shall show the zoning district or districts in which the Mortgaged Property or the Mezzanine Property is located and shall show whether or not the Mortgaged Property or the Mezzanine Property is located in a flood hazard district as established by the Federal Emergency Management Agency or any successor agency or is located in any flood plain, flood hazard or wetland protection district established under federal, state or local law and shall otherwise be in form and substance reasonably satisfactory to the Agent. Surveyor Certification. With respect to each parcel of Mortgaged Property or Mezzanine Property, a certificate executed by the surveyor who prepared the Survey with respect thereto, dated as of a recent date and containing such information relating to such parcel as the Majority Banks or the Title Insurance Company may reasonably require, such certificate to be reasonably satisfactory to the Agent in form and substance. Tenant Improvement Project. With respect to the Mortgaged Properties commonly known as Point View, 15 Broad, Mountain Heights, Morris Technology Center and the Polaroid Buildings, base building and/or tenant improvements to the existing Buildings on such Mortgaged Property to be performed by the Property Owner in connection with any Lease approved pursuant to Section 5.6. Tenant Improvement Reserve. The amount of $8,000,000.00, which amount shall be reserved from the amounts available to be borrowed under this Agreement and shall be disbursed as provided in Section 5.6. Test Period. See Section 9.2. Title Insurance Company. Commonwealth Land Title Insurance Company or another title insurance company or companies reasonably approved by the Agent. Title Policy. With respect to each parcel of Mortgaged Property, an ALTA standard form title insurance policy (or, if such form is not available, an equivalent form of or legally promulgated form of owner's title insurance policy reasonably acceptable to the Agent) issued by a Title Insurance Company (with such reinsurance or co-insurance as the Agent may require, any such reinsurance to be with direct access endorsements to the extent available under applicable law) in such amount as the Agent may require insuring that the Property Owner holds marketable fee simple title to such parcel, subject only to the encumbrances approved by Agent and which shall not contain standard exceptions for mechanics liens, persons in occupancy (other than tenants as tenants only under Leases) or matters which would be shown by a survey, shall not insure over any matter except to the extent that any such affirmative insurance is acceptable to the Agent in its sole discretion, and shall contain such other endorsements and affirmative insurance as the Agent reasonably may require and is available in the State in which the Real Estate is located. Total Commitment. The sum of the Commitments of the Banks, as in effect from time to time. Type. As to any Loan, its nature as a Base Rate Loan or a Eurodollar Rate Loan. Under Development. Any Real Estate shall be considered under development until such time as (a) a certificate of occupancy has been obtained, (b) seventy-five percent (75%) of the net leasable area is leased and occupied, and (c) the gross revenue from the operation of such Real Estate shall have been not less than the operating costs (including amounts properly allocable to such period for expenses which are not payable on a regular basis during such period, such as taxes and insurance) for three (3) consecutive months. Voting Interests. Stock or similar ownership interests, of any class or classes (however designated), the holders of which are at the time entitled, as such holders, (a) to vote for the election of a majority of the directors (or persons performing similar functions) of the corporation, association, partnership, trust or other business entity involved, or (b) to control, manage, or conduct the business of the corporation, partnership, association, trust or other business entity involved. WASH. Wells Avenue Senior Holdings LLC, a Massachusetts limited liability company. WASH Manager. WASH Manager L.L.C., a Delaware limited liability company. WASH Manager Organizational Agreements. The WASH Manager Organizational Agreements shall mean the "Manager Organizational Agreements" as defined in the Mortgage Loan Agreement. WASH Organizational Agreements. The WASH Organizational Agreements shall mean the "Property Owner Organizational Agreements" as defined in the Mortgage Loan Agreement. Wells Avenue Holdings. Wells Avenue Holdings L.L.C., a Delaware limited liability company. Wells Avenue Holdings Organizational Agreements. The Wells Avenue Holdings Organizational Agreements shall mean the "Member Organizational Agreements" as defined in the Mortgage Loan Agreement. Wellsford Commercial. Wellsford Commercial Properties Trust, a Maryland real estate investment trust. Wellsford Real Properties. Wellsford Real Properties, Inc., a Maryland corporation. WHWEL. WHWEL Real Estate Limited Partnership, a Delaware limited partnership. WWP Member Indemnity Agreement. The Indemnity Agreement by Wellsford Real Properties, Whitehall Street Real Estate Limited Partnership V, Whitehall Street Real Estate Limited Partnership VI, Whitehall Street Real Estate Limited Partnership VII and Whitehall Street Real Estate Limited Partnership VIII in favor of the Agent and the Banks, as the same may be modified or amended. WWP Members. Wellsford Commercial and WHWEL. Section 1.2. Rules of Interpretation. (a) A reference to any document or agreement shall include such document or agreement as amended, modified or supplemented from time to time in accordance with its terms and the terms of this Agreement. (b) The singular includes the plural and the plural includes the singular. (c) A reference to any law includes any amendment or modification to such law. (d) A reference to any Person includes its permitted successors and permitted assigns. (e) Accounting terms not otherwise defined herein have the meanings assigned to them by generally accepted accounting principles applied on a consistent basis by the accounting entity to which they refer. (f) The words "include", "includes" and "including" are not limiting. (g) The words "approval" and "approved", as the context so determines, means an approval in writing given to the party seeking approval after full and fair disclosure to the party giving approval of all material facts necessary in order to determine whether approval should be granted. (h) All terms not specifically defined herein or by generally accepted accounting principles, which terms are defined in the Uniform Commercial Code as in effect in the State of New York, have the meanings assigned to them therein. (i) Reference to a particular "Section", refers to that section of this Agreement unless otherwise indicated. (j) The words "herein", "hereof", "hereunder" and words of like import shall refer to this Agreement as a whole and not to any particular section or subdivision of this Agreement. Section 2. THE FACILITY. Section 2.1. Commitment to Lend. Subject to the terms and conditions set forth in this Agreement, each of the Banks severally agrees to lend to the Borrower, and the Borrower may borrow from time to time between the Closing Date and the Advance Termination Date upon notice by the Borrower to the Agent given in accordance with Section 2.6, such sums as are requested by the Borrower for the purposes set forth in Section 7.11 up to the lesser of (a) a maximum aggregate principal amount outstanding (after giving effect to all amounts requested) at any one time equal to such Bank's Commitment and (b) such Bank's Commitment Percentage of the difference of (i) the aggregate Designated Collateral Value minus (ii) an amount equal to the aggregate Holdback; provided, that, in all events no Default or Event of Default shall have occurred and be continuing; and provided, further, that the outstanding principal amount of the Loans (after giving effect to all amounts requested) shall not at any time exceed the Total Commitment. The Borrower may repay and reborrow from time to time between the Closing Date and the Revolving Credit Termination Date. Notwithstanding anything herein to the contrary, in no event shall the amount of the Loans advanced for purposes permitted under this Agreement, other than the purposes contemplated by Section 5.6, exceed $67,000,000.00, and in no event shall the Borrower be permitted to request Loans after the Revolving Credit Termination Date except for amounts requested pursuant to Section 5.6. The Loans shall be made pro rata in accordance with each Bank's Commitment Percentage. The Loan Request shall constitute a representation and warranty by the Borrower that all of the conditions set forth in Section 10 and Section 11, in the case of the initial Loan, and Section 11, in the case of all other Loans, have been satisfied on the date of such funding. Section 2.2. Facility Fee. The Borrower agrees to pay to the Agent for the accounts of the Banks in accordance with their respective Commitment Percentages a facility fee calculated at the rate of 0.1875% per annum on the average daily amount by which the Total Commitment exceeds the outstanding principal amount of Loans during each calendar quarter or portion thereof commencing on the date hereof and ending on the Advance Termination Date; provided, however, that from and after the Revolving Credit Termination Date and ending on the Advance Termination Date, such fee shall be calculated at the rate of 0.1875% per annum on the average daily amount by which the Tenant Improvement Reserve exceeds the outstanding principal amount of Loans disbursed pursuant to Section 5.6 from the Tenant Improvement Reserve. The facility fee shall be payable quarterly in arrears on the first day of each calendar quarter for the immediately preceding calendar quarter or portion thereof, or on any earlier date on which the Commitments shall be reduced or shall terminate as provided in Section 2.3, with a final payment on the Advance Termination Date. Section 2.3. Reduction of Commitment. The Borrower shall have the right at any time and from time to time upon five Business Days' prior written notice to the Agent to reduce by $1,000,000 or an integral multiple of $1,000,000 in excess thereof or to terminate entirely the unborrowed portion of the Commitments, whereupon the Commitments of the Banks shall be reduced pro rata in accordance with their respective Commitment Percentages of the amount specified in such notice or, as the case may be, terminated, any such reduction to be without penalty (unless such reduction requires repayment of a Eurodollar Rate Loan). Promptly after receiving any notice of the Borrower delivered pursuant to this Section 2.3, the Agent will notify the Banks of the substance thereof. Upon the effective date of any such reduction or termination, the Borrower shall pay to the Agent for the respective accounts of the Banks the full amount of any facility fee under Section 2.2 then accrued on the amount of the reduction. No reduction or termination of the Commitments may be reinstated. Notwithstanding the foregoing, in no event shall the aggregate Commitments be reduced to less than $50,000,000.00. Section 2.4. Notes. The Loans shall be evidenced by a single promissory note of the Borrower to each Bank in substantially the form of Exhibit A hereto (collectively, the "Notes"), dated as of the Closing Date and completed with appropriate insertions. Each such Note shall be payable to the order of each Bank in the principal amount equal to such Bank's Commitment or, if less, the outstanding amount of all Loans made by such Bank, plus interest accrued thereon, as set forth below. The Borrower irrevocably authorizes the Agent to make or cause to be made, at or about the time of the Drawdown Date of any Loan or at the time of receipt of any payment of principal thereof, an appropriate notation on the Agent's Record reflecting the making of such Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Loans set forth on the Agent's Record shall be prima facie evidence of the principal amount thereof owing and unpaid to each Bank, but the failure to record, or any error in so recording, any such amount on the Agent's Record shall not limit or otherwise affect the obligations of the Borrower hereunder or under any Note to make payments of principal of or interest on any Note when due. By delivery of the Notes, there shall not be deemed to have occurred, and there has not otherwise occurred, any payment, satisfaction or novation of the Indebtedness evidenced by the "Notes" described in the Original Revolving Credit Agreement. Section 2.5. Interest on Loans. law Each Base Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the date on which such Base Rate Loan is converted to a Eurodollar Rate Loan at a rate per annum equal to the sum of the Base Rate plus one and one-half percent (1.50%). (b) Each Eurodollar Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at a rate per annum equal to the sum of the Eurodollar Rate determined for such Interest Period plus three and two-tenths percent (3.20%). (c) The Borrower promises to pay interest on each Loan in arrears on each Interest Payment Date with respect thereto. (d) Base Rate Loans and Eurodollar Rate Loans may be converted to Loans of the other Type as provided in Section 4.1. Section 2.6. Requests for Loans. (a) Except with respect to the initial Loan funded at the Closing Date, the Borrower shall give to the Agent written notice in the form of Exhibit B hereto (or telephonic notice confirmed in writing in the form of Exhibit B hereto) of each Loan requested hereunder (a "Loan Request") no less than five (5) Business Days prior to the proposed Drawdown Date. The Borrower shall not make a Loan Request more frequently than two (2) times each month. Each such notice shall specify with respect to the requested Loan the proposed principal amount, Drawdown Date, Interest Period (if applicable) and Type; provided, that, notwithstanding anything herein to the contrary, each Type of Loan requested by Borrower shall be the same Type requested by Property Owner for the corresponding advance under the Mortgage Loan Agreement. Each such notice shall also contain (i) a statement as to the purpose for which such advance shall be used (which purpose shall be in accordance with the terms of Section 5.6 or Section 7.11, as applicable), (ii) in the case of any advance relating to any Capital Improvement Project for a Mortgaged Property or a Mezzanine Property, a certification from the Borrower that all materialmen, laborers, subcontractors and any other parties who might or could claim statutory or common law liens and are furnishing or have furnished material or labor to the Mortgaged Property or Mezzanine Property, as applicable, have been paid (or will be paid from the proceeds of the requested advance) all amounts due for such labor and materials, and if requested by the Agent, delivery to the Agent of affidavits, lien waivers or other evidence reasonably satisfactory to the Agent evidencing the same, and (iii) a certification by the chief financial or chief accounting officer of the Borrower that the Borrower and the Guarantor are and will be in compliance with all of their respective covenants under the Loan Documents after giving effect to the making of such Loan. With respect to any Loan proposed to be funded after the initial Loan funded at the Closing Date, the Borrower shall have complied with all requirements set forth in Section 5.4 and the Majority Banks shall have granted their consent to and agreed to advance against a Mortgaged Property in accordance with the terms and conditions of Section 5.4. (b) Promptly upon receipt of any such notice, the Agent shall notify each of the Banks thereof. Except as provided in this Section 2.6, each such Loan Request shall be irrevocable and binding on the Borrower and shall obligate the Borrower to accept the Loan requested from the Banks on the proposed Drawdown Date, provided that, in addition to the Borrower's other remedies against any Bank which fails to advance its proportionate share of a requested Loan, such Loan Request may be revoked by the Borrower by notice received by the Agent no later than the Drawdown Date if any Bank fails to advance its proportionate share of the requested Loan in accordance with the terms of this Agreement, provided further that the Borrower shall be liable in accordance with the terms of this Agreement (including, without limitation, amounts due pursuant to Section 4.8) to any Bank which is prepared to advance its proportionate share of the requested Loan for any costs, expenses or damages incurred by such Bank as a result of the Borrower's election to revoke such Loan Request. Nothing herein shall prevent the Borrower or the funding Banks from seeking recourse against any Bank that fails to advance its proportionate share of a requested Loan (but not any other Bank) as required by this Agreement for the actual and consequential damages incurred by the Borrower (including, without limitation, amounts required to be paid under this Agreement by the Borrower to any Bank) and such funding Banks proximately caused by such Bank that has failed to advance its proportionate share, provided that in no event shall such Bank be liable for punitive or exemplary damages. The Borrower may without cost or penalty revoke a Loan Request by delivering notice thereof to each of the Banks no later than three (3) Business Days prior to the Drawdown Date. Each Loan Request shall be (a) for a Base Rate Loan in a minimum aggregate amount of $1,000,000 or an integral multiple of $100,000 in excess thereof, or (b) for a Eurodollar Rate Loan in a minimum aggregate amount of $2,000,000 or an integral multiple of $100,000 in excess thereof; provided, however, that there shall be no more than five (5) Eurodollar Rate Loans outstanding at any one time. In the event that the proceeds from such Loan are to be used for a purpose other than a Capital Improvement Project, then the Borrower shall provide to the Agent as soon as practicable thereafter such evidence as the Agent shall reasonably require to evidence that such funds have been used for such purpose (which evidence may include, without limitation, a closing statement). (c) Notwithstanding the foregoing, the Banks shall not be obligated to advance a Loan to Borrower unless and until the Mortgage Loan Banks have contemporaneously therewith advanced a pro rata amount for the same purpose as Borrower is requesting funds pursuant to Section 7.11. For the purposes hereof, the Banks' pro rata amount shall be twenty percent (20%) and the Mortgage Loan Banks' pro rata amount shall be eighty percent (80%). Section 2.7. Funds for Loans. (a) Not later than 2:00 p.m. (Boston time) on the proposed Drawdown Date of any Loans, each of the Banks will make available to the Agent, at the Agent's Head Office, in immediately available funds, the amount of such Bank's Commitment Percentage of the amount of the requested Loans which may be disbursed pursuant to Section 2.1. Upon receipt from each Bank of such amount, and upon receipt of the documents required by Section 10 and Section 11 and the satisfaction of the other conditions set forth therein, to the extent applicable, the Agent will make available to the Borrower the aggregate amount of such Loans made available to the Agent by the Banks by crediting such amount to the account of the Borrower maintained at the Agent's Head Office. The failure or refusal of any Bank to make available to the Agent at the aforesaid time and place on any Drawdown Date the amount of its Commitment Percentage of the requested Loans shall not relieve any other Bank from its several obligation hereunder to make available to the Agent the amount of such other Bank's Commitment Percentage of any requested Loans, including any additional Loans that may be requested subject to the terms and conditions hereof to provide funds to replace those not advanced by the Bank so failing or refusing, provided that the Borrower may by notice received by the Agent no later than the Drawdown Date refuse to accept any Loan which is not fully funded in accordance with the Borrower's Loan Request subject to the terms of Section 2.6. In the event of any such failure or refusal, the Banks not so failing or refusing shall be entitled to a priority secured position as against the Bank or Banks so failing or refusing for such Loans as provided in Section 12.4. (b) Unless Agent shall have been notified by any Bank prior to the applicable Drawdown Date that such Bank will not make available to Agent such Bank's pro rata share of a proposed Loan, Agent may in its discretion assume that such Bank has made such Loan available to Agent in accordance with the provisions of this Agreement and Agent may, if it chooses, in reliance upon such assumption make such Loan available to Borrower, and such Bank shall be liable to the Agent for the amount of such advance. Section 2.8. Extension of Maturity Date. (a) Provided that no Default or Event of Default shall have occurred and be continuing, the Borrower shall have the option, to be exercised by giving written notice to the Agent in the form of Exhibit D hereto at least 90 days prior to the Maturity Date, subject to the terms and conditions set forth in this Agreement, to extend the Maturity Date by one (1) year. The request by the Borrower for extension of the Maturity Date shall constitute a representation and warranty by the Borrower that all of the conditions set forth in this Section shall have been satisfied on the date of such request or shall be satisfied prior to the then existing Maturity Date. (b) The obligations of the Agent and the Banks to extend the Maturity Date shall be subject to the satisfaction of the following conditions precedent on or prior to the Maturity Date (without regard to any extension): (i) Payment of Extension Fee. The Borrower shall pay to the Agent for the pro rata accounts of the Banks in accordance with their respective Commitment Percentages an extension fee equal to fifteen- hundredths of one percent (0.15%) of the Total Commitment, which fee shall, when paid, be fully earned and non-refundable under any circumstances. (ii) No Default. On the date the Extension Request is given and on the Maturity Date (as determined without regard to such extension) there shall exist no Default or Event of Default. (iii) Representations and Warranties. The representations and warranties made by the Borrower, the Guarantor or the Property Owner or any of their respective Subsidiaries in the Loan Documents or otherwise made by or on behalf of such Persons in connection therewith or after the date thereof shall have been true and correct in all material respects when made and (other than representations as to the Guarantor) shall also be true and correct in all material respects on the Maturity Date (as determined without regard to such extension) other than for changes in the ordinary course of business permitted by this Agreement that have not had any materially adverse affect on the business of any of such Persons. (iv) Covenant Compliance. On the Maturity Date (as determined without regard to such extension request), the Borrower would be in compliance with the covenants set forth in Section 9.1 and Section 9.2 at the levels set forth in such covenants as would be applicable during the extension period after December 31, 2000. (v) Appraisals. The Agent shall have received at Borrower's expense Appraisals or updates of prior Appraisals to determine the current Appraised Value and Designated Collateral Value of the Mortgaged Property and the Mezzanine Property, which Appraisals shall be ordered, reviewed and approved as provided in Section 5.2(a). The aggregate outstanding principal amount of the Loans shall be reduced to an amount such that the aggregate outstanding principal amount of the Loans does not exceed the Designated Collateral Value (as most recently determined based upon the Appraisals obtained pursuant to this Section 2.8). (vi) Extension of Mortgage Loan Agreement Maturity Date. The maturity date for the Mortgage Loan shall have been extended to coincide with the Maturity Date, as extended. Section 2.9. Termination of Advances. Notwithstanding anything in this Agreement to the contrary, the Borrower shall have no right to obtain from the Banks, and the Banks shall have no obligation to lend to Borrower, any additional sums under this Agreement after the Advance Termination Date. Section 3. REPAYMENT OF THE LOANS. Section 3.1. Stated Maturity. The Borrower promises to pay on the Maturity Date, and there shall become absolutely due and payable on the Maturity Date, all of the Loans outstanding on such date, together with any and all accrued and unpaid interest thereon. Section 3.2. Mandatory Prepayments. (a) If at any time the outstanding principal amount of the Mortgage Loan is prepaid in full and the obligation of the Mortgagee to advance Mortgage Loans thereunder shall terminate, whether voluntarily or involuntarily or as the result of an acceleration of the maturity date thereof, all proceeds from any repayment or refinance thereof in excess of the amounts due and payable under the Mortgage Loan Documents shall be paid to Agent for the account of the Banks as a prepayment of the Loans; provided that Borrower shall not permit Property Owner to refinance the Mortgage Loans unless the holder of such new loan shall enter into an intercreditor agreement with Agent and the Banks in the form of the intercreditor agreement entered into of even date herewith between Agent and BKB as agent for the Mortgagee. For the purposes hereof, and without limiting the generality of the foregoing, the Mortgage Loan shall be deemed to have been prepaid in the event that a Mortgage or the Mortgages are assigned by the holder thereof to a new holder for the purpose of facilitating a refinance of the indebtedness secured thereby. (b) In the event that the Borrower shall prepay in whole or in part the outstanding amount of the Mortgage Loans and the obligation of the Mortgagee to advance Mortgage Loans thereunder shall not have terminated, then the Borrower shall pay to the Agent for the account of the Banks as a prepayment of the Loans an amount such that the principal amount of the Loans shall be reduced in the same proportion as the Mortgage Loans are reduced as a result of the corresponding prepayment thereof. By way of example, if ten percent (10%) of the outstanding principal balance of the Mortgage Loans is prepaid, then the Borrower shall prepay the Loans in an amount equal to ten percent (10%) of the outstanding principal balance thereof. The provisions of this Section 3.2(b) shall not apply to a prepayment in full of the Mortgage Loan and the termination of the Mortgage Loan Documents, which prepayment shall be governed by Section 3.2(a). (c) Except with the prior written approval of the Majority Banks, which approval may be withheld in the sole and absolute discretion of the Majority Banks, if at any time the outstanding principal amount of the Mezzanine Mortgage Loan is prepaid in full, whether voluntarily, involuntarily or as the result of an acceleration of the maturity date thereof, all of the outstanding Obligations together with any and all accrued but unpaid interest thereon and prepayment fees shall become absolutely due and payable. For the purposes hereof, and without limiting the generality of the foregoing, the Mezzanine Mortgage Loan shall be deemed to have been prepaid in the event that (i) a Nomura Mortgage or the Nomura Mortgages are assigned by the holder thereof to a new holder for the purpose of facilitating a refinance of the indebtedness secured thereby or (ii) WASH defeases the Mezzanine Mortgage Loan as permitted by Section 2.3.3 of the Mezzanine Mortgage Loan Agreement. (d) If at any time there shall occur, whether voluntarily, involuntarily or by operation of law, a sale, transfer, assignment, conveyance, option or other disposition of, or any mortgage, hypothecation, encumbrance, financing or refinancing of (i) any assets or properties of WASH, except for the Mezzanine Mortgage Loan and releases of the Mezzanine Property in accordance with the terms of this Agreement, and except as provided in Section 7.21(a) with respect to the replacement of fixtures, equipment, machinery and other personal property by WASH in connection with the operation of the Mezzanine Property in the ordinary course of business, (ii) any assets or properties of the Property Owner, except for the Mortgage Loan and releases of the Mortgaged Property in accordance with the terms of this Agreement, and except as provided in Section 7.21(a) with respect to the replacement of fixtures, equipment, machinery and other personal property by the Property Owner in connection with the operation of the Mortgaged Property in the ordinary course of business, (iii) any of the Collateral or the Mezzanine Collateral except as provided in this Agreement, (iv) any other assets or properties of WASH Manager or Wells Avenue Holdings, (v) any direct or indirect interest of Borrower in the Property Owner or either Property Owner, WASH Manager or Wells Avenue Holdings in WASH, (vi) any direct or indirect interest of Wells Avenue Holdings in WASH Manager, or (vii) any direct or indirect interest of Property Owner in Wells Avenue Holdings, all of the Obligations outstanding on such date, together with any and all accrued but unpaid interest thereon and prepayment fees, shall become absolutely due and payable. Section 3.3. Optional Prepayments. The Borrower shall have the right, at the Borrower's election, to prepay the outstanding amount of the Loans, as a whole or in part, at any time without penalty or premium; provided, that the full or partial prepayment of the outstanding amount of any Eurodollar Rate Loans pursuant to Section 3.2(b) or this Section 3.3 may be made only on the last day of the Interest Period relating thereto except as otherwise required pursuant to Section 4.7 unless payment is first made of any amounts payable pursuant to Section 4.8. The Borrower shall give the Agent, no later than 10:00 a.m., Boston time, at least three (3) Business Days prior written notice of any prepayment pursuant to Section 3.2(b) or this Section 3.3 of any Base Rate Loans and at least four Eurodollar Business Days notice of any proposed repayment pursuant to this Section 3.3 of Eurodollar Rate Loans, in each case specifying the proposed date of payment of Loans and the principal amount to be paid. Section 3.4. Partial Prepayments. Each partial prepayment of the Loans under Section 3.3 shall be in an integral multiple of $100,000, shall be accompanied by the payment of accrued interest on the principal prepaid to the date of payment and, after payment of such interest, shall be applied, in the absence of instruction by the Borrower, first to the principal of Base Rate Loans and then to the principal of Eurodollar Rate Loans. Section 3.5. Effect of Prepayments. Amounts of the Loans prepaid under Section 3.2(b) and Section 3.3 prior to the Revolving Credit Termination Date may be reborrowed as provided in Section 2. Notwithstanding anything herein to the contrary, amounts of the Loans prepaid after the Revolving Credit Termination Date may not be reborrowed. Section 4. CERTAIN GENERAL PROVISIONS. Section 4.1. Conversion Options. (a) The Borrower may elect from time to time to convert any outstanding Loan to a Loan of another Type and such Loan shall thereafter bear interest as a Base Rate Loan or a Eurodollar Rate Loan, as applicable; provided that (i) with respect to any such conversion of a Eurodollar Rate Loan to a Base Rate Loan, the Borrower shall give the Agent at least three Business Days' prior written notice of such election, and such conversion shall only be made on the last day of the Interest Period with respect to such Eurodollar Rate Loan; (ii) with respect to any such conversion of a Base Rate Loan to a Eurodollar Rate Loan, the Borrower shall give the Agent at least four Eurodollar Business Days' prior written notice of such election and the Interest Period requested for such Loan, the principal amount of the Loan so converted shall be in a minimum aggregate amount of $2,000,000 or an integral multiple of $100,000 in excess thereof and, after giving effect to the making of such Loan, there shall be no more than five (5) Eurodollar Rate Loans outstanding at any one time; and (iii) no Loan may be converted into a Eurodollar Rate Loan when any Default or Event of Default has occurred and is continuing. All or any part of the outstanding Loans of any Type may be converted as provided herein, provided that no partial conversion shall result in a Base Rate Loan in an aggregate principal amount of less than $1,000,000 or a Eurodollar Rate Loan in an aggregate principal amount of less than $2,000,000 and that the aggregate principal amount of each Loan shall be in an integral multiple of $100,000. On the date on which such conversion is being made, each Bank shall take such action as is necessary to transfer its Commitment Percentage of such Loans to its Domestic Lending Office or its Eurodollar Lending Office, as the case may be. Each Conversion Request relating to the conversion of a Base Rate Loan to a Eurodollar Rate Loan shall be irrevocable by the Borrower. (b) Any Loan may be continued as such Type upon the expiration of an Interest Period with respect thereto by compliance by the Borrower with the terms of Section 4.1; provided that no Eurodollar Rate Loan may be continued as such when any Default of the type described in subsections (a), (b), (c) or (d) of Section 12.1 or Event of Default has occurred and is continuing, but shall be automatically converted to a Base Rate Loan on the last day of the Interest Period relating thereto ending during the continuance of any Default or Event of Default. (c) In the event that the Borrower does not notify the Agent of its election hereunder with respect to any Loan, such Loan shall be automatically converted to a Base Rate Loan at the end of the applicable Interest Period. (d) Notwithstanding anything herein to the contrary, each Loan that is continued or converted pursuant to this Section 4.1 shall be continued as or converted to the same Type of Loan as the corresponding loan to Property Owner under the Mortgage Loan Agreement is converted or continued, and if such Type is a Eurodollar Rate Loan, the Interest Period selected shall comply with the conditions set forth in the definition of the term "Interest Period". Section 4.2. Closing Fee. The Borrower has paid to BKB and Goldman a closing fee as specified in the Agreement Regarding Fees. BKB and Goldman shall pay on the Closing Date to the other Banks a closing fee in accordance with their separate agreement. Section 4.3. Agent's Fee. The Borrower shall pay to the Agent, for the Agent's own account, an Agent's fee as specified in the Agreement Regarding Fees. Section nlaw Funds for Payments. (a) All payments of principal, interest, facility fees, Agent's fees, closing fees and any other amounts due hereunder or under any of the other Loan Documents shall be made to the Agent, for the respective accounts of the Banks and the Agent, as the case may be, at the Agent's Head Office, not later than 12:00 noon (Boston time) on the day when due, in each case in immediately available funds. The Agent is hereby authorized to charge the account of the Borrower with BKB, on the dates when the amount thereof shall become due and payable, with the amounts of the principal of and interest on the Loans and all fees, charges, expenses and other amounts owing to the Agent and/or the Banks under the Loan Documents. (b) All payments by the Borrower hereunder and under any of the other Loan Documents shall be made without setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless the Borrower is compelled by law to make such deduction or withholding. If any such obligation is imposed upon the Borrower with respect to any amount payable by it hereunder or under any of the other Loan Documents, the Borrower will pay to the Agent, for the account of the Banks or (as the case may be) the Agent, on the date on which such amount is due and payable hereunder or under such other Loan Document, such additional amount in Dollars as shall be necessary to enable the Banks or the Agent to receive the same net amount which the Banks or the Agent would have received on such due date had no such obligation been imposed upon the Borrower. The Borrower will deliver promptly to the Agent certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by the Borrower hereunder or under such other Loan Document. Section 4.5. Computations. All computations of interest on the Loans and of other fees to the extent applicable shall be based on a 360-day year and paid for the actual number of days elapsed. Except as otherwise provided in the definition of the term "Interest Period" with respect to Eurodollar Rate Loans, whenever a payment hereunder or under any of the other Loan Documents becomes due on a day that is not a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and interest shall accrue during such extension. The outstanding amount of the Loans as reflected on the records of the Agent from time to time shall be considered prima facie evidence of such amount. Section 4.6. Inability to Determine Eurodollar Rate. In the event that, prior to the commencement of any Interest Period relating to any Eurodollar Rate Loan, the Agent shall determine that adequate and reasonable methods do not exist for ascertaining the Eurodollar Rate for such Interest Period, the Agent shall forthwith give notice of such determination (which shall be conclusive and binding on the Borrower and the Banks) to the Borrower and the Banks. In such event (a) any Loan Request with respect to Eurodollar Rate Loans shall be automatically withdrawn and shall be deemed a request for Base Rate Loans and (b) each Eurodollar Rate Loan will automatically, on the last day of the then current Interest Period thereof, become a Base Rate Loan, and the obligations of the Banks to make Eurodollar Rate Loans shall be suspended until the Agent determines that the circumstances giving rise to such suspension no longer exist, whereupon the Agent shall so notify the Borrower and the Banks. Section 4.7. Illegality. Notwithstanding any other provisions herein, if any present or future law, regulation, treaty or directive or the interpretation or application thereof shall make it unlawful, or any central bank or other governmental authority having jurisdiction over a Bank or its Eurodollar Lending Office shall assert that it is unlawful, for any Bank to make or maintain Eurodollar Rate Loans, such Bank shall forthwith give notice of such circumstances to the Agent and the Borrower and thereupon (a) the commitment of the Banks to make Eurodollar Rate Loans or convert Loans of another type to Eurodollar Rate Loans shall forthwith be suspended and (b) the Eurodollar Rate Loans then outstanding shall be converted automatically to Base Rate Loans on the last day of each Interest Period applicable to such Eurodollar Rate Loans or within such earlier period as may be required by law. Section 4.8. Additional Interest. If any Eurodollar Rate Loan or any portion thereof is repaid or is converted to a Base Rate Loan for any reason on a date which is prior to the last day of the Interest Period applicable to such Eurodollar Rate Loan, the Borrower will pay to the Agent upon demand for the account of the Banks in accordance with their respective Commitment Percentages, in addition to any amounts of interest otherwise payable hereunder, any amounts required to compensate the Banks for any losses, costs or expenses which may reasonably be incurred as a result of such payment or conversion, including, without limitation, an amount equal to daily interest for the unexpired portion of such Interest Period on the Eurodollar Rate Loan or portion thereof so repaid or converted at a per annum rate equal to the excess, if any, of (a) the interest rate calculated on the basis of the Eurodollar Rate applicable to such Eurodollar Rate Loan minus (b) the yield obtainable by the Agent upon the purchase of debt securities customarily issued by the Treasury of the United States of America which have a maturity date most closely approximating the last day of such Interest Period (it being understood that the purchase of such securities shall not be required in order for such amounts to be payable and that a Bank shall not be obligated or required to have actually obtained funds at the Eurodollar Rate). Section 4.9. Additional Costs, Etc. Notwithstanding anything herein to the contrary, if any future applicable law or any amendment or modification of present applicable law which expression, as used herein, includes statutes, rules and regulations thereunder and legally binding interpretations thereof by any competent court or by any governmental or other regulatory body or official with appropriate jurisdiction charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued to any Bank or the Agent by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), shall: (a) subject any Bank or the Agent to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Agreement, the other Loan Documents, such Bank's Commitment or the Loans (other than taxes based upon or measured by the income or profits of such Bank or the Agent), or (b) materially change the basis of taxation (except for changes in taxes on income or profits) of payments to any Bank of the principal of or the interest on any Loans or any other amounts payable to any Bank under this Agreement or the other Loan Documents, or (c) impose or increase or render applicable any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or loans by, or commitments of an office of any Bank beyond those in effect as of the date hereof, or (d) impose on any Bank or the Agent any other conditions or requirements with respect to this Agreement, the other Loan Documents, the Loans, such Bank's Commitment, or any class of loans or commitments of which any of the Loans or such Bank's Commitment forms a part; and the result of any of the foregoing is (i) to increase the cost to any Bank of making, funding, issuing, renewing, extending or maintaining any of the Loans or such Bank's Commitment, or (ii) to reduce the amount of principal, interest or other amount payable to such Bank or the Agent hereunder on account of such Bank's Commitment or any of the Loans, or (iii) to require such Bank or the Agent to make any payment or to forego any interest or other sum payable hereunder, the amount of which payment or foregone interest or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by such Bank or the Agent from the Borrower hereunder, then, and in each such case, the Borrower will, within fifteen (15) days of demand made by such Bank or (as the case may be) the Agent at any time and from time to time and as often as the occasion therefor may arise, pay to such Bank or the Agent such additional amounts as such Bank or the Agent shall determine in good faith to be sufficient to compensate such Bank or the Agent for such additional cost, reduction, payment or foregone interest or other sum. Each Bank and the Agent in determining such amounts may use any reasonable averaging and attribution methods, generally applied by such Bank or the Agent. Section 4.10. Capital Adequacy. If after the date hereof any Bank determines that (a) the adoption of or change in any law, rule, regulation or guideline regarding capital requirements of general application for banks or bank holding companies or any change in the interpretation or application thereof by any governmental authority charged with the administration thereof, or (b) compliance by such Bank or its parent bank holding company with any future guideline, request or directive of any such entity regarding capital adequacy or any amendment or change in interpretation of any existing guideline, request or directive (whether or not having the force of law), has the effect of reducing the return on such Bank's or such holding company's capital as a consequence of such Bank's commitment to make Loans hereunder to a level below that which such Bank or holding company could have achieved but for such adoption, change or compliance (taking into consideration such Bank's or such holding company's then existing policies with respect to capital adequacy and assuming the full utilization of such entity's capital) by any amount deemed by such Bank to be material, then such Bank may notify the Borrower thereof. The Borrower agrees to pay to such Bank the amount of such reduction in the return on capital as and when such reduction is determined, upon presentation by such Bank of a statement of the amount setting for the Bank's calculation thereof. In determining such amount, such Bank may use any reasonable averaging and attribution methods, generally applied by such Bank or the Agent. Section 4.11. Indemnity of Borrower. The Borrower agrees to indemnify each Bank and to hold each Bank harmless from and against any loss, cost or expense that such Bank may sustain or incur as a consequence of (a) default by the Borrower in payment of the principal amount of or any interest on any Eurodollar Rate Loans as and when due and payable, including any such loss or expense arising from interest or fees payable by such Bank to lenders of funds obtained by it in order to maintain its Eurodollar Rate Loans, or (b) default by the Borrower in making a borrowing or conversion after the Borrower has given (or is deemed to have given) a Loan Request or a Conversion Request; provided, however, that the Borrower shall not be required to so indemnify any Bank pursuant to clause (b) above which fails or refuses to fund its proportionate share of a Loan in accordance with the terms of this Agreement. Section 4.12. Interest on Overdue Amounts; Late Charge. Overdue principal and (to the extent permitted by applicable law) interest on the Loans and all other overdue amounts payable hereunder or under any of the other Loan Documents shall bear interest payable on demand at a rate per annum equal to four percent (4.0%) above the Base Rate from the date due until such amount shall be paid in full (after as well as before judgment). In addition, the Borrower shall pay a late charge equal to three percent (3.0%) of any amount of interest and/or principal payable on the Loans or any other amounts payable hereunder or under the Loan Documents, which is not paid within ten days of the date when due. Section 4.13. Intentionally Omitted. Section 4.14. Certificate. A certificate setting forth any amounts payable pursuant to Section 4.8, Section 4.9, Section 4.10, Section 4.11 or Section 4.12 and a brief explanation of such amounts which are due, submitted by any Bank or the Agent to the Borrower, shall be conclusive in the absence of manifest error. Section 4.15. Limitation on Interest. Notwithstanding anything in this Agreement to the contrary, all agreements between the Borrower and the Banks and the Agent, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of any of the Obligations or otherwise, shall the interest contracted for, charged or received by the Banks exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, interest would otherwise be payable to the Banks in excess of the maximum lawful amount, the interest payable to the Banks shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance the Banks shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal balance of the Obligations and to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal of the Obligations, such excess shall be refunded to the Borrower. All interest paid or agreed to be paid to the Banks shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal of the Obligations (including the period of any renewal or extension thereof) so that the interest thereon for such full period shall not exceed the maximum amount permitted by applicable law. This section shall control all agreements between the Borrower and the Banks and the Agent. Section 4.16. Certain Provisions Relating to Increased Costs. If any Bank requests compensation for any losses or costs to be reimbursed pursuant to any one or more of the provisions of Section 4.9 or Section 4.10, then, upon request of Borrower, such Bank shall use reasonable efforts in a manner consistent with such institution's practice in connection with loans like the Loan to eliminate, mitigate or reduce amounts that would otherwise be payable by Borrower under the foregoing provisions, provided that such action would not be otherwise prejudicial to such Bank, including, without limitation, by designating another of such Bank's offices, branches or affiliates; the Borrower agreeing to pay all reasonably incurred costs and expenses incurred by such Bank in connection with any such action. Notwithstanding anything to the contrary contained herein, if no Default or Event of Default shall have occurred and be continuing, and if any Bank has requested payment or compensation for any losses or costs to be reimbursed pursuant to any one or more of the provisions of Section 4.9 or Section 4.10 (each, an "Affected Bank"), then, within thirty (30) days after such request for payment or compensation, Borrower shall have the one-time right as to such Affected Bank, to be exercised by delivery of written notice delivered to the Agent and the Affected Bank within thirty (30) days of receipt of such notice, to elect to cause the Affected Bank to transfer its Commitment. The Agent shall promptly notify the remaining Banks that each of such Banks shall have the right, but not the obligation, to acquire a portion of the Commitment, pro rata based upon their relevant Commitment Percentages, of the Commitment of the Affected Bank (or if any of such Banks does not elect to purchase its pro rata share, then to such remaining Banks in such proportion as approved by the Agent). In the event that the Banks do not elect to acquire all of the Affected Bank's Commitment, then the Agent shall endeavor to obtain a new Bank to acquire such remaining Commitment. Upon any such purchase of the Commitment of the Affected Bank, the Affected Bank's interest in the Obligations and its rights hereunder and under the Loan Documents shall terminate at the date of purchase, and the Affected Bank shall promptly execute all documents reasonably requested to surrender and transfer such interest. The purchase price for the Affected Bank's Commitment shall equal any and all amounts outstanding and owed by Borrower to the Affected Bank, including principal and all accrued and unpaid interest or fees. Section 5. COLLATERAL SECURITY. Section 5.1. Collateral. The Obligations shall be secured by (i) the Indemnity Agreement, (ii) a perfected first priority security interest to be held by the Agent for the benefit of the Banks in the Equity Interests pursuant to the terms of the Assignment of Interests, (iii) a perfected first priority lien to be held by the Agent for the benefit of the Banks in cash and Short-term Investments of the Borrower from time to time pledged to the Agent pursuant to one or more Pledge Agreements, and (iv) such additional collateral, if any, as the Agent may from time to time accept as security for the Obligations with the consent of the Majority Banks, which consent may be given or withheld in the sole discretion of the Majority Banks. The Obligations shall also be guaranteed pursuant to the Guaranty. Section 5.2. Appraisals. (a) The Agent on behalf of the Banks shall require Appraisals of each of the Mortgaged Property and the Mezzanine Property in the event that the Borrower exercises its extension option pursuant to Section 2.8, which will be ordered by the Agent and reviewed and approved by the appraisal departments of the Majority Banks, in order to determine the current Appraised Value of the Mortgaged Property and the Mezzanine Property, and the Borrower shall pay to the Agent on demand all reasonable costs of all such Appraisals; provided, however, that so long as no Default or Event of Default shall have occurred and be continuing and regulatory requirements of any Bank generally applicable to real estate loans of the category made under this Agreement as reasonably interpreted by such Bank shall not require more frequent Appraisals, and except as required with respect to the approval of Eligible Real Estate as a Mortgaged Property under Section 5.4, the Borrower shall not be required to pay for an Appraisal of a particular Mortgaged Property or Mezzanine Property except in connection with such extension request. (b) Notwithstanding the provisions of Section 5.2(a), the Agent may obtain Appraisals or perform internal studies updating and revising prior Appraisals with respect to the Mortgaged Property and the Mezzanine Property or such portion thereof as the Majority Banks shall determine, for the purpose of determining the current Appraised Value of the Mortgaged Property and the Mezzanine Property at any time following a partial condemnation of or uninsured casualty to a Mortgaged Property or a Mezzanine Property (provided that such Appraisal shall be limited to the affected property). The expense of such Appraisals and updates performed pursuant to this Section 5.2(b) shall be borne by the Borrower. Section 5.3. Release of Property. (a) Provided no Default or Event of Default shall have occurred hereunder and be continuing (or would exist immediately after giving effect to the transactions contemplated by this Section 5.3), the Property Owner may release a Mortgaged Property from the lien of the Mortgage encumbering the same upon the request of the Borrower and upon the following terms and conditions (provided that a release of a Mezzanine Property shall be governed by the provisions of Section 5.3(b)): (i) The Borrower shall deliver to the Agent written notice of Property Owner's desire to obtain each such release no later than fifteen (15) days prior to the date on which each such release is to be effected together with evidence satisfactory to the Agent that such release is to facilitate a sale of such Mortgaged Property to an unrelated third party in a bona-fide arms-length transaction for a cash sales price and that such release is in compliance with the requirements of the Mortgage Loan Documents (or has otherwise been consented to by the Mortgagee); and (ii) The Borrower shall submit to the Agent with such request a Compliance Certificate prepared using the financial statements of the Borrower most recently provided or required to be provided to the Agent under Section 6.4 or Section 7.4 adjusted in the best good faith estimate of the Borrower to give effect to the proposed release and demonstrating that no Default or Event of Default with respect to the covenants referred to therein shall exist after giving effect to such release; and (iii) The Borrower shall pay all reasonable costs and expenses of the Agent in connection with such release, including without limitation, reasonable attorney's fees and disbursements; and (iv) The Borrower shall pay to the Agent for the account of the Banks, which payment shall be applied to reduce the outstanding principal balance of the Loans, a release price equal to one hundred twenty percent (120%) of the Designated Collateral Value attributable to such Mortgaged Property. In the event of a release pursuant hereto, the amount available to be borrowed against the Collateral remaining after such release shall be reduced by an amount equal to twenty percent (20%) of the Designated Collateral Value of the Mortgaged Property so released without reducing the Designated Collateral Value of the remaining Mortgaged Properties or other Collateral for purposes of calculating release prices. Notwithstanding the foregoing, (A) the vacant land described on Schedule 5.3(a) hereto comprising part of the Mortgaged Property commonly known as Point View and (B) the farmhouse improvements at the Mortgaged Property commonly known as 180/188 Mt. Airy Road subject to the purchase option contained in Paragraph 33 of that certain Agreement between Fidelity Union Bank, as ancillary trustee for Mellon Bank, N.A., as trustee for Westinghouse Master Trust Fund, as landlord, and Mt. Airy Associates/Management, as tenant, dated November 8, 1982, shall be released upon the payment to the Agent for the account of the Banks of an amount (without premium) equal to twenty percent (20%) of the gross sales proceeds less reasonable and customary closing costs from such sale, the Mortgaged Property commonly known as 74 Turner Street shall be released upon the payment to the Agent for the account of the Banks an amount (without premium) equal to seventy-six percent (76%) of the gross sales proceeds less reasonable and customary closing costs from such sale (the "74 Turner Release Price"), and the vacant land described in Schedule 5.3(b) hereto comprising part of the Mortgaged Property commonly known as Greenbrook Corporate Center shall be released upon the payment to the Agent for the account of the Banks an amount (without premium) equal to the amount allocated to such vacant land in the Appraisal of such Mortgaged Property (as most recently determined pursuant to this Agreement) upon the sale of such land to an unrelated third party, provided that the Borrower shall submit to the Agent with the request for the release of the Point View and Greenbrook Corporate Center land, 74 Turner Street or such improvements at Mt. Airy (A) a survey satisfactory to Agent showing such land that Borrower desires to release from the Mortgage and such other evidence as Agent may reasonably require to show the availability of unrestricted (whether by private agreement or governmental provision) direct access to public roads and utilities from all unreleased portions of such Mortgaged Property, (B) a certification from Borrower that the conveyance by Borrower of such land which is requested to be released will not violate the terms of any lease, agreement, ordinance or restriction by which such Mortgaged Property is subject (and, with respect to the release of 74 Turner Street, any lease, agreement, ordinance or restriction by which the Mezzanine Property commonly known as 128 Technology Center is subject) and, with respect to the release of 74 Turner Street, a certification from an appropriate licensed professional that the Mezzanine Property commonly known as 128 Technology Center satisfies all zoning requirements applicable thereto, including without limitation, parking requirements without utilization of 74 Turner Street, and (C) evidence of the proper subdivision of the property to be released. Such payments shall be applied to reduce the outstanding principal balance of the Loans; provided, that the Borrower shall not be required to make a payment which would reduce the principal balance below zero. Upon the release of 74 Turner Street, the Designated Collateral Value for the Mezzanine Property commonly known as 128 Technology Center shall be reduced by the amount of the 74 Turner Release Price. (b) Provided no Default or Event of Default shall have occurred hereunder or the other Loan Documents and be continuing (or would exist immediately after giving effect to the transactions contemplated by this Section 5.3), WASH may from time to time release a Mezzanine Property from the lien of the Nomura Mortgage encumbering the same (and Property Owner may obtain a release thereof from the Collateral for the Mortgage Loan), and thereafter (or concurrently) sell, transfer or otherwise convey such Mezzanine Property to a third party, without thereby requiring the prepayment of the outstanding Obligations as provided in Section 3.2(c) upon the request of the Borrower and upon the following terms and conditions: (i) The Borrower shall deliver to the Agent written notice of WASH's desire to obtain each such release no later than fifteen (15) days prior to the date on which each such release is to be effected together with evidence satisfactory to the Agent that such release is to facilitate a sale of such Mezzanine Property to an unrelated third party in a bona-fide arms-length transaction for a cash sales price or a bona- fide refinance and that such release is in compliance with the requirements of the Mezzanine Mortgage Loan Documents and the Mortgage Loan Documents (or has otherwise been consented to by the Mortgagee and the Mezzanine Mortgagee); and (ii) The Borrower shall submit to the Agent with such request a Compliance Certificate prepared using the financial statements of the Borrower most recently provided or required to be provided to the Agent under Section 6.4 or Section 7.4 adjusted in the best good faith estimate of the Borrower to give effect to the proposed release and demonstrating that no Default or Event of Default with respect to the covenants referred to therein shall exist after giving effect to such release; and (iii) The Borrower shall pay all reasonable costs and expenses of the Agent in connection with such release, including without limitation, reasonable attorney's fees and disbursements; and (iv) The Borrower shall pay to the Agent for the account of the Banks, which payment shall be applied to reduce the outstanding principal balance of the Loans, a release price for such property as set forth on Schedule 6.4. In the event of a release pursuant hereto, the amount available to be borrowed against the Collateral remaining for the Loans after such release shall be reduced by an amount equal to twenty percent (20%) of the Designated Collateral Value attributable to the property so released without reducing the Designated Collateral Value of such remaining property for the purposes of calculating release prices or the release prices set forth on Schedule 6.4; provided that upon a release of the Mezzanine Property commonly known as 201 University, the amount available to be borrowed against the balance of the Mezzanine Collateral remaining for the Loan shall be reduced by the sum of $151,535.00, provided further that such reduction shall not reduce the release prices set forth on Schedule 6.4. Such payments shall be applied to reduce the outstanding principal balance of the Loans; provided, that the Borrower shall not be required to make a payment which would reduce the principal balance below zero. Section 5.4. Additional Collateral. (a) The Borrower shall have the right subject to the terms hereof to permit Property Owner to add to the collateral for the Mortgage Loan any other Real Estate that is owned by Property Owner and which is not security for any other Indebtedness. Such addition shall be completed by the delivery to the Agent of each of the Eligible Real Estate Qualification Documents. Notwithstanding the foregoing, the addition of such collateral for the Mortgage Loan shall not increase the Designated Collateral Value or the amounts available to be borrowed by the Borrower unless each of the following conditions shall be satisfied: (i) if such proposed collateral is Real Estate, such Real Estate shall be Eligible Real Estate; [Remainder of This Page Intentionally Left Blank] (ii) no Default or Event of Default shall have occurred or exist or would occur or exist if such asset were included within the Collateral and the requested Loan fully funded; (iii) the Borrower shall have delivered to the Agent all Eligible Real Estate Qualification Documents or other instruments, documents or agreements as the Agent shall deem necessary or desirable, all of which instruments, documents or agreements shall be in form and substance satisfactory to the Agent in its sole discretion; (iv) the Agent, on behalf of the Banks, shall have received any other appraisals, surveys, rent rolls, environmental reports, title insurance reports, certificates, opinions or other information or documentation with respect to such Real Estate as the Agent, in its sole discretion, shall deem necessary or desirable; and (v) the Mortgagee shall have accepted such Real Estate as a Mortgaged Property. The Borrower acknowledges that the decision of the Majority Banks to grant or withhold their consent to the acceptance of an additional Mortgaged Property under this Section 5.4 shall be based entirely on such factors as the Majority Banks deem relevant in their sole discretion, including, without limitation, those enumerated in clauses (i) through (v) hereinabove, and such consent may be granted or withheld solely at the discretion of the Majority Banks; provided, however, that if the such Real Estate is a Stabilized Property, acceptance of such Real Estate shall be subject only to the satisfaction of the terms of Section 5.4(a)(ii), (iii), (iv) and (v). (b) In connection with each such addition, the Borrower shall pay to the Agent the reasonable out-of-pocket costs and expenses (including reasonable attorney's fees and expenses) of the Agent in connection with the addition of such property. (c) In no event shall the acquisition cost of any Mortgaged Property or the equity interests of Property Owner in the Mezzanine Property exceed $40,000,000.00. Section 5.5. Holdback. The Banks have required that Borrower reserve from the amounts available to be borrowed under this Agreement an amount necessary to cover (a) twenty percent (20%) of the corporate general and administrative costs of the Borrower and Property Owner, and (b) twenty percent (20%) of the operating expenses for each Non-Stabilized Property for which net operating income from such property is insufficient to cover (such amount pursuant to clause (b) is hereinafter referred to as the "Negative Carry") as reasonably determined by the Borrower subject to the approval of the Agent in an amount to cover all such costs for a period of eighteen (18) months; provided that in the event that as of any date of determination such amount shall not have been determined as so provided, then such amount shall be as reasonably determined by Agent (such amount is hereafter referred to as the "Holdback"). Amounts reserved under the Holdback shall not bear interest until disbursed. The Borrower may request a disbursement of amounts reserved pursuant to the Holdback to pay such costs as such costs are incurred subject to the other terms of this Agreement, but at no time shall the amount of the Holdback be less than an amount sufficient to cover such cost and expenses for a period of six (6) months, and the Borrower shall take such actions as are necessary (including the prepayment of the Loan to reinstate the Holdback to such minimum level if it should ever fall below such level). The Holdback described on Section 5.5(a) shall be allocated pro rata among all Non- Stabilized Properties that also have a Holdback described in Section 5.5(b). At such time as a Non-Stabilized Property shall become a Stabilized Property, the Holdback for such Non-Stabilized Property shall be eliminated, provided that any Holdback for corporate general and administrative costs shall be re- allocated among the remaining Non-Stabilized Properties that also have a Holdback described in Section 5.5(b) pro rata based upon their respective Designated Collateral Values. As of the date of this Agreement, the Holdback is $989,400.40. The Holdback shall be determined by the Agent for each additional Mortgaged Property that is included as collateral for the Mortgage Loan which is a Non-Stabilized Property at the time it becomes a Mortgaged Property. At such time as the Borrower is able to comply with the covenants set forth in Sections 9.1 and 9.2 assuming that 100% of the general and administrative costs of the Borrower and Property Owner and the uncapitalized Negative Carry (which for the purposes hereof shall include 100% of the uncapitalized Negative Carry and shall not be limited to the 20% reserved against under this Section 5.5) are added back (with respect to the calculation of Section 9.2) and that the Holdback has been fully disbursed, the Holdback shall no longer be required. Section 5.6. Disbursement of Tenant Improvement Reserve. Amounts from the Tenant Improvement Reserve shall be available to be disbursed hereunder for Tenant Improvement Projects and Leasing Commissions. With respect to Loan Requests for Loans to fund Tenant Improvement Projects or Leasing Commissions, Loans shall be made on the following basis: (a) prior to any disbursements from the Tenant Improvement Reserve, the Borrower shall submit to the Agent for approval by the Majority Banks the proposed Lease to which the Tenant Improvement Project and/or Leasing Commission relate and a separate budget for such proposed Tenant Improvement Project and Leasing Commission (a "Building Capital Project Budget") setting forth the total cost required to construct the Tenant Improvement Project to be constructed by the Property Owner pursuant to such Lease (such cost is hereinafter referred to as the "Total Cost") and the Leasing Commissions with respect to such Lease; (b) upon written approval by the Majority Banks in their sole and absolute discretion of a Lease and the corresponding Building Capital Project Budget (which approval may include, without limitation, evidence that such matters have been approved pursuant to the Mortgage Loan Agreement), the Borrower may thereafter submit Loan Requests for Tenant Improvement Projects with respect to the applicable Mortgaged Property which Loan Requests shall separately identify the Mortgaged Property and the Tenant Improvement Project for which funds are requested and shall identify that portion of the Total Cost that has been drawn and the amount of the Total Cost remaining to be drawn (separately identifying amounts drawn under this Agreement and amounts drawn by Property Owner under the Mortgage Loan Agreement) and a certification that the amount of the Total Cost remaining to be drawn (including amounts available to be drawn by Property Owner under the Mortgage Loan Agreement with respect thereto) together with equity funds to be provided by Borrower will be sufficient to cause the Tenant Improvement Project to be completed in full; provided that prior to the initial disbursement with respect to a Tenant Improvement Project, the Borrower shall provide to the Agent evidence satisfactory to the Agent that Borrower has paid from equity twenty-five percent (25%) of the amounts identified in the Building Capital Project Budget for such Tenant Improvement Project; (c) upon compliance with all terms and conditions set forth in this Agreement with respect to advances of the Loans including, without limitation, the terms and conditions in Section 2.6 and this Section 5.6, Loan Requests for Tenant Improvement Projects for work in place will be funded in accordance with the applicable Building Capital Project Budget; provided, however, if the Agent in its sole and absolute discretion determines at any time that the cost of completing a Tenant Improvement Project is in excess of the amount remaining with respect thereto in the Building Capital Project Budget and equity funds provided by Borrower, no additional advances with respect to such Tenant Improvement Project shall be made unless the Borrower shall provide such funds as the Agent in its sole and absolute discretion determines are necessary to fully complete such Tenant Improvement Project in accordance with the terms of this Section 5.6; (d) amounts disbursed for any approved Tenant Improvement Project shall be an amount not to exceed, under any circumstances, the costs and expenses actually incurred by the Borrower with respect thereto notwithstanding the approval by the Agent of the Total Cost thereof or the amounts set forth in any Building Capital Project Budget with respect thereto; (e) the Borrower shall construct each Tenant Improvement Project in a good and workmanlike manner and in compliance with all applicable laws and complete the approved Tenant Improvement Project within the time periods and as required by, and in accordance with, the Lease with respect thereto; (f) amounts disbursed for Leasing Commissions shall be an amount not to exceed, under any circumstances, the commission actually incurred by Borrower which is reasonable and customary for a licensed real estate broker in the market area in which the Mortgaged Property is located; (g) with respect to a Loan Request to pay any portion of the Leasing Commissions, Borrower shall provide evidence as reasonably requested by the Agent that such Leasing Commissions are then due and payable or have been properly paid; provided that prior to the initial disbursement with respect to a Leasing Commission, the Borrower shall provide to the Agent evidence satisfactory to the Agent that Borrower has paid from equity twenty-five percent (25%) of the amounts identified in the Building Capital Project Budget for such Leasing Commission; and (h) with respect to each Loan Request for Tenant Improvement Projects or Leasing Commissions, the Borrower shall provide the Agent with such additional documents, certificates, lien waivers and affidavits as the Agent may reasonably request. Section 6. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to the Agent and the Banks as follows. Section 6.1. Corporate Authority, Etc. (a) Incorporation; Good Standing. The Borrower is a limited liability company duly organized pursuant to its organizational documents and amendments thereto filed with the Secretary of State of Delaware and is validly existing and in good standing under the laws of the State of Delaware. The Property Owner is a limited liability company duly organized pursuant to its organizational documents and amendments thereto filed with the Secretary of State of Delaware and is validly existing and in good standing under the laws of the State of Delaware. Wellsford Commercial is a Maryland real estate investment trust duly organized pursuant to its organizational documents and amendments thereto filed with the Secretary of State of Maryland and is validly existing and in good standing under the laws of the State of Maryland. WHWEL is a limited partnership duly organized pursuant to its organizational documents and amendments thereto filed with the Secretary of State of Delaware and is validly existing and in good standing under the laws of the State of Delaware. Each of the Borrower and the WWP Members (i) has all requisite power to own its property and conduct its business as now conducted and as presently contemplated, and (ii) is in good standing as a foreign entity and is duly authorized to do business in the jurisdictions where the Mortgaged Property and other Collateral held by it is located and in each other jurisdiction where a failure to be so qualified in such other jurisdiction could have a materially adverse effect on the business, assets or financial condition of such Person. Wellsford Commercial is a real estate investment trust in full compliance with and entitled to the benefits of Section 856 of the Code. Borrower is a qualified subsidiary of a real estate investment trust within the meaning of the Code. (b) Subsidiaries. Each of the Subsidiaries of the Borrower and the Guarantor (i) is a corporation, limited partnership, limited liability company or trust duly organized under the laws of its State of organization and is validly existing and in good standing under the laws thereof, (ii) has all requisite power to own its property and conduct its business as now conducted and as presently contemplated and (iii) is in good standing and is duly authorized to do business in each jurisdiction where Mortgaged Property, Mezzanine Property, Collateral or collateral for the Mortgage Loan held by it is located and in each other jurisdiction where a failure to be so qualified could have a materially adverse effect on the business, assets or financial condition of the Borrower or such Subsidiary or any Guarantor. (c) Authorization. The execution, delivery and performance of this Agreement and the other Loan Documents to which any of the Borrower, any of its Subsidiaries, the Property Owner or the Guarantor are or are to become a party and the transactions contemplated hereby and thereby (i) are within the authority of the such Person, (ii) have been duly authorized by all necessary proceedings on the part of such Person, (iii) do not and will not conflict with or result in any breach or contravention of any provision of law, statute, rule or regulation to which such Person is subject or any judgment, order, writ, injunction, license or permit applicable to such Person, (iv) do not and will not conflict with or constitute a default (whether with the passage of time or the giving of notice, or both) under any provision of the articles of incorporation , bylaws, or other charter documents of, or any agreement or other instrument binding upon, such Person, or any of its properties, and (v) do not and will not result in or require the imposition of any lien or other encumbrance on any of the properties, assets or rights of any such Person (other than those in favor of the Agent pursuant to the terms of the Loan Documents). (d) Enforceability. The execution and delivery of this Agreement and the other Loan Documents to which any of the Borrower, any of its Subsidiaries, the Property Owner or the Guarantor are or are to become a party are valid and legally binding obligations of such Person enforceable in accordance with the respective terms and provisions hereof and thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought. Section 6.2. Governmental Approvals. The execution, delivery and performance by the Borrower, any of its Subsidiaries, the Property Owner and the Guarantor of this Agreement and the other Loan Documents, as applicable, and the transactions contemplated hereby and thereby do not require the approval or consent of, or filing with, any governmental agency or authority other than those already obtained and the filing of the Security Documents in the appropriate records office with respect thereto. Section 6.3. Title to Properties; Leases. Except as indicated on Schedule 6.3 hereto, the Borrower and its Subsidiaries own all of the assets reflected in the pro forma consolidated balance sheet of the Borrower as of the Balance Sheet Date or acquired since that date (except property and assets sold or otherwise disposed of in the ordinary course of business since that date), subject to no rights of others, including any mortgages, leases, conditional sales agreements, title retention agreements, liens or other encumbrances except Permitted Liens. The Property Owner owns all of the assets reflected in the balance sheet of the Property Owner dated as of May 31, 1997, subject to no rights of others, including any rights of first refusal, right of first offer or other right to acquire, mortgages, leases, conditional sales agreements, title retention agreements, liens or other encumbrances, except the Mortgage Loan, the Mezzanine Mortgage Loan, the Permitted Liens, the rights of tenants as tenants only under the Leases reflected in the Rent Rolls for the Mortgaged Property and the Mezzanine Property and the right of first offer with respect to a sale of 201 University Avenue, Westwood, Massachusetts. Section 6.4. Financial Statements. The Borrower has furnished to each of the Banks: (a) a pro forma unaudited consolidated balance sheet and a pro forma unaudited consolidated statement of income and cash flows of the Borrower and its Subsidiaries as of the Balance Sheet Date certified by the Borrower's chief financial or chief accounting officer to have been prepared in accordance with generally accepted accounting principles and to fairly present the financial condition of the Borrower and its Subsidiaries as at the close of business on the dates thereof (subject to year-end adjustments); and (b) the balance sheet of the Property Owner dated as of May 31, 1998 and an unaudited consolidated statement of operating income for the Mortgaged Property satisfactory in form to the Agent and certified by the Borrower's chief financial or accounting officer as fairly presenting the operating income for such parcels for such periods. Such balance sheet and statements of income, stockholder's equity and cash flows have been prepared in accordance with generally accepted accounting principles and fairly present the financial condition of the Borrower and its Subsidiaries as of such dates and the results of the operations of the Borrower and its Subsidiaries, the Mortgaged Property, the Mezzanine Property and the Property Owner for such periods. There are no liabilities, contingent or otherwise, of the Borrower or any of its Subsidiaries or the Property Owner involving material amounts not disclosed in said financial statements and the related notes thereto as of their respective dates. The all-in acquisition costs of the Mortgaged Property, the Mezzanine Property, the Designated Collateral Value as of the date hereof allocable thereto and the classification of such property as a Stabilized Property or Non-Stabilized Property are as set forth on Schedule 6.4 hereto. Section 6.5. No Material Adverse Changes. Since the Balance Sheet Date, there has occurred no materially adverse change in the financial condition or business of the Borrower and its Subsidiaries taken as a whole, as shown on or reflected in the consolidated balance sheet of the Borrower and its Subsidiaries as of the Balance Sheet Date, or its consolidated statement of income or cash flows for the fiscal year then ended, other than changes in the ordinary course of business that have not had any materially adverse effect either individually or in the aggregate on the business or financial condition of the Borrower and its Subsidiaries taken as a whole. There has occurred no materially adverse change in the financial condition or business of the Property Owner as shown on or reflected in the balance sheet of the Property Owner dated as of May 31, 1998, or its statement of income or cash flows for the fiscal year then ended, other than changes in the ordinary course of business that have not had any materially adverse effect either individually or in the aggregate on the business or financial condition of the Property Owner. Section 6.6. Franchises, Patents, Copyrights, Etc. The Borrower, its Subsidiaries, the Property Owner and the Guarantor possess all franchises, patents, copyrights, trademarks, trade names, service marks, licenses and permits, and rights in respect of the foregoing, adequate for the conduct of their business substantially as now conducted without known conflict with any rights of others. Section 6.7. Litigation. Except as stated on Schedule 6.7 there are no actions, suits, proceedings or investigations of any kind pending or threatened against the Borrower or any of its Subsidiaries, the Property Owner, the Guarantor, the Mortgaged Property, the Mezzanine Property, the Collateral or any other collateral for the Mortgage Loan before any court, tribunal or administrative agency or board that, if adversely determined, might, either in any case or in the aggregate, materially adversely affect the properties, assets, financial condition or business of such Person or materially impair the right of such Person to carry on business substantially as now conducted by it, or result in any liability not adequately covered by insurance, or for which adequate reserves are not maintained on the balance sheet of such Person, or which question the validity of this Agreement or any of the other Loan Documents or any of the Mortgage Loan Documents, any action taken or to be taken pursuant hereto or thereto or any lien or security interest created or intended to be created pursuant hereto or thereto, or which will adversely affect the ability of such Person to pay and perform the Obligations in the manner contemplated by this Agreement and the other Loan Documents. There are no judgments outstanding against or affecting the Borrower, any of its Subsidiaries (other than the Property Owner, WASH, WASH Manager or Wells Avenue Holdings) in excess of $250,000.00 or against or affecting Property Owner, WASH, WASH Manager, Wells Avenue Holdings, the Guarantor or the Mortgaged Property, the Mezzanine Property, the Collateral, or any other collateral for the Mortgage Loan. Section 6.8. No Materially Adverse Contracts, Etc. None of the Borrower, any of its Subsidiaries, the Property Owner or any Guarantor is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation that has or is expected in the future to have a materially adverse effect on the business, assets or financial condition of any such Person. None of the Borrower, any of its Subsidiaries, the Property Owner or the Guarantor is a party to any contract or agreement that has or is expected, in the judgment of the officers of such Person, to have any materially adverse effect on the business of any such Person. Section 6.9. Compliance with Other Instruments, Laws, Etc. None of the Borrower, any of its Subsidiaries, the Property Owner or the Guarantor is in violation of any provision of its charter or other organizational documents, by-laws, or any agreement or instrument to which it may be subject or by which it or any of its properties may be bound or any decree, order, judgment, statute, license, rule or regulation, in any of the foregoing cases in a manner that could result in the imposition of substantial penalties or materially and adversely affect the financial condition, properties or business of such Person. Section 6.10. Tax Status. Each of the Borrower, its Subsidiaries, the Property Owner and the Guarantor (a) has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (b) has paid all taxes and other governmental assessments and charges shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and by appropriate proceedings and (c) has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers or members of each of the Borrower, its Subsidiaries, the Property Owner and the Guarantor know of no basis for any such claim. Section 6.11. No Event of Default. No Default or Event of Default has occurred and is continuing. Section 6.12. Holding Company and Investment Company Acts. None of the Borrower, any of its Subsidiaries, the Property Owner or the Guarantor is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935; nor is it an "investment company", or an "affiliated company" or a "principal underwriter" of an "investment company", as such terms are defined in the Investment Company Act of 1940. Section 6.13. Absence of UCC Financing Statements, Etc. Except with respect to Permitted Liens, the Mezzanine Mortgage Loan Documents, the Mortgage Loan Documents and the Loan Documents, there is no financing statement, security agreement, chattel mortgage, real estate mortgage or other document filed or recorded with any filing records, registry, or other public office, that purports to cover, affect or give notice of any present or possible future lien on, or security interest or security title in, any property of the Borrower, any of its Subsidiaries or the Property Owner or rights thereunder. Section 6.14. Setoff, Etc. The Collateral and the rights of the Agent and the Banks with respect to the Collateral are not subject to any setoff, claims, withholdings or other defenses. The Borrower is the owner of the Collateral free from any lien, security interest, encumbrance or other claim or demand, except Permitted Liens. Section 6.15. Certain Transactions. Except as disclosed in writing to the Agent, and except with respect to (i) that certain Asset Management Agreement dated May 15, 1998 between Wellsford/Whitehall Properties, L.L.C. and Saracen Partners, LLC, as assigned to Borrower, and (ii) that certain Property Management Agreement between WASH and Northeast Real Estate Services, LLC, dated May 15, 1998, none of the members, officers, trustees, directors, or employees of the Borrower, any of its Subsidiaries, the Property Owner or the Guarantor is a party to any transaction with each other (other than for services as employees, officers and directors and transactions solely between Guarantors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, trustee, director or such employee or, to the knowledge of such Person, any corporation, partnership, trust or other entity in which any member, officer, trustee, director, or any such employee has a substantial interest or is a member, officer, director, trustee or partner. Section 6.16. Employee Benefit Plans. The Borrower, its Subsidiaries and each ERISA Affiliate are in compliance in all material respects with ERISA. There has been no Reportable Event with respect to any Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan. There has been no institution of proceedings or any other action by PBGC, the Borrower, any of its Subsidiaries, or any ERISA Affiliate to terminate or withdraw or partially withdraw from any such Plan under any circumstances which could lead to material liabilities to PBGC or, with respect to a Multiemployer Plan, the "Reorganization" or "Insolvency" (as each such term is defined in ERISA) of any such Plan. To the best of the Borrower's knowledge, no "prohibited transaction" (within the meaning of Section 406 of ERISA or Section 4975 of the Code) has occurred with respect to any such Plan, and neither the consummation of the transactions provided for in this Agreement and compliance by the Borrower, its Subsidiaries, and the Guarantor with the provisions hereof and the other Loan Documents, nor the consummation of the transactions provided for in the Mortgage Loan Documents and compliance by the Property Owner with the provisions thereof, will involve any prohibited transaction. Section ful o ERISA Taxes. None of the Borrower, its Subsidiaries nor any ERISA Affiliate thereof is currently and the Borrower has no reason to believe that any such Person or any ERISA Affiliate will become subject to any liability (other than routine expenses or contributions relating to the Plans set forth on Schedule 6.17, if timely paid), tax or penalty whatsoever to any person whomsoever, which liability, tax or penalty is directly or indirectly related to any Plans set forth on Schedule 6.17 including, but not limited to, any penalty or liability arising under Title I or Title IV of ERISA, any tax or penalty resulting from a loss of deduction under Sections 404 and 419 of the Code, or any tax or penalty under Chapter 43 of the Code, except such liabilities, taxes or penalties (when taken as a whole) as will not have a material adverse effect on such Person or upon its financial condition, assets, business, operations, liabilities or prospects. Section 6.18. Plan Payments. The Borrower, its Subsidiaries and each ERISA Affiliate has made full and timely payment of all amounts (i) required to be contributed under the terms of each Plan set forth on Schedule 6.17 and applicable law and (ii) required to be paid as expenses of each Plan set forth on Schedule 6.17. No Plan set forth on Schedule 6.17 would have an "amount of unfunded benefit liabilities" (as defined in Section 4001(a)(18) of ERISA) if such Plan were terminated as of the date on which this representation and warranty is made. Section 6.19. Regulations U and X. No portion of any Loan is to be used for the purpose of purchasing or carrying any "margin security" or "margin stock" as such terms are used in Regulations U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224. Section 6.20. Environmental Compliance. The Borrower or an affiliate or agent thereof has conducted or caused to be conducted Phase I environmental site assessments with respect to the past usage and condition of the Real Estate, the Mortgaged Property and the Mezzanine Property and the operations conducted thereon, and is familiar with the present condition and usage of the Real Estate, the Mortgaged Property, and the Mezzanine Property, and the operations conducted thereon and, based upon such reports and knowledge, makes the following representations and warranties. (a) With respect to the Mortgaged Property and the Mezzanine Property, and to the best of the Borrower's knowledge with respect to any other Real Estate, none of the Borrower, its Subsidiaries, the Property Owner or the Guarantor or any operator of the Real Estate, the Mortgaged Property or the Mezzanine Property, or any operations thereon is in violation, or alleged violation, of any judgment, decree, order, law, license, rule or regulation pertaining to environmental matters, including without limitation, those arising under the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any state or local statute, regulation, ordinance, order or decree relating to the environment (hereinafter "Environmental Laws"), which violation involves the Real Estate, the Mortgaged Property or the Mezzanine Property, and would have a material adverse effect on the environment or the business, assets or financial condition of any such Person. (b) None of the Borrower, any of its Subsidiaries, the Property Owner nor any Guarantor has received any notice from any third party including, without limitation, any federal, state or local governmental authority, (i) that it has been identified by the United States Environmental Protection Agency ("EPA") as a potentially responsible party under CERCLA with respect to a site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B (1986); (ii) that any hazardous waste, as defined by 42 U.S.C. Section 9601(5), any hazardous substances as defined by 42 U.S.C. Section 9601(14), any pollutant or contaminant as defined by 42 U.S.C. Section 9601(33) or any toxic substances, oil or hazardous materials or other chemicals or substances regulated by any Environmental Laws ("Hazardous Substances") which it has generated, transported or disposed of have been found at any site at which a federal, state or local agency or other third party has conducted or has ordered that such Person, conduct a remedial investigation, removal or other response action pursuant to any Environmental Law; or (iii) that it is or shall be a named party to any claim, action, cause of action, complaint, or legal or administrative proceeding (in each case, contingent or otherwise) arising out of any third party's incurrence of costs, expenses, losses or damages of any kind whatsoever in connection with the release of Hazardous Substances. (c) With respect to the Mortgaged Property and the Mezzanine Property, and to the best of the Borrower's knowledge with respect to any other Real Estate, except as specifically set forth in the environmental site assessment reports for the initial Mortgaged Property and the Mezzanine Property, each of which has been provided to the Agent on or before the date hereof or, in the case of Real Estate acquired after the date hereof, the environmental site assessment reports with respect thereto provided to the Agent under Section 5.4 or Section 7.4(h): (i) no portion of the Real Estate, the Mortgaged Property or the Mezzanine Property has been used for the handling, processing, storage or disposal of Hazardous Substances except in accordance with applicable Environmental Laws, and no underground tank or other underground storage receptacle for Hazardous Substances is located on any portion of the Real Estate, the Mortgaged Property or the Mezzanine Property; (ii) in the course of any activities conducted by the Borrower, its Subsidiaries, the Property Owner, the Guarantor or the operators of its properties, no Hazardous Substances have been generated or are being used on the Real Estate, the Mortgaged Property or the Mezzanine Property except in the ordinary course of business and in accordance with applicable Environmental Laws; (iii) there has been no past or present releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, disposing or dumping (a "Release") or threatened Release of Hazardous Substances on, upon, into or from the Real Estate, the Mortgaged Property or the Mezzanine Property, or to the best of the Borrower's knowledge, on, upon, into or from the other properties of the Borrower, its Subsidiaries or the Guarantor, which Release would have a material adverse effect on the value of any of the Real Estate, the Mortgaged Property or the Mezzanine Property or adjacent properties or the environment; (iv) to the best of the Borrower's knowledge, there have been no Releases on, upon, from or into any real property in the vicinity of any of the Real Estate, the Mortgaged Property or the Mezzanine Property which, through soil or groundwater contamination, may have come to be located on, and which would have a material adverse effect on the value of, the Real Estate, the Mortgaged Property or the Mezzanine Property; and (v) to the best of Borrower's knowledge and belief, any Hazardous Substances that have been generated on any of the Real Estate, the Mortgaged Property or the Mezzanine Property have been transported off-site only by carriers having an identification number issued by the EPA or approved by a state or local environmental regulatory authority having jurisdiction regarding the transportation of such substance and, to the best knowledge of the Borrower without independent investigation, treated or disposed of only by treatment or disposal facilities maintaining valid permits as required under all applicable Environmental Laws, which transporters and facilities have been and are, to the best of the Borrower's knowledge, operating in compliance with such permits and applicable Environmental Laws. (d) None of the Borrower, its Subsidiaries, the Property Owner, the Guarantor nor any of the Mortgaged Property, the Mezzanine Property nor any other Real Estate is required by any applicable Environmental Law to perform Hazardous Substances site assessments, or remove or remediate Hazardous Substances, or give notice to any governmental agency or to record or deliver to other Persons an environmental disclosure document or statement by virtue of the transactions set forth herein and contemplated hereby, or to the effectiveness of any other transactions contemplated hereby. Section 6.21. Subsidiaries. Schedule 6.21 sets forth all of the Subsidiaries of the Borrower. The form and jurisdiction of organization of each of the Subsidiaries, and the Borrower's ownership interest therein, is set forth in said Schedule 6.21. Section 6.22. Leases. The Borrower has delivered to the Agent true copies of the Leases and any amendments thereto relating to the Mortgaged Property and the Mezzanine Property. Section 6.23. Loan Documents. All of the representations and warranties made by or on behalf of the Borrower, its Subsidiaries, the Property Owner or the Guarantor in the Loan Documents to which it is a party or any document or instrument delivered to the Agent or the Banks pursuant to or in connection with any of such Loan Documents are true and correct in all material respects, and no such Person has failed to disclose such information as is necessary to make such representations and warranties not misleading. Section 6.24. Mortgaged Property and Mezzanine Property. The Borrower makes the following representations and warranties concerning each Mortgaged Property and Mezzanine Property: (a) Off-Site Utilities. All water, sewer, electric, gas, telephone and other utilities necessary for the use and operation of the Mortgaged Property and Mezzanine Property are installed to the property lines of the Mortgaged Property and Mezzanine Property through dedicated public rights-of-way or through perpetual private easements approved by the Agent, except in the case of drainage facilities, are connected to the Building located thereon with valid permits and are adequate to service the Building in compliance with applicable law. (b) Access, Etc. The streets abutting the Mortgaged Property and Mezzanine Property are dedicated and accepted public roads, to which the Mortgaged Property and Mezzanine Property have direct access by trucks and other motor vehicles and by foot, or are perpetual private ways (with direct access by trucks and other motor vehicles and by foot to public roads) to which the Mortgaged Property and Mezzanine Property have direct access approved by the Agent. All private ways providing access to the Mortgaged Property and Mezzanine Property are zoned in a manner which will permit access to the Building over such ways by trucks and other commercial and industrial vehicles. (c) Independent Building. Each Building is fully independent in all respects including, without limitation, in respect of structural integrity, heating, ventilating and air conditioning, plumbing, mechanical and other operating and mechanical systems, and electrical, sanitation and water systems, all of which are connected directly to off-site utilities located in public streets or ways or through insured perpetual private easements approved by the Agent. Each Building is located on a lot which is separately assessed for purposes of real estate tax assessment and payment. Each Building, all Building Service Equipment and all paved or landscaped areas related to or used in connection with each Building are, except as specifically disclosed on a Survey delivered to the Agent prior to the date hereof and except as disclosed in the Condominium Documents with respect to the Condominium only, located wholly within the perimeter lines of the lot or lots on which the Mortgaged Property or the Mezzanine Property is located. WASH has not made any additions, alterations or improvements to the Mezzanine Property, nor have any other changes occurred with respect to the Mezzanine Property, from the last revision date of the survey of the Mezzanine Property delivered by Borrower to the Agent that in accordance with good surveying practices should be disclosed on an as-built survey of the Mezzanine Property. (d) Condition; No Asbestos. Except as may otherwise be specifically disclosed in any written engineering report furnished or caused to be furnished by the Borrower to the Agent prior to the date hereof, each Building is structurally sound, in good repair and free of material defects in materials and workmanship. All major building systems located within each Building, including without limitation heating, ventilating and air conditioning, electrical, sprinkler, plumbing or other mechanical systems, are in good working order and condition. No asbestos is located in or on any Building, except for nonfriable asbestos or contained friable asbestos which is being monitored and/or remediated in accordance with the recommendations of an Environmental Engineer. (e) Compliance with Law. Except as may otherwise be specifically disclosed on the face of any certificate of occupancy delivered to the Agent prior to the date hereof, each Building as presently constructed, used, occupied and operated does not violate any applicable federal or state law or governmental regulation, or any local ordinance, order or regulation, including but not limited to laws, regulations, or ordinances relating to zoning, building use and occupancy, subdivision control, fire protection, health, sanitation, safety, handicapped access, historic preservation and protection, tidelands, wetlands, flood control and Environmental Laws. Each Building complies with applicable zoning laws and regulations and is not a so-called non-conforming use. The zoning laws permit use of each Building for its current use. There is such number of parking spaces on the lot or lots on which each Building is located as is adequate under the zoning laws and regulations to permit use of each Building for its current use. (f) No Required Consents, Permits, Etc. None of the Borrower, any of its Subsidiaries, the Property Owner or the Guarantor has received notice of, or has knowledge of, any approvals, consents, licenses, permits, utility installations and connections (including, without limitation, drainage facilities), curb cuts and street openings, required by applicable laws, rules, ordinances or regulations or any agreement affecting the Mortgaged Property or the Mezzanine Property for the maintenance, operation, servicing and use of the Mortgaged Property or the Mezzanine Property or the Building for its current use which have not been granted, effected, or performed and completed (as the case may be), or any fees or charges therefor which have not been fully paid, or which are no longer in full force and effect. To the best knowledge of the Borrower, there are no outstanding notices, suits, orders, decrees or judgments relating to zoning, building use and occupancy, fire, health, sanitation or other violations affecting, against, or with respect to, the Mortgaged Property or the Mezzanine Property or any part thereof. (g) Insurance. None of the Borrower, any of its Subsidiaries, the Property Owner or the Guarantor has received any notice from any insurer or its agent requiring performance of any work with respect to the Mortgaged Property or the Mezzanine Property or canceling or threatening to cancel any policy of insurance, and the Mortgaged Property and the Mezzanine Property comply with the requirements of all carriers of insurance on the Mortgaged Property and the Mezzanine Property. (h) Real Property Taxes; Special Assessments. There are no unpaid or outstanding real estate or other taxes or assessments on or against the Mortgaged Property or the Mezzanine Property or any part thereof which are payable by the Property Owner, WASH or any prior owner of the Mortgaged Property or the Mezzanine Property (except only real estate taxes or other taxes or assessments, that are not yet due and payable). No abatement proceedings are pending with reference to any real estate taxes assessed against the Mortgaged Property. There are no betterment assessments or other special assessments presently pending with respect to any portion of the Mortgaged Property or the Mezzanine Property, and none of the Borrower, any of its Subsidiaries, the Property Owner or the Guarantor has received any notice of any such special assessment being contemplated. (i) Historic Status. No Building is a historic structure or landmark and no Building or Mortgaged Property or Mezzanine Property is located within any historic district pursuant to any federal, state or local law or governmental regulation. (j) Eminent Domain; Casualty. There are no pending eminent domain proceedings against the Mortgaged Property or the Mezzanine Property or any part thereof, and, to the knowledge of the Borrower, no such proceedings are presently threatened or contemplated by any taking authority. No Mortgaged Property, Mezzanine Property or Building nor any part thereof is now damaged or injured as a result of any fire, explosion, accident, flood or other casualty. (k) Leases. An accurate and complete Rent Roll and summary thereof in a form reasonably satisfactory to the Agent as of the date of inclusion of each Mortgaged Property or interests in the Mezzanine Property (or such other recent date as may be acceptable to the Agent) with respect to all Leases of any portion of the Mortgaged Property and the Mezzanine Property has been provided to the Agent. The Leases reflected on such Rent Roll constitute as of the date thereof the sole agreements and understandings relating to leasing or licensing of space at such Mortgaged Property or Mezzanine Property and in the Building relating thereto. There are no occupancies, rights, privileges or licenses in or to any Mortgaged Property or Mezzanine Property or portion thereof other than pursuant to the Leases reflected in Rent Rolls previously furnished to the Agent for such Mortgaged Property or Mezzanine Property. Except as set forth in each Rent Roll, the Leases reflected therein are in full force and effect in accordance with their respective terms, without any payment default or any other material default thereunder, nor are there any defenses, counterclaims, offsets, concessions or rebates available to any tenant thereunder, and none of the Borrower, any of its Subsidiaries, the Property Owner or the Guarantor has given or made any notice of any payment or other material default, or any claim, which remains uncured or unsatisfied, with respect to any of the Leases. The Rent Rolls furnished to the Banks accurately and completely set forth all rents payable by and security, if any, deposited by tenants, no tenant having paid more than one month's rent in advance. The Borrower has reviewed the estoppel certificates delivered by the tenants of the Mortgaged Property and the Mezzanine Property to the Agent and such estoppel certificates as of the date thereof are true and correct in all material respects. Except as otherwise set forth in Schedule A-5 to the Contribution Agreement, all tenant improvements or work to be done, furnished or paid for by the Borrower, any of its Subsidiaries, the Property Owner, WASH or the Guarantor or credited or allowed to a tenant, for, or in connection with, the Building pursuant to any Lease has been completed and paid for or provided for in a manner satisfactory to the Agent. No material leasing, brokerage or like commissions, fees or payments are due from the Borrower, any of its Subsidiaries, the Property Owner or the Guarantor in respect of the Leases. (l) Management Agreements. Borrower has delivered to Agent true, correct and complete copies of the Management Agreements for the Mortgaged Property and the Mezzanine Property. To the best knowledge of the Borrower, there are no material claims or any bases for material claims in respect of the Mortgaged Property or the Mezzanine Property or its operation by any party to any Management Agreement. (m) Other Material Real Property Agreements; No Options. There are no material agreements pertaining to the Mortgaged Property or the Mezzanine Property, any Building thereon or the operation or maintenance of any thereof other than as described in this Agreement (including the Schedules hereto) or otherwise disclosed in writing to the Agent by the Borrower; and no person or entity has any right or option to acquire the Mortgaged Property, the Mezzanine Property or any Building thereon or any portion thereof or interest therein (other than the right of first offer of Computer Associates set forth in its lease with respect to 201 University Avenue, the option to purchase the farmhouse improvements at the Mortgaged Property commonly known as 180/188 Mt. Airy Road as described in Section 5.3(a)(iv), and the option of JVC Americas Corp. to acquire approximately 2.5 acres of the Mortgaged Property commonly known as 1800 Valley). All service agreements with respect to the Mortgaged Property and the Mezzanine Property are terminable upon thirty (30) days notice with no penalty or premium or as otherwise disclosed in writing to the Agent. Section 6.25. Brokers. None of the Borrower, any of its Subsidiaries, the Property Owner or the Guarantor has engaged or otherwise dealt with any broker, finder or similar entity in connection with this Agreement or the Loans contemplated hereunder. Section 6.26. Fair Consideration. The Borrower (and, as applicable, the Guarantor), by receiving the benefits under this Agreement and the other Loan Documents is receiving "reasonably equivalent value" within the meaning of Section 548 of the Bankruptcy Code, Title 11, U.S.C.A. and "fair consideration" within the meaning of Consolidated Laws of New York Annotated, Chapter 12, Article 10, Section 272 in exchange for the delivery of the Security Documents to Agent, and but for the willingness of the Guarantor to enter into the Guaranty, the Borrower would be unable to obtain the financing contemplated hereunder which financing will enable the Borrower and its Subsidiaries (including the Guarantor) to have available financing to conduct and expand its business. The transaction evidenced by this Agreement and the other Loan Documents is in the best interests of the Borrower and the Guarantor and the creditors of such Persons. Section 6.27. Solvency. As of the Closing Date and after giving effect to the transactions contemplated by this Agreement and the other Loan Documents, including all of the Loans made or to be made hereunder, none of the Borrower, any of its Subsidiaries, the Property Owner or the Guarantor is insolvent on a balance sheet basis, the sum of such Person's assets exceeds the sum of such Person's liabilities, each such Person is able to pay its debts as they become due, and each such Person has sufficient capital to carry on its business. Section 6.28. No Bankruptcy Filing. None of the Borrower, any of its Subsidiaries, the Property Owner or the Guarantor is contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or the liquidation of its assets or property, and Borrower has no knowledge of any Person contemplating the filing of any such petition against it or any of such other Persons. Section 6.29. No Fraudulent Intent. Neither the execution and delivery of this Agreement or any of the other Loan Documents nor the performance of any actions required hereunder or thereunder is being undertaken by the Borrower, any of its Subsidiaries, the Property Owner or the Guarantor with or as a result of any actual intent by any of such Persons to hinder, delay or defraud any entity to which any of such Persons is now or will hereafter become indebted. Section 6.30. Other Debt. None of the Borrower, the Property Owner, the Guarantor or any of their respective Subsidiaries is in default in the payment of any other Indebtedness or under any agreement, mortgage, deed of trust, security agreement, financing agreement, indenture or lease to which any of them is a party. None of the Borrower, the Property Owner, the Guarantor or any of their respective Subsidiaries is a party to or bound by any agreement, instrument or indenture that may require the subordination in right or time of payment of any of the Obligations to any other indebtedness or obligation of the such Person. Without limiting the foregoing, no "Default" or "Event of Default" under the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents has occurred. The Borrower has provided to the Agent copies of all agreements, mortgages, deeds of trust, financing agreements or other material agreements binding upon the Borrower, the Property Owner, WASH, the Guarantor and their respective Subsidiaries and properties and entered into by such Person as of the date of this Agreement with respect to any Indebtedness of such Person. Attached hereto as Schedule 6.30-1 and Schedule 6.30-2 is a true, accurate and complete list of all of the Mortgage Loan Documents and the Mezzanine Mortgage Loan Documents. Without limiting the foregoing, Borrower has delivered to the Agent true, correct and complete copies of the Mortgage Loan Documents and the Mezzanine Mortgage Loan Documents, and none of such documents has been modified or amended in any respect except as set forth in Schedule 6.30-1 or Schedule 6.30-2 hereto. As of the date hereof, the outstanding principal balance secured by the Nomura Mortgages is [$68,340,815.57] and interest has been paid through [May 10, 1998.] The initial allocation of the Mezzanine Mortgage Loan among the Mezzanine Properties is set forth on Schedule 6.30-3 hereto. As of the date hereof, the amount on deposit in the "Tax and Insurance Escrow Fund" (as defined in the Mezzanine Mortgage Loan Documents) is approximately [$278,184.89,] the amount on deposit in the "Capital Reserve Fund" (as defined in the Mezzanine Mortgage Loan Documents) is approximately [$181,243.70,] and the amount on deposit in the "Rollover Reserve Fund" (as defined in the Mezzanine Mortgage Loan Documents) is approximately [$608,232.64.] Section 6.31. Ownership. Wellsford Commercial and WHWEL own 94.64% of the membership units in the Borrower. Wellsford Real Properties owns not less than 99% of the legal, equitable and beneficial interests in Wellsford Commercial. Whitehall Street Real Estate Limited Partnership V, Whitehall Street Real Estate Limited Partnership VI, Whitehall Street Real Estate Limited Partnership VII and Whitehall Street Real Estate Limited Partnership VIII are partners of WHWEL, a member of the Borrower. The Borrower is and shall remain the sole member of the Property Owner free and clear of all liens, restrictions, claims, pledges, encumbrances, charges, claims or rights of third parties and rights of set-off or recoupment whatsoever, and no other Person owns or shall own any legal, equitable or beneficial interests in the Property Owner, or have any right to vote or exercise control over the Property Owner or its management. Wells Avenue Holdings and WASH Manager are and shall remain the sole members of WASH, free and clear of all liens, restrictions, claims, pledges, encumbrances, charges, claims or rights of third parties and rights of set-off or recoupment whatsoever, and no other Person owns or shall own any legal, equitable or beneficial interests in WASH, or have any right to vote or exercise control over WASH or its management (except for the rights of the "independent manager" of WASH, as set forth in the WASH Organizational Agreements). Wells Avenue Holdings is and shall remain the sole member of WASH Manager, free and clear of all liens, restrictions, claims, pledges, encumbrances, charges, claims or rights of third parties and rights of set-off or recoupment whatsoever, and no other Person owns or shall own any legal, equitable or beneficial interests in WASH Manager, or have any right to vote or exercise control over WASH Manager or its management (except for the rights of the "independent manager" of WASH Manager, as set forth in the WASH Manager Organizational Agreements). Property Owner is and shall remain the sole member of Wells Avenue Holdings free and clear of all liens, restrictions, claims, pledges, encumbrances, charges, claims or rights of third parties and rights of set-off or recoupment whatsoever, and no other Person owns or shall own any legal, equitable or beneficial interest in Wells Avenue Holdings, or have any right to vote or exercise control over Wells Avenue Holdings or its management (except for the rights of the "independent manager" of Wells Avenue Holdings as set forth in the Wells Avenue Holdings Organizational Agreements). WASH owns no assets other than the Mezzanine Property, and no other Person owns any legal, equitable or beneficial interests in the Mezzanine Property, other than the interest as tenants only of the tenants listed on the Rent Roll delivered to the Agent pursuant to Section 6.24(k). WASH Manager and Wells Avenue Holdings own no assets other than their respective interests in WASH, and as to Wells Avenue Holdings, its interests in WASH Manager. Property Owner owns no assets other than the Mortgaged Property and the member interest in Wells Avenue Holdings L.L.C. and no other Person owns any legal, equitable or beneficial interests in the Mortgaged Property or such member interest, other than the interest as tenants only of the tenants listed on the Rent Roll delivered to the Agent pursuant to Section 6.24(k). Section 6.32. Special Purpose Entity. The Property Owner is in full and complete compliance with the Property Owner Organizational Agreements. Section 6.33. Obligations as Members. (a) All duties, obligations and responsibilities required to be performed by the Borrower as of the date hereof under the Property Owner Organizational Agreements have been performed, and no default or condition which with the passage of time or the giving of notice, or both, would constitute a default exists under the Property Owner Organizational Agreements. (b) Except for the Loan Documents, the Mortgage Loan Documents, the Mezzanine Mortgage Loan Documents and, with respect to clause (iii) only, the Property Owner Organizational Agreements, neither the Property Owner nor the Borrower is a party to or is bound by any indenture, contract or other agreement which purports to prohibit, restrict, limit, or control (i) the transfer or pledge of direct or indirect interests in the Property Owner or the Borrower, (ii) the exercise of voting rights with respect to the such Persons or (iii) the management of such Persons. Section 6.34. Mortgage Loan Documents. The Borrower hereby restates and reaffirms each of the representations and warranties made by the Property Owner set forth in the Mortgage Loan Documents as if the same were more fully set forth herein and were made to the Agent and the Banks herein as of the date hereof. Section 7. AFFIRMATIVE COVENANTS OF THE BORROWER. The Borrower covenants and agrees that, so long as any Loan or Note is outstanding or any Bank has any obligation to make any Loans: Section 7.1. Punctual Payment. The Borrower will duly and punctually pay or cause to be paid the principal and interest on the Loans and all interest and fees provided for in this Agreement, all in accordance with the terms of this Agreement and the Notes as well as all other sums owing pursuant to the Loan Documents. Section 7.2. Maintenance of Office. The Borrower will maintain its chief executive office at 610 Fifth Avenue, 7th Floor, New York County, New York, New York, or at such other place in the United States of America as the Borrower shall designate upon prior written notice to the Agent and the Banks, where notices, presentations and demands to or upon the Borrower in respect of the Loan Documents may be given or made. Section 7.3. Records and Accounts. The Borrower will keep and will cause each of its Subsidiaries and the Property Owner to (a) keep true and accurate records and books of account in which full, true and correct entries will be made in accordance with generally accepted accounting principles and (b) maintain adequate accounts and reserves for all taxes (including income taxes), depreciation and amortization of its properties, contingencies and other reserves. The Borrower will not make and will not allow any of its Subsidiaries or the Property Owner to make, without the prior written consent of the Majority Banks, (x) any material changes to the accounting procedures used by such Person in preparing the financial statements and other information described in Section 6.4 (excluding the conversion of a Subsidiary's accounting procedures such that they are consistent with the Borrower's accounting procedures) or (y) a change in its fiscal year. Section 7.4. Financial Statements, Certificates and Information. The Borrower will deliver or cause to be delivered to the Agent with sufficient copies for each of the Banks: (a) as soon as practicable, but in any event not later than 90 days after the end of each fiscal year of the Borrower, the audited consolidated balance sheet of the Borrower at the end of such year, and the related audited consolidated statements of income, changes in shareholders' equity and cash flows for such year, each setting forth in comparative form the figures for the previous fiscal year (other than the fiscal year ending prior to the Closing Date for which such statements of Borrower were not separately prepared) and all such statements to be in reasonable detail, prepared in accordance with generally accepted accounting principles, and accompanied by an auditor's report prepared without qualification by Ernst & Young LLP or by another "Big Six" accounting firm, together with the unaudited annual operating statement of each Mortgaged Property and the Mezzanine Property (which statement shall also be reconciled to the budget for the Mortgaged Property and the Mezzanine Property), together with a certification by Borrower's chief financial or chief accounting officer that the information contained in such statement fairly presents the operations of the Mortgaged Property and the Mezzanine Property for such period, and any other information the Banks may reasonably need to complete a financial analysis of the Borrower; (b) as soon as practicable, but in any event not later than 45 days after the end of each fiscal quarter of the Borrower (including the fourth quarter), copies of the unaudited consolidated balance sheet of the Borrower and its Subsidiaries, as of the end of such quarter, and the related unaudited consolidated statements of income, changes in shareholders' equity and cash flows for the portion of the Borrower's fiscal year then elapsed, and the unaudited operating statement for the Mortgaged Property and the Mezzanine Property for such quarter and year- to-date (which statement shall also be reconciled to the budget for the Mortgaged Property and the Mezzanine Property), all in reasonable detail and prepared in accordance with generally accepted accounting principles, together with a certification by the principal financial or accounting officer of the Borrower that the information contained in such financial statements fairly presents the financial position of the Borrower and its Subsidiaries, and the operations of the Mortgaged Property and the Mezzanine Property on the date thereof (subject to year-end adjustments); (c) as soon as practicable, but in any event not later than 45 days after the end of each fiscal quarter of the Borrower (including the fourth fiscal quarter in each year), copies of a consolidated statement of Operating Cash Flow for such fiscal quarter and year-to-date for the Borrower and its Subsidiaries and a statement of Net Operating Income for such fiscal quarter and year-to-date for each of the Mortgaged Properties and the Mezzanine Properties, prepared in a manner reasonable satisfactory to the Agent, together with a certification by the Borrower's chief financial or chief accounting officer that the information contained in such statement fairly presents the Operating Cash Flow of the Borrower and its Subsidiaries and the Net Operating Income of the Mortgaged Property and the Mezzanine Property for such period; (d) simultaneously with the delivery of the financial statements referred to in subsections (a) and (b) above, a statement (a "Compliance Certificate") certified by the principal financial or accounting officer of the Borrower in the form of Exhibit C hereto setting forth in reasonable detail computations evidencing compliance with the covenants contained in Section 9 and the other covenants described therein, and (if applicable) reconciliations to reflect changes in generally accepted accounting principles since the Balance Sheet Date; (e) concurrently with the delivery of the financial statements described in subsections (b) and (c) above, a certificate signed by the President or Chief Financial Officer of the Borrower to the effect that, having read this Agreement, and based upon an examination which they deem sufficient to enable them to make an informed statement, there does not exist any Default or Event of Default, or if such Default or Event of Default has occurred, specifying the facts with respect thereto; (f) contemporaneously with the filing, mailing or releasing thereof, copies of all press releases and all material of a financial nature filed with the SEC, if applicable, or sent to all of the members of the Borrower; (g) as soon as practicable but in any event not later than 45 days after the end of each fiscal quarter of the Borrower (including the fourth fiscal quarter in each year), updated Rent Rolls with respect to the Mortgaged Property and the Mezzanine Property and a summary of each Rent Roll in form reasonably satisfactory to the Agent; (h) not later than 30 days following each acquisition of an interest in Real Estate by the Borrower or any of its Subsidiaries (which for the purposes of this Section 7.4(h) shall include the Investments described in Section 8.3(k)), each of the following: (i) a description of the interest acquired, (ii) an environmental site assessment prepared by an Environmental Engineer stating no material qualification with respect to such Real Estate or property, and (iii) a Compliance Certificate prepared using the financial statements of the Borrower most recently provided or required to be provided to the Banks under Section 6.4 or this Section 7.4 adjusted in the best good-faith estimate of the Borrower to give effect to such acquisition and demonstrating that no Default or Event of Default with respect to the covenants referred to therein shall exist after giving effect to such acquisition; (i) as soon as practicable, but in any event not later than 30 days prior to the beginning of each calendar year, the annual operating budget for each Mortgaged Property, in form and substance satisfactory to the Majority Banks, and a copy of each budget that is submitted by WASH to the Mezzanine Mortgagee for approval by the Mezzanine Mortgagee pursuant to the Mezzanine Mortgage Loan Documents, or any revision or amendment thereof, as the same are submitted by WASH to the Mezzanine Mortgagee pursuant to the Mezzanine Mortgage Loan Documents; (j) promptly after they are filed with the Internal Revenue Service, copies of all annual federal income tax returns and amendments thereto of the Borrower and the Guarantor; (k) not later than 45 days after the end of each fiscal quarter of the Borrower (including the fourth fiscal quarter in each year), the market comparable study conducted by the Borrower's internal staff or its property managers, and at other times copies of such market studies relating to the Mortgaged Property and Mezzanine Property as are from time to time prepared by or on behalf of the Borrower; (l) to the extent not otherwise provided to Agent hereunder, a copy of each statement, report, Rent Roll, tax return or other matter required to be delivered to the Mortgagee or the Mezzanine Mortgagee pursuant to the Mortgage Loan Documents and the Mezzanine Mortgage Loan Documents, respectively, as and when the same is required to be delivered to the Mortgagee or the Mezzanine Mortgagee pursuant to the terms thereof; (m) not later than 45 days after the end of each fiscal quarter (including the fourth quarter), a certification by the principal financial or accounting officer of the Borrower to the effect that to such Person's knowledge no "Default" or "Event of Default" exists under the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents, or if such Person shall obtain knowledge of any then existing "Default" or "Event of Default" under the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents, they shall disclose in such statement such "Defaults" or "Events of Default"; (n) not later than 45 days after the end of each fiscal quarter (including the fourth quarter), a copy of each Lease entered into by or on behalf of the Property Owner or WASH during such quarter; (o) promptly upon issuance of the same by any of the Property Owner, the Borrower or any of its Subsidiaries, duplicate copies of any and all notices of any proposed sale or other disposition, or financing or refinancing, of any interest of or in the Property Owner, the Mortgaged Property, the Collateral or any collateral for the Mortgage Loan, together with all material documents related thereto and a description of the material terms thereof; (p) duplicate copies of any and all notices of default by or under the Property Owner Organizational Agreements or of any failure by any Persons to perform any obligation under such agreements; (q) not later than 45 days after the end of each calendar year, evidence that the Property Owner has taken all actions required by the state in which it is organized to remain in good standing; (r) duplicate copies of any and all appraisals or updates thereof that are required to be delivered by the Property Owner or WASH to the Mortgagee or Mezzanine Mortgagee, as applicable, pursuant to any of the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents as and when the same are required to be delivered to the Mortgagee or Mezzanine Mortgagee, as applicable; (s) duplicate copies of any and all notices sent by WASH to any Rating Agency, or sent by a Rating Agency to WASH; and (t) from time to time such other financial data and information in the possession of or reasonably obtainable by the Borrower, any of its Subsidiaries or the Property Owner relating to the Borrower, the Property Owner, WASH, the Guarantor, the Mortgaged Property, the Mezzanine Property or the Collateral (including without limitation auditors' management letters, property inspection and environmental reports and information as to zoning and other legal and regulatory changes affecting the Borrower, any of its Subsidiaries, the Property Owner or WASH) as the Agent may reasonably request. Section 7.5. Notices. (a) Defaults. The Borrower will promptly notify the Agent in writing of the occurrence of any Default or Event of Default. If any Person shall give any notice or take any other action in respect of a claimed default (whether or not constituting an Event of Default) under this Agreement or under any note, evidence of indebtedness, indenture or other obligation (including, without limitation, the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents) to which or with respect to which any of the Borrower, any of its Subsidiaries, the Property Owner or any Guarantor is a party or obligor, whether as principal or surety, and such default would permit the holder of such note or obligation or other evidence of indebtedness to accelerate the maturity thereof, which acceleration would have a material adverse effect on any such Person, the Borrower shall forthwith give written notice thereof to the Agent and each of the Banks, describing the notice or action and the nature of the claimed default. (b) Environmental Events. The Borrower will promptly give notice to the Agent (i) upon the Borrower or the Guarantor obtaining knowledge of any potential or known Release, or threat of Release, of any Hazardous Substances at or from the Mortgaged Property or the Mezzanine Property; (ii) of any violation of any Environmental Law that the Borrower, any of its Subsidiaries, the Property Owner or the Guarantor reports in writing or is reportable by such Person in writing (or for which any written report supplemental to any oral report is made) to any federal, state or local environmental agency and (iii) upon becoming aware thereof, of any inquiry, proceeding, investigation, or other action, including a notice from any agency of potential environmental liability, of any federal, state or local environmental agency or board, that in either case involves the Mortgaged Property or the Mezzanine Property or has the potential to materially affect the assets, liabilities, financial conditions or operations of such Person or the Agent's liens or security title on the Collateral pursuant to the Security Documents. (c) Notification of Claims Against Collateral. The Borrower will, immediately upon becoming aware thereof, notify the Agent in writing of any setoff, claims (including, with respect to the Mortgaged Property and Mezzanine Property, environmental claims), withholdings or other defenses to which any of the Collateral, the Mortgaged Property or the Mezzanine Property or the rights of the Borrower, its Subsidiaries, the Property Owner, WASH, the Guarantor or the Agent or the Banks with respect to the Mortgaged Property, the Mezzanine Property or any of the Collateral are subject. In addition, the Borrower will, immediately upon becoming aware thereof, notify the Agent in writing of the occurrence of any material default under any Lease, the intention of any tenant under a Lease to withhold any fixed or base rent or the actual withholding thereof, or any bankruptcy, insolvency or cessation of operations by any tenant under a Lease. (d) Notice of Litigation and Judgments. The Borrower will give notice to the Agent in writing within 15 days of becoming aware of any litigation or proceedings threatened in writing or any pending litigation and proceedings affecting any of the Borrower, its Subsidiaries, the Property Owner or the Guarantor or to which any of such Persons is or is to become a party involving an uninsured claim against any of such Persons that could reasonably be expected to have a materially adverse effect on any of such Persons and stating the nature and status of such litigation or proceedings. The Borrower will give notice to the Agent, in writing, in form and detail satisfactory to the Agent and each of the Banks, within ten days of any judgment not covered by insurance, whether final or otherwise, against the Borrower, any of its Subsidiaries, the Property Owner or the Guarantor in an amount in excess of $250,000. (e) Notice of Proposed Sales, Encumbrances, Refinance or Transfer of Non-Mortgaged Property. The Borrower will give notice to the Agent of any proposed or completed sale, encumbrance, refinance or transfer of any Real Estate or other Investment described in Section 8.3(k) of the Borrower or its Subsidiaries other than Mortgaged Property within any fiscal quarter of the Borrower, such notice to be submitted together with the Compliance Certificate provided or required to be provided to the Banks under Section 7.4 with respect to such fiscal quarter. The Compliance Certificate shall with respect to any proposed or completed sale, encumbrance, refinance or transfer be adjusted in the best good-faith estimate of the Borrower to give effect to such sale, encumbrance, refinance or transfer and demonstrate that no Default or Event of Default with respect to the covenants referred to therein shall exist after giving effect to such sale, encumbrance, refinance or transfer. Notwithstanding the foregoing, in the event of any sale, encumbrance, refinance or transfer of any Real Estate or other Investment described in Section 8.3(k) of the Borrower or its Subsidiaries other than the Mortgaged Property involving an amount in excess of $10,000,000.00, the Borrower shall promptly give notice to the Agent of such transaction, which notice shall be accompanied by a Compliance Certificate prepared using the financial statements of the Borrower most recently provided or required to be provided to the Banks under Section 6.4 or Section 7.4 adjusted as provided in the preceding sentence. (f) Notification of Banks. Promptly after receiving any notice under this Section 7.5, the Agent will forward a copy thereof to each of the Banks, together with copies of any certificates or other written information that accompanied such notice. Section 7.6. Existence; Maintenance of Properties. (a) The Borrower will do or cause to be done all things necessary to preserve and keep in full force and effect its existence as a Delaware limited liability company and shall not amend or modify the Operating Agreement in any manner without the prior written consent of the Agent. The Borrower will do or cause to be done all things necessary to preserve and keep in full force all of its rights and franchises. The Borrower will cause each of its Subsidiaries and the Property Owner to do or cause to be done all things necessary to preserve and keep in full force and effect and in good standing their legal existence as a corporation, limited partnership, trust or limited liability company, as applicable. Without limiting the foregoing, the Property Owner shall take all actions as are necessary to maintain all protection afforded to limited liability companies in its state of organization. The Borrower will do or cause to be done all things necessary to preserve and keep in full force and affect all of the rights and franchises of its Subsidiaries and the Property Owner. The Borrower will continue to engage primarily in the business now conducted by it. The Borrower will cause each of its Subsidiaries and the Property Owner to continue to engage primarily in the respective businesses now conducted by each of them and in related businesses. (b) The Borrower (i) will cause all of its properties and those of its Subsidiaries used or useful in the conduct of its business and the business of its Subsidiaries to be maintained and kept in good condition, repair and working order (ordinary wear and tear excepted) and supplied with all necessary equipment, and (ii) will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof in all cases in which the failure so to do would have a material adverse effect on the condition of the applicable Mortgaged Property, Mezzanine Property or Collateral or on the financial condition, assets or operations of any of the Borrower, its Subsidiaries, the Property Owner or the Guarantor. Section 7.7. Insurance. (a) The Borrower will cause the Property Owner, at its expense, to procure and maintain the insurance policies required by the Mortgage Loan Documents. Each commercial general liability or umbrella liability policy with respect to the Mortgaged Property and the Mezzanine Property shall name the Agent and the Banks as an additional insured and shall contain a cross liability/severability endorsement. The Borrower shall deliver duplicate originals or certified copies of all such policies to the Agent, and the Borrower shall promptly furnish to the Agent all renewal notices and evidence that all premiums or portions thereof then due and payable have been paid. At least 15 days prior to the expiration date of all such policies, the Borrower shall deliver to the Agent evidence of continued coverage, including a certificate of insurance, as may be reasonably satisfactory to the Agent. Agent acknowledges and agrees that such insurance may be provided by the Borrower covering the Mortgaged Property and the Mezzanine Property as well as other properties directly or indirectly owned by the Borrower, provided that such insurance satisfies the requirements of the Mezzanine Mortgage Loan Documents, the Mortgage Loan Documents and the Loan Documents. (b) In the event of any loss or damage to the Mortgaged Property or the Mezzanine Property, the Borrower shall give prompt written notice to the insurance carrier and the Agent. The Agent acknowledges that the Property Owner's and WASH's rights to any insurance proceeds are subject to the terms of the Mortgage Loan Documents and the Mezzanine Mortgage Loan Documents, respectively. The Borrower may not and shall not permit the Property Owner or WASH, respectively, to settle, adjust or compromise any claim under such insurance policies without the prior written consent of the Agent; provided, further, that the Property Owner or WASH, as applicable, may make proof of loss and adjust and compromise any claim under casualty insurance policies which is of an amount less than $1,000,000.00 so long as no Default or Event of Default has occurred. Any proceeds of such claim which are not used to reconstruct or repair the Mortgaged Property or the Mezzanine Property, as applicable, or applied to the balance of the loan evidenced by the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents, as applicable, shall be deposited into the accounts established pursuant to the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents, as applicable, to the extent required thereby, or if such deposit is not required thereunder, then such proceeds shall be, subject to the rights of the Mortgagee, paid to (i) Borrower (and not to Agent) so long as the Mortgaged Property or the Mezzanine Property, as applicable, has been fully repaired and restored and no Default or Event of Default has occurred and is continuing, or (ii) if a Default of Event of Default has occurred and is continuing, or if the Mortgaged Property or the Mezzanine Property, as applicable, has not been so fully repaired or restored, then such excess insurance proceeds shall, subject to the rights of the Mortgagee, be paid to Agent and applied to the payment of the Obligations whether or not then due. Notwithstanding anything contained in the Loan Documents to the contrary, Agent hereby agrees that the Property Owner and WASH may use all insurance proceeds to restore and repair the Mortgaged Property or the Mezzanine Property, as applicable, provided that such use is permitted or required under the terms of the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents, as applicable. (c) In the event that the Property Owner or WASH is permitted pursuant to the terms of the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents, as applicable, to reconstruct, restore or repair the Mortgaged Property or the Mezzanine Property, as applicable, following a casualty to any portion of the Mortgaged Property or the Mezzanine Property, the Borrower shall cause the Property Owner or WASH, as applicable, to promptly and diligently repair and restore the Mortgaged Property or the Mezzanine Property, as applicable, in the manner and within the time periods required by the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents, as applicable, the Leases and any other agreements affecting the Mortgaged Property or the Mezzanine Property. In the event that Property Owner or WASH, as applicable, is permitted pursuant to the terms of the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents, as applicable, to elect not to reconstruct, restore or repair the Mortgaged Property or the Mezzanine Property following a casualty to any portion of the Mortgaged Property or the Mezzanine Property, the Borrower shall not permit the Property Owner or WASH to elect not to reconstruct, restore or repair the Mortgaged Property or the Mezzanine Property without the prior written consent of the Agent. Section 7.8. Taxes. (a) The Borrower will duly pay and discharge, or cause to be paid and discharged, before the same shall become overdue, all taxes, assessments and other governmental and private charges imposed upon the Borrower, its Subsidiaries and upon the Collateral and the other Real Estate, such Person's sales and activities, or any part thereof, or upon the income or profits therefrom, as well as all claims for labor, materials, or supplies that if unpaid might by law become a lien or charge upon any of its property, and shall in any event cause the prompt, full and unconditional discharge of all liens imposed on or against the Collateral or any portion thereof within thirty (30) days after receiving written notice (whether from the Mortgagee, the Agent, the lienholder or any other Person) of the filing thereof; provided that so long as no Event of Default has occurred, any such tax, assessment, charge, levy or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings which shall suspend the collection thereof with respect to such property, neither such property nor any portion thereof or interest therein would be in any danger of sale, forfeiture or loss by reason of such proceeding and the Borrower or such Person shall have set aside adequate reserves with respect thereto as the Agent may reasonably require; and provided, further, that forthwith upon the commencement of proceedings to foreclose any lien that may have attached as security therefor, the Borrower either (i) will provide a bond issued by a surety reasonably acceptable to the Majority Banks and sufficient to stay all such proceedings or (ii) if no such bond is provided, will pay each such tax, assessment, charge, levy or claim. (b) Notwithstanding the foregoing, the Borrower shall cause the Property Owner and WASH to pay all taxes, assessments and other charges, to pay all claims for labor, material or supplies that if unpaid or unbonded might by law become a lien or charge upon any of its property (including the Mortgaged Property and the Mezzanine Property), and to keep the Mortgaged Property and Mezzanine Property free from all liens (other than the lien of the Mortgages, the Nomura Mortgages and the Permitted Liens), and shall in any event cause the prompt, full and unconditional discharge of all Liens imposed upon the Mortgaged Property and the Mezzanine Property or any portion thereof within thirty (30) days after receiving written notice (whether from the Mortgagee, the Mezzanine Mortgagee, the Agent, the lienholder or any other Person) of the filing thereof or such earlier time as may be required by the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents, as applicable; subject in each case to the Property Owner's or WASH's, as applicable, right to contest the same as permitted in but subject to the conditions set forth in the Mortgages or the Nomura Mortgages, as applicable, so long as no Event of Default has occurred. In the event that the Property Owner or WASH elects to commence any contest or similar proceeding with respect to any such taxes, other charges, liens or other claims described herein, the Borrower shall provide prompt written notice thereof to the Agent together with such other evidence as the Agent may reasonably require showing compliance with the requirements of the Mortgage Loan Documents and the Mezzanine Mortgage Loan Documents, as applicable. Notwithstanding the foregoing, the Borrower shall cause the Property Owner and WASH promptly to pay any contested taxes, other charges, liens or claims and the payment thereof shall not be deferred, if the Mortgagee, the Mezzanine Mortgagee, the Property Owner or WASH, as applicable, may be subject to civil or criminal damages as a result thereof. If such action or proceeding is terminated or discontinued adversely to the Property Owner or WASH, then the Borrower shall deliver to the Agent reasonable evidence of payment of such contested taxes, other charges or lien. Section 7.9. Inspection of Properties and Books. The Borrower shall permit the Banks, through the Agent or any representative designated by the Agent, at the Borrower's expense to visit and inspect any of the properties of the Borrower or any of its Subsidiaries and the Mortgaged Property and the Mezzanine Property, to examine the books of account of the Borrower and its Subsidiaries (and to make copies thereof and extracts therefrom) and to discuss the affairs, finances and accounts of the Borrower and its Subsidiaries with, and to be advised as to the same by, its officers, all at such reasonable times and intervals as the Agent or any Bank may reasonably request. The Banks shall use good faith efforts to coordinate such visits and inspections so as to minimize the interference with and disruption to the Borrower's and its Subsidiaries' normal business operations. Section 7.10. Compliance with Laws, Contracts, Licenses, and Permits. The Borrower will comply and will cause each of its Subsidiaries to comply in all respects with (i) all applicable laws and regulations now or hereafter in effect wherever its business is conducted, including all Environmental Laws, (ii) the provisions of its or their certificate of formation, operating agreement, corporate charter, and other charter documents and bylaws, (iii) all agreements and instruments to which it is a party or by which it or any of its properties may be bound, (iv) all applicable decrees, orders, and judgments, and (v) all licenses and permits required by applicable laws and regulations for the conduct of its business or the ownership, use or operation of its properties. The Borrower covenants and agrees to give Agent prompt notice of any non-compliance with such laws, ordinances, regulations or requirements and of any notice of non-compliance therewith which the Borrower or any of its Subsidiaries receives or any threatened or pending proceedings in respect thereto or with respect to the Mortgaged Property or the Mezzanine Property (including, without limitation, changes in zoning), of which the Property Owner, the Borrower or any of its Subsidiaries receives notice. If at any time while any Loan or Note is outstanding or the Banks have any obligation to make Loans hereunder, any authorization, consent, approval, permit or license from any officer, agency or instrumentality of any government shall become necessary or required in order that the Borrower or the Property Owner may fulfill any of its obligations hereunder, the Borrower will immediately take or cause to be taken all steps necessary to obtain such authorization, consent, approval, permit or license and furnish the Agent and the Banks with evidence thereof. Notwithstanding the foregoing, the Property Owner and WASH shall have the right to contest the applicability of any legal requirement subject to the approval of the Mortgagee and the Mezzanine Mortgagee, as applicable, so long as Property Owner or WASH is in good faith, and by proper legal proceedings, diligently contesting the application thereof, provided no Event of Default shall exist and be continuing hereunder, and the Borrower provides evidence to the Agent that the Property Owner or WASH is otherwise fully complying with each of the conditions set forth in the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents, as applicable, or prescribed by the Mortgagee or the Mezzanine Mortgagee, as applicable, applicable to such contest. The Borrower shall promptly notify the Agent of the commencement of any contest or similar proceeding hereunder. Notwithstanding the foregoing, the Borrower shall cause the Property Owner or WASH promptly to comply with any contested legal requirement, and compliance therewith shall not be deferred, if the Property Owner, WASH, the Mortgagee or the Mezzanine Mortgagee, as applicable, may be subject to civil or criminal charges or damages as a result thereof or such noncompliance might place the Mortgaged Property, the Mezzanine Property or any part thereof in danger of being forfeited, lost or closed. If such action or proceeding is terminated or discontinued adversely to the Property Owner or WASH, then, the Borrower shall, upon written demand, deliver to the Agent reasonable evidence of compliance by the Property Owner or WASH with such contested legal requirement. Section 7.11. Use of Proceeds. The Borrower will use the proceeds of the Loans solely to provide short-term financing (a) for the acquisition of fee interests by the Property Owner in Real Estate which is located in the northeastern corridor of the United States and utilized principally as commercial office space, (b) for Capital Improvement Projects to Real Estate owned by the Property Owner, (c) for the repayment of Indebtedness incurred or assumed by the Property Owner or any Subsidiary of the Borrower in connection with the acquisitions and investments described in Section 7.11(a), (d) for the acquisition by Property Owner of the equity interests in Wells Avenue Holdings; (e) for reasonable transaction costs related to the transactions referred to in the preceding clause (a) and (d), (f) for Tenant Improvement Projects and Leasing Commissions, (g) up to $10,000,000 for general working capital purposes, and (h) for such other purposes as the Majority Banks may approve. Notwithstanding the foregoing, in no event shall the proceeds of the Loan be used (i) to acquire any asset that as a part of such transaction or in a related transaction will be or is to become subject to a lien against such asset other than a lien in favor of the Mortgagee under the Mortgage Loan Documents, or (ii) without the consent of the Majority Banks, to pay amounts due under the Mortgage Loan Documents. Section 7.12. Further Assurances. The Borrower will cooperate with, and will cause each of its Subsidiaries and the Property Owner and the Guarantor to cooperate with, the Agent and the Banks and execute such further instruments and documents as the Banks or the Agent shall reasonably request to carry out to their satisfaction the transactions contemplated by this Agreement and the other Loan Documents. Section 7.13. Management Agreements. The Borrower will provide prompt written notice to the Agent of any termination or material modification or amendment of any Management Agreement, provided that, without the prior consent of the Majority Banks, none of the Management Agreements shall be modified or amended to increase the fees payable thereunder and provided further, that without the prior consent of the Majority Banks, which consent shall not be unreasonably withheld or delayed, the Borrower shall not permit WASH to terminate, modify or amend any Management Agreement for the Mezzanine Property. The Borrower will not enter into and will not permit the Property Owner or WASH to enter into any Management Agreement or otherwise manage any of the Mortgaged Property or Mezzanine Property except with property and leasing managers having sufficient expertise and resources to manage such properties as Class A office buildings or if such buildings are Non- Stabilized Properties, as Class B office buildings and with respect to the Mezzanine Property are approved by the Agent, and on leasing terms and conditions no less favorable to the Borrower or the Property Owner or WASH than are contained in the Management Agreements delivered to the Agent prior to the date hereof or are otherwise on then commercially reasonable terms. Any Management Agreement for the Mortgaged Property or the Mezzanine Property shall be in form and substance reasonably satisfactory to the Agent. The Agent hereby approves the Mezzanine Management Agreement. Notwithstanding the foregoing, any manager of the Mezzanine Property shall satisfy any conditions or requirements contained in the Mezzanine Mortgage Loan Documents applicable to such entity acting as the manager of the Mezzanine Property, and in no event shall there be a change to the manager of the Mezzanine Property or any Management Agreement for the Mezzanine Property if the same would constitute a "Default" or "Event of Default" under the Mezzanine Mortgage Loan Documents. Section 7.14. ERISA Compliance. The Borrower will not permit the present value of all employee benefits vested in all Employee Benefit Plans, Multiemployer Plans and Guaranteed Pension Plans maintained by the Borrower and any ERISA Affiliate thereof to exceed the present value of the assets allocable to such vested benefits by an amount greater than $500,000.00 in the aggregate. Neither the Borrower nor any ERISA Affiliate thereof will at any time permit any such Plan maintained by it to engage in any "prohibited transaction" as such term is defined in Section 4975 of the Code or Section 406 of ERISA, incur any "accumulated funding deficiency" as such term is defined in Section 302 of ERISA, whether or not waived, or terminate any such Plan in any manner which could result in the imposition of a lien on the property of the Borrower or the Guarantor pursuant to Section 4068 of ERISA. Section 7.15. Condemnation. In the event that all or any portion of the Mortgaged Property or the Mezzanine Property shall be damaged or taken through condemnation (which term shall include any damage or taking by any governmental authority, quasi-governmental authority, any party having the power of condemnation, or any transfer by private sale in lieu thereof), or any such condemnation shall be threatened, the Borrower shall give prompt written notice to the Agent. The Agent and the Banks acknowledge that the Property Owner's and WASH's rights to any condemnation award is subject to the terms of the Mortgage Loan Documents and the Mezzanine Mortgage Loan Documents, respectively. The Borrower may not and shall not permit the Property Owner or WASH to settle or compromise any claim, action or proceeding relating to such damage or condemnation without the prior written consent of the Agent. Any proceeds, award or damages from such damage or condemnation which are not used to reconstruct or repair the Mortgaged Property or the Mezzanine Property, as applicable, or applied to the balance of the loan evidenced by the Mortgage Loan Documents or the Mezzanine Mortgage Loan documents, as applicable, shall, subject to the rights of the Mortgagee, be paid to the Agent and applied to the payment of the Obligations whether or not then due. Notwithstanding anything contained in the Loan Documents to the contrary, Agent hereby agrees that the Property Owner or WASH, as applicable, may use all condemnation proceeds, awards and damages to restore and repair the Mortgaged Property or the Mezzanine Property, as applicable, provided that such use is permitted or required under the terms of the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents, as applicable. In the event that the Property Owner or WASH, as applicable, is permitted pursuant to the terms of the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents, as applicable, to reconstruct, restore or repair the Mortgaged Property or the Mezzanine Property, as applicable, following a condemnation of any portion of the Mortgaged Property or the Mezzanine Property, the Borrower shall cause the Property Owner or WASH, as applicable, to promptly and diligently repair and restore the Mortgaged Property or the Mezzanine Property in the manner and within the time periods required by the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents, as applicable, the Leases and any other agreements affecting the Mortgaged Property or the Mezzanine Property. In the event that the Property Owner or WASH, as applicable, is permitted pursuant to the terms of the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents, as applicable, to elect not to reconstruct, restore or repair the Mortgaged Property or the Mezzanine Property following a condemnation of any portion of the Mortgaged Property or the Mezzanine Property, the Borrower shall not permit the Property Owner or WASH to elect not to reconstruct, restore or repair the Mortgaged Property or the Mezzanine Property without the prior written consent of the Agent. Section 7.16. Distribution of Income to the Borrower. The Borrower shall cause all of its Subsidiaries to promptly distribute to the Borrower (but not less frequently than monthly), whether in the form of dividends, distributions or otherwise, all profits, proceeds or other income relating to or arising from its Subsidiaries' use, operation, financing, refinancing, sale or other disposition of their respective assets and properties after (a) the payment by each Subsidiary of its operating expenses and debt service for such month and (b) the establishment of reasonable reserves for the payment of operating expenses not paid on at least a monthly basis and capital improvements to be made to such Subsidiary's assets and properties approved by such Subsidiary in the ordinary course of business consistent with its past practices. Section 7.17. More Restrictive Agreements. Without limiting the terms of Section 8.1, should the Borrower or any Guarantor enter into or modify any agreements or documents pertaining to any existing or future Indebtedness, Debt Offering or Equity Offering, which agreements or documents include covenants (whether affirmative or negative), warranties, representations, defaults or events of default (or any other provision which may have the same practical effect as any of the foregoing) which are individually or in the aggregate more restrictive against the Borrower, the Guarantor or their respective Subsidiaries than those set forth herein or in any of the other Loan Documents, the Borrower shall promptly notify the Agent and, if requested by the Majority Banks, the Borrower, the Agent, and the Majority Banks shall (and if applicable, the Borrower shall cause the Guarantor to) promptly amend this Agreement and the other Loan Documents to include some or all of such more restrictive provisions as determined by the Majority Banks in their sole discretion. Notwithstanding the foregoing, this Section 7.17 shall not apply to covenants contained in any agreements or documents evidencing or securing Non-Recourse Indebtedness or covenants in agreements or documents relating to recourse Indebtedness that relate only to specific Real Estate that is collateral for such Indebtedness. Section 7.18. Compliance. The Borrower shall operate its business and shall cause each of its Subsidiaries to operate its business in compliance with the terms and conditions of this Agreement and the other Loan Documents. Wellsford Commercial shall at all times comply with all requirements of applicable laws necessary to maintain REIT Status. Section 7.19. Leasing. The Borrower will cause the Property Owner and WASH to take or cause to be taken all reasonable steps within the power of the Property Owner and WASH to market and lease the leasable area of the Mortgaged Property and the Mezzanine Property in accordance with sound and customary leasing and management practices for similar properties. The Borrower will not allow the Property Owner or WASH to lease all or any portion of the Mortgaged Property or the Mezzanine Property or amend, supplement or otherwise modify, terminate or cancel, or accept the surrender of, or consent to the assignment or subletting of, or grant any concessions to or waive the performance of any obligations of any tenant, lessee or licensee under, any now existing or future Lease without the prior written consent of the Agent; provided, however, with respect to any Lease which covers less than 25,000 square feet or provides less than three percent (3%) of the Operating Cash Flow of the Mortgaged Property and the Mezzanine Property, whichever is less, the Property Owner or WASH, as applicable, may amend, supplement or otherwise modify, terminate or cancel, or accept the surrender of, or consent to the assignment or subletting of, or grant concessions to or waive the performance of any obligations of any tenant, lessee or licensee under any such Lease in the ordinary course of business consistent with sound leasing and management practices for similar properties provided that such action with respect to a lease for a Mortgaged Property or Mezzanine Property shall not cause (with the passage of time or otherwise) a default under the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents. The Borrower shall furnish or cause the Property Owner and WASH to furnish the Agent with executed copies of all Leases hereafter made, and all Leases now or hereafter entered into will be in form and substance subject to the approval of the Agent. Notwithstanding the foregoing, following the Agent's approval of the "Leasing Parameters" (as hereinafter defined) for the Mortgaged Property and the Mezzanine Property, then the Borrower may permit Property Owner or WASH, without the prior approval of the Agent, to enter into any Lease provided that the Lease covers less than 25,000 square feet or provides less than three percent (3%) of the Operating Cash Flow of the Mortgaged Property and the Mezzanine Property, is a bona fide arm's length lease entered into in the ordinary course of business with a party unaffiliated with the Borrower, any of its Subsidiaries, the Property Owner or the Guarantor, falls within the Leasing Parameters and is on the standard lease form (without material modification or addition). In connection with any Lease to be approved by the Agent as provided herein, the Borrower shall submit to the Agent for its approval the identity of the tenant and a summary of the major terms of the Lease (which terms shall include without limitation those matters included within the Leasing Parameters) (collectively the "Major Terms"), and Agent's approval shall be limited to the approval of the Major Terms, and provided further that any such terms submitted to the Agent for approval shall be deemed approved by the Agent unless the Agent expressly disapproves the same by written notice delivered to the Borrower (which shall state the reasons for disapproval) within five (5) Business Days after the date of the delivery of such Lease to the Agent for approval and all other information reasonably requested by the Agent in order to make such determination. Following the approval by the Agent of the Major Terms, the Property Owner or WASH, as applicable, shall be permitted to enter into a lease to such tenant which falls within the Major Terms. As used herein, "Leasing Parameters" means leasing parameters for the Mortgaged Property and the Mezzanine Property approved by the Agent. Leasing Parameters shall include, without limitation, the minimum and maximum term, the minimum rent, tax and operating stops, tenant standard improvements, tenant allowances and other tenant inducements and leasing commissions, and shall be approved by the Agent prior to the commencement of each calendar year during the term of the Notes. The Agent shall have the right, and the Borrower hereby authorizes the Agent, to communicate directly with any tenant under a Lease to verify any information delivered to the Agent by the Borrower concerning such tenant or such tenant's Lease. The Borrower shall not collect and shall not permit the Property Owner or WASH to collect any rents, issues, profits, revenues, income or other benefits payable under any of the Leases more than one (1) month in advance (provided that the foregoing shall not prohibit the collection of security deposits). The Borrower shall not, directly or indirectly, cause or permit to exist, or allow the Property Owner or WASH to cause or permit to exist, any condition which would result in the termination or cancellation of, or which would relieve the performance of any obligations of any tenant under, any Lease. Section 7.20. Plan Assets, etc. The Borrower will do, or cause to be done, all things necessary to ensure that the Borrower, its Subsidiaries and the Property Owner will not be deemed to hold Plan Assets at any time. Each owner of an equity interest in Borrower has certified to Borrower and the Banks, and Borrower shall require each proposed transferee of any equity interest in Borrower, as a condition precedent to such transfer, to certify to Borrower and the Banks, that the source of funds used or to be used by it to acquire its interest in Borrower are not assets of any plan subject to Title I of ERISA or Section 4975 of the Code and are not deemed to be assets of any such plan under the U.S. Department of Labor's plan asset regulations. Borrower has provided the Agent with a copy of each such certification from each owner of an equity interest in Borrower and will promptly provide the Agent with a copy of each such certification from each proposed transferee. Section 7.21. Preservation and Maintenance. (a) The Borrower (i) shall not permit or commit waste, impairment, or deterioration of the Mortgaged Property or the Mezzanine Property or permit the Property Owner or WASH to abandon the Mortgaged Property or the Mezzanine Property, (ii) shall cause the Property Owner or WASH to restore or repair promptly and in a good and workmanlike manner all or any part of the Mortgaged Property and the Mezzanine Property in the event of any damage, injury or loss thereto, to the equivalent of its condition prior to such damage, injury or loss, or such other condition as the Agent may approve in writing, (iii) shall cause the Property Owner and WASH to keep the Mortgaged Property and the Mezzanine Property, including the Building and any fixtures, equipment, machinery and personal property, in good order, repair and tenantable condition (subject to ordinary wear and tear) and shall replace fixtures, equipment, machinery and personal property on the Mortgaged Property and the Mezzanine Property when necessary to keep such items in good order, repair, and tenantable condition, and (iv) shall cause Property Owner and WASH to keep all trademarks, tradenames, servicemarks and licenses and permits necessary for the use and occupancy of the Mortgaged Property and the Mezzanine Property in good standing and in full force and effect. Subject to the provisions of Section 7.21(b) below, neither the Borrower, the Property Owner, WASH nor any tenant or other Person shall remove, demolish or alter any Building now existing or hereafter erected on the Mortgaged Property or the Mezzanine Property or any other fixtures, equipment, machinery or personal property in or on the Mortgaged Property or the Mezzanine Property except when incident to the replacement of fixtures, equipment, machinery or other personal property with items of like kind and value. The Borrower shall cause the Property Owner and WASH to comply with the asbestos operations and maintenance program in effect as of the date hereof (if any) or adopted hereafter with respect to any new Mortgaged Property, and shall not permit the Property Owner or WASH to discontinue or materially modify such program without the Agent's prior written consent. In the event that the Property Owner or WASH shall remove any asbestos or asbestos- containing materials after the date hereof, such removal shall be performed in accordance with all applicable laws and, upon the request of the Agent, the Borrower shall provide evidence of such compliance to the Agent. (b) Provided that no Event of Default shall have occurred and be continuing hereunder, the Borrower may permit the Property Owner and WASH to undertake any alteration, improvement, demolition or removal of the Mortgaged Property or the Mezzanine Property or any portion thereof (an "Alteration") so long as such Alteration (i) is performed strictly in compliance with the terms and conditions of the Mortgages and the other Mortgage Loan Documents and the Nomura Mortgages and the other Mezzanine Mortgage Loan Documents, respectively, (ii) is permitted by the Leases, (iii) shall not materially adversely affect the value of the applicable Mortgaged Property or Mezzanine Property or materially reduce the income from the level available immediately prior to commencement of such Alteration, and (iv) shall not have a material adverse effect on the ability of the Property Owner or WASH to perform its obligations under the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents, respectively, and the Leases or of the Borrower to perform its obligations under the Loan Documents. Any other Alteration shall require the prior written consent of the Agent, such consent not to be unreasonably withheld or delayed. All work performed in connection with any Alteration shall be performed in accordance with all applicable laws. The Borrower shall cause the Property Owner and WASH to provide to the Agent such evidence as the Agent may reasonably require to evidence the Property Owner's and WASH's compliance with the terms of the Mortgage Loan Documents, the Mezzanine Mortgage Loan Documents and this Agreement in connection with any Alteration. Section 7.22. Use of Mortgaged Property and Mezzanine Property. Unless required by applicable law or unless the Agent has otherwise agreed in writing, the Borrower shall not allow or permit the Property Owner or WASH to allow changes in the nature of the occupancy or use for which the Mortgaged Property or the Mezzanine Property was intended at the time this Agreement was executed. The Borrower shall not initiate, permit to occur or acquiesce in or permit the Property Owner or WASH to initiate, permit to occur or acquiesce in a change in the zoning classification of the Mortgaged Property or the Mezzanine Property or subject the Mortgaged Property or the Mezzanine Property to restrictive, negative or other covenants without the Agent's written consent, which consent shall not be unreasonably withheld or delayed. The Borrower shall cause the Property Owner and WASH to comply with, observe and perform in all material respects all zoning and other laws affecting the Mortgaged Property and the Mezzanine Property, all agreements and other covenants affecting the Mortgaged Property and the Mezzanine Property (including without limitation the Mortgaged Mortgage Loan Documents and the Mezzanine Mortgage Loan Documents), and all licenses and permits affecting the Mortgaged Property and the Mezzanine Property. Section 7.23. Property Owner to Remain a Single-Purpose Entity. The Borrower shall cause the Property Owner, WASH Manager and Wells Avenue Holdings to comply with the provisions of Section 8.12 of the Mortgage Loan Agreement, shall cause the Property Owner to do all things necessary to observe limited liability company formalities and to preserve its existence, and will not permit the Property Owner to amend, modify or otherwise change its articles of organization, operating agreement or other organizational documents. Section 8. CERTAIN NEGATIVE COVENANTS OF THE BORROWER. The Borrower covenants and agrees that, so long as any Loan or Note is outstanding or any of the Banks has any obligation to make any Loans: Section 8.1. Restrictions on Indebtedness. The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any Indebtedness other than: (a) Indebtedness of Borrower to the Banks arising under any of the Loan Documents; (b) current liabilities of the Borrower or its Subsidiaries incurred in the ordinary course of business but not incurred through (i) the borrowing of money, or (ii) the obtaining of credit except for credit on an open account basis customarily extended and in fact extended in connection with normal purchases of goods and services; (c) Indebtedness in respect of taxes, assessments, governmental charges or levies and claims for labor, materials and supplies to the extent that payment therefor shall not at the time be required to be made in accordance with the provisions of Section 7.8; (d) Indebtedness in respect of judgments or awards that have been in force for less than the applicable period for taking an appeal so long as execution is not levied thereunder or in respect of which the Borrower or the relevant Subsidiary shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review; (e) endorsements for collection, deposit or negotiation and warranties of products or services, in each case incurred in the ordinary course of business; (f) Subject to Section 9, recourse Indebtedness (other than the Obligations) of the Borrower or any Subsidiary of the Borrower (other than Property Owner, WASH, WASH Manager or Wells Avenue Holdings) in the aggregate principal amount not greater than $20,000,000.00, provided that neither the Borrower nor any of such permitted Subsidiaries shall incur any Indebtedness pursuant to this Section 8.1(f) unless the Borrower shall have provided to the Agent a statement that no Default or Event of Default exists and a Compliance Certificate demonstrating that the Borrower will be in compliance with its covenants referred to therein after giving effect to such incurrence; and provided further that recourse to Borrower pursuant to any such recourse Indebtedness shall be expressly subordinate in right and time of payment to the Obligations pursuant to a subordination agreement in form and substance satisfactory to the Majority Banks; (g) Non-recourse Indebtedness any Subsidiary of the Borrower (other than Property Owner, WASH, WASH Manager or Wells Avenue Holdings), provided that such Indebtedness is incurred in connection with the acquisition of Real Estate by such permitted Subsidiary and the credit facility established pursuant to this Agreement and the Mortgage Loan Agreement is fully funded, or if not fully funded, the Indebtedness to be incurred in connection with an acquisition or refinance is in excess of the remaining amounts available to be funded pursuant to this Agreement and the Mortgage Loan Agreement (assuming such Real Estate was to become a Mortgaged Property) or either the Banks or the Mortgagee do not approve the addition of such Real Estate as a Mortgaged Property, provided that none of such Subsidiaries shall incur any Indebtedness pursuant to this Section 8.1(g) unless the Borrower shall have provided to the Agent a statement that no Default or Event of Default exists and a Compliance Certificate demonstrating that the Borrower will be in compliance with its covenants referred to therein and the covenants set forth in Section 9 of the Mortgage Loan Agreement after giving effect to such incurrence; (h) Subject to Section 9, Non-recourse Indebtedness existing prior to an acquisition of Real Estate by any Subsidiary of the Borrower (other than Property Owner, WASH, WASH Manager or Wells Avenue Holdings) that is assumed by such permitted Subsidiary in connection with the acquisition of Real Estate, provided that none of such permitted Subsidiaries shall incur any Indebtedness pursuant to this Section 8.1(h) unless the Borrower shall have provided to the Agent a statement that no Default or Event of Default exists and a Compliance Certificate demonstrating that the Borrower will be in compliance with its covenants referred to therein after giving effect to such incurrence; (i) Subject to Section 8.12, Section 8.13 and Section 9, Indebtedness of the Property Owner under the Mortgage Loan Agreement not to exceed $300,000,000.00 and, subject to the terms of this Agreement, any refinance thereof in a principal amount not exceeding the then outstanding balance of the Mortgage Loan; and (j) Subject to Section 8.12, Section 8.13 and Section 9, Indebtedness of WASH under the Mezzanine Mortgage Loan Documents not to exceed [$68,340,815.57]. Notwithstanding anything in this Section 8.1 to the contrary, neither Property Owner nor WASH shall be permitted to create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any Indebtedness other than Indebtedness expressly permitted pursuant to Section 8.1(i), Section 8.1(j) and Section 8.12, and neither WASH Manager nor Wells Avenue Holdings shall be permitted to create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any indebtedness other than indebtedness described in Section 8.1(b). Section 8.2. Restrictions on Liens, Etc. Without limiting the terms of Section 8.1, the Borrower will not, and will not permit any of its Subsidiaries to, (a) create or incur or suffer to be created or incurred or to exist any lien, encumbrance, mortgage, pledge, negative pledge, charge, restriction or other security interest of any kind upon any of its property or assets of any character whether now owned or hereafter acquired, or upon the income or profits therefrom; (b) transfer any of its property or assets or the income or profits therefrom for the purpose of subjecting the same to the payment of Indebtedness or performance of any other obligation in priority to payment of its general creditors; (c) acquire, or agree or have an option to acquire, any property or assets upon conditional sale or other title retention or purchase money security agreement, device or arrangement; (d) suffer to exist for a period of more than 30 days after the same shall have been incurred any Indebtedness or claim or demand against it that if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be given any priority whatsoever over its general creditors; (e) sell, assign, pledge or otherwise transfer any accounts, contract rights, general intangibles, chattel paper or instruments, with or without recourse; (f) incur or maintain any obligation to any holder of Indebtedness of the Borrower or any Subsidiary which prohibits the creation or maintenance of any lien securing the Obligations (collectively "Liens"); or (g) permit either WASH Manager or Wells Avenue Holdings to create or incur or suffer to be created or incurred or to exist any Lien upon any of its property or assets of any character whether now owned or hereafter acquired, or upon the income or profits therefrom; provided that the Borrower and its Subsidiaries (other than WASH, WASH Manager, Wells Avenue Holdings and Property Owner) may create or incur or suffer to be created or incurred or to exist: (i) liens in favor of the Borrower on all or part of the assets of Subsidiaries of the Borrower securing Indebtedness owing by Subsidiaries of the Borrower to the Borrower (provided that no such liens shall be permitted with respect to any of the Mortgaged Property, the Mezzanine Property, the Collateral or any other collateral for the Mortgage Loan); (ii) liens on properties to secure taxes, assessments and other governmental charges or claims for labor, material or supplies in respect of obligations not overdue; (iii) deposits or pledges made in connection with, or to secure payment of, worker's compensation, unemployment insurance, old age pensions or other social security obligations; (iv) liens on properties other than Collateral, the Mortgaged Property, the Mezzanine Property or other collateral for the Mortgage Loan in respect of judgments, awards or indebtedness, the Indebtedness with respect to which is permitted by Section 8.1(d), (f), (g) or (h); (v) encumbrances on Real Estate other than the Mortgaged Property and the Mezzanine Property consisting of easements, rights of way, zoning restrictions, restrictions on the use of real property and defects and irregularities in the title thereto, landlord's or lessor's liens under leases to which the Borrower or a Subsidiary of the Borrower is a party, and other minor non-monetary liens or encumbrances none of which interferes materially with the use of the property affected in the ordinary conduct of the business of the Borrower and its Subsidiaries, and which defects do not individually or in the aggregate have a materially adverse effect on the business of the Borrower and its Subsidiaries on a Consolidated basis; (vi) liens in favor of the Agent and the Banks under the Loan Documents; (vii) Permitted Liens and the Mortgages on the Mortgaged Property and Permitted Liens and the Nomura Mortgages on the Mezzanine Property; and (viii) liens in favor of the Mortgagee on the interest of Property Owner in Wells Avenue Holdings. Notwithstanding anything in this Section 8.2 to the contrary, neither Property Owner, WASH, WASH Manager or Wells Avenue Holdings shall be permitted to create or incur or suffer to be created or incurred any Lien other than Liens described in Section 8.2(vii) or (viii) with respect to Property Owner and WASH. Section 8.3. Restrictions on Investments. The Borrower will not, and will not permit any of its Subsidiaries to, make or permit to exist or to remain outstanding any Investment except Investments by Borrower and its Subsidiaries (other than WASH, WASH Manager, Wells Avenue Holdings and, except as expressly permitted below, Property Owner) in: (a) Investments by Borrower and its permitted Subsidiaries in marketable direct or guaranteed obligations of the United States of America that mature within one (1) year from the date of purchase by the Borrower or its Subsidiary; (b) Investments by Borrower and its permitted Subsidiaries in marketable direct obligations of any of the following: Federal Home Loan Mortgage Corporation, Student Loan Marketing Association, Federal Home Loan Banks, Federal National Mortgage Association, Government National Mortgage Association, Bank for Cooperatives, Federal Intermediate Credit Banks, Federal Financing Banks, Export-Import Bank of the United States, Federal Land Banks, or any other agency or instrumentality of the United States of America; (c) Investments by Borrower and its permitted Subsidiaries in demand deposits, certificates of deposit, bankers acceptances and time deposits of United States banks having total assets in excess of $100,000,000; provided, however, that the aggregate amount at any time so invested with any single bank having total assets of less than $1,000,000,000 will not exceed $200,000; (d) Investments by Borrower and its permitted Subsidiaries in securities commonly known as "commercial paper" issued by a corporation organized and existing under the laws of the United States of America or any State which at the time of purchase are rated by Moody's Investors Service, Inc. or by Standard & Poor's Corporation at not less than "P 1" if then rated by Moody's Investors Service, Inc., and not less than "A 1", if then rated by Standard & Poor's Corporation; (e) Investments by Borrower and its permitted Subsidiaries in mortgage-backed securities guaranteed by the Government National Mortgage Association, the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation and other mortgage-backed bonds which at the time of purchase are rated by Moody's Investors Service, Inc. or by Standard & Poor's Corporation at not less than "Aa" if then rated by Moody's Investors Service, Inc. and not less than "AA" if then rated by Standard & Poor's Corporation; (f) Investments by Borrower and its permitted Subsidiaries in repurchase agreements having a term not greater than 90 days and fully secured by securities described in the foregoing subsection (a), (b) or (e) with banks described in the foregoing subsection (c) or with financial institutions or other corporations having total assets in excess of $500,000,000; (g) Investments by Borrower and its permitted Subsidiaries in shares of so-called "money market funds" registered with the SEC under the Investment Company Act of 1940 which maintain a level per-share value, invest principally in investments described in the foregoing subsections (a) through (f) and have total assets in excess of $50,000,000; (h) Investments by Subsidiaries of the Borrower (other than WASH, WASH Manager and Wells Avenue Holdings) in fee interests in Real Estate located in the northeastern United States utilized principally for commercial office space, including earnest money deposits relating thereto and transaction costs (provided that as to Property Owner, such Real Estate shall be Mortgaged Property only); (i) Investments by Borrower in the Property Owner provided it is wholly- owned by the Borrower and by Borrower or Property Owner in other wholly- owned Subsidiaries of the Borrower or Property Owner, as applicable, which own Investments of the type described in Section 8.3(h) or (j); (j) Investments by Subsidiaries of the Borrower (other than Property Owner, WASH, WASH Manager and Wells Avenue Holdings) in leasehold interests in properties located in the northeastern United States which are used principally for commercial office purposes under ground leases having not less than fifty (50) years of the leasehold term remaining at the time of acquisition thereof; (k) Investments by Subsidiaries of the Borrower (other than Property Owner, WASH, WASH Manager and Wells Avenue Holdings) in Investment Partnerships which own Investments of the type described in Section 8.3(h) or (j); provided that the aggregate value of such Investments shall not exceed ten percent (10%) of Borrower's Consolidated Total Assets; (l) Investments by Property Owner in Wells Avenue Holdings, and by Wells Avenue Holdings in WASH Manager, and by Wells Avenue Holdings and WASH Manager in WASH; and (m) Investments by WASH in the Mezzanine Property. Section 8.4. Merger, Consolidation. The Borrower will not, and will not permit any of its Subsidiaries to, become a party to any merger, consolidation or other business combination, or agree to effect any asset acquisition, stock acquisition or other acquisition without the prior written consent of the Majority Banks except (i) the merger or consolidation of one or more of the Subsidiaries of the Borrower with and into the Borrower, (ii) the merger or consolidation of two or more Subsidiaries of the Borrower, and (iii) the merger or consolidation of one or more unaffiliated corporations or other entities with and into the Borrower where (a) the Borrower is the surviving entity, (b) immediately after the merger or consolidation, the original shareholders of the Borrower at the time of such consolidation or merger own at least fifty-one percent (51%) of the Voting Interests in the Borrower (which for the purposes hereof shall include satisfaction of the provisions of clauses (a) and (b) of the definition of the term "Voting Interests"), (c) the purpose of the consolidation or merger is the acquisition of Real Estate used for commercial office purposes located in the northeastern United States, (d) the assets of such other entity do not exceed fifty percent (50%) of the Consolidated Total Assets of the Borrower as determined prior to such merger, and (e) immediately prior to such merger the Borrower shall have provided to the Agent a written statement that no Default or Event of Default exists and a Compliance Certificate demonstrating that the Borrower will be in compliance with the covenants referred to therein after giving effect to said merger. Section 8.5. Sale and Leaseback; Ground Lease. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any arrangement, directly or indirectly, whereby the Borrower or any Subsidiary of the Borrower shall sell or transfer any Real Estate owned by it in order that then or thereafter the Borrower or any Subsidiary of the Borrower or any affiliate thereof shall lease back such Real Estate. The Borrower will not permit WASH to enter into a ground lease or similar lease for the Mezzanine Property. Section 8.6. Compliance with Environmental Laws. The Borrower will not do and will not permit any of its Subsidiaries, the Property Owner or any tenant of the Real Estate or the Mezzanine Property to do any of the following: (a) use any of the Real Estate or the Mezzanine Property or any portion thereof as a facility for the handling, processing, storage or disposal of Hazardous Substances, except for small quantities of Hazardous Substances used in the ordinary course of business and in compliance with all applicable Environmental Laws and the presence of asbestos or asbestos- containing materials located in the Building which are to be maintained, contained and removed in accordance with the terms of the Mezzanine Mortgage Loan Documents, the Mortgage Loan Documents and the Loan Documents, (b) cause or permit to be located on any of the Real Estate or the Mezzanine Property any underground tank or other underground storage receptacle for Hazardous Substances except in full compliance with Environmental Laws, (c) generate any Hazardous Substances on any of the Real Estate or the Mezzanine Property except in full compliance with Environmental Laws, (d) conduct any activity at any of the Real Estate or the Mezzanine Property or use any Real Estate or Mezzanine Property in any manner so as to cause a Release of Hazardous Substances on, upon or into the Real Estate or the Mezzanine Property or any surrounding properties or any threatened Release of Hazardous Substances which might give rise to liability under CERCLA or any other Environmental Law, or (e) directly or indirectly transport or arrange for the transport of any Hazardous Substances (except in compliance with all Environmental Laws). The Borrower shall: (i) in the event of any change in Environmental Laws governing the assessment, release or removal of Hazardous Substances, which change would lead a prudent lender to require additional testing to avail itself of any statutory insurance or limited liability, take all action (including, without limitation, the conducting of engineering tests at the sole expense of the Borrower) to confirm that no Hazardous Substances have been Released or disposed of on the Mortgaged Property or the Mezzanine Property in violation of any Environmental Laws; and (ii) if any Release or disposal of Hazardous Substances shall occur or shall have occurred on the Mortgaged Property or Mezzanine Property (including without limitation any such Release or disposal occurring prior to the acquisition of such Mortgaged Property or Mezzanine Property by Property Owner or WASH, respectively), cause the prompt containment and removal of such Hazardous Substances and remediation of the Mortgaged Property or the Mezzanine Property in full compliance with all applicable laws and regulations and to the satisfaction of the Majority Banks; provided, that the Borrower shall be deemed to be in compliance with Environmental Laws for the purpose of this clause (ii) so long as it or a responsible third party with sufficient financial resources is taking reasonable action to remediate or manage any event of noncompliance to the satisfaction of the Majority Banks and no action shall have been commenced by any enforcement agency. The Majority Banks may engage their own Environmental Engineer to review the environmental assessments and the Borrower's compliance with the covenants contained herein. At any time after an Event of Default shall have occurred hereunder, or, whether or not an Event of Default shall have occurred, at any time that the Agent or the Majority Banks shall have reasonable grounds to believe that a Release or threatened Release of Hazardous Substances may have occurred relating to any Mortgaged Property or Mezzanine Property, or that any of the Mortgaged Property or Mezzanine Property is not in compliance with the Environmental Laws, the Agent may at its election and will at the request of the Majority Banks obtain such environmental assessments of such Mortgaged Property or Mezzanine Property prepared by an Environmental Engineer as may be necessary or advisable for the purpose of evaluating or confirming (i) whether any Hazardous Substances are present in the soil or water at or adjacent to such Mortgaged Property or Mezzanine Property and (ii) whether the use and operation of such Mortgaged Property or Mezzanine Property comply with all Environmental Laws. Environmental assessments may include detailed visual inspections of such Mortgaged Property or Mezzanine Property including, without limitation, any and all storage areas, storage tanks, drains, dry wells and leaching areas, and the taking of soil samples, as well as such other investigations or analyses as are necessary or appropriate for a complete determination of the compliance of such Mortgaged Property or Mezzanine Property and the use and operation thereof with all applicable Environmental Laws. All such environmental assessments shall be at the sole cost and expense of the Borrower. Section 8.7. Distributions. The Borrower will not make any Distributions which would cause it to violate any of the following covenants: (a) The Borrower shall not pay any Distribution to the members of the Borrower in excess of the amount (assuming that Distributions are made pro rata to the members of the Borrower in accordance with their respective ownership interests) which is sufficient to allow Wellsford Commercial to receive from the Borrower the minimum distributions required under the Code to maintain the REIT Status of Wellsford Commercial (assuming for the purposes hereof that such Distributions are the only income of Wellsford Commercial), as evidenced by a certification of the principal financial or accounting officer of the Borrower containing calculations in detail reasonably satisfactory in form and substance to the Agent; provided that in all events Distributions of not less than $1,250,000.00 per annum shall be permitted pursuant to this Section 8.7(a); and (b) The Borrower shall make no Distributions in the event that an Event of Default shall have occurred and be continuing or a Default or Event of Default would be created after giving effect to such Distribution. Section 8.8. Asset Sales. Neither the Borrower nor any Subsidiary of the Borrower shall sell, transfer or otherwise dispose of any Real Estate or other Investment described in Section 8.3(i), Section 8.3(j) or Section 8.3(k)(except as the result of a condemnation or casualty and except for the granting of Permitted Liens) unless there shall have been delivered to the Banks a statement that no Default or Event of Default exists and a Compliance Certificate demonstrating that the Borrower will be in compliance with its covenants referred to therein after giving effect to such sale, transfer or other disposition. Section 8.9. Development Activity. Neither the Borrower nor any Subsidiary of the Borrower shall, without the prior written consent of the Majority Banks, engage, directly or indirectly, in the "ground-up" development of properties to be used principally for commercial office purposes or otherwise, except that Property Owner and Subsidiaries of Borrower or Property Owner (other than WASH, WASH Manager and Wells Avenue Holdings) may engage in the "ground-up" development of Real Estate to be used principally for commercial office purposes provided that the aggregate costs of acquisition and development of all such properties Under Development (assuming the full cost of developing such property) at any time shall not exceed the greater of (i) ten percent (10%) of the Borrower's Consolidated Total Assets or (ii) $25,000,000.00. Notwithstanding anything herein to the contrary, except for the Mortgaged Property commonly known as 140 Kendrick Street which may be developed by the Property Owner, no "ground up" development shall be performed by the Borrower, the Property Owner, WASH, WASH Manager or Wells Avenue Holdings. For purposes of this Section 8.9, the term "development" shall include the new construction of an office building or office park, but shall not include Capital Improvement Projects to existing Real Estate which is already used principally for commercial office purposes. Without limiting the foregoing, the Borrower acknowledges that for the purposes of this Agreement, (a) any interest by the Borrower or any Subsidiary in a property which is proposed to be developed, or any interest therein pursuant to which the Borrower or any Subsidiary has the right to approve site plans or other plans and specifications or pursuant to which such parties' obligations are conditioned upon the achievement of certain leasing levels, (b) any agreement by the Borrower or any Subsidiary which obligates such party to contribute or otherwise advance funds in connection with or upon completion of the development of a property, or (c) any acquisition of a property which is proposed to be developed or which is under development and lease-up at the time such agreement is entered into, shall be considered a "development" for the purposes of this Section 8.9. The Borrower acknowledges that the decision of the Majority Banks to grant or withhold such consent shall be based on such factors as the Majority Banks deem relevant in their sole discretion, including without limitation, evidence of sufficient funds both from borrowings and equity to complete such development and evidence that such Subsidiary has the resources and expertise necessary to complete such project. Nothing herein shall prohibit the Borrower or any Subsidiary of the Borrower from entering into an agreement to acquire Real Estate which has been developed and initially leased by another Person to the extent not otherwise prohibited by this Agreement. Section 8.10. Sources of Capital. The Borrower shall, at all times that the Borrower or any of its Subsidiaries permitted by Section 8.9 is engaging in any development as provided in Section 8.9 or has entered into any agreement to provide funds with respect to a development, maintain or have identified available sources of capital equal to the total cost to acquire and complete such developments and to satisfy such funding obligations, which sources of capital shall be acceptable to the Agent in its reasonable discretion. Amounts available to be disbursed for such purposes pursuant to this Agreement may be considered as a source of capital for the purposes of this Section 8.10. Section 8.11. Transfers. The Borrower shall not permit any sale, transfer, disposition, pledge, mortgage, hypothecation or encumbering of any direct or indirect interest (a) of Wellsford Commercial in Borrower, (b) of Wellsford Real Properties in Wellsford Commercial, (c) of WHWEL in Borrower, or (d) of any Person or Persons directly or indirectly holding the ownership interests in WHWEL, provided that sales, transfers or other dispositions (but not pledges, mortgages, hypothecations or encumbrances) of interests in WHWEL shall be permitted if after giving effect thereto the Goldman Group, directly or indirectly, owns and controls at least seventy percent (70%) of the ownership interests in WHWEL. Notwithstanding anything herein to the contrary, (x) WHWEL shall be permitted at any time and from time to time to convert all or any of its interest in the Borrower into an interest in Wellsford Commercial and/or Wellsford Real Properties, and (y) WHWEL and Wellsford Commercial may transfer or pledge their interests in Borrower to one another as may be permitted in the operating agreement of the Borrower. Section 8.12. Additional Restrictions Concerning the Mortgaged Property and the Mezzanine Property. (a) Except as expressly provided in Section 5.3 or Section 7.19, the Borrower will not, without the prior written consent of the Agent in each instance, permit the Property Owner or WASH, directly or indirectly to: (i) sell, convey, assign, transfer, contribute, option, mortgage, pledge, encumber, charge, hypothecate or dispose of the Mortgaged Property, the Mezzanine Property or any part thereof or interest therein; or any income or profits therefrom, or any other accounts, contract rights, general intangibles, instruments, chattel paper or other assets or claims, whether now owned or hereafter acquired; or (ii) create or suffer to be created or to exist any lien, encumbrance, security interest, mortgage, pledge, restriction, attachment or other charge of any kind upon, or any levy, seizure, attachment or foreclosure of, the Mortgaged Property, the Mezzanine Property or any part thereof or interest therein, or any income or profit therefrom, or any other accounts, contract rights, general intangibles, instruments, chattel paper or other assets or claims, whether now owned or hereafter acquired, except for Permitted Liens. For the purposes of this paragraph, the sale, conveyance, transfer, disposition, alienation, hypothecation or encumbering of all or any portion of any interest in the Property Owner, WASH ,WASH Manager or Wells Avenue Holdings or the creation or addition of a new member or other owner of any interest in the Property Owner, WASH, WASH Manager or Wells Avenue Holdings shall be deemed to be a transfer of an interest in the Property Owner or WASH. (b) The Borrower will not permit the Property Owner to create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any Indebtedness other than: (i) Indebtedness arising under the Mortgage Loan Documents (it being acknowledged and agreed that any refinancing of such Indebtedness in connection with an assignment and restatement of the Mortgage Loan Documents shall not constitute permitted Indebtedness); (ii) current liabilities of the Property Owner incurred in the ordinary course of business but not incurred through (A) the borrowing of money, or (B) the obtaining of credit except for credit on an open account basis customarily extended and in fact extended in connection with normal purchases of goods and services; and (iii) Indebtedness in respect of taxes, assessments, governmental charges or levies and claims for labor, materials and supplies to the extent that payment therefor shall not at the time be required to be made in accordance with the provisions of Section 7.8. (c) The Borrower will not permit WASH to create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any Indebtedness other than: (i) Indebtedness arising under the Mezzanine Mortgage Loan Documents (it being acknowledged and agreed that any refinancing of such Indebtedness in connection with an assignment and restatement of the Mezzanine Mortgage Loan Documents shall not constitute permitted Indebtedness); (ii) current liabilities of WASH permitted pursuant to the budget approved by Mezzanine Mortgagee pursuant to the Mezzanine Mortgage Loan Documents incurred in the ordinary course of business but not incurred through (A) the borrowing of money, or (B) the obtaining of credit except for credit on an open account basis customarily extended and in fact extended in connection with normal purchases of goods and services; and (iii) Indebtedness in respect of taxes, assessments, governmental charges or levies and claims for labor, materials and supplies to the extent that payment therefor shall not at the time be required to be made in accordance with the provisions of Section 7.8. Section 8.13. Mortgage Loan Documents. The Borrower agrees to cause the Property Owner and WASH to deliver immediately to the Agent copies of any notices, certificates, requests, demands or other instruments (including without limitation any notice of default, acceleration or the exercise or threat of exercise of any remedies under the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents) furnished or delivered to or by the Property Owner or WASH under or in any way relating to the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents. The Borrower shall not permit the Property Owner or WASH to seek nor to obtain additional advances from the holder or holders of the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents, respectively (provided that the foregoing shall not be deemed violated in the event that the holder or holders of the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents shall make a protective advance or advances for the payment of taxes, insurance premiums or to protect the Mortgaged Property or the Mezzanine Property pursuant to the terms of the Mortgages or the Nomura Mortgages, as applicable, provided that such advance may otherwise constitute a Default or Event of Default hereunder to the extent that such protected advance is made by the Mortgagee or Mezzanine Mortgagee as a result of a "Default" or "Event of Default" under the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents), or to modify, amend, terminate, extend or seek a consent or waiver under the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents in any respect without the prior written approval of the Agent. Section 9. FINANCIAL COVENANTS OF BORROWER. The Borrower covenants and agrees that, so long as any Loan or Note is outstanding or any Bank has any obligation to make any Loans it will comply with the following: Section 9.1. Liabilities to Assets Ratio. The Borrower will not permit the ratio of Consolidated Total Liabilities to Consolidated Total Assets of the Borrower at the end of any fiscal quarter as set forth below to exceed the ratio set forth below: Fiscal Quarter Ending On or Before: Ratio --------------------- ----- December 31, 1999 0.75 to 1 December 31, 2000 0.70 to 1 Thereafter 0.65 to 1 Section 9.2. Consolidated Operating Cash Flow Coverage. The Borrower will not, at the end of any fiscal quarter set forth below permit (a) the sum of (i) its Consolidated Operating Cash Flow for any period of four consecutive fiscal quarters then ended (treated as a single accounting period) (the "Test Period"), plus (ii) the general and administrative costs of the Borrower and its Subsidiaries for such Test Period plus (iii) the aggregate Negative Carry for such Test Period minus (iv) the Capital Improvement Reserve for such Test Period minus (v) any capitalized Negative Carry for such Test Period to be less than (b) the multiple of Debt Service for such Test Period as set forth below: Fiscal Quarter Ending Multiple of On or Before: Debt Service: --------------------- ------------ December 31, 1999 1.15 December 31, 2000 1.25 Thereafter 1.35 In the event that the Borrower shall not have any of the foregoing components for four (4) consecutive fiscal quarters, then such components shall be annualized in a manner reasonably satisfactory to the Agent. For the purposes hereof, the aggregate Negative Carry and capitalized Negative Carry shall include 100% of such Negative Carry and shall not be limited to the 20% reserved against under Section 5.5. Notwithstanding the foregoing, the amounts set forth in clauses (a)(ii) and (a)(iii) above shall be added in such calculation only so long as the Borrower is in compliance with the terms of Section 5.5, and shall not be added back in such calculation for any periods during which the Holdback is not required. Section 9.3. Minimum Shareholders Equity. The Borrower will not, at the end of any fiscal quarter, permit the Shareholders Equity to be less than the sum of (a) $68,000,000.00 plus (b) eighty percent (80%) of the net proceeds from any Equity Offering after the Closing Date plus (c) one hundred percent (100%) of (i) the sum of (A) all Net Income (or Deficit) from the Closing Date plus (B) depreciation deducted in calculating such Net Income (or Deficit) less (ii) the aggregate amount of all Distributions made by Borrower from the Closing Date pursuant to the terms of Section 8.7(a). Section 9.4. Real Estate Assets. The Borrower shall not permit its direct or indirect interest in undeveloped land to exceed, in the aggregate, five percent (5%) of the Borrower's Consolidated Total Assets; provided, however, that, except for the Mortgaged Property commonly known as 600 Atrium which may be owned by the Property Owner, all of the direct interests in undeveloped land shall be owned by Subsidiaries of the Borrower, other than Property Owner, WASH, WASH Manager and Wells Avenue Holdings, or by Investment Partnerships permitted by Section 8.3(k). Section 9.5. Required Equity. The Borrower shall not permit the ratio of the (a) aggregate Indebtedness without duplication of the Borrower and its Subsidiaries pursuant to Section 8.1(a), (f), (g), (h), (i) and (j) to (b) the sum of (i) the aggregate all-in acquisition cost of the Real Estate and the Mezzanine Property of the Borrower and its Subsidiaries plus (ii) the historic cost of capital improvements to the Real Estate and the Mezzanine Property after the respective acquisitions of such assets on a consolidated basis, to exceed 0.75 to 1. For the purposes hereof, the all-in acquisition cost of the Mezzanine Property shall be deemed to be $130,219,292, and the Indebtedness of the Property Owner and other Subsidiaries of the Borrower or Property Owner shall be included as Indebtedness of the Borrower. Section 10. CLOSING CONDITIONS. The obligations of the Agent and the Banks to make the initial Loans shall be subject to the satisfaction of the following conditions precedent on or prior to July 16, 1998: Section 10.1. Loan Documents. Each of the Loan Documents shall have been duly executed and delivered by the respective parties thereto, shall be in full force and effect and shall be in form and substance satisfactory to the Majority Banks. The Agent shall have received a fully executed copy of each such document, except that each Bank shall have received a fully executed counterpart of its Note. Section 10.2. Certified Copies of Organizational Documents. The Agent shall have received from the Borrower a copy, certified as of a recent date by the appropriate officer of the State in which the Borrower and the Guarantor are organized or in which the Mortgaged Property is located, and by a duly authorized officer of such Person to be true and complete, of the articles of incorporation or other organizational documents of the Borrower and the Guarantor (or a certification satisfactory to the Agent that there have been no changes to the foregoing from those previously provided to the Agent) or their respective qualification to do business, as applicable, as in effect on such date of certification. Section 10.3. Bylaws; Resolutions. All action on the part of the Borrower and the Guarantor necessary for the valid execution, delivery and performance by the Borrower and the Guarantor of the Loan Documents to which it is or is to become a party shall have been duly and effectively taken, and evidence thereof satisfactory to the Agent shall have been provided to the Agent. The Agent shall have received from the Borrower and the Guarantor, as applicable, true copies of its bylaws (or a certification satisfactory to the Agent that there have been no changes to the foregoing from those previously provided to the Agent) and the resolutions adopted by its board of directors or other governing body authorizing the transactions described herein, each certified by its secretary or other duly authorized officer as of a recent date to be true and complete. Section 10.4. Incumbency Certificate; Authorized Signers. The Agent shall have received from the Borrower and Guarantor an incumbency certificate, dated as of the Closing Date, signed by a duly authorized officer of the Borrower and Guarantor and giving the name and bearing a specimen signature of each individual who shall be authorized: (a) to sign, in the name and on behalf of the Borrower and the Guarantor, each of the Loan Documents to which the Borrower or the Guarantor is or is to become a party; (b) in the case of the Borrower to make Loan and Conversion Requests; and (c) to give notices and to take other action on behalf of the Borrower under the Loan Documents. Section 10.5. Opinion of Counsel. The Agent shall have received a favorable opinion addressed to the Banks and the Agent and dated as of the Closing Date, in form and substance satisfactory to the Banks and the Agent, from Robinson, Silverman, Pearce, Aronsohn & Berman, and other counsel of the Borrower and the Guarantor, as to such matters as the Agent shall reasonably request. Section 10.6. Payment of Fees. The Borrower shall have paid to the Agent the commitment fee pursuant to Section 4.2. Section 10.7. Appraisals. The Agent shall have received Appraisals of the Mortgaged Property and the Mezzanine Property in form and substance satisfactory to the Majority Banks prior to the Closing Date demonstrating that the initial Collateral has a Designated Collateral Value that is in compliance with the terms of this Agreement. Section 10.8. Environmental Reports. The Agent shall have received environmental site assessment reports for the Mortgaged Property and the Mezzanine Property prepared by an Environmental Engineer which indicate the condition of the Mortgaged Property and the Mezzanine Property and such other properties and any Buildings thereon and which set forth no qualifications except those that are acceptable to the Majority Banks in their sole discretion, and disclosing that each piece of Mortgaged Property, Mezzanine Property and any Building thereon is free of oil, underground storage tanks, asbestos or asbestos containing material, lead paint and other Hazardous Substances (except to the extent acceptable to the Majority Banks in their sole discretion), and which reports are otherwise in form and substance satisfactory to the Majority Banks). Section 10.9. Insurance. The Agent shall have received duplicate originals or certified copies of all policies of insurance required by this Agreement. Section 10.10. Performance; No Default. The Borrower shall have performed and complied with all terms and conditions herein required to be performed or complied with by it on or prior to the Closing Date, and on the Closing Date there shall exist no Default or Event of Default. Section 10.11. Representations and Warranties. The representations and warranties made by the Borrower and the Guarantor in the Loan Documents or otherwise made by or on behalf of any Borrower and Guarantor, or any Subsidiary thereof, in connection therewith or after the date thereof shall have been true and correct in all material respects when made and shall also be true and correct in all material respects on the Closing Date. Section 10.12. Proceedings and Documents. All proceedings in connection with the transactions contemplated by this Agreement and the other Loan Documents shall be reasonably satisfactory to the Agent and the Agent's Special Counsel in form and substance, and the Agent shall have received all information and such counterpart originals or certified copies of such documents and such other certificates, opinions or documents as the Agent and the Agent's Special Counsel may reasonably require. Section 10.13. Eligible Real Estate Qualification Documents. The Eligible Real Estate Qualification Documents for each parcel of Mortgaged Property and Mezzanine Property as of the Closing Date shall have been delivered to Agent. Section 10.14. Compliance Certificate. A Compliance Certificate dated as of the date of the Closing Date demonstrating compliance with each of the covenants calculated therein as of the most recent fiscal quarter end for which the Borrower has provided financial statements under Section 6.4 adjusted in the best good faith estimate of the Borrower dated as of the date of the Closing Date shall have been delivered to the Agent. Section 10.15. Other Documents. To the extent requested by the Agent, executed copies of all material agreements of any nature whatsoever to which the Borrower or any Subsidiary of the Borrower is a party affecting or relating to the use, operation, development, construction or management of the Mortgaged Property, the Mezzanine Property or the Collateral. Section 10.16. No Condemnation/Taking. The Agent shall have received written confirmation from the Borrower that no condemnation proceedings are pending or to the Borrower's knowledge threatened against any Mortgaged Property, Mezzanine Property or other Collateral or, if any such proceedings are pending or threatened, identifying the same and the Real Estate affected thereby and the Agent shall have determined that none of such proceedings is or will be material to the Mortgaged Property, Mezzanine Property or other Collateral affected thereby. Section 10.17. Governmental Policy. Each Bank shall have determined that there have been no material changes in governmental regulations or policy affecting the Banks, the Borrower or the Guarantor. Section 10.18. Other. The Agent shall have reviewed such other documents, instruments, certificates, opinions, assurances, consents and approvals as the Agent or the Agent's Special Counsel may reasonably have requested. Section 10.19. Satisfaction of Conditions as to Initial Collateral. The parties hereto acknowledge that the requirements of Sections 10.7, 10.8 and 10.13 for the Mezzanine Properties and the Mortgaged Properties as of the date hereof have been satisfied. Section 11. CONDITIONS TO ALL BORROWINGS. The obligations of the Banks to make any Loan, whether on or after the Closing Date, shall also be subject to the satisfaction of the following conditions precedent: Section 11.1. Prior Conditions Satisfied. All conditions set forth in Section 10 shall continue to be satisfied as of the date upon which any Loan is to be made. Section 11.2. Representations True; No Default. Each of the representations and warranties contained in this Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with this Agreement shall be true as of the date as of which they were made and shall also be true at and as of the time of the making of such Loan (except that representations and warranties as to the Guarantor shall not be deemed to have been repeated), with the same effect as if made at and as of that time (except to the extent of changes resulting from transactions contemplated or permitted by this Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and except to the extent that such representations and warranties relate expressly to an earlier date) and no Default or Event of Default shall have occurred and be continuing. Agent shall have received a certificate of the Borrower signed by an authorized officer of the Borrower to such effect. Section 11.3. No Legal Impediment. No change shall have occurred in any law or regulations thereunder or interpretations thereof that in the reasonable opinion of any Bank would make it illegal for such Bank to make such Loan. Section 11.4. Governmental Regulation. Each Bank shall have received such statements in substance and form reasonably satisfactory to such Bank as such Bank shall require for the purpose of compliance with any applicable regulations of the Comptroller of the Currency or the Board of Governors of the Federal Reserve System. Section 11.5. Proceedings and Documents. All proceedings in connection with the Loan shall be satisfactory in substance and in form to the Majority Banks, and the Majority Banks shall have received all information and such counterpart originals or certified or other copies of such documents as the Majority Banks may reasonably request. Section 11.6. Borrowing Documents. In the case of any request for a Loan, the Agent shall have received a copy of each of the request for a Loan required by Section 2.6 in the form of Exhibit B hereto, fully completed. Section 12. EVENTS OF DEFAULT; ACCELERATION; ETC. Section 12.1. Events of Default and Acceleration. If any of the following events ("Events of Default" or, if the giving of notice or the lapse of time or both is required, then, prior to such notice or lapse of time, "Defaults") shall occur: (a) the Borrower shall fail to pay any principal of the Loans when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment; (b) the Borrower shall fail to pay any interest on the Loans or any other sums due hereunder or under any of the other Loan Documents, when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment; (c) Intentionally Omitted. (d) the Borrower shall fail to comply with the covenant contained in Section 9.1, Section 9.2, Section 9.3, Section 9.4 or Section 9.5 and such failure shall continue for thirty (30) Business Days after written notice thereof shall have been given to the Borrower by the Agent; (e) any of the Borrower, any of its Subsidiaries, the Property Owner, the Guarantor or any other party shall fail to perform any other term, covenant or agreement contained herein or in any of the other Loan Documents (other than those specified in this Section 12.1); (f) any representation or warranty of the Borrower, any of its Subsidiaries, the Property Owner or any Guarantor in this Agreement or any other Loan Document, or in any report, certificate, financial statement, request for a Loan, or in any other document or instrument delivered pursuant to or in connection with this Agreement, any advance of a Loan or any of the other Loan Documents shall prove to have been false in any material respect upon the date when made or deemed to have been made or repeated; (g) without limiting any other terms of the Loan Documents prohibiting or restricting the ability of such Persons to incur Indebtedness, any of the Borrower, its Subsidiaries, the Property Owner or any Guarantor shall fail to pay at maturity, or within any applicable period of grace, any obligation for borrowed money or credit received or other Indebtedness or fail to observe or perform any material term, covenant or agreement contained in any agreement by which it is bound (including, without limitation, the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents), evidencing or securing any such borrowed money or credit received or other Indebtedness for such period of time as would permit (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof, provided that the events described in this Section 12.1(g) shall not constitute an Event of Default unless such failure to perform, together with other failures to perform as described in this Section 12.1(g), involve singly or in the aggregate obligations for borrowed money or credit received totaling in excess of $10,000,000 or with respect to WASH only, in excess of $1,000,000; (h) any of the Borrower, any of its Subsidiaries, the Property Owner or the Guarantor (A) shall make an assignment for the benefit of creditors, or admit in writing its general inability to pay or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver of any such Person of any substantial part of the assets of any thereof, (B) shall commence any case or other proceeding relating to any such Person under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or (C) shall take any action to authorize or in furtherance of any of the foregoing; (i) a petition or application shall be filed for the appointment of a trustee or other custodian, liquidator or receiver of any of the Borrower, any of its Subsidiaries, the Property Owner or the Guarantor or any substantial part of the assets of any thereof, or a case or other proceeding shall be commenced against any such Person under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, and such Person shall indicate its approval thereof, consent thereto or acquiescence therein or such petition, application, case or proceeding shall not have been dismissed within 60 days following the filing or commencement thereof; (j) a decree or order is entered appointing any such trustee, custodian, liquidator or receiver or adjudicating any of the Borrower, any of its Subsidiaries, the Property Owner or the Guarantor bankrupt or insolvent, or approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of any such Person, in each case of the foregoing in an involuntary case under federal bankruptcy laws as now or hereafter constituted; (k) there shall remain in force, undischarged, unsatisfied and unstayed, for more than 60 days, whether or not consecutive, any uninsured final judgment against any of the Borrower, any of its Subsidiaries, the Property Owner or the Guarantor that, with other outstanding uninsured final judgments, undischarged, against such Person exceeds in the aggregate $5,000,000.00 or $1,000,000.00 with respect to WASH, WASH Manager or Wells Avenue Holdings (provided that in any event such judgment with respect to Property Owner, WASH, WASH Manager or Wells Avenue Holdings shall be sooner removed prior to the commencement of any proceeding of foreclosure, levy or other sale pursuant thereto); (l) if any of the Loan Documents shall be canceled, terminated, revoked or rescinded otherwise than in accordance with the terms thereof or with the express prior written agreement, consent or approval of the Banks, or any action at law, suit in equity or other legal proceeding to cancel, revoke or rescind any of the Loan Documents shall be commenced by or on behalf of any of the Borrower, any of its Subsidiaries, the Property Owner or the Guarantor or any of their respective holders of Voting Interests, or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or issue a judgment, order, decree or ruling to the effect that, any one or more of the Loan Documents is illegal, invalid or unenforceable in accordance with the terms thereof in any material respect as determined by the Majority Banks; (m) any dissolution, termination, partial or complete liquidation, merger or consolidation of any of the Borrower, any of its Subsidiaries, the Property Owner or the Guarantor, or any sale, transfer or other disposition of the assets of any such Person, other than as permitted under the terms of this Agreement or the other Loan Documents or otherwise consented to in writing by the Majority Banks; l o any suit or proceeding shall be filed against any of the Borrower, any of its Subsidiaries, the Property Owner or the Guarantor or any of the Mortgaged Property, the Mezzanine Property, the Collateral or any collateral for the Mortgage Loan which in the good faith business judgment of the Majority Banks after giving consideration to the likelihood of success of such suit or proceeding and the availability of insurance to cover any judgment with respect thereto and based on the information available to them, if adversely determined, would have a materially adverse affect on the ability of such Person to perform each and every one of their respective obligations under and by virtue of the Loan Documents, the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents, as applicable; (o) WASH, WASH Manager or Wells Avenue Holding shall be indicted for a federal crime, a punishment for which could include the forfeiture of any assets of such Person, or the Borrower or the Property Owner shall be indicted for a federal crime, a punishment for which could include the forfeiture of any assets of the Borrower, the Property Owner or the Guarantor included in the Collateral, the Mortgaged Property or other collateral for the Mortgage Loan; (p) Jeffrey H. Lynford shall cease to be the Chairman of the Board of, or Edward Lowenthal shall cease to be the President of, Wellsford Commercial, and a competent and experienced successor for such Person shall not be approved by the Majority Banks within six (6) months of such event; (q) Any violation of the covenant set forth in Section 8.11 shall occur; (r) with respect to any Guaranteed Pension Plan, an ERISA Reportable Event shall have occurred and the Majority Banks shall have determined in their reasonable discretion that such event reasonably could be expected to result in liability of any of the Borrower, WASH, WASH Manager, Wells Avenue Holdings or the Guarantor to the PBGC or such Guaranteed Pension Plan in an aggregate amount exceeding $1,000,000 and such event in the circumstances occurring reasonably could constitute grounds for the termination of such Guaranteed Pension Plan by the PBGC or for the appointment by the appropriate United States District Court of a trustee to administer such Guaranteed Pension Plan; or a trustee shall have been appointed by the United States District Court to administer such Plan; or the PBGC shall have instituted proceedings to terminate such Guaranteed Pension Plan; (s) any Guarantor denies that it has any liability or obligation under the Guaranty or the Indemnity Agreement, or shall notify the Agent or any of the Banks of such Guarantor's intention to attempt to cancel or terminate the Guaranty or the Indemnity Agreement, or shall fail to observe or comply with any term, covenant, condition or agreement under the Guaranty or the Indemnity Agreement; (t) any warranty or representation of the Property Owner, WASH, WASH Manager, Wells Avenue Holdings or the Borrower in any acknowledgment delivered to the Agent in connection with the Loan shall prove to have been false or misleading in any material respect upon the date when made or deemed to have been made or repeated, or the Property Owner, WASH, WASH Manager, Wells Avenue Holdings or the Borrower shall fail to perform any term, covenant or agreement contained in any such acknowledgment; or (u) The occurrence of an Event of Default under any of the other Loan Documents; or (v) The occurrence of any "Triggering Event" (as defined in each of the Mezzanine Conditional Guaranty and the Nomura Conditional Guaranty, respectively); then, and in any such event, the Agent may, and upon the request of the Majority Banks shall, by notice in writing to the Borrower declare all amounts owing with respect to this Agreement, the Notes and the other Loan Documents to be, and they shall thereupon forthwith become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower; provided that in the event of any Event of Default specified in Section 12.1(h), Section 12.1(i) or Section 12.1(j), all such amounts shall become immediately due and payable automatically and without any requirement of notice from any of the Banks or the Agent. Section 12.1A. Limitation of Cure Periods. (a) Notwithstanding anything contained in Section 12.1 to the contrary, (i) no Event of Default shall exist hereunder upon the occurrence of any failure described in Section 12.1(b) in the event that the Borrower cures such default within five (5) days following receipt of written notice of such default, provided, however, that Borrower shall not be entitled to receive more than two (2) notices in the aggregate pursuant to this clause (i) in any period of 365 days ending on the date of any such occurrence of default, and provided further that no such cure period shall apply to any payments due upon the maturity of the Notes, and (ii) no Event of Default shall exist hereunder upon the occurrence of any failure described in Section 12.1(e) in the event that the Borrower cures such default with thirty (30) days following receipt of written notice of such default, provided that the provisions of this clause (ii) shall not pertain to defaults consisting of a failure to provide insurance as required by Section 7.7, to any default consisting of a failure to comply with Section 3.2(a), Section 7.4(e), Section 7.23 (as to the failure of WASH, WASH Manager or Wells Avenue Holdings to comply therewith) Section 8.2(g), Section 8.7, Section 8.12, Section 8.13 (as to the failure to deliver any notice of default, acceleration or the exercise or threat of exercise of any remedies under the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents) or to any default excluded from any provision of cure of defaults contained in any other of the Loan Documents. (b) Notwithstanding the provisions of subsections (c) and (d) of Section 12.1, the cure periods provided therein shall not be allowed and the occurrence of a Default thereunder immediately shall constitute an Event of Default for all purposes of this Agreement and the other Loan Documents if, within the period of twelve months immediately preceding the occurrence of such Default, there shall have occurred two periods of cure or portions thereof under any one or more than one of said subsections. Section 12.2. Termination of Commitments. If any one or more Events of Default specified in Section 12.1(h), Section 12.1(i) or Section 12.1(j) shall occur, then immediately and without any action on the part of the Agent or any Bank any unused portion of the credit hereunder shall terminate and the Banks shall be relieved of all obligations to make Loans to the Borrower. If any other Event of Default shall have occurred and be continuing, the Agent, upon the election of the Majority Banks, may by notice to the Borrower terminate the obligation to make Loans to the Borrower. No termination under this Section 12.2 shall relieve the Borrower of its obligations to the Banks arising under this Agreement or the other Loan Documents. Section 12.3. Remedies. In case any one or more of the Events of Default shall have occurred and be continuing, and whether or not the Banks shall have accelerated the maturity of the Loans pursuant to Section 12.1, the Agent on behalf of the Banks, may, with the consent of the Majority Banks but not otherwise, proceed to protect and enforce their rights and remedies under this Agreement, the Notes or any of the other Loan Documents by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Agreement and the other Loan Documents or any instrument pursuant to which the Obligations are evidenced, including to the full extent permitted by applicable law the obtaining of the ex parte appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right. No remedy herein conferred upon the Agent or the holder of any Note is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of law. Section 12.4. Distribution of Collateral Proceeds. In the event that, following the occurrence or during the continuance of any Event of Default, any monies are received in connection with the enforcement of any of the Security Documents, or otherwise with respect to the realization upon any of the Collateral, such monies shall be distributed for application as follows: (a) First, to the payment of, or (as the case may be) the reimbursement of, the Agent for or in respect of all reasonable costs, expenses, disbursements and losses which shall have been incurred or sustained by the Agent to protect or preserve the collateral or in connection with the collection of such monies by the Agent, for the exercise, protection or enforcement by the Agent of all or any of the rights, remedies, powers and privileges of the Agent under this Agreement or any of the other Loan Documents or in respect of the Collateral or in support of any provision of adequate indemnity to the Agent against any taxes or liens which by law shall have, or may have, priority over the rights of the Agent to such monies; (b) Second, to all other Obligations in such order or preference as the Majority Banks shall determine; provided, however, that (i) distributions in respect of such Obligations shall be made pari passu among Obligations with respect to the Agent's fee payable pursuant to Section 4.3 and all other Obligations, (ii) in the event that any Bank shall have wrongfully failed or refused to make an advance under Section 2.7 and such failure or refusal shall be continuing, advances made by other Banks during the pendency of such failure or refusal shall be entitled to be repaid as to principal and accrued interest in priority to the other Obligations described in this subsection (b), and (iii) Obligations owing to the Banks with respect to each type of Obligation such as interest, principal, fees and expenses, shall be made among the Banks pro rata; and provided, further, that the Majority Banks may in their discretion make proper allowance to take into account any Obligations not then due and payable; and (c) Third, the excess, if any, shall be returned to the Borrower or to such other Persons as are entitled thereto. Section 12.5. Default under Mortgage Loan Documents or Mezzanine Mortgage Loan Documents. Notwithstanding anything herein to the contrary, the Borrower hereby expressly agrees that any "Event of Default" (as defined in the Mortgage Loan Documents and the Mezzanine Mortgage Loan Documents, respectively) (which shall be deemed to include maturity of the debt secured by the Mortgage Loan Document or the Mezzanine Mortgage Loan Documents or any other occurrence which would give the holder of the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents the right to exercise remedies thereunder) shall constitute and be deemed to be an Event of Default under this Agreement for which no right to cure shall be available; provided, however, that in the event that (a) a court of competent jurisdiction finally determines in an adjudication binding upon the Mortgagee or the Mezzanine Mortgagee, as applicable, and sufficient to prohibit or stay any exercise by the Mortgagee or the Mezzanine Mortgagee of its remedies under the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents, as applicable, that an "Event of Default" under the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents, as applicable, was in fact not an "Event of Default" thereunder, or (b) the Mortgagee or the Mezzanine Mortgagee withdraws such notice of the existence of an "Event of Default" (subject to the terms of this Section 12.5 below concerning the approval thereof by the Majority Banks), and in either event the Agent has not foreclosed on the "Member Interests" (as defined in the Assignment of Interests), such "Event of Default" shall no longer constitute an Event of Default hereunder. Without limiting the foregoing, an "Event of Default" under the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents, as applicable, shall conclusively be deemed to have occurred upon the declaration, statement or notice from the Mortgagee or the Mezzanine Mortgagee, as applicable, as to the existence or occurrence of an "Event of Default" under the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents, as applicable. The Borrower shall cause the Property Owner or WASH, as applicable, to give the Agent immediate notice of default and all other notices or communications received by the Property Owner or WASH pursuant to the Mortgage Loan Documents or in connection with the Mortgage Loan or pursuant to the Mezzanine Mortgage Loan Documents or in connection with the Mezzanine Mortgage Loan, respectively. Upon the occurrence of any "Default" (as defined in the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents, respectively), the Borrower shall cause the Property Owner or WASH, as applicable, to deliver to the Agent within five (5) days after the first to occur of (x) receipt by the Property Owner or WASH, as applicable, of notice of such "Default" from the Mortgagee or the Mezzanine Mortgagee or (y) the date the Property Owner or WASH, as applicable, obtains actual knowledge of the occurrence of such "Default", a detailed description of the actions to be taken by the Property Owner or WASH, as applicable, to cure such "Default" and the dates by which each such action shall occur. Such schedule shall be subject to the approval of the Majority Banks. The Borrower shall cause the Property Owner or WASH, as applicable, to take all such actions as are necessary to cure such "Default" under the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents, as applicable, by the date approved by the Majority Banks, and shall deliver to the Agent not less frequently than weekly thereafter written updates concerning the status of the Property Owner's or WASH's efforts, as applicable, to cure such "Default". The Agent shall have the right, but not the obligation, to pay any sums or to take any action which the Agent deems necessary or advisable to cure any default or alleged default under the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents (whether or not the Property Owner or WASH, as applicable, is undertaking efforts to cure such default or the same is an "Event of Default" under the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents or a Default or Event of Default hereunder), and such payment or such action is hereby authorized by the Borrower, and any sum so paid and any expense incurred by the Agent in taking any such action shall be evidenced by this Agreement and secured by the Security Documents and shall be immediately due and payable by Borrower to the Agent with interest at the rate for overdue amounts set forth in Section 4.12 until paid. The Agent shall be authorized to take such actions upon the assertion by the Mortgagee or the Mezzanine Mortgagee of the existence of such "Default" or "Event of Default" without any duty to inquire or determine whether such "Default" or "Event of Default" exist. The consent or waiver by the Mortgagee or the Mezzanine Mortgagee of any "Event of Default" under the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents shall not annul the occurrence of an Event of Default hereunder unless otherwise approved by the Majority Banks; provided, however that if the Mortgagee or the Mezzanine Mortgagee shall accept the cure of an "Event of Default" under the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents, as applicable, resulting from a failure to pay any amounts due to the Mortgagee or the Mezzanine Mortgagee thereunder within five (5) days of the occurrence of such event, such acceptance shall not require the consent of the Majority Banks to annul the occurrence of an Event of Default hereunder. The Borrower shall cause the Property Owner and WASH to permit Agent to enter upon the Mortgaged Property and the Mezzanine Property for the purpose of curing any default or alleged default under the Mortgage Loan Documents or the Mezzanine Mortgage Loan Documents or hereunder. The Borrower hereby transfers and assigns any excess proceeds arising from any foreclosure or sale under power pursuant to the Mortgages or other security documents for the Mortgage Loan or any instrument evidencing the indebtedness secured thereby, and the Borrower hereby authorizes and directs the holder or holders of the Mortgages to pay such excess proceeds directly to the Agent up to the amount of the Obligations. Section 13. SETOFF. Regardless of the adequacy of any collateral, during the continuance of any Event of Default, any deposits (general or specific, time or demand, provisional or final, regardless of currency, maturity, or the branch of where such deposits are held) or other sums credited by or due from any of the Banks to the Borrower or any Guarantor and any securities or other property of the Borrower or any Guarantor in the possession of such Bank may be applied to or set off against the payment of Obligations and any and all other liabilities, direct, or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, of the Borrower or any Guarantor to such Bank. Each of the Banks agrees with each other Bank that if such Bank shall receive from the Borrower or any Guarantor, whether by voluntary payment, exercise of the right of setoff, or otherwise, and shall retain and apply to the payment of the Note or Notes held by such Bank any amount in excess of its ratable portion of the payments received by all of the Banks with respect to the Notes held by all of the Banks, such Bank will make such disposition and arrangements with the other Banks with respect to such excess, either by way of distribution, pro tanto assignment of claims, subrogation or otherwise as shall result in each Bank receiving in respect of the Notes held by it its proportionate payment as contemplated by this Agreement; provided that if all or any part of such excess payment is thereafter recovered from such Bank, such disposition and arrangements shall be rescinded and the amount restored to the extent of such recovery, but without interest. Section 14. THE AGENT. Section 14.1. Authorization. The Agent is authorized to take such action on behalf of each of the Banks and to exercise all such powers as are hereunder and under any of the other Loan Documents and any related documents delegated to the Agent, together with such powers as are reasonably incident thereto, provided that no duties or responsibilities not expressly assumed herein or therein shall be implied to have been assumed by the Agent. The obligations of Agent hereunder are primarily administrative in nature, and nothing contained in this Agreement or any of the other Loan Documents shall be construed to constitute the Agent as a trustee for any Bank or to create any agency or fiduciary relationship. The Borrower and any other Person shall be entitled to conclusively rely on a statement from the Agent that it has the authority to act for and bind the Banks pursuant to this Agreement and the other Loan Documents. Section 14.2. Employees and Agents. The Agent may exercise its powers and execute its duties by or through employees or agents and shall be entitled to take, and to rely on, advice of counsel concerning all matters pertaining to its rights and duties under this Agreement and the other Loan Documents. The Agent may utilize the services of such Persons as the Agent may reasonably determine, and all reasonable fees and expenses of any such Persons shall be paid by the Borrower. Section 14.3. No Liability. Neither the Agent nor any of its shareholders, directors, officers or employees nor any other Person assisting them in their duties nor any agent, or employee thereof, shall be liable for any waiver, consent or approval given or any action taken, or omitted to be taken, in good faith by it or them hereunder or under any of the other Loan Documents, or in connection herewith or therewith, or be responsible for the consequences of any oversight or error of judgment whatsoever, except that the Agent or such other Person, as the case may be, may be liable for losses due to its willful misconduct or gross negligence. Section 14.4. No Representations. The Agent shall not be responsible for the execution or validity or enforceability of this Agreement, the Notes, any of the other Loan Documents or any instrument at any time constituting, or intended to constitute, collateral security for the Notes, or for the value of any such collateral security or for the validity, enforceability or collectability of any such amounts owing with respect to the Notes, or for any recitals or statements, warranties or representations made herein or in any of the other Loan Documents or in any certificate or instrument hereafter furnished to it by or on behalf of the Borrower, any of its Subsidiaries or the Guarantor, or be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements herein or in any other of the Loan Documents. The Agent shall not be bound to ascertain whether any notice, consent, waiver or request delivered to it by the Borrower or the Guarantor or any holder of any of the Notes shall have been duly authorized or is true, accurate and complete. The Agent has not made nor does it now make any representations or warranties, express or implied, nor does it assume any liability to the Banks, with respect to the creditworthiness or financial condition of the Borrower, any of its Subsidiaries, or the Guarantor. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based upon such information and documents as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank, based upon such information and documents as it deems appropriate at the time, continue to make its own credit analysis and decisions in taking or not taking action under this Agreement and the other Loan Documents. Section 14.5. Payments. (a) A payment by the Borrower or the Guarantor to the Agent hereunder or under any of the other Loan Documents for the account of any Bank shall constitute a payment to such Bank. The Agent agrees to distribute to each Bank not later than one Business Day after the Agent's receipt of good funds, determined in accordance with the Agent's customary practices, such Bank's pro rata share of payments received by the Agent for the account of the Banks except as otherwise expressly provided herein or in any of the other Loan Documents. (b) If in the opinion of the Agent the distribution of any amount received by it in such capacity hereunder, under the Notes or under any of the other Loan Documents might involve it in liability, it may refrain from making distribution until its right to make distribution shall have been adjudicated by a court of competent jurisdiction. If a court of competent jurisdiction shall adjudge that any amount received and distributed by the Agent is to be repaid, each Person to whom any such distribution shall have been made shall either repay to the Agent its proportionate share of the amount so adjudged to be repaid or shall pay over the same in such manner and to such Persons as shall be determined by such court. (c) Notwithstanding anything to the contrary contained in this Agreement or any of the other Loan Documents, any Bank that fails (i) to make available to the Agent its pro rata share of any Loan or (ii) to comply with the provisions of Section 13 with respect to making dispositions and arrangements with the other Banks, where such Bank's share of any payment received, whether by setoff or otherwise, is in excess of its pro rata share of such payments due and payable to all of the Banks, in each case as, when and to the full extent required by the provisions of this Agreement, shall be deemed delinquent (a "Delinquent Bank") and shall be deemed a Delinquent Bank until such time as such delinquency is satisfied. A Delinquent Bank shall be deemed to have assigned any and all payments due to it from the Borrower and the Guarantor, whether on account of outstanding Loans, interest, fees or otherwise, to the remaining nondelinquent Banks for application to, and reduction of, their respective pro rata shares of all outstanding Loans. The Delinquent Bank hereby authorizes the Agent to distribute such payments to the nondelinquent Banks in proportion to their respective pro rata shares of all outstanding Loans. A Delinquent Bank shall be deemed to have satisfied in full a delinquency when and if, as a result of application of the assigned payments to all outstanding Loans of the nondelinquent Banks or as a result of other payments by the Delinquent Banks to the nondelinquent Banks, the Banks' respective pro rata shares of all outstanding Loans have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency. Section 14.6. Holders of Notes. Subject to the terms of Article 18, the Agent may deem and treat the payee of any Note as the absolute owner or purchaser thereof for all purposes hereof until it shall have been furnished in writing with a different name by such payee or by a subsequent holder, assignee or transferee. Section 14.7. Indemnity. The Banks ratably agree hereby to indemnify and hold harmless the Agent from and against any and all claims, actions and suits (whether groundless or otherwise), losses, damages, costs, expenses (including any expenses for which the Agent has not been reimbursed by the Borrower as required by Section 15), and liabilities of every nature and character arising out of or related to this Agreement, the Notes, or any of the other Loan Documents or the transactions contemplated or evidenced hereby or thereby, or the Agent's actions taken hereunder or thereunder, except to the extent that any of the same shall be directly caused by the Agent's willful misconduct or gross negligence. Section 14.8. Agent as Bank. In its individual capacity, BKB shall have the same obligations and the same rights, powers and privileges in respect to its Commitment and the Loans made by it, and as the holder of any of the Notes as it would have were it not also the Agent. Section 14.9. Resignation; Removal. The Agent may resign at any time by giving 60 days' prior written notice thereof to the Banks and the Borrower. In the event that a "Default" or "Event of Default" shall occur and be continuing under the Mortgage Loan Documents and BKB shall be the Agent, then the Majority Banks may remove BKB as Agent for cause. Upon any such resignation or removal, the Majority Banks shall have the right to appoint as a successor Agent any Bank or any other sophisticated investor knowledgeable in the lending to and/or operation of real estate similar to the Mortgaged Property and the Mezzanine Property and, so long as the interests of Borrower in the Mezzanine Property are included in the Collateral, who is approved by the Rating Agencies pursuant to the Mezzanine Mortgage Loan Agreement. Any such removal shall be effective upon appointment and acceptance of a successor agent selected by the Majority Banks. Unless a Default or Event of Default shall have occurred and be continuing, such successor Agent shall be reasonably acceptable to the Borrower. If no successor Agent shall have been so appointed by the Majority Banks and shall have accepted such appointment within 30 days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a Bank or any other sophisticated investor knowledgeable in the lending to and/or operation of real estate similar to the Mortgaged Property and the Mezzanine Property and, so long as the interests of Borrower in the Mezzanine Property are included in the Collateral, who is approved by the Rating Agencies pursuant to the Mezzanine Mortgage Loan Agreement. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Agent, and the retiring or removed Agent shall be discharged from its duties and obligations hereunder as Agent. After any retiring Agent's resignation or the removal of an Agent, the provisions of this Agreement and the other Loan Documents shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. Section 14.10. Duties in the Case of Enforcement. In case one or more Events of Default have occurred and shall be continuing, and whether or not acceleration of the Obligations shall have occurred, the Agent shall, if (a) so requested by the Majority Banks and (b) the Banks have provided to the Agent such additional indemnities and assurances against expenses and liabilities as the Agent may reasonably request, proceed to enforce the provisions of the Security Documents authorizing the sale or other disposition of all or any part of the Collateral and exercise all or any such other legal and equitable and other rights or remedies as it may have in respect of such Collateral. The Majority Banks may direct the Agent in writing as to the method and the extent of any such sale or other disposition, the Banks hereby agreeing to indemnify and hold the Agent harmless from all liabilities incurred in respect of all actions taken or omitted in accordance with such directions, provided that the Agent need not comply with any such direction to the extent that the Agent reasonably believes the Agent's compliance with such direction to be unlawful or commercially unreasonable in any applicable jurisdiction. Section 15. EXPENSES. The Borrower agrees to pay (a) the reasonable costs of producing and reproducing this Agreement, the other Loan Documents and the other agreements and instruments mentioned herein, (b) any taxes (including any interest and penalties in respect thereto) payable by the Agent or any of the Banks (other than taxes based upon the Agent's or any Bank's gross or net income, except that the Agent and the Banks shall be entitled to indemnification for any and all amounts paid by them in respect of taxes based on income or other taxes assessed by any State in which Mortgaged Property or the Collateral is located, such indemnification to be limited to taxes due solely on account of the granting of Collateral under the Security Documents and to be net of any credit allowed to the indemnified party from any other State on account of the payment or incurrence of such tax by such indemnified party), including any recording, mortgage, documentary or intangibles taxes in connection with the Loan Documents, or other taxes payable on or with respect to the transactions contemplated by this Agreement, including any such taxes payable by the Agent or any of the Banks after the Closing Date (the Borrower hereby agreeing to indemnify the Agent and each Bank with respect thereto), (c) all title insurance premiums, appraisal fees, engineer's fees, reasonable internal charges of the Agent (determined in good faith and in accordance with the Agent's internal policies applicable generally to its customers) for commercial finance exams and engineering and environmental reviews and the reasonable fees, expenses and disbursements of the counsel to the Agent, counsel for the Majority Banks and any local counsel to the Agent incurred in connection with the preparation, administration or interpretation of the Loan Documents and other instruments mentioned herein (excluding, however, the preparation of agreements evidencing participations granted under Section 18.4), the review of any additional or substitute Collateral, the addition of any guarantor, each closing hereunder, and amendments, modifications, approvals, consents or waivers hereto or hereunder, (d) the reasonable fees, expenses and disbursements of the Agent incurred by the Agent in connection with the preparation, administration or interpretation of the Loan Documents and other instruments mentioned herein, and the making of each advance hereunder, (e) all reasonable out-of-pocket expenses (including reasonable attorneys' fees and costs, which attorneys may be employees of any Bank or the Agent and the fees and costs of appraisers, engineers, investment bankers or other experts retained by any Bank or the Agent) incurred by any Bank or the Agent in connection with (i) the enforcement of or preservation of rights under any of the Loan Documents against the Borrower or any Guarantor or the administration thereof after the occurrence of a Default or Event of Default and (ii) any litigation, proceeding or dispute whether arising hereunder or otherwise, in any way related to the Agent's or any of the Bank's relationship with the Borrower or any Guarantor, (f) all reasonable fees, expenses and disbursements of any Bank or the Agent incurred in connection with U.C.C. searches, U.C.C. filings, title rundowns, title searches or mortgage recordings, and (g) all reasonable fees and expenses (including reasonable attorney's fees and costs) incurred by BankBoston and Goldman in connection with the assignment of Commitments and interests in the Loans pursuant to Section 18.1. The covenants of this Section 15 shall survive payment or satisfaction of payment of amounts owing with respect to the Notes. Section 16. INDEMNIFICATION. The Borrower agrees to indemnify and hold harmless the Agent and the Banks and each director, officer, employee, agent and Person who controls the Agent or any Bank from and against any and all claims, actions and suits, whether groundless or otherwise, and from and against any and all liabilities, losses, damages and expenses of every nature and character arising out of or relating to this Agreement or any of the other Loan Documents or the transactions contemplated hereby and thereby including, without limitation, (a) any leasing fees and any brokerage, finders or similar fees asserted against any Person indemnified under this Section 16 based upon any agreement, arrangement or action made or taken, or alleged to have been made or taken, by the Borrower or any of its Subsidiaries or the Guarantor, (b) any condition, use, operation or occupancy of the Mortgaged Property, the Mezzanine Property or the Collateral, (c) any actual or proposed use by the Borrower of the proceeds of any of the Loans, (d) any actual or alleged infringement of any patent, copyright, trademark, service mark or similar right of the Borrower or any of its Subsidiaries or the Guarantor comprised in the Collateral, (e) the Borrower and the Guarantor entering into or performing this Agreement or any of the other Loan Documents, (f) any actual or alleged violation of any law, ordinance, code, order, rule, regulation, approval, consent, permit or license relating to the Mortgaged Property or the Mezzanine Property, (g) with respect to the Borrower or any of its Subsidiaries, or the Guarantor and their respective properties and assets, the violation of any Environmental Law, the Release or threatened Release of any Hazardous Substances or any action, suit, proceeding or investigation brought or threatened with respect to any Hazardous Substances (including, but not limited to claims with respect to wrongful death, personal injury or damage to property), (h) the Mortgage Loan Documents, the Mezzanine Mortgage Loan Documents, the Property Owner Organizational Agreements, the Wells Avenue Holdings Organizational Agreements, the WASH Manager Organizational Agreements and the WASH Organizational Agreements, (i) matters for which the Mezzanine Mortgagee is indemnified pursuant to Section 9.2 of the Mezzanine Mortgage Loan Agreement to the same extent provided therein, (j) in the event that the Agent or any nominee of the Agent and the Banks shall foreclose or otherwise obtain title to all or any portion of the Collateral, any obligations, duties or liabilities of the Property Owner, WASH, WASH Manager or Wells Avenue Holdings other than those pursuant to Leases entered into in compliance with this Agreement, the Mortgage Loan Documents, the Mezzanine Mortgage Loan Documents (subject to the terms of the Loan Documents) or the approved budgets, or (k) the exercise by the Agent of the rights and remedies set forth in Section 32; in each case including, without limitation, the reasonable fees and disbursements of counsel and allocated costs of internal counsel incurred in connection with any such investigation, litigation or other proceeding; provided, however, that the Borrower shall not be obligated under this Section 16 to indemnify any Person for liabilities arising from such Person's own gross negligence or willful misconduct. In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in Section 9.2(b) or (c) of the Mezzanine Mortgage Loan Agreement is for any reason held to be unenforceable by an indemnified party in respect of any claims, expenses, losses, damages, obligations or liabilities (or action in respect thereof) referred to therein which would otherwise be indemnifiable under Section 16(i) above the Borrower shall contribute to the amount paid or payable by the Agent or the Banks as a result of such claims, expenses, losses, damages, obligations or liabilities (or action in respect thereof); provided, however, that no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act of 1933) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. In determining the amount of contribution to which the respective parties are entitled, the following factors shall be considered: (i) the Agent's, the Banks' and the Borrower's or its Subsidiaries' (or the Borrower's or its Subsidiaries' predecessors) relative knowledge and access to information concerning the matter with respect to which claim was asserted; (ii) the opportunity to correct and prevent any statement or omission; and (iii) any other equitable considerations appropriate in the circumstances. Agent and the Borrower hereby agree that it may not be equitable if the amount of such contribution were determined by pro rata or per capita allocation. In litigation, or the preparation therefor, the Banks and the Agent shall be entitled to select a single law firm as their own counsel and, in addition to the foregoing indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses of such counsel. If, and to the extent that the obligations of the Borrower under this Section 16 are unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment in satisfaction of such obligations which is permissible under applicable law. The provisions of this Section 16 shall survive the repayment of the Loans and the termination of the obligations of the Banks hereunder. Section 17. SURVIVAL OF COVENANTS, ETC. All covenants, agreements, representations and warranties made herein, in the Notes, in any of the other Loan Documents or in any documents or other papers delivered by or on behalf of the Borrower, any of its Subsidiaries, the Property Owner or any Guarantor pursuant hereto or thereto shall be deemed to have been relied upon by the Banks and the Agent, notwithstanding any investigation heretofore or hereafter made by any of them, and shall survive the making by the Banks of any of the Loans, as herein contemplated, and shall continue in full force and effect so long as any amount due under this Agreement or the Notes or any of the other Loan Documents remains outstanding or any Bank has any obligation to make any Loans. The indemnification obligations of the Borrower provided herein and the other Loan Documents shall survive the full repayment of amounts due and the termination of the obligations of the Banks hereunder and thereunder to the extent provided herein and therein. All statements contained in any certificate or other paper delivered to any Bank or the Agent at any time by or on behalf of the Borrower, any of its Subsidiaries, the Property Owner or any Guarantor pursuant hereto or in connection with the transactions contemplated hereby shall constitute representations and warranties by such Person hereunder. Section 18. ASSIGNMENT AND PARTICIPATION. Section 18.1. Conditions to Assignment by Banks. Except as provided herein, each Bank may assign to one or more banks or other entities all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitment Percentage and Commitment and the same portion of the Loans at the time owing to it, and the Notes held by it); provided that (a) the Agent shall have given its prior written consent to such assignment, which consent shall not be unreasonably withheld (provided that such consent shall not be required for any assignment to another Bank, to a bank which is under common control with the assigning Bank or to a wholly-owned Subsidiary of such Bank provided that such assignee shall remain a wholly-owned Subsidiary of such Bank), (b) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Bank's rights and obligations under this Agreement, (c) the parties to such assignment shall execute and deliver to the Agent, for recording in the Register (as hereinafter defined), a notice of such assignment, together with any Notes subject to such assignment, (d) in no event shall any voting, consent or approval rights of a Bank be assigned to any Person controlling, controlled by or under common control with, or which is not otherwise free from influence or control by, the Borrower, any of its Subsidiaries, the Property Owner or any Guarantor, which rights shall instead be allocated pro rata among the other remaining Banks, (e) such assignee shall have a net worth as of the date of such assignment of not less than $500,000,000 and (f) such assignee shall acquire an interest in the Loans of not less than $10,000,000.00. No such assignment shall be made without the prior consent of the Borrower, which consent shall not be unreasonably withheld or delayed; provided that such consent shall not be required in the event that a Default or Event of Default shall have occurred. Upon such execution, delivery, acceptance and recording, of such notice of assignment, (i) the assignee thereunder shall be a party hereto and all other Loan Documents executed by the Banks and, to the extent provided in such assignment, have the rights and obligations of a Bank hereunder, (ii) the assigning Bank shall, to the extent provided in such assignment and upon payment to the Agent of the registration fee referred to in Section 18.2, be released from its obligations under this Agreement, and (iii) the Agent may unilaterally amend Schedule 1.1 to reflect such assignment. In connection with each assignment, the assignee shall represent and warrant to the Agent, the assignor and each other Bank as to whether such assignee is controlling, controlled by, under common control with or is not otherwise free from influence or control by, the Borrower, any of its Subsidiaries, the Property Owner or any Guarantor. Notwithstanding anything herein to the contrary, in the event that BKB shall at any time hold a Commitment equal to or less than $10,000,000, then BKB shall promptly provide written notice thereof to the Banks and the Majority Banks shall have the right, to be exercised within fifteen (15) days of delivery of such notice by BKB, to elect to remove BKB as Agent and replace BKB as Agent, subject to the terms of Section 14.9. Section 18.2. Register. The Agent shall maintain a copy of each assignment delivered to it and a register or similar list (the "Register") for the recordation of the names and addresses of the Banks and the Commitment Percentages of, and principal amount of the Loans owing to the Banks from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Agent and the Banks may treat each Person whose name is recorded in the Register as a Bank hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and the Banks at any reasonable time and from time to time upon reasonable prior notice. Upon each such recordation, the assigning Bank agrees to pay to the Agent a registration fee in the sum of $2,000. Section 18.3. New Notes. Upon its receipt of an assignment executed by the parties to such assignment, together with each Note subject to such assignment, the Agent shall (a) record the information contained therein in the Register, and (b) give prompt notice thereof to the Borrower and the Banks (other than the assigning Bank). Within five Business Days after receipt of such notice, the Borrower, at its own expense, shall execute and deliver to the Agent, in exchange for each surrendered Note, a new Note to the order of such assignee in an amount equal to the amount assumed by such assignee pursuant to such assignment and, if the assigning Bank has retained some portion of its obligations hereunder, a new Note to the order of the assigning Bank in an amount equal to the amount retained by it hereunder, and shall cause the Guarantor to deliver to Agent an acknowledgment in form and substance satisfactory to the Agent to the effect that the Guaranty extends and is applicable to each new Note. Such new Notes shall provide that they are replacements for the surrendered Notes, shall be in an aggregate principal amount equal to the aggregate principal amount of the surrendered Notes, shall be dated the effective date of such assignment and shall otherwise be in substantially the form of the assigned Notes. The surrendered Notes shall be canceled and returned to the Borrower. Section 18.4. Participations. Each Bank may sell participations to one or more banks or other entities in all or a portion of such Bank's rights and obligations under this Agreement and the other Loan Documents with the prior written consent of the Agent (after giving due regard to the limitations in Section 18.8); provided that (a) any such sale or participation shall not affect the rights and duties of the selling Bank hereunder to the Borrower, (b) such sale and participation shall not entitle such participant any rights or privileges under this Agreement or the Loan Documents (including, without limitation, the right to approve waivers, amendments or modifications), (c) such participant shall have no direct rights against the Borrower or the Guarantor except the rights granted to the Banks pursuant to Section 13, (d) such sale is effected in accordance with all applicable laws, and (e) such participant shall not be a Person controlling, controlled by or under common control with, or which is not otherwise free from influence or control by, the Borrower, any of its Subsidiaries, the Property Owner or any Guarantor. Section 18.5. Pledge by Bank. Any Bank may at any time pledge all or any portion of its interest and rights under this Agreement (including all or any portion of its Note) to any of the twelve Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or the enforcement thereof shall release the pledgor Bank from its obligations hereunder or under any of the other Loan Documents. Section 18.6. No Assignment by Borrower. The Borrower shall not assign or transfer any of its rights or obligations under any of the Loan Documents without the prior written consent of each of the Banks. Section 18.7. Disclosure. The Borrower agrees that in addition to disclosures made in accordance with standard institutional lending practices any Bank may disclose information obtained by such Bank pursuant to this Agreement to assignees or participants and potential assignees or participants hereunder. Section ul or Additional Restrictions on Assignments and Participations. Notwithstanding anything to the contrary set forth in this Agreement or in any of the other Loan Documents, so long as the Mezzanine Conditional Guaranty or the Nomura Conditional Guaranty remains in effect, no interest in the Loan may be assigned, transferred or participated, unless in each case the additional requirements set forth in clauses (a) through (e) below are satisfied: (a) the entity to which any interest in the Loan is assigned, transferred or participated is an Eligible Transferee (as defined below), (b) the minimum denomination assigned, transferred or participated shall not be less than $10,000,000.00, (c) assignments, transfers and participations may not be made to more than eight (8) Eligible Transferees in the aggregate, (d) assignments, transfers and participations may not be made without the consent of Whitehall Street Real Estate Limited Partnership V, Whitehall Street Real Estate Limited Partnership VI, Whitehall Street Real Estate Limited Partnership VII and Whitehall Street Real Estate Limited Partnership VIII, which consent shall not be unreasonably withheld, delayed or conditioned, and (e) assignments, transfers and participations may not be made unless the prospective assignee, transferee or participant executes and delivers a fully completed certificate in the form of Exhibit E hereto confirming that such assignee, transferee or participant is an Eligible Transferee. "Eligible Transferee" means a "qualified purchaser" as defined in Section 2(a)(51)(A) of the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder. Section 19. NOTICES. Each notice, demand, election or request provided for or permitted to be given pursuant to this Agreement (hereinafter in this Section 19 referred to as "Notice"), but specifically excluding to the maximum extent permitted by law any notices of the institution or commencement of foreclosure proceedings, must be in writing and shall be deemed to have been properly given or served by personal delivery or by sending same by overnight courier or by depositing same in the United States Mail, postpaid and registered or certified, return receipt requested, or as expressly permitted herein, by telegraph, telecopy, telefax or telex, and addressed as follows: If to the Agent or BKB: BankBoston, N.A. 100 Federal Street Boston, Massachusetts 02110 Attn: Real Estate Division With a copy to: BankBoston, N.A. 115 Perimeter Center Place, N.E. Suite 500 Atlanta, Georgia 30346 Attn: Mr. Jay Johns Telecopy No.: 770/390-8434 If to the Borrower: Wellsford/Whitehall Properties II, L.L.C. 610 Fifth Avenue 7th Floor New York, New York 10020 Attn: Mr. Gregory F. Hughes With a copy to: Alan S. Pearce, Esq. Robinson Silverman Pearce Aronsohn & Berman LLP 1290 Avenue of the Americas New York, New York 10104 if to another Bank now a party to this Agreement, to the address set forth on the signature page hereto, and to each other Bank which may hereafter become a party to this Agreement at such address as may be designated by such Bank. Each Notice shall be effective upon being personally delivered or upon being sent by overnight courier or upon being deposited in the United States Mail as aforesaid. The time period in which a response to such Notice must be given or any action taken with respect thereto (if any), however, shall commence to run from the date of receipt if personally delivered or sent by overnight courier, or if so deposited in the United States Mail, the earlier of three (3) Business Days following such deposit or the date of receipt as disclosed on the return receipt. Rejection or other refusal to accept or the inability to deliver because of changed address for which no notice was given shall be deemed to be receipt of the Notice sent. By giving at least fifteen (15) days prior Notice thereof, the Borrower, a Bank or Agent shall have the right from time to time and at any time during the term of this Agreement to change their respective addresses and each shall have the right to specify as its address any other address within the United States of America. Section 20. RELATIONSHIP. Neither the Agent nor any Bank has any fiduciary relationship with or fiduciary duty to Borrower arising out of or in connection with this Agreement or the other Loan Documents, or the transactions contemplated hereunder or thereunder, and the relationship between each Bank and the Borrower is solely that of a lender and borrower, and nothing contained herein or in any of the other Loan Documents shall in any manner be construed as making the parties hereto partners, joint venturers or any other relationship other than lender and borrower. Section 21. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE. THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN, ARE CONTRACTS UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SUCH STATE (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN Section 19. THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT. Section 22. HEADINGS. The captions in this Agreement are for convenience of reference only and shall not define or limit the provisions hereof. Section 23. COUNTERPARTS. This Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. Section 24. ENTIRE AGREEMENT, ETC. The Loan Documents and any other documents executed in connection herewith or therewith express the entire understanding of the parties with respect to the transactions contemplated hereby. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated, except as provided in Section 27. Section 25. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT AND THE BANKS HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY NOTE OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. THE BORROWER (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY BANK OR THE AGENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH BANK OR THE AGENT WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT THE AGENT AND THE BANKS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH THEY ARE PARTIES BY, AMONG OTHER THINGS, THE WAIVER AND CERTIFICATIONS CONTAINED IN THIS Section 25. Section 26. DEALINGS WITH THE BORROWER. The Banks and their affiliates may accept deposits from, extend credit to and generally engage in any kind of banking, trust or other business with the Borrower, it Subsidiaries or the Guarantor or any of their affiliates regardless of the capacity of the Bank hereunder. Section 27. CONSENTS, AMENDMENTS, WAIVERS, ETC. Except as otherwise expressly provided in this Agreement, any consent or approval required or permitted by this Agreement may be given, and any term of this Agreement or of any other instrument related hereto or mentioned herein may be amended, and the performance or observance by the Borrower or the Guarantor of any terms of this Agreement or such other instrument or the continuance of any Default or Event of Default may be waived (either generally or in a particular instance and either retroactively or prospectively) with, but only with, the written consent of the Majority Banks. Notwithstanding the foregoing, none of the following may occur without the written consent of each Bank: a change in the rate of interest on and the term of the Notes; a change in the amount of the Commitments of the Banks; a forgiveness, reduction or waiver of the principal of any unpaid Loan or any interest thereon or fee payable under the Loan Documents; a change in the amount of any fee payable to a Bank hereunder; the postponement of any date fixed for any payment of principal of or interest on the Loan; an extension of the Maturity Date (except as provided in Section 2.8); a change in the manner of distribution of any payments to the Banks or the Agent; the release of the Borrower or the Guarantor or any Collateral except as otherwise provided herein; an amendment of the definition of Majority Banks or of any requirement for consent by all of the Banks; any modification to require a Bank to fund a pro rata share of a request for an advance of the Loan made by the Borrower other than based on its Commitment Percentage; an amendment to this Section 27; an amendment of the definition of Majority Banks; or an amendment of any provision of this Agreement or the Loan Documents which requires the approval of all of the Banks or the Majority Banks to require a lesser number of Banks to approve such action. The amount of the Agent's fee payable for the Agent's account and the provisions of Section 14 may not be amended without the written consent of the Agent. No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of the Agent or any Bank in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon the Borrower shall entitle the Borrower to other or further notice or demand in similar or other circumstances. Section 28. SEVERABILITY. The provisions of this Agreement are severable, and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Agreement in any jurisdiction. Section 29. LIMITATION ON LIABILITY. NO OBLIGATION OR LIABILITY WHATSOEVER OF THE BORROWER WHICH MAY ARISE AT ANY TIME UNDER THIS AGREEMENT OR ANY OBLIGATION OR LIABILITY WHICH MAY BE INCURRED BY IT PURSUANT TO ANY OTHER LOAN DOCUMENT SHALL BE PERSONALLY BINDING UPON, NOR SHALL RESORT FOR THE ENFORCEMENT THEREOF BE HAD TO, THE PRIVATE PROPERTY OF ANY OF THE BORROWER'S MEMBERS REGARDLESS OF WHETHER SUCH OBLIGATION OR LIABILITY IS IN THE NATURE OF CONTRACT, TORT OR OTHERWISE; PROVIDED, HOWEVER, NOTHING HEREIN SHALL DIMINISH OR IMPAIR THE RIGHTS OF AGENT AND THE BANKS TO PURSUE ANY REMEDY AGAINST ANY ASSETS OF THE BORROWER OR RELIEVE, REDUCE OR IMPAIR ANY OBLIGATION OF ANY GUARANTOR UNDER ITS GUARANTY OR INDEMNITY AGREEMENT. Section 30. NO UNWRITTEN AGREEMENTS. THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES. Section 31. TIME OF THE ESSENCE. Time is of the essence with respect to each and every covenant, agreement and obligation of the Borrower under this Agreement and the other Loan Documents. Section 32. BANKRUPTCY. (a) Material Inducement. Each of the Borrower, WASH Manager, Wells Avenue Holdings and the undersigned Guarantor, jointly and severally, acknowledges and agrees that the representations, warranties, covenants and agreements contained in this Section 32 constitute a material inducement to the Agent and the Banks to enter into this Agreement, the other Loan Documents and the transactions contemplated hereby and thereby and that without the inclusion of this Section 32 herein the Agent and the Banks would not have entered into this Agreement and the other Loan Documents. (b) No Fraudulent Intent. Each of the Borrower, WASH Manager, Wells Avenue Holdings and the undersigned Guarantor, jointly and severally, hereby acknowledges, warrants, represents and agrees that neither the execution and delivery of this Agreement and the other Loan Documents nor the performance of any actions required hereunder or thereunder is being consummated by the Borrower, the Property Owner, WASH Manager, Wells Avenue Holdings or the Guarantor with or as a result of any actual intent by such Persons, or any of them, to hinder, delay or defraud any entity to which such Persons, or any of them, are now or will hereafter become indebted. (c) No Bankruptcy Intent. Each of the Borrower, WASH Manager, Wells Avenue Holdings and the undersigned Guarantor, jointly and severally, hereby represents, covenants and agrees that none of the Borrower, the Property Owner, WASH, WASH Manager, Wells Avenue Holdings or the Guarantor has any intent (1) to file any voluntary petition in bankruptcy under any Chapter of the Bankruptcy Code or in any manner to seek relief, protection, reorganization, liquidation, dissolution or similar relief for debtors under any local, state, federal or other insolvency laws or laws providing for relief of debtors, or in equity, or directly or indirectly to cause any of the other of such Persons to file any such petition or to seek any such relief, either at the present time, or at any time hereafter, or (2) directly or indirectly to cause any involuntary petition under any Chapter of the Bankruptcy Code to be filed against any of such Persons or directly or indirectly to cause any of such Persons to become the subject of any dissolution, liquidation or insolvency proceeding or any other proceeding pursuant to any local, state, federal, or other insolvency laws or laws providing for relief of debtors, or in equity, either at the present time, or at any time hereafter, or (3) directly or indirectly to cause the Mortgaged Property, the Mezzanine Property, any other collateral for the Mortgage Loan, the Collateral or any portion thereof or any interest of such Persons in the Mortgaged Property, the Mezzanine Property, any other collateral for the Mortgage Loan or the Collateral to become the property of any bankruptcy estate or the subject of any local, state, federal or other bankruptcy, dissolution, liquidation or insolvency proceedings, either at the present time or at any time hereafter. (d) Agreement in Best Interests of Parties; Consideration. Each of the Borrower, WASH Manager, Wells Avenue Holdings and the undersigned Guarantor, jointly and severally, hereby acknowledges and agrees that (1) the transactions evidenced by this Agreement and the other Loan Documents are in the best interests of such Persons and the creditors of such Persons, and (2) the benefit to inure to such Persons pursuant to this Agreement and the other Loan Documents constitute substantially more than "reasonable equivalent value" (as such term is used in Section 548 of the Bankruptcy Code) and "fair consideration" (as such term is defined and used in the New York Debtor and Creditor Law Sections 272- 279), in exchange for the benefits to be provided by such Persons to the Agent and the Banks pursuant to this Agreement and the other Loan Documents. (e) Subsequent Bankruptcy; Waiver of Automatic Stay. (1) It is expressly agreed and understood by the parties hereto that, in the event the Property Owner, WASH, WASH Manager, Wells Avenue Holdings, the Borrower, the undersigned Guarantor, the Collateral, the Mortgaged Property, the Mezzanine Property, any other collateral for the Mortgage Loan, or any portion thereof, shall be or become the subject of any bankruptcy proceeding or the property of any bankruptcy estate, the United States Bankruptcy Court for the Southern District of New York (hereinafter referred to as the "Bankruptcy Court") shall have the sole and exclusive jurisdiction of such bankruptcy proceeding. The parties hereto hereby further acknowledge and agree that any voluntary bankruptcy petition filed by any of the Property Owner, WASH, WASH Manager, Wells Avenue Holdings, the Borrower, or the Guarantor, or any involuntary bankruptcy petition caused to be filed by any of the Property Owner, WASH, WASH Manager, Wells Avenue Holdings, the Borrower or Guarantor, or any affiliate thereof against any of the Property Owner, WASH, WASH Manager, Wells Avenue Holdings, the Borrower or the Guarantor (any such bankruptcy filing being hereinafter referred to as a "Bad Faith Filing"), or any other action by the Borrower or such Persons, or any of them, to attempt in any manner to hinder, delay, impede, stay, void, rescind or nullify any lawful action taken by Agent to exercise its rights and remedies under this Agreement or any of the other Loan Documents, or at law or in equity, from and after the date hereof, or pursuant to any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar proceedings, would be in bad faith and contrary to the purposes of the bankruptcy laws, would be for the sole purpose of delaying, inhibiting or interfering with the exercise by Agent of its rights and remedies under this Agreement and the Loan Documents and would, in and of itself, constitute "cause" for relief from the automatic stay pursuant to the provisions of Section 362(d)(1) of the Bankruptcy Code. Without limitation of the foregoing, the parties hereto hereby further acknowledge and agree that, in the event of any Bad Faith Filing by or against any of the Property Owner, WASH, WASH Manager, Wells Avenue Holdings, the Borrower, or Guarantor, or their respective successors, successors-in-interest or assigns, Agent shall be entitled to obtain upon ex parte application therefor, and without further notice or action of any kind or nature whatsoever, (A) an order from the Bankruptcy Court prohibiting the use of Agent's "cash collateral" (as such term is defined in Section 363 of the Bankruptcy Code) in connection with the Loan, and (B) an order from the Bankruptcy Court granting immediate relief from the automatic stay pursuant to Section 362 of the Bankruptcy Code so as to permit Agent to exercise all of its rights and remedies pursuant to this Agreement, the Loan Documents, and at law and in equity. (2) The Borrower, WASH Manager, Wells Avenue Holdings and the undersigned Guarantor covenant not to directly or indirectly oppose or otherwise defend against Agent's effort to obtain relief from the stay pursuant to Section 32(e)(1), above, and covenant and agree that Agent shall be entitled to the lifting of the stay pursuant to Section 32(e)(1), above, without the necessity of an evidentiary hearing and without the necessity or requirement that Agent establish or prove the value of the Mortgaged Property, the Mezzanine Property or the Collateral, the lack of adequate protection of Agent's interest in the Collateral, the lack of any reasonable prospect of reorganization with respect either to the Property Owner, WASH, WASH Manager, Wells Avenue Holdings, the Borrower, the Guarantor, the Mortgaged Property, the Mezzanine Property or the Collateral, or the Borrower's or the Guarantor's lack of equity in the Collateral. (3) The waiver by the Borrower, WASH Manager, Wells Avenue Holdings and the undersigned Guarantor of the Section 362 automatic stay contained in the Bankruptcy Code pursuant to Section 32(e)(1) and (2), above, and the waiver of the Section 362 automatic and Section 105 supplemental stay contained in the Bankruptcy Code pursuant to Section 32(f), below, shall be unconditional and absolute, and each of the Borrower, WASH Manager, Wells Avenue Holdings and the undersigned Guarantor hereby agree never to directly or indirectly maintain before any court that such waiver of the automatic stay and supplemental stay should not be strictly enforced. (f) Waiver of Automatic and Supplemental Stays. Each of the Borrower, WASH Manager, Wells Avenue Holdings and the undersigned Guarantor, on behalf of itself only, hereby represents, covenants and agrees, in the event of the filing of any voluntary or involuntary petition in bankruptcy by or against any of the Property Owner, WASH, WASH Manager, Wells Avenue Holdings, the Borrower or the Guarantor, not to assert or request any other party to assert that the automatic stay provided by Section 362 of the Bankruptcy Code shall operate or be interpreted to stay, interdict, condition, reduce or inhibit the ability of Agent to enforce any rights it has by virtue of this Agreement or the Loan Documents, or any other rights Agent has, whether now or hereafter acquired, against any of the Property Owner, WASH, WASH Manager, Wells Avenue Holdings, the Borrower, the Guarantor, or against any of the Collateral; and further, in the event of the filing of any voluntary or involuntary petition in bankruptcy by or against any of the Property Owner, WASH, WASH Manager, Wells Avenue Holdings, the Borrower or the Guarantor, not to seek a supplemental stay or any other relief, whether injunctive or otherwise, pursuant to Section 105 of the Bankruptcy Code or any other provision of the Bankruptcy Code, to stay, interdict, condition, reduce or inhibit the ability of Agent to enforce any rights it has by virtue of this Agreement or the Loan Documents, or at law or in equity, or any other rights Agent has, whether now or hereafter acquired against the Property Owner, WASH, WASH Manager, Wells Avenue Holdings, the Borrower or the Guarantor, or against any of the Collateral. The parties hereto acknowledge that the waivers in this Section 32(f) with respect to an involuntary petition shall not be effective until the occurrence of an Event of Default provided that none of the Borrower, WASH, WASH Manager, Wells Avenue Holdings, the undersigned Guarantor, or the Property Owner directly or indirectly causes such petition to be filed against any of them. (g) Approval Rights Regarding Bankruptcy Proceeding. Upon the occurrence and during the continuance of any Event of Default, all rights of the Borrower and the Guarantor to exercise their Voting Interests in the Property Owner, as the case may be, shall automatically terminate and cease to exist and all such rights shall thereupon be automatically vested in the Agent who shall thereupon have the sole and exclusive right to exercise such Voting Interests. Without limiting the foregoing, in the event of a Bad Faith Filing or any other voluntary or involuntary bankruptcy filing or any other insolvency proceeding of any kind under local, state, federal or other insolvency laws involving the Property Owner, WASH, WASH Manager, Wells Avenue Holdings, the Borrower, the Guarantor, or all of them, or any of their properties (collectively the "Bankruptcy Filings"), the Borrower, WASH Manager, Wells Avenue Holdings and the Guarantor each acknowledge and agree to recognize the rights and powers granted to the Agent in this Section 32(g) and agree not to oppose or object on any basis whatsoever to the exercise by the Agent of such rights in connection with the Bankruptcy Filings. Further, upon the commencement of one or more Bankruptcy Filings, the Borrower, WASH Manager, Wells Avenue Holdings and the undersigned Guarantor, jointly and severally, covenant and agree: (1) not to propose, approve, vote for, or acquiesce in a plan of reorganization concerning the Property Owner, WASH, WASH Manager, Wells Avenue Holdings, the Borrower, the Guarantor, or all of them, as it directly or indirectly relates to the Property Owner, WASH, WASH Manager, Wells Avenue Holdings, the Collateral, the Mortgaged Property, the Mezzanine Property or the Mezzanine Collateral without the consent of Agent; (2) not to challenge or object on any basis whatsoever to the standing of Agent to be recognized as a creditor and/or party-in-interest in the Bankruptcy Filings; and (3) not to violate or breach any of the covenants or agreements contained in this Agreement and any of the Loan Documents. (h) Miscellaneous Representations. Each of the Borrower, WASH Manager, Wells Avenue Holdings and the undersigned Guarantor warrant and represent to Agent and the Banks that, other than Agent and the Banks, applicable taxing authorities, and as to the Borrower only, the Indebtedness permitted by this Agreement, the Borrower, WASH Manager, Wells Avenue Holdings and the Guarantor have no creditors; that none of such Persons has any employees; that each of such Persons are single asset entities such that each of such Persons does not own or hold any beneficial interest in any property of any kind or nature whatsoever other than their respective direct or indirect interests in the Property Owner; and that any dispute which may arise between Agent, the Banks, the Borrower (arising from its interest in the Collateral), the Guarantor (arising from its interest in the Collateral), or any of them, would be, for all intents and purposes, a dispute, involving only Agent and the Banks and the Borrower, or the Guarantor, or any of them, as applicable. (i) Covenant of Noninterference and Cooperation. (1) The Borrower, WASH Manager, Wells Avenue Holdings and the undersigned Guarantor jointly and severally, covenant and agree that, except for a "Permitted Defense" (as defined in each of the Mezzanine Conditional Guaranty and the Nomura Conditional Guaranty, as applicable), none of them shall take any action of any kind or nature whatsoever, either directly or indirectly, to oppose, impede, obstruct, hinder, frustrate, enjoin or otherwise interfere with the exercise by Agent of any of Agent's rights and remedies against or with respect to the Collateral, this Agreement or the other Loan Documents, including specifically, but without limitation, those rights and remedies contained in this Section 32, at law or in equity, and shall not, either directly or indirectly cause any other Person to take any of the foregoing actions. (2) The Borrower, WASH Manager, Wells Avenue Holdings and the undersigned Guarantor jointly and severally, covenant and agree, except with respect to a Permitted Defense, to cooperate fully and completely with the exercise by Agent of any of Agent's rights and remedies against or with respect to the Collateral, this Agreement or the other Loan Documents, including specifically, but without limitation, those rights and remedies contained in this Section 32. (3) The Borrower, WASH Manager, Wells Avenue Holdings and the undersigned Guarantor jointly and severally covenant and agree that any violation of either Section 32(i)(1) or (2), above, or the occurrence of any "Triggering Event" (as defined in each of the Mezzanine Conditional Guaranty and the Nomura Conditional Guaranty, respectively), will constitute an act of bad faith undertaken with intent to hinder, delay and defraud Agent. IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as a sealed instrument as of the date first set forth above. WELLSFORD/WHITEHALL PROPERTIES II, L.L.C., a Delaware limited liability company By: Wellsford Commercial Properties Trust, a Maryland real estate investment trust, its manager By:/s/ Gregory F. Hughes ------------------------------------ Name: Gregory F. Hughes Title: CFO & Treasurer BANKBOSTON, N.A., a national banking association, individually and as Agent By: /s/ Mark E. Basham ------------------------------------ Name: Mark E Basham Title: Managing Director [BANK SEAL] GOLDMAN SACHS MORTGAGE COMPANY, a New York limited partnership, individually and as Co-Arranger and Co-Syndication Agent By: /s/ Robert R. Foley --------------------------------- Name: Robert R. Foley Title: Authorized Signatory [CORPORATE SEAL] BHF-BANK AKTIENGESELLSCHAFT By: /s/ Sylvia Gross ----------------------------- Title: Vice President By: /s/ Nicholas Nouvel ----------------------------- Title: Vice President BHF-BANK AKTIENGESELLSCHAFT 590 Madison Avenue New York, New York 10022 Attn: Mr. Johnathan Oh MORGAN STANLEY SENIOR FUNDING, INC. By: /s/ Christopher A. Pucillo ------------------------------- Title: Vice President Morgan Stanley Senior Funding, Inc. 1585 Broadway 10th Floor New York, New York 10036 Attn: Mr. Jim Morgan The undersigned Wells Avenue Holdings, WASH Manager and Guarantor hereby join in this Agreement for the purpose of being bound to the provisions of Section 32 of this Agreement. WELLS AVENUE HOLDINGS: --------------------- WELLS AVENUE HOLDINGS, L.L.C., a Delaware limited liability company By: Wellsford/Whitehall Holdings, L.L.C., a Delaware limited liability company, its sole member By: Wells/Whitehall Properties II, L.L.C., a Delaware limited liability company, its managing member By: Wellsford Commercial Properties Trust, a Maryland real estate investment trust, its manager By: /s/ Gregory F. Hughes ---------------------- Name: Gregory F. Hughes Title: CFO & Treasurer WASH MANAGER: ------------ WASH MANAGER L.L.C., a Delaware limited liability company By: Wells Avenue Holdings L.L.C., a Delaware limited liability company, its sole member By: Wellsford/Whitehall Holdings, L.L.C., a Delaware limited liability company, its sole member By: Wellsford/Whitehall Properties II, L.L.C., a Delaware limited liability company, its managing member By: Wellsford Commercial Properties Trust, a Maryland real estate investment trust, its manager By: /s/ Gregory F. Hughes ---------------------- Name: Gregory F. Hughes Title: CFO & Treasurer GUARANTOR: --------- WELLSFORD COMMERCIAL PROPERTIES TRUST, a Maryland real estate investment trust By: /s/ Gregory F. Hughes ---------------------------------- Name: Gregory F. Hughes Title: CFO & Treasurer WHWEL REAL ESTATE LIMITED PARTNERSHIP By: WHATR Gen-Par, Inc., General Partner By: /s/ Alan S. Kava ---------------------------- Name: Alan S. Kava Title: Vice President EXHIBIT A FORM OF NOTE $______________ _______________ FOR VALUE RECEIVED, the undersigned WELLSFORD/WHITEHALL HOLDINGS II, L.L.C., a Delaware limited liability company, hereby promises to pay to ______________________________ or order, in accordance with the terms of that certain Mezzanine Loan Agreement dated as of July ____, 1998 (the "Credit Agreement"), as from time to time in effect, among the undersigned, BankBoston, N.A., for itself and as Agent, Goldman Sachs Mortgage Company, and such other Banks as may be from time to time named therein, to the extent not sooner paid, on or before the Maturity Date, the principal sum of _________________________ DOLLARS ($______________), or such amount as may be advanced by the payee hereof under the Credit Agreement with daily interest from the date hereof, computed as provided in the Credit Agreement, on the principal amount hereof from time to time unpaid, at a rate per annum on each portion of the principal amount which shall at all times be equal to the rate of interest applicable to such portion in accordance with the Credit Agreement, and with interest on overdue principal and, to the extent permitted by applicable law, on overdue installments of interest and late charges at the rates provided in the Credit Agreement. Interest shall be payable on the dates specified in the Credit Agreement, except that all accrued interest shall be paid at the stated or accelerated maturity hereof or upon the prepayment in full hereof. Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Credit Agreement. Payments hereunder shall be made to BankBoston, N.A., as Agent for the payee hereof, 100 Federal Street, Boston, Massachusetts 02110. This Note is one of one or more Notes evidencing borrowings under and is entitled to the benefits and subject to the provisions of the Credit Agreement. The principal of this Note may be due and payable in whole or in part prior to the maturity date stated above and is subject to mandatory prepayment in the amounts and under the circumstances set forth in the Credit Agreement, and may be prepaid in whole or from time to time in part, all as set forth in the Credit Agreement. Notwithstanding anything in this Note to the contrary, all agreements between the Borrower and the Banks and the Agent, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of any of the Obligations or otherwise, shall the interest contracted for, charged or received by the Banks exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, interest would otherwise be payable to the Banks in excess of the maximum lawful amount, the interest payable to the Banks shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance the Banks shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal balance of the Obligations and to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal of the Obligations, such excess shall be refunded to the Borrower. All interest paid or agreed to be paid to the Banks shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal of the Obligations (including the period of any renewal or extension thereof) so that the interest thereon for such full period shall not exceed the maximum amount permitted by applicable law. This paragraph shall control all agreements between the Borrower and the Banks and the Agent. In case an Event of Default shall occur, the entire principal amount of this Note may become or be declared due and payable in the manner and with the effect provided in said Credit Agreement. This Note shall be governed by and construed in accordance with the laws of the State of New York (without giving effect to the conflict of laws rules of any jurisdiction). The undersigned maker and all guarantors and endorsers, hereby waive presentment, demand, notice, protest, notice of intention to accelerate the indebtedness evidenced hereby, notice of acceleration of the indebtedness evidenced hereby and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, except as specifically otherwise provided in the Credit Agreement, and assent to extensions of time of payment or forbearance or other indulgence without notice. IN WITNESS WHEREOF the undersigned has by its duly authorized officers, executed this Note under seal as of the day and year first above written. WELLSFORD/WHITEHALL PROPERTIES II, L.L.C., a Delaware limited liability company By: Wellsford Commercial Properties Trust, a Maryland real estate investment trust, its manager By:___________________________________ Name:______________________________ Title:_____________________________ EXHIBIT B FORM OF REQUEST FOR LOAN BankBoston, N.A.,as Agent 115 Perimeter Center Place, N.E. Suite 500 Atlanta, Georgia 30346 Attn: Mr. Jay Johns Ladies and Gentlemen: Pursuant to the provisions of Section 2.6 of the Mezzanine Loan Agreement dated July ___, 1998, as from time to time in effect (the "Credit Agreement"), among Wellsford/Whitehall Properties II, L.L.C. (the "Borrower"), BankBoston, N.A., for itself and as Agent, Goldman Sachs Mortgage Company, and the other Banks from time to time party thereto, the Borrower hereby requests and certifies as follows: 1. Loan. The Borrower hereby requests a Loan under Section 2.1 of the Credit Agreement: Principal Amount: $ Type (Eurodollar, Base Rate): Drawdown Date: _____________, 19__ Interest Period: by credit to the general account of the Borrower with the Agent at the Agent's Head Office. 2. Use of Proceeds. Such Loan shall be used for the following purposes permitted by Section 7.11 of the Credit Agreement: [Describe] 3. Capital Improvement Project. In the event that such Loan relates to any Capital Improvement Project or portion thereof, the Borrower represents and warrants that such Loan will reimburse the Borrower for or pay costs incurred for work on the Capital Improvement Project identified above, which work covered by this request is in place or is for stored materials which are properly secured. The Borrower further certifies that all materialmen, laborers, subcontractors and any other parties who might or could claim statutory or common law liens and are furnishing or have furnished material or labor to the Mortgaged Property in connection with such Capital Improvement Project have been paid (or will be paid from the proceeds of the requested advance) all amounts due for such labor and materials. 4. No Default. The undersigned chief financial or chief accounting officer of the Borrower certifies that the Borrower is and will be in compliance with all covenants under the Loan Documents after giving effect to the making of the Loan requested hereby. No condemnation proceedings are pending or to the Borrower's knowledge threatened against any Mortgaged Property or the Mezzanine Property or other Collateral for the Loan. 5. Representations True. Each of the representations and warranties made by or on behalf of the Borrower and its Subsidiaries and the Guarantor contained in the Credit Agreement, in the other Loan Documents or in any document or instrument delivered pursuant to or in connection with the Credit Agreement was true as of the date as of which it was made and shall also be true at and as of the Drawdown Date for the Loan requested hereby (except that representations as to the Guarantor shall not be deemed to have been repeated), with the same effect as if made at and as of such Drawdown Date (except to the extent of changes resulting from transactions contemplated or permitted by the Credit Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and except to the extent that such representations and warranties relate expressly to an earlier date) and no Default or Event of Default has occurred and is continuing. 6. Other Conditions. All other conditions to the making of the Loan requested hereby set forth in Section 11 of the Credit Agreement have been satisfied. (Reference title insurance "date down", if applicable.) 7. Drawdown Date. Except to the extent, if any, specified by notice actually received by the Agent prior to the Drawdown Date specified above, the foregoing representations and warranties shall be deemed to have been made by the Borrower on and as of such Drawdown Date. 8. Definitions. Terms defined in the Credit Agreement are used herein with the meanings so defined. IN WITNESS WHEREOF, I have hereunto set my hand this _____ day of _______________, 199___. WELLSFORD/WHITEHALL PROPERTIES II, L.L.C., a Delaware limited liability company By: Wellsford Commercial Properties Trust, a Maryland real estate investment trust, its manager By:____________________________________ Name:_______________________________ Title:______________________________ EXHIBIT C FORM OF COMPLIANCE CERTIFICATE BankBoston, N.A., for itself and as Agent 115 Perimeter Center Place, N.E. Suite 500 Atlanta, Georgia 30346 Attn: Mr. Jay Johns Ladies and Gentlemen: Reference is made to the Mezzanine Loan Agreement dated as of July __, 1998 (the "Credit Agreement") by and among Wellsford/Whitehall Properties II, L.L.C. (the "Borrower"), BankBoston, N.A., for itself and as Agent, Goldman Sachs Mortgage Company, and the other Banks from time to time party thereto. Terms defined in the Credit Agreement and not otherwise defined herein are used herein as defined in the Credit Agreement. Pursuant to the Credit Agreement, the Borrower is furnishing to you herewith (or has most recently furnished to you) the financial statements of the Borrower and its Subsidiaries for the fiscal period ended _______________ (the "Balance Sheet Date"). Such financial statements have been prepared in accordance with generally accepted accounting principles and present fairly the financial position of the Borrower and its Subsidiaries covered thereby at the date thereof and the results of their operations for the periods covered thereby, subject in the case of interim statements only to normal year-end audit adjustments. This certificate is submitted in compliance with requirements of Section 2.6(iii), Section 5.3(a)(ii), Section 5.3(b)(ii), Section 7.4(d), Section 7.4(h), Section 7.5(e), Section 8.1(f), Section 8.1(g), Section 8.1(h), Section 8.4, Section 8.8 or Section 10.14 of the Credit Agreement. If this Certificate is provided under a provision other than Section 7.4(d), the calculations provided below are made using the financial statements of the Borrower and its Subsidiaries as of the Balance Sheet Date adjusted in the best good-faith estimate of the Borrower to give effect to the making of a Loan, extension of the Maturity Date, acquisition or disposition of property or other event that occasions the preparation of this certificate; and the nature of such event and the Borrower's estimate of its effects are set forth in reasonable detail in an attachment hereto. The undersigned officer of the Borrower is its chief financial or chief accounting officer. The undersigned officer has caused the provisions of the Credit Agreement to be reviewed and has no knowledge of any Default or Event of Default. (Note: If the signer does have knowledge of any Default or Event of Default, the form of certificate should be revised to specify the Default or Event of Default, the nature thereof and the actions taken, being taken or proposed to be taken by the Borrower with respect thereto.) The Borrower is providing the following information to demonstrate compliance as of the date hereof with the following covenants: I. Section 9.1. Liabilities to Assets Ratio. A. Consolidated Total Liabilities per balance sheet $______________ B. Consolidated Total Assets per definition thereof $______________ (Attach Worksheet) Ratio of A to B ________ Ratio of A to B may not exceed 0.75 to 1 on or before December 31, 1999; 0.70 to 1 for the period thereafter through December 31, 2000; 0.65 to 1 for the period thereafter. II. Section 9.2. Consolidated Operating Cash Flow Coverage. A. Consolidated Operating Cash Flow = Consolidated Net Income for most recent quarter $____________ Plus depreciation and amortization $____________ Plus interest expense $____________ Plus extraordinary or non-recurring losses $____________ Minus extraordinary or non- recurring gains ($__________) Plus/Minus Rent Adjustments $___________ Minus Rents included in Net Income from tenants delinquent in excess of 60 days ($__________) Subtotal for most recent quarter $___________ Consolidated Operating Cash Flow for three prior quarters: Quarter ended __________ $___________ Quarter ended __________ $___________ Quarter ended __________ $___________ Total $___________ Plus General and Administrative Costs for four prior Quarters $___________ Plus Negative Carry for four prior Quarters $___________ Minus Capital Improvement Reserve for four prior quarters ($__________) Minus Capitalized Negative Carry for four prior quarters ($__________) Total $___________ B. Debt Service for four prior quarters $___________ Ratio of A to B _________ A must equal or exceed 115% of B for the period ending on or before December 31, 1999; A must equal or exceed 125% of B for the period thereafter through December 31, 2000; A must equal or exceed 135% of B thereafter. III. Section 9.3. Minimum Shareholder's Equity A. Shareholders' Equity $__________ B. $68,000,000.00 $__________ Plus 80% of net proceeds from any Equity Offering after Closing Date $__________ Plus 100% of Net Income (or Deficit) after Closing Date $__________ plus Depreciation deducted in calculating Net Income (or Deficit) after Closing Date $__________ Minus Aggregate Distributions pursuant to Section 8.7(a) after Closing Date $__________ Total $__________ A must equal or exceed B IV. Section 9.4. Real Estate Assets A. Consolidated Total Assets $______________ B. Value of direct or indirect interests in undeveloped land $______________ Total $______________ Ratio of B to A _______ B may not exceed 5% of A V. Section 9.5. Required Equity A. Indebtedness pursuant to this Agreement (Section 8.1(a)) $______________ Plus Recourse Indebtedness (Section 8.1(f)) $______________ (Amount may not exceed $20,000,000) Plus Non-Recourse Indebtedness (Section 8.1(g)) $______________ Plus Non-Recourse Indebtedness (Section 8.1(h)) $______________ Plus Indebtedness under Mortgage Loan Agreement (Section 8.1(i)) $______________ Plus Indebtedness under Mezzanine Mortgage Loan Agreement (Section 8.1(j)) $______________ Total $______________ B. Aggregate all-in acquisition cost of Real Estate $______________ and the Mezzanine Property of Borrower and its Subsidiaries and historic cost of capital improvements Ratio of A to B ________ A may not exceed 0.75 of B VI. Section 8.3(j). Investment Partnerships A. Value of investments in Investment Partnerships $______________ B. Consolidated Total Assets $______________ Ratio of A to B _______ A may not exceed 10% of B. VII. Section 8.7. Distributions A. Distributions $______________ B. Minimum Distributions required to $______________ maintain REIT status of Wellsford Commercial A may not exceed B (provided that B may be at least $1,250,000 per annum) VIII. Section 8.9. Development A. Aggregate cost of Real Estate $______________ Under Development B. Consolidated Total Assets $______________ A may not exceed the greater of $25,000,000.00 or 10% of B. IN WITNESS WHEREOF, I have hereunto set may hand this __ day ____________, _______. WELLSFORD/WHITEHALL PROPERTIES II, L.L.C., a Delaware limited liability company By: Wellsford Commercial Properties Trust, a Maryland real estate investment trust, its manager By:_______________________________ Name:__________________________ Title:_________________________ EXHIBIT D FORM OF REQUEST FOR EXTENSION OF LOAN BankBoston, N.A., as Agent 115 Perimeter Center Place, N.E. Suite 500 Atlanta, Georgia 30346 Attn: Jay Johns Ladies and Gentlemen: Pursuant to the provisions of Section 2.8 of the Mezzanine Loan Agreement dated July ___, 1998, as from time to time in effect (the "Credit Agreement"), among Wellsford/Whitehall Properties II, L.L.C. (the "Borrower"), BankBoston, for itself and as Agent, Goldman Sachs Mortgage Company, and the other Banks from time to time party thereto, the Borrower hereby requests and certifies as follows: 1. Extension Request. The Borrower hereby irrevocably requests that the Maturity Date be extended as provided in Section 2.8 of the Credit Agreement. 2. Extension Fee. The Borrower undertakes to pay the extension fee as required by Section 2.8 (b)(i) of the Credit Agreement as required therein. 3. No Default. The undersigned chief financial or chief accounting officer of the Borrower certifies that the Borrower is and will be in compliance with all covenants under the Loan Documents after giving effect to the extension requested hereby. 4. Representations True. Each of the representations and warranties made by or on behalf of the Borrower, its Subsidiaries, the Property Owner and the Guarantor contained in the Credit Agreement, in the other Loan Documents or in any document or instrument delivered pursuant to or in connection with the Credit Agreement was true and correct in all material respect as of the date as of which it was made and (other than representations as to the Guarantor) shall also be true and correct in all material respects at and as of the Maturity Date (without regard to such extension request) with the same effect as if made at and as of the Maturity Date (without regard to such extension request) (except to the extent of changes occurring in the ordinary course of business that have not had any materially adverse affect on the business of the Borrower, any of its Subsidiaries, the Property Owner or any Guarantor). 5. Other Conditions. All other conditions to the extension to the Loan requested hereby set forth in Section 2.8 of the Credit Agreement have been satisfied. 6. Date. Except to the extent, if any, specified by notice actually received by the Agent prior to the Maturity Date (without regard to such extension request) specified above, the foregoing representations and warranties shall be deemed to have been made by the Borrower on and as of the Maturity Date (without regard to such extension request). 7. Definitions. Terms defined in the Credit Agreement are used herein with the meanings so defined. IN WITNESS WHEREOF, I have hereunto set my hand this _____ day of ______________, 199__. WELLSFORD/WHITEHALL PROPERTIES II, L.L.C., a Delaware limited liability company By: Wellsford Commercial Properties Trust, a Maryland real estate investment trust, its manager By:_____________________________________ Name:________________________________ Title:_______________________________ EXHIBIT E CERTIFICATE In connection with the purchase being made by the undersigned of a participation interest in or assignment of the loan (the "Loan") made by the "Banks" (as defined in the Credit Agreement referred to below) to Wellsford/Whitehall Properties II, L.L.C. (the "Borrower") pursuant to a Mezzanine Loan Agreement dated July ___, 1998, (the "Credit Agreement"), the undersigned represents, warrants and covenants as follows: (1) The undersigned either: (a) is a "qualified institutional buyer" as defined in paragraph (a) of Rule 144A under the Securities Act of 1933, acting for its own account, the account of another "qualified institutional buyer", or the account of a "qualified purchaser" as defined in paragraph (b)(i)(2) below; provided that if the undersigned is a dealer described in paragraph (a)(1)(ii) of Rule 144A, the undersigned owns and invests on a discretionary basis at least $25,000,000 in securities of issuers that are not affiliated persons of such dealer, all within the meaning of Rule 2a51-1(g)(1) under the Investment Company Act of 1940 (the "Act"). (For purposes of making this determination, a plan referred to in paragraph (a)(1)(i)(D) or (a)(1)(i)(E) of Rule 144A, or a trust fund referred to in paragraph (a)(1)(i)(F) of Rule 144A that holds the assets of such a plan, is not deemed to be acting for its own account if investment decisions with respect to the plan are made by the beneficiaries of the plan, except with respect to investment decisions made solely by the fiduciary, trustee or sponsor of such plan.) OR (b) (i)(1) is acting for its own account or (2) is acting for the account of individuals or entities each of which is a "qualified purchaser" as defined in Section 2(a)(51)(A) of the Act and the rules promulgated thereunder; and (ii) owns and invests on a discretionary basis at least $25,000,000 in "investments" (as defined in Section 2(a)(51)(A) of the Act), after deducting the amount of any outstanding indebtedness incurred to acquire or for the purpose of acquiring such investments. OR (c) is a company (other than a trust formed for the specific purpose of acquiring an interest in the Loan) all the securities of which are beneficially owned by "qualified purchasers" as defined in paragraph (b)(i)(2) above. (2) The undersigned acknowledges and agrees that the interest in the Loan is being purchased by the undersigned for its own account and not pursuant to a public offering and that such interest may only be sold or transferred in a manner that does not constitute a public offering to another entity that can deliver to the Borrower a certification to the effect set forth in paragraphs 1(a), (b) or (c) and 2 of this Certificate and otherwise in accordance with the Credit Agreement. [name of proposed transferee] By: ____________________________________ Name: Title: SCHEDULE 1.1 BANKS AND COMMITMENTS Name and Address Commitment Commitment Percentage - ---------------- ---------- --------------------- BankBoston, N.A. $25,000,000.00 33.3333% 100 Federal Street Boston, Massachusetts 02110 Attn: Real Estate Division Eurodollar Lending Office Same as above Goldman Sachs Mortgage Company $15,000,000.00 20.0000% 85 Broad Street New York, New York 10004 Attn: Mr. Bob Foley Eurodollar Lending Office Same as above BHF-Bank Aktiengesellschaft $10,000,000.00 13.3333% 590 Madison Avenue New York, New York 10022 Mr. Johnathan Oh Eurodollar Lending Office Same as above Morgan Stanley Senior Funding, Inc. $10,000,000.00 13.3333% 1585 Broadway, 10th Floor New York, New York 10036 Attn: Mr. Jim Morgan Eurodollar Lending Office Same as above Pam Capital Funding LP $15,000,000.00 20.0000% c/o Highland Capital Management, L.P. 1150 Two Galleria Tower 13455 Noel Road LB#45 Dallas, Texas 75240 Attn: Chris Curtis Eurodollar Lending Office Same as above Total Commitment $75,000,000.00 100% Percentages may not equal 100% due to rounding. SCHEDULE 5.3 DESCRIPTION OF GREENBROOK CORPORATE CENTER AND POINT VIEW VACANT LAND SCHEDULE 6.3 TITLE TO PROPERTIES None. SCHEDULE 6.4 ALL-IN ACQUISITION COST, DESIGNATED COLLATERAL VALUE, STABILIZED PROPERTIES AND RELEASE PRICES Acquisition Designated Stabilized Property/ Release Property Cost Collateral Value Non-Stabilized Property Price - -------- ----------- ---------------- ----------------------- ------- SCHEDULE 6.7 LITIGATION None. SCHEDULE 6.17 ERISA PLANS None. SCHEDULE 6.21 SUBSIDIARIES OF THE BORROWER 1. Wellsford/Whitehall Holdings, L.L.C. 2. Wells Avenue Holdings L.L.C. 3. WASH Manager L.L.C. 4. Wells Avenue Senior Holdings LLC 5. WEL/WH Convention Managers, L.L.C. SCHEDULE 6.30-1 MEZZANINE MORTGAGE LOAN DOCUMENTS SCHEDULE 6.30-2 MORTGAGE LOAN DOCUMENTS SCHEDULE 6.30-3 ALLOCATION OF MEZZANINE MORTGAGE LOAN EX-10.41 10 FORM OF NOTE $25,000,000 July 16, 1998 FOR VALUE RECEIVED, the undersigned WELLSFORD/WHITEHALL HOLDINGS II, L.L.C., a Delaware limited liability company, hereby promises to pay to BANKBOSTON, N.A. or order, in accordance with the terms of that certain Mezzanine Loan Agreement dated as of July 16, 1998 (the "Credit Agreement"), as from time to time in effect, among the undersigned, BankBoston, N.A., for itself and as Agent, Goldman Sachs Mortgage Company, and such other Banks as may be from time to time named therein, to the extent not sooner paid, on or before the Maturity Date, the principal sum of TWENTY-FIVE MILLION AND NO/100 DOLLARS ($25,000,000), or such amount as may be advanced by the payee hereof under the Credit Agreement with daily interest from the date hereof, computed as provided in the Credit Agreement, on the principal amount hereof from time to time unpaid, at a rate per annum on each portion of the principal amount which shall at all times be equal to the rate of interest applicable to such portion in accordance with the Credit Agreement, and with interest on overdue principal and, to the extent permitted by applicable law, on overdue installments of interest and late charges at the rates provided in the Credit Agreement. Interest shall be payable on the dates specified in the Credit Agreement, except that all accrued interest shall be paid at the stated or accelerated maturity hereof or upon the prepayment in full hereof. Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Credit Agreement. Payments hereunder shall be made to BankBoston, N.A., as Agent for the payee hereof, 100 Federal Street, Boston, Massachusetts 02110. This Note is one of one or more Notes evidencing borrowings under and is entitled to the benefits and subject to the provisions of the Credit Agreement. The principal of this Note may be due and payable in whole or in part prior to the maturity date stated above and is subject to mandatory prepayment in the amounts and under the circumstances set forth in the Credit Agreement, and may be prepaid in whole or from time to time in part, all as set forth in the Credit Agreement. Notwithstanding anything in this Note to the contrary, all agreements between the Borrower and the Banks and the Agent, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of any of the Obligations or otherwise, shall the interest contracted for, charged or received by the Banks exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, interest would otherwise be payable to the Banks in excess of the maximum lawful amount, the interest payable to the Banks shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance the Banks shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal balance of the Obligations and to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal of the Obligations, such excess shall be refunded to the Borrower. All interest paid or agreed to be paid to the Banks shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal of the Obligations (including the period of any renewal or extension thereof) so that the interest thereon for such full period shall not exceed the maximum amount permitted by applicable law. This paragraph shall control all agreements between the Borrower and the Banks and the Agent. In case an Event of Default shall occur, the entire principal amount of this Note may become or be declared due and payable in the manner and with the effect provided in said Credit Agreement. This Note shall be governed by and construed in accordance with the laws of the State of New York (without giving effect to the conflict of laws rules of any jurisdiction). The undersigned maker and all guarantors and endorsers, hereby waive presentment, demand, notice, protest, notice of intention to accelerate the indebtedness evidenced hereby, notice of acceleration of the indebtedness evidenced hereby and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, except as specifically otherwise provided in the Credit Agreement, and assent to extensions of time of payment or forbearance or other indulgence without notice. IN WITNESS WHEREOF the undersigned has by its duly authorized officers, executed this Note under seal as of the day and year first above written. WELLSFORD/WHITEHALL PROPERTIES II, L.L.C., a Delaware limited liability company By: Wellsford Commercial Properties Trust, a Maryland real estate investment trust, its manager By:/s/ Gregory F. Hughes ---------------------- Name: Gregory F. Hughes Title: CFO & Treasurer EX-10.42 11 ASSIGNMENT OF MEMBER'S INTEREST ------------------------------- THIS ASSIGNMENT OF MEMBER'S INTEREST (this "Assignment"), made as of the 16th day of July, 1998, by WELLSFORD/WHITEHALL PROPERTIES II, L.L.C., a Delaware limited liability company ("Assignor"), to BANKBOSTON, N.A., a national banking association ("BKB"), as Agent for itself and the other Banks from time to time party to the Credit Agreement (as hereinafter defined) (BKB, in its capacity as Agent, is hereinafter referred to as "Agent"). W I T N E S S E T H: WHEREAS, Assignor is the sole member of Wellsford/Whitehall Holdings, L.L.C., a limited liability company formed under the laws of the State of Delaware (the "Property Owner"); and WHEREAS, the Property Owner is presently governed by that certain Certificate of Formation filed on August 18, 1997 with the Delaware Secretary of State, as amended by amendment filed June 19, 1998 with the Delaware Secretary of State, and that certain Amended and Restated Limited Liability Company Operating Agreement for Wellsford/Whitehall Holdings, L.L.C., a Delaware limited liability company, dated as of July 16, 1998 (collectively the "Property Owner Organizational Agreements"); and WHEREAS, Assignor, BKB, the other lenders a party thereto and Agent have entered into that certain Mezzanine Loan Agreement dated of even date herewith (as the same may be varied, extended, supplemented, consolidated, amended, replaced, renewed or modified or restated, the "Credit Agreement"), pursuant to which the Banks a party to the Credit Agreement have agreed to provide a loan to the Assignor in the amount of up to $75,000,000.00 (the "Loan"), which Loan is evidenced by those certain Notes made by Assignor to the order of the Banks in the aggregate principal face amount of $75,000,000.00 (such notes, together with such other Notes as may be issued pursuant to the Credit Agreement, as the same may be varied, extended, supplemented, consolidated, amended, replaced, renewed, modified or restated, are hereinafter referred to collectively as the "Note"); and WHEREAS, the Banks and Agent have required, as a condition to the making of the Loan to Assignor, that Assignor execute this Assignment to secure the obligations of Assignor under the Note, the Credit Agreement and certain other agreements; NOW, THEREFORE, for and in consideration of the sum of Ten and No/100 Dollars ($10.00), and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby covenant and agree as follows: 1. Definitions. Capitalized terms used herein that are not otherwise defined herein shall have the meaning set forth in the Credit Agreement. 2. Grant of Security Interest. As security for the payment and performance by Assignor of each and all of Assignor's duties, responsibilities and obligations under this Assignment, the Credit Agreement, the Note and any and all agreements evidencing, securing or otherwise relating to the obligations evidenced by the Note and the Credit Agreement (this Assignment, the Credit Agreement, the Note and such other agreements, together with any and all renewals, modifications, consolidations and extensions thereof, are hereinafter referred to collectively as the "Loan Documents"; and said duties, responsibilities and obligations of Assignor are hereinafter referred to collectively as the "Obligations"), Assignor does hereby transfer, assign, pledge, convey and grant to Agent, and does hereby grant a security interest to Agent in, all of Assignor's right, title and interest in and to the following: (a) All right, title, interest, claims or rights of Assignor now or hereafter in, to or against the Property Owner (including, without limitation, Assignor's membership interest in the Property Owner, the interest of Assignor in and to the Property Owner Organizational Agreements, the capital of the Property Owner, and the property and assets of the Property Owner and any rights pertaining thereto) which interest is evidenced by Certificate No. 1 (the "Certificate"), together with any and all other securities, cash, certificates or other property, option or right in respect of, in addition to or substitution or exchange for the Certificate, or other property at any time and from time to time receivable or otherwise distributed in respect of or in exchange for all or any thereof; and (b) Any and all profits, proceeds, accounts, income, distributions, payments upon dissolution or liquidation of the Property Owner or the sale, financing or refinancing of any of the property or assets of the Property Owner, proceeds of a casualty or condemnation, return of capital, repayment of loans, and payments of any kind or nature whatsoever, now or hereafter distributable or payable by the Property Owner to Assignor, by reason of Assignor's interest in the Property Owner or otherwise, or now or hereafter distributable or payable to Assignor from any other source by reason of Assignor being a member in the Property Owner, or on account of any interest in or claim or rights against the Property Owner held by Assignor, or by reason of services performed by Assignor for or on behalf of the Property Owner or with respect to the assets of the Property Owner, and any and all proceeds from any transfer, assignment or pledge of any interest of Assignor in, or claim or right against, the Property Owner (regardless of whether such transfer, assignment or pledge is permitted under the terms hereof or the other Loan Documents), and all claims, choses in action, or things in action or rights as a creditor now or hereafter arising against the Property Owner; and (c) All accounts, contract rights and general intangibles now or hereafter arising from any of the foregoing; and (d) All notes or other documents or instruments now or hereafter evidencing or securing any of the foregoing; and (e) All right of Assignor to collect and enforce payments distributable or payable by the Property Owner to Assignor pursuant to the terms of the Property Owner Organizational Agreements; and (f) All documents, writings, leases, books, files, records, computer tapes, programs, ledger books and ledger pages arising from or used in connection with any of the foregoing; and law All renewals, extensions, additions, substitutions or replacements of any of the foregoing; and (h) All powers, options, rights, privileges and immunities pertaining to any of the foregoing; and (i) All proceeds of any of the foregoing and all cash, security or other property distributed on account of any of the foregoing. All of the foregoing described in this paragraph 2 are hereinafter referred to collectively as the "Collateral". The items described in (a), above, are sometimes hereinafter referred to as the "Member Interests"; and the items described in (b) - (i), above, are sometimes hereinafter referred to collectively as the "Distributions." 3. Obligations Secured. This Assignment secures the payment and performance by Assignor of the Obligations. 4. Collection of Distributions. (a) It is acknowledged and agreed by the parties hereto that Agent shall have sole and exclusive possession of the Distributions and that this Assignment constitutes a present, absolute and current assignment of all the Distributions and is effective upon the execution and delivery hereof. Payments under or with respect to the Distributions shall be made as follows: (1) Except as otherwise specifically provided in this Paragraph 4, Assignor shall have no right to receive payments made under or with respect to the Distributions (including without limitation any Distributions from or relating to any sale, transfer, assignment, conveyance, option or other disposition of, or any pledge, mortgage, encumbrance, financing or refinancing of, or casualty to or condemnation of, any of the Collateral, the Mortgaged Property or the Mezzanine Property regardless of whether such event is permitted under the terms of the Loan Documents), and all such payments shall be delivered directly by the Property Owner to Agent for application by Agent in satisfaction of the Obligations in such order as Agent in its sole and absolute discretion shall determine. (2) Except as otherwise specifically provided in this Paragraph 4, if Assignor shall receive any payments made under or with respect to the Distributions (including without limitation any Distributions from or relating to any sale, transfer, assignment, conveyance, option or other disposition of, or any pledge, mortgage, encumbrance, financing or refinancing of, or casualty to or condemnation of, any of the Collateral, the Mortgaged Property or the Mezzanine Property regardless of whether such event is permitted under the terms of the Loan Documents), Assignor shall hold all such payments in trust for Agent, will not co-mingle such payments with other funds of Assignor, and will immediately pay and deliver in kind, all such payments directly to Agent (with such endorsements and assignments as may be necessary to transfer title to Agent) for application by Agent in satisfaction of the Obligations in such order as Agent in its sole and absolute discretion shall determine. (3) Assignor hereby agrees for the benefit of the Property Owner that all payments actually received by Agent shall be deemed payments to Assignor by the Property Owner. Agent shall apply any and all such payments actually received by Agent in satisfaction of the Obligations in such order as Agent in its sole and absolute discretion shall determine. Agent shall return to Assignor that portion of any payments actually received by Agent from the Property Owner which Agent determines, in the exercise of its sole and absolute discretion but in good faith is not needed to repay the Obligations. awf In furtherance of the foregoing, Assignor does hereby notify and direct the Property Owner and its members that all payments under or with respect to the Distributions shall be made directly to Agent at the address of Agent set forth in the Credit Agreement. (b) Assignor shall cause the Property Owner, WASH, WASH Manager and Wells Avenue Holdings promptly to distribute all net proceeds of the sale, transfer, assignment, conveyance, option or other disposition of, or any mortgage, hypothecation, encumbrance, financing or refinancing of, or casualty to or condemnation of, any of its assets or properties, and any and all other Distributions distributable or payable by the Property Owner, WASH, WASH Manager or Wells Avenue Holdings or any member thereof under the terms of the Property Owner Organizational Agreements, the WASH Organizational Agreements, the WASH Manager Organizational Agreements or the Wells Avenue Holdings Organizational Agreements, as applicable. (c) Assignor hereby irrevocably designates and appoints Agent its true and lawful attorney-in-fact, which appointment is coupled with an interest, either in the name of Agent, or in the name of Assignor, at Assignor's sole cost and expense, and regardless of whether Agent becomes a member in the Property Owner or not, to take any or all of the following actions: (1) to ask, demand, sue for, attach, levy, settle, compromise, collect, compound, recover, receive and give receipt and acquittances for any and all Collateral and to take any and all actions as Agent may deem necessary or desirable in order to realize upon the Collateral, or any portion thereof, including, without limitation, making any statements and doing and taking any actions on behalf of Assignor which are otherwise required of Assignor under the terms of any agreement as conditions precedent to the payment of the Distributions, and the right and power to receive, endorse, assign and deliver, in the name of Assignor, any checks, notes, drafts, instruments or other evidences of payment received in payment of or on account of all or any portion of the Collateral, and Assignor hereby waives presentment, demand, protest and notice of demand, protest and non-payment of any instrument so endorsed; and (2) to institute one or more actions against the Property Owner or any member thereof in connection with the collection of the Distributions, to prosecute to judgment, settle or dismiss any such actions, and to make any compromise or settlement deemed desirable, in Agent's sole and absolute discretion, with respect to such Distributions, to extend the time of payment, arrange for payment in installments or otherwise modify the terms of the Property Owner Organizational Agreements with respect to the Distributions or release the Property Owner or any member thereof from their respective obligations to pay any Distribution, without incurring responsibility to, or affecting any liability of, Assignor under the Property Owner Organizational Agreements; it being specifically understood and agreed, however, that Agent shall not be obligated in any manner whatsoever to give any notices of default (except as may be specifically required herein or the other Loan Documents) or to exercise any such power or authority or be in any way responsible for the preservation, maintenance, collection of or realizing upon the Collateral, or any portion thereof, or any of Assignor's rights therein. Notwithstanding anything contained in this Paragraph 4 to the contrary, provided no Event of Default has occurred and is continuing, Assignor shall have a license (revocable upon the occurrence and during the continuance of an Event of Default) to receive amounts attributable to (A) rents, issues and profits paid under Leases not more than one (1) month in advance, (B) excess proceeds from a sale of a Mortgaged Property or a Mezzanine Property that has been released in accordance with Section 5.3 of the Credit Agreement, (c) proceeds from a casualty permitted to be paid to Assignor pursuant to Section 7.7(b) of the Credit Agreement, (D) excess amounts released from the reserves maintained under Sections 7.2, 7.3, 7.4 and 7.5 of the Mezzanine Mortgage Loan Agreement, and (E) rebates or refunds of property taxes paid with respect to the Mortgaged Property or the Mezzanine Property. The foregoing appointment is irrevocable and continuing and any such rights, powers and privileges shall be exclusive in Agent, its successors and assigns until this Assignment terminates as provided in Paragraph 13, below. 5. Warranties and Covenants. Assignor does hereby warrant and represent to, and covenant and agree with, Agent and the Banks as follows: (a) Performance. All duties, obligations and responsibilities required to be performed by Assignor, WASH, WASH Manager and Wells Avenue Holdings as of the date hereof under the Property Owner Organizational Agreements, the WASH Organizational Agreements, the WASH Manager Organizational Agreements and the Wells Avenue Holdings Organizational Agreements, as applicable, have been performed, and no default or condition which with the passage of time or the giving of notice, or both, would constitute a default exists under the Property Owner Organizational Agreements, the WASH Organizational Agreements, the WASH Manager Organizational Agreements and the Wells Avenue Holdings Organizational Agreements, as applicable. (b) Organizational Agreements. A true, correct and complete copy of the Property Owner Organizational Agreements, the WASH Organizational Agreements, the WASH Manager Organizational Agreements and the Wells Avenue Holdings Organizational Agreements together with all amendments thereto, are attached hereto as Exhibit "A-1", "A-2", "A-3" and "A-4". The Property Owner Organizational Agreements, the WASH Organizational Agreements, the WASH Manager Organizational Agreements and the Wells Avenue Holdings Organizational Agreements have been duly authorized, executed and delivered by the parties thereto and are in full force and effect. Except for the Loan Documents, the Mortgage Loan Documents and the Mezzanine Mortgage Loan Documents, neither the Property Owner nor Assignor is a party to or is bound by any indenture, contract or other agreement which purports to prohibit, restrict, limit, or control the transfer or pledge of the Collateral, the exercise of voting rights with respect to the Property Owner or the management of the Property Owner. (c) Title. Assignor is and shall remain the sole, lawful, beneficial and record owner of the Member Interests and the Distributions, free and clear of all liens, restrictions, claims, pledges, encumbrances, charges, claims or rights of third parties and rights of set-off or recoupment whatsoever (other than those in favor of Agent hereunder), and Assignor has the full and complete right, power and authority to create a security interest in the Collateral in favor of Agent, in accordance with the terms and provisions of this Assignment. The Certificate has been duly authorized and validly issued, and is fully paid and non-assessable. Assignor is not and will not become a party to or otherwise be bound by any agreement, other than the Loan Documents, the Mortgage Loan Documents and the Mezzanine Mortgage Loan Documents, which restricts in any manner the rights of any present or future holder of the Certificate with respect thereto. (d) Members. Assignor is the sole member of the Property Owner, and no other Person owns any legal, equitable or beneficial interest in the Property Owner or, except for the voting rights of the independent manager as set forth in the Property Owner Organizational Agreements, has any right to vote or exercise control over the Property Owner or its management. The Member Interests are not represented or otherwise evidenced by any certificate or other document other than the Certificate. (e) Priority. Upon the delivery of the Certificate to Agent, this Assignment creates a valid and binding first priority security interest in the Collateral securing the payment and performance of the Obligations and the performance by Assignor of the Obligations, and upon the filing of UCC Financing Statements with the Secretary of State of New York, the Office of the Register of the City of New York and the Massachusetts Secretary of State, all filings and other actions necessary to perfect and protect such security interests shall have been duly made and taken. Neither Assignor nor the Property Owner has performed or will perform any acts which might prevent Agent from enforcing any of the terms and conditions of this Agreement or which would limit Agent in any such enforcement. (f) Notes. All original notes and other documents or instruments (if any) evidencing, constituting, guaranteeing or securing any of the Distributions or any right to receive the Distributions have been endorsed to and delivered to Agent. (g) Principal Place of Business. For the purposes of Article 9- 401 of the New York Uniform Commercial Code, the principal place of business of Assignor is located in New York County, New York. In the event that Assignor has more than one place of business in the State of New York, its chief executive office is located in New York County, New York. In order to perfect the pledge and security interests granted herein against Assignor, U.C.C. Financing Statements must be filed with the Secretary of State of New York, the Office of the Register of the City of New York, New York County and the Massachusetts Secretary of State. (h) Securities Laws. The transactions contemplated by this Assignment do not violate and do not require that any filing, registration or other act be taken with respect to any and all laws pertaining to the registration or transfer of securities, including without limitation the Securities Act of 1933, the Securities and Exchange Act of 1934, and any and all rules and regulations promulgated thereunder or any similar federal, state or local law, rule, regulation or orders (collectively the "Applicable Law") hereafter enacted or analogous in effect, as the same are amended and in effect from time to time (such Act and any similar laws as from time to time being in effect being referred to as the "Federal Securities Laws"). Assignor shall at all times comply with Applicable Law and the Federal Securities Laws as the same pertain to all or any portion of the Collateral or any of the transactions contemplated by this Assignment (provided that the foregoing shall not apply to assignments by the Banks of interests in the Loan pursuant to the Credit Agreement). (i) No Transfer Tax. No transfer tax, deed tax, conveyance tax or similar tax may be payable as a result of a transfer of the Collateral (whether by foreclosure, conveyance in lieu of foreclosure or otherwise) by Assignor to Agent. 6. General Covenants. Assignor covenants and agrees that, so long as this Assignment is continuing: (a) No Further Encumbrance. Except as expressly permitted by Section 5.3 of the Credit Agreement, Assignor shall not, without the prior written consent of Agent, which consent may be withheld by Agent in its sole and absolute discretion, directly, indirectly or by operation of law, sell, transfer, assign, dispose of, pledge, convey, option, mortgage, hypothecate or encumber any of the Collateral, nor shall there occur, directly, indirectly or by operation of law, without the prior written consent of Agent in each instance, which consent may be withheld by Agent in its sole and absolute discretion, any sale, assignment, transfer, conveyance, disposition, option, mortgage, hypothecation, pledge or other encumbrance of (i) any direct or indirect interests, rights or claims of Property Owner in and to Wells Avenue Holdings, (ii) any direct or indirect interests, rights or claims of Wells Avenue Holdings in and to WASH Manager or (iii) any direct or indirect interests, rights or claims of Wells Avenue Holdings and WASH Manager in and to WASH. The foregoing shall not be deemed to restrict the transfer of interests in Assignor itself, which transfers shall be governed by the terms of the Credit Agreement. (b) Defense of Collateral. Assignor shall at all times defend the Collateral against all claims and demands of all persons at any time claiming any interest in the Collateral adverse to Agent's interest in the Collateral as granted hereunder. (c) Modification of Organizational Agreements. So long as this Assignment remains in effect, Assignor shall not modify, amend, cancel, release, surrender, terminate or permit the modification, amendment, cancellation, release, surrender or termination of, the Property Owner Organizational Agreements, the WASH Organizational Agreements, the WASH Manager Organizational Agreements or the Wells Avenue Holdings Organizational Agreements, or dissolve, liquidate, redeem, cancel, wind-up or permit the dissolution, liquidation, redemption, cancellation, winding-up or expiration of the Property Owner, WASH, WASH Manager or Wells Avenue Holdings or the Property Owner Organizational Agreements, the WASH Organizational Agreements, the WASH Manager Organizational Agreements or the Wells Avenue Holdings Organizational Agreements, or seek or permit the partition of any of the assets of the Property Owner, WASH, WASH Manager or Wells Avenue Holdings, without in each instance the prior written consent of Agent, which consent may be withheld by Agent in its sole and absolute discretion; provided, however, that Agent shall not unreasonably withhold its consent to any modification or amendment of the Property Owner Organizational Agreements, the WASH Organizational Agreements, the WASH Manager Organizational Agreements or the Wells Avenue Holdings Organizational Agreements which does not affect or have an impact on the management of the Property Owner, WASH, WASH Manager or Wells Avenue Holdings, as applicable, any voting rights, the rights to receive distributions, any provisions of the Property Owner Organizational Agreements, the WASH Organizational Agreements, the WASH Manager Organizational Agreements or the Wells Avenue Holdings Organizational Agreements, as applicable, concerning actions that the Property Owner, WASH, WASH Manager or Wells Avenue Holdings, as applicable, is either authorized to do or that are ultra vires, or otherwise materially affect the Property Owner, WASH, WASH Manager or Wells Avenue Holdings, as applicable, the Collateral or the rights and benefits afforded to Agent and the Banks pursuant to this Assignment and the other Loan Documents (such modifications or amendments described in the foregoing proviso are hereinafter referred to as the "Minor Amendments"). (d) Performance of Duties. (1) Assignor shall perform all of its duties, responsibilities and obligations under the Property Owner Organizational Agreements and with respect to the Collateral, and shall diligently and in good faith protect the value of the Collateral. Assignor shall cause Property Owner to perform all of its duties, responsibilities and obligations under the Wells Avenue Holdings Organizational Agreements, and shall cause Wells Avenue Holdings and WASH Manager to perform all of their respective duties, responsibilities and obligations under the WASH Manager Organizational Agreements and the WASH Organizational Agreements, respectively. (2) Assignor shall not, without the prior written consent of Agent, which consent may be withheld by Agent in its sole and absolute discretion, take or permit to be taken any action which could result in the sale, reduction, cancellation, dilution, diminution, conversion or withdrawal of any interest of Assignor in the Property Owner, of the Property Owner in Wells Avenue Holdings, of Wells Avenue Holdings in WASH Manager, or of Wells Avenue Holdings or WASH Manager in WASH, or omit to take any action necessary to prevent any such sale, reduction, cancellation, dilution, diminution, conversion or withdrawal, or otherwise take any action or omit to take any action that would, in the exercise of Agent's judgment, jeopardize or diminish the security interests or rights and benefits afforded to Agent by the Collateral. Without limiting the foregoing, Assignor shall not consent to or permit to occur the admission of any new member in the Property Owner, Wells Avenue Holdings, WASH Manager or WASH, the creation of any new class of interest in the Property Owner, Wells Avenue Holdings, WASH Manager or WASH, or the issuance, directly or indirectly, of any other equity or beneficial interest in the Property Owner, Wells Avenue Holdings, WASH Manager or WASH. (e) Payment of Taxes. Assignor shall pay all taxes and other charges against the Collateral, shall not use the Collateral illegally, and shall not suffer to exist any loss, theft, damage or destruction of the Collateral and shall suffer to exist no levy, seizure or attachment of the Collateral. (f) Enforcement of Organizational Agreements. Assignor, at the request of Agent, shall take such actions as Agent may reasonably require to enforce the terms of the Property Owner Organizational Agreements, the WASH Organizational Agreements, the WASH Manager Organizational Agreements and the Wells Avenue Holdings Organizational Agreements, respectively, or any other contract, agreement or instrument included in, giving rise to, creating, establishing, evidencing or relating to the Collateral or to collect or enforce any claim for payment or other right or privilege assigned to Agent hereunder. (g) Further Assurances. Assignor authorizes Agent, at the expense of Assignor, to execute and file any financing statement or statements deemed necessary by Agent to perfect its security interest in any of the Collateral. Any such financing statement may be signed by Agent alone. Assignor will sign and deliver any financing statements and other documents, and perform such other acts as Agent may deem necessary or desirable from time to time to establish and maintain in favor of Agent, valid and perfected security interests in the Collateral, free of all other liens, encumbrances, security interests and claims other than as permitted by the terms of this Assignment. Assignor shall do anything else Agent may reasonably require from time to time to establish a valid security interest in and to further protect and perfect its security interest in the Collateral. (h) Location of Collateral. Except for those items of the Collateral that are delivered to Agent as provided herein, the Collateral, and all records of Assignor relative to the Collateral, are and will be kept at the office of Assignor located in New York County, New York. Assignor shall give Agent not fewer than thirty (30) days prior written notice of any proposed change in the name of Assignor or the Member and any proposed change in the location of the Collateral or of such records, and Assignor will not, without the prior written consent of Agent, move the Collateral or such records to a location outside of New York County, New York or keep duplicate records with respect to the Collateral at any address outside such county. Notwithstanding the foregoing, Agent acknowledges and agrees that the property records for the Mezzanine Property (including leases, service contracts and the like) will be kept at the office of the managing agent in Newton, Massachusetts. Nothing contained in this subparagraph shall be construed so as to prevent Assignor from keeping material abstracted from the books and records described herein at any of its offices as necessity or convenience dictates. Assignor shall permit the Agent or any representative designated by the Agent, at the Agent's expense and upon reasonable advance notice (which may be oral), to examine the books and accounts of the Assignor (and to make copies thereof and extracts therefrom) and to discuss the affairs, finances and accounts of the Assignor with, and to be advised as to the same by, its members and officers, all at such reasonable times and intervals as the Agent may reasonably request. The Agent shall use good faith efforts to coordinate such visits and inspections so as to minimize the interference with and disruption to Assignor's normal business operations. (i) Evidence of Indebtedness. Without limiting any other terms of the Loan Documents prohibiting or restricting the ability of the Property Owner to incur Indebtedness, if any amounts are due from the Property Owner to Assignor and the obligations to repay such amount is to be evidenced by a separate document or instrument, then as evidence of such obligations, Assignor shall cause the Property Owner to issue Assignor, as the evidence of any obligations of the Property Owner to pay Distributions to Assignor in the future, a promissory note bearing the legend attached hereto as Exhibit "B" and which note shall provide that all payments due under such promissory note are to be paid directly to Agent as required by and applied as provided in the Loan Documents until the Obligations are paid in full or this Assignment is otherwise terminated as provided herein. No other evidence of such obligations shall be executed by the Property Owner to Assignor. (j) Delivery of Notes. Assignor shall promptly deliver to Agent any note or other document or instrument entered into after the date hereof which evidences, constitutes, guarantees or secures any of the Distributions or any right to receive a Distribution, which notes or other documents and instruments shall be accompanied by such endorsements or assignments as Agent may require to transfer title to Agent. (k) Assignor Remains Liable. Anything herein to the contrary notwithstanding, (1) Assignor shall remain liable under the Property Owner Organizational Agreements and all other contracts, agreements and instruments included in, giving rise to, creating, establishing, evidencing or relating to the Collateral to the extent set forth therein to perform all of its duties and obligations (including, without limitation, the making of any contributions to the capital of the Property Owner or the payment of any other sum to or on behalf of the Property Owner) to the same extent as if this Assignment had not been executed, (2) the exercise by Agent of any of its rights hereunder shall not release Assignor from any of its duties or obligations under the Property Owner Organizational Agreements or any such contracts, agreements and instruments, and (3) Agent shall not have any obligation or liability under the Property Owner Organizational Agreements, the WASH Organizational Agreements, the WASH Manager Organizational Agreements or the Wells Avenue Holdings Organizational Agreements or any such contract, agreement or instrument by reason of this Assignment, nor shall Agent be obligated to perform any of the obligations or duties of Assignor thereunder or to take any action to collect or enforce any claim for payment or other right or privilege assigned to Agent hereunder. (l) Substitutions or Exchanges. If Assignor shall at any time be entitled to receive or shall receive any cash, certificate or other property, option or right, upon, in respect of, as an addition to, or in substitution or exchange for any of the Collateral, whether for value paid by Assignor or otherwise, Assignor agrees that the same shall be deemed to be Collateral and shall be delivered directly to Agent in each case, accompanied by proper instruments of assignment duly executed by Assignor in such a form as may be required by Agent, to be held by Agent subject to the terms hereof, as further security for the Obligations (except as otherwise provided herein with respect to the application of the foregoing to the Obligations). If Assignor receives any of the foregoing directly, Assignor agrees to hold such cash or other property in trust for the benefit of Agent, and to surrender such cash or other property to Agent immediately. (m) Additional Interests in Member. In the event that Assignor purchases or otherwise acquires or obtains any additional interest in the Property Owner or any rights or options to acquire such interest, all such interest, rights and options shall automatically be deemed to be a part of the Collateral. All certificates, if any, representing such member interest shall be promptly delivered to Agent, together with assignments related thereto, or other instruments appropriate to transfer a certificate representing any Property Owner interest, duly executed in blank. 7. Events of Default. An Event of Default shall exist hereunder upon the occurrence of any of the following: (a) Any warranty, representation or statement made by or on behalf of Assignor in this Assignment proves untrue or misleading in any material respect upon the date when made or deemed to have been made or repeated; or (b) Assignor shall fail to duly and fully comply with any covenant, condition or agreement in Paragraphs 6(a), 6(c), 6(d)(2), 6(i), 6(j) or 6(l) of this Assignment; or (c) any of the Assignor, Property Owner, WASH Manager or Wells Avenue Holdings shall fail to, or the Assignor shall fail to cause WASH to, duly and fully comply with any other covenant, condition or agreement of this Assignment (other than those specified in this Paragraph 7 or any default excluded from any provision of cure of defaults contained in any other of the Loan Documents) and the same is not cured within thirty (30) days following receipt of written notice of such default; or (d) The occurrence of an Event of Default under any of the other Loan Documents. 8. Remedies. (a) Upon the occurrence and during the continuance of any Event of Default, Agent may take any action deemed by Agent to be necessary or appropriate to the enforcement of the rights and remedies of Agent under this Assignment and the Loan Documents, including, without limitation, the exercise of its rights and remedies with respect to any or all of the Member Interests. The remedies of Agent shall include, without limitation, all rights and remedies specified in the Loan Documents and this Assignment, all remedies of Agent under applicable general or statutory law, and the remedies of a secured party under the Uniform Commercial Code as enacted in the State of New York, regardless of whether the Uniform Commercial Code has been enacted or enacted in that form in any other jurisdiction in which such right or remedy is asserted. Any notice required by law, including, but not limited to, notice of the intended disposition of all or any portion of the Collateral, shall be reasonably and properly given in the manner prescribed for the giving of notice herein, and, in the case of any notice of disposition, if given at least ten (10) calendar days prior to such disposition. Agent may require Assignor to assemble the Collateral and make it available to Agent at any place to be designated by Agent which is reasonably convenient to both parties. It is expressly understood and agreed that Agent shall be entitled to dispose of the Collateral at any public or private sale, without recourse to judicial proceedings and without either demand, appraisement, advertisement or notice of any kind, all of which are expressly waived, and that Agent shall be entitled to bid and purchase at any such sale. In the event that Agent is the successful bidder at any public or private sale of any note or other document or instrument evidencing Assignor's right to receive a Distribution, Agent shall be entitled to credit the amount bid by Agent against the obligations evidenced by such note, document or instrument rather than the obligations evidenced by the Note. To the extent the Collateral consist of marketable securities, Agent shall not be obligated to sell such securities for the highest price obtainable, but shall sell them at the market price available on the date of sale. Agent shall not be obligated to make any sale of the Collateral if it shall determine not to do so regardless of the fact that notice of sale of the Collateral may have been given. Agent may, without notice or publication, adjourn any public sale from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. Each such purchaser at any such sale shall hold the Collateral sold absolutely free from claim or right on the part of Assignor. In the event that any consent, approval or authorization of any governmental agency or commission will be necessary to effectuate any such sale or sales, Assignor shall execute all such applications or other instruments as Agent may deem reasonably necessary to obtain such consent, approval or authorization. Agent may notify any account debtor or obligor with respect to the Collateral to make payment directly to Agent, and may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose or realize upon the Collateral as Agent may determine whether or not the Obligations or the Collateral are due, and for the purpose of realizing Agent's rights therein, Agent may receive, open and dispose of mail addressed to Assignor and endorse notes, checks, drafts, money orders, documents of title or other evidences of payment, shipment or storage of any form of Collateral on behalf and in the name of Assignor, as its attorney-in-fact. In addition, Assignor hereby irrevocably designates and appoints Agent its true and lawful attorney-in-fact either in the name of Agent or Assignor to (i) sign Assignor's name on any Collateral, drafts against account debtors, assignments, any proof of claim in any bankruptcy or other insolvency proceeding involving any account debtor, any notice of lien, claim of lien or assignment or satisfaction of lien, or on any financing statement or continuation statement under the Uniform Commercial Code; (ii) send verifications of accounts receivable to any account debtor; and (iii) in connection with a transfer of the Collateral as described above, sign in Assignor's name any documents necessary to transfer title to the Collateral to Agent or any third party. All acts of said power of attorney are hereby ratified and approved and Agent shall not be liable for any mistake of law or fact made in connection therewith. This power of attorney is coupled with an interest and shall be irrevocable so long as any amounts remain unpaid on any of the Obligations. All remedies of Agent shall be cumulative to the full extent provided by law, all without liability except to account for property actually received, but the Agent shall have no duty to exercise such rights and shall not be responsible for any failure to do so or delay in so doing. Pursuit by Agent of certain judicial or other remedies shall not abate nor bar other remedies with respect to the Obligations or to other portions of the Collateral. Agent may exercise its rights to the Collateral without resorting or regard to other collateral or sources of security or reimbursement for the Obligations. In the event that any transfer tax, deed tax, conveyance tax or similar tax is payable in connection with the foreclosure, conveyance in lieu of foreclosure or otherwise of the Member Interests, the Borrower shall pay such amount to agent upon demand and if Borrower fails to pay such amount on demand, Agent may advance such amount on behalf of Borrower and the amount thereof shall become a part of the Obligations and bear interest at the rate for overdue amounts under the Credit Agreement until paid. (b) If Assignor fails to perform any agreement or covenant contained in this Assignment beyond any applicable period for notice and cure, Agent may itself perform, or cause to be performed, any agreement or covenant of Assignor contained in this Assignment which Assignor shall fail to perform, and the cost of such performance, together with any reasonable expenses, including reasonable attorneys' fees actually incurred (including attorneys' fees incurred in any appeal) by Agent in connection therewith, shall be payable by Assignor upon demand and shall constitute a part of the Obligations and shall bear interest at the rate for overdue amounts as set forth in the Credit Agreement. (c) Whether or not an Event of Default has occurred and whether or not Agent is the absolute owner of the Collateral, Agent may take such action as Agent may deem necessary to protect the Collateral or its security interest therein, Agent being hereby authorized to pay, purchase, contest and compromise any encumbrance, charge or lien which in the judgment of Agent appears to be prior or superior to its security interest, and in exercising any such powers and authority to pay necessary expenses, employ counsel and pay reasonable attorney's fees. Any such advances made or expenses incurred by Agent shall be deemed advanced under the Loan Documents, shall increase the indebtedness evidenced and secured thereby, shall be payable upon demand and shall bear interest at the rate for overdue payments set forth in the Credit Agreement. (d) Any certificates or securities held by Agent as Collateral hereunder may, at any time, and at the option of Agent, be registered in the name of Agent or its nominee, endorsed or assigned in blank or in the name of any nominee and Agent may deliver any or all of the Collateral to the issuer or issuers thereof for the purpose of making denominational exchanges or registrations or transfer or for such other purposes in furtherance of this Agreement as Agent may deem desirable. Until the occurrence of an Event of Default, Assignor shall retain the right to vote any of the Collateral or exercise limited liability company membership rights, in a manner not inconsistent with the terms of this Agreement and the other Loan Documents, and Agent hereby grants to Assignor its proxy to enable Assignor to so vote any of the Collateral or exercise such limited liability company member rights (except that Assignor shall not have any right to exercise any such power or right if the exercise thereof would violate or result in a violation of any of the terms of this Agreement or any of the other Loan Documents). At any time after the occurrence and during the continuance of any Event of Default, Agent or its nominee shall, without notice or demand, automatically have the sole and exclusive right to give all consents, waivers and ratifications in respect of the Collateral and exercise all voting and other membership, management, approval or other rights at any meeting of the members of the Property Owner (and the right to call such meetings) or otherwise (and to give written consents in lieu of voting thereon), and exercise any and all rights of conversion, exchange, subscription or any of the rights, privileges or options pertaining to the Collateral and otherwise act with respect thereto and thereunder as if it were the absolute owner thereof (all of such rights of the Assignor ceasing to exist and terminating upon the occurrence of an Event of Default) including, without limitation, the right to exchange, at its discretion, any and all of the Collateral upon the merger, consolidation, reorganization, recapitalization or the readjustment of the issuer thereof, all without liability except to account for property actually received and in such manner as Agent shall determine in its sole and absolute discretion, but Agent shall have no duty to exercise any of the aforesaid rights, privileges or options and shall not be responsible for the failure to do so or delay in so doing. The exercise by Agent of any of its rights and remedies under this paragraph shall not be deemed a disposition of collateral under Article 9 of the UCC nor an acceptance by Agent of any of the Collateral in satisfaction of the Obligations. (e) Upon the occurrence and during the continuance of any Event of Default, the Agent may direct the Assignor in writing to, and the Assignor shall cause WASH to, replace the existing property manager and leasing agent for the Mezzanine Property with a property manager and leasing agent approved by the Agent, subject to any conditions in the Mortgage Loan Documents and the Mezzanine Mortgage Loan Documents to the qualifications and approval of such manager and leasing agent and the form and terms of any new property management and/or leasing agreement. The Assignor hereby irrevocably constitutes and appoints the Agent its true and lawful attorney-in-fact, with full power of substitution, to execute, acknowledge and deliver any instruments and to do and perform any acts which are referred to in this Paragraph 8(e), in the name and on behalf of the Assignor. The power vested in such attorney-in-fact is, and shall be deemed to be, coupled with an interest and irrevocable. (f) Upon the written demand of the Agent following the occurrence of and during the continuance of an Event of Default, the Assignor shall deliver or cause to be delivered to the Agent or the Agent's designee all books, records, contracts, Leases, files and other correspondence relating to the Mortgaged Property and the Mezzanine Property. In addition, upon the occurrence and during the continuance of an Event of Default, the Assignor shall upon the written demand of the Agent cause all tenant security deposits (whether in the form of cash, letter of credit or otherwise) and other refundable deposits paid to or held by or on behalf of the Property Owner or WASH in connection with the Leases to be delivered to the Agent, subject to the rights of the Mortgagee under the Mortgage Loan Documents and the Mezzanine Mortgagee under the Mezzanine Mortgage Loan Documents, as applicable. (g) Notwithstanding anything in this Assignment or any other Loan Document to the contrary, any reference in this Assignment or any other Loan Document to "the continuance of a default" or "the continuance of an Event of Default" or any similar phrase shall not create or be deemed to create any right on the part of Assignor or any other party to cure any default following the expiration of any applicable grace or notice and cure period. 9. Duties of Agent. The powers conferred on Agent hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Agent's duty with reference to the Collateral shall be solely to use slight care in the custody and preservation of the Collateral, which shall not include any steps necessary to preserve rights against prior parties. Agent shall have no responsibility or liability for the collection of any Collateral or by reason of any invalidity, lack of value or uncollectability of any of the payments received by it. 10. Indemnification. (a) It is specifically understood and agreed that this Assignment shall not operate to place any responsibility or obligation whatsoever upon Agent, or cause Agent to be, or to be deemed to be, a member in the Property Owner and that in accepting this Assignment, Agent neither assumes nor agrees to perform at any time whatsoever any obligation or duty of Assignor relating to the Collateral or under the Property Owner Organizational Agreements or any other mortgage, indenture, contract, agreement or instrument to which the Property Owner is a party or to which it is subject, all of which obligations and duties shall be and remain with and upon Assignor; provided, however, that Assignor shall not be liable for the performance of any liabilities or duties under the Organizational Agreements of Property Owner, Wells Avenue Holdings, WASH Manager or WASH which may result from written amendments thereof made by Agent after the occurrence of an Event of Default. (b) Assignor upon receipt of written demand shall pay to Agent the amount of any and all reasonable expenses, including, without limitation, the reasonable fees and disbursements of counsel actually incurred (including those incurred in any appeal), and of any experts and agents, which Agent may incur in connection with (i) the administration of this Assignment, (ii) the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of Agent hereunder, or (iv) the failure by Assignor to perform or observe any of the provisions hereof beyond any applicable period for notice and cure. 11. Security Interest Absolute. All rights of Agent, and the security interests hereunder, and all of the obligations secured hereby, shall be absolute and unconditional, irrespective of: (a) Any lack of validity or enforceability of the Loan Documents or any other agreement or instrument relating thereto; (b) Any change in the time (including the extension of the maturity date of the Note), manner or place of payment of, or in any other term of, all or any of the Obligations or any other amendment or waiver of or any consent to any departure from the Loan Documents; (c) Any exchange, release or nonperfection of any other collateral for the Obligations, or any release or amendment or waiver of or consent to departure from any of the Loan Documents with respect to all or any part of the Obligations; or (d) Any other circumstance (other than payment of the Obligations in full) that might otherwise constitute a defense available to, or a discharge of, Assignor or any third party for the Obligations or any part thereof. 12. Amendments and Waivers. No amendment or waiver of any provision of this Assignment nor consent to any departure therefrom shall in any event be effective unless the same shall be in writing and signed by Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No delay or omission of Agent to exercise any right, power or remedy accruing upon any Event of Default shall exhaust or impair any such right, power or remedy or shall be construed to be a waiver of any such Event of Default, or acquiescence therein; and every right, power and remedy given by this Assignment to Agent may be exercised from time to time and as often as may be deemed expedient by Agent. Failure on the part of Agent to complain of any act or failure to act which constitutes an Event of Default, irrespective of how long such failure continues, shall not constitute a waiver by Agent of Agent's rights hereunder or impair any rights, powers or remedies consequent on any Event of Default. Assignor hereby waives to the extent permitted by law all rights which Assignor has or may have under and by virtue of the Uniform Commercial Code as enacted in the State of New York, and any federal, state, county or municipal statute, regulation, ordinance, Constitution or charter, now or hereafter existing, similar in effect thereto providing any right of Assignor to notice and to a judicial hearing prior to seizure by Agent of any of the Collateral. Assignor hereby waives and renounces for itself, its heirs, successors and assigns, presentment, demand, protest, advertisement or notice of any kind (except for any notice required by law or the Loan Documents) and all rights to the benefits of any statute of limitations and any moratorium, reinstatement, marshaling, forbearance, valuation, stay, extension, homestead, redemption and appraisement now provided or which may hereafter be provided by the Constitution and laws of the United States and of any state thereof, both as to itself and in and to all of its property, real and personal, against the enforcement of this Assignment and the collection of any of the Obligations. 13. Continuing Security Interest; Transfer of Note; Release of Collateral. This Assignment shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until the indefeasible payment in full of the Obligations and the termination of the obligation of the Banks to make Loans to Assignor, (b) be binding upon Assignor and its permitted successors and assigns, and (c) inure, together with the rights and remedies of Agent hereunder, to the benefit of Agent and the Banks and their respective successors, transferees and assigns. Upon the indefeasible payment in full of the Obligations and the termination of the obligation of the Banks to make Loans to Assignor, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to Assignor. Upon any such termination, Agent will at Assignor's expense execute and deliver to Assignor such documents as Assignor shall reasonably request to evidence such termination. 14. Modifications, Etc. Assignor hereby consents and agrees that Agent and the Banks may at any time and from time to time, without notice to or further consent from Assignor, either with or without consideration, surrender any property or other security of any kind or nature whatsoever held by it or by any person, firm or corporation on its behalf or for its account, securing the Obligations; substitute for any Collateral so held by it, other collateral of like kind; agree to modification of the terms of the Loan Documents; extend or renew the Loan Documents for any period; grant releases, compromises and indulgences with respect to the Loan Documents for any period; grant releases, compromises and indulgences with respect to the Loan Documents to any persons or entities now or hereafter liable thereunder or hereunder; release any guarantor, endorser or any other Person liable with respect to the Obligations; or take or fail to take any action of any type whatsoever; and no such action which Agent shall take or fail to take in connection with the Loan Documents, or any of them, or any security for the payment of the Obligations or for the performance of any obligations or undertakings of Assignor, nor any course of dealing with Assignor or any other person, shall release Assignor's obligations hereunder, affect this Assignment in any way or afford Assignor any recourse against Agent. 15. Securities Act. In view of the position of Assignor in relation to the Collateral, or because of other current or future circumstances, a question may arise under Applicable Law or the Federal Securities Laws with respect to any disposition of the Collateral permitted hereunder. Assignor understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of Agent if Agent were to attempt to dispose of all or any part of the Collateral in accordance with the terms hereof, and might also limit the extent to which or the manner in which any subsequent transferee of any Collateral could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Agent in any attempt to dispose of all or part of the Collateral in accordance with the terms hereof under applicable Blue Sky or other state securities laws or similar Applicable Law analogous in purpose or effect. Assignor recognizes that in light of the foregoing restrictions and limitations Agent may, with respect to any sale of the Collateral, limit the purchasers to those who will agree, among other things, to acquire such Collateral for their own account, for investment, and not with a view to the distribution or resale thereof. Assignor acknowledges and agrees that in light of the foregoing restrictions and limitations, the Agent in its sole and absolute discretion may, in accordance with Applicable Law, (a) proceed to make such a sale whether or not a registration statement for the purpose of registering such Collateral or part thereof shall have been filed under the Federal Securities Laws and (b) approach and negotiate with a single potential purchaser to effect such sale. Assignor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller if such sale were a public sale without such restrictions. In the event of any such sale, Agent shall incur no responsibility or liability for selling all or any part of the Collateral in accordance with the terms hereof at a price that Agent, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached. The provisions of this paragraph will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Agent sells. 16. Governing Law; Terms. THIS ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE INTERNAL LAWS OF THE STATE OF NEW YORK. 17. Notices. Each notice, demand, election or request provided for or permitted to be given pursuant to this Assignment shall be deemed to have been properly given or served if given in the manner provided in the Credit Agreement. 18. No Unwritten Agreements. THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 19. Miscellaneous. Time is of the essence of this Assignment. Title or captions of paragraphs hereof are for convenience only and neither limit nor amplify the provisions hereof. References to a particular paragraph refer to that paragraph of this Assignment unless otherwise indicated. If, for any circumstances whatsoever, fulfillment of any provision of this Assignment shall involve transcending the limit of validity presently prescribed by applicable law, the obligation to be fulfilled shall be reduced to the limit of such validity; and if any clause or provision herein operates or would prospectively operate to invalidate this Assignment, in whole or in part, then such clause or provision only shall be held for naught, as though not herein contained, and the remainder of this Assignment shall remain operative and in full force and effect. IN WITNESS WHEREOF, Assignor and Agent have executed this Assignment on the date first above written. AGENT: BANKBOSTON, N.A., as Agent By: /s/ Mark E. Basham --------------------------------- Mark E. Basham, Managing Director ASSIGNOR: WELLSFORD/WHITEHALL PROPERTIES II, L.L.C., a Delaware limited liability company By: Wellsford Commercial Properties Trust, a Maryland real estate investment trust, its manager By: /s/ Gregory F. Hughes -------------------------------- Name: Gregory F. Hughes Title: CFO & Treasurer EXHIBIT "A" ORGANIZATIONAL AGREEMENTS EXHIBIT "B" PROMISSORY NOTE LEGEND "THIS NOTE HAS BEEN PLEDGED BY WELLSFORD/WHITEHALL PROPERTIES II, L.L.C. ("ASSIGNOR") TO BANKBOSTON, N.A., AS AGENT ("AGENT") PURSUANT TO AN ASSIGNMENT OF MEMBER'S INTEREST DATED AS OF JULY 16, 1998 (THE "ASSIGNMENT"). ALL AMOUNTS PAYABLE TO ASSIGNOR PURSUANT TO THIS NOTE SHALL BE PAID DIRECTLY TO AGENT AS REQUIRED BY THE ASSIGNMENT." EX-10.43 12 INDEMNITY AGREEMENT REGARDING HAZARDOUS MATERIALS ($75,000,000.00 Loan) THIS INDEMNITY AGREEMENT (this "Agreement"), is made as of this 16th day of July, 1998, by WELLSFORD/WHITEHALL PROPERTIES II, L.L.C., a Delaware limited liability company ("Borrower"), and WELLSFORD COMMERCIAL PROPERTIES TRUST, a Maryland real estate investment trust ("Trust"), and WHWEL REAL ESTATE LIMITED PARTNERSHIP, ("WHWEL"; WHWEL and Trust, collectively "Guarantor"), for the benefit of BANKBOSTON, N.A., a national banking association ("BankBoston"), as Administrative Agent for itself, Goldman Sachs Mortgage Company, and certain other lenders which may now or hereafter become parties to the "Loan Agreement" (as hereinafter defined) (BankBoston and such other lenders are hereinafter referred to collectively as the "Lenders"). W I T N E S S E T H: WHEREAS, Wellsford/Whitehall Holdings, L.L.C. ("Property Owner") is the owner of certain real property more particularly described in Exhibit A attached hereto and incorporated herein by this reference (the "Property Owner Land"; together with all improvements now or hereafter located in, on or under the Property Owner Land, collectively, the "Property Owner Property"); WHEREAS, Wells Avenue Senior Holdings LLC, a Massachusetts limited liability company ("WASH"), is the owner of certain real property more particularly described on Exhibit B attached hereto and incorporated herein by this reference (the "WASH Land," the WASH Land, together with all improvements now or hereafter located in, on or under the WASH Land, collectively, the "WASH Property"; the Property Owner Property and the WASH Property are hereinafter referred to collectively as the "Property"); WHEREAS, Wells Avenue Holdings L.L.C., a Delaware limited liability company ("Wells Avenue Holdings"), and WASH Manager, L.L.C, a Delaware limited liability company ("WASH Manager") are the sole members of WASH; WHEREAS, Property Owner is the sole member of Wells Avenue Holdings; WHEREAS, Borrower is the sole member of Property Owner; WHEREAS, Borrower has requested that the Lenders provide financing to Borrower secured by its interests in Property Owner; WHEREAS, Lenders have agreed to provide to Borrower a loan in the amount of up to $75,000,000.00 (the "Loan") pursuant to that certain Mezzanine Loan Agreement, dated July ___, 1998 between Lenders, Borrower, Goldman Sachs Mortgage Company, as Co-Arranger and Co-Syndication Agent, and BankBoston, as Administrative Agent, Co-Arranger and Co-Syndication Agent (the "Loan Agreement"), which Loan is evidenced by certain Notes dated July __, 1998 from Borrower to Lenders as described in the Loan Agreement (collectively, together with all amendments, modifications, consolidations, increases, supplements and extensions thereof, the "Note"), and secured by, among other things, that certain Assignment of Member's Interest of even date from Borrower to BankBoston as Administrative Agent (the "Agent") pledging Borrower's membership interest in Property Owner (collectively, together with all amendments or modifications thereof, the "Assignment"); WHEREAS, as a condition to making the Loan, Lenders require Borrower and Guarantor to provide certain indemnities concerning Hazardous Materials (as hereinafter defined) presently upon, in or under the Property, or hereafter placed or otherwise located thereon or therein; WHEREAS, to induce Lenders to make the Loan to Borrower, Borrower and Guarantor have agreed to provide this Agreement for Lenders' benefit. NOW, THEREFORE, for and in consideration of the sum of Ten and No/100 ($10.00) Dollars and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lenders, by their acceptance of delivery hereof, and Borrower and Guarantor hereby agree as follows: 1. Definitions. The definitions set forth below shall apply for purposes of this Agreement. Capitalized terms used herein and not otherwise defined herein shall have the meaning set forth in the Credit Agreement: (a) "Environmental Law" shall mean any federal, state or local statute, regulation or ordinance or any judicial or administrative decree or decision, whether now existing or hereinafter enacted, promulgated or issued, with respect to any Hazardous Materials, drinking water, groundwater, wetlands, landfills, open dumps, storage tanks, underground storage tanks, solid waste, waste water, storm water run-off, waste emissions or wells. Without limiting the generality of the foregoing, the term shall encompass each of the following statutes, and regulations promulgated thereunder, and amendments and successors to such statutes and regulations, as may be enacted and promulgated from time to time: (i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (codified in scattered sections of 26 U.S.C.; 33 U.S.C.; 42 U.S.C. and 42 U.S.C. Section 9601 et seq.); (ii) the Resource Conservation and Recovery Act of 1976 (42 U.S.C. Section 6901 et seq.); (iii) the Toxic Substances Control Act (15 U.S.C. et seq.); (iv) the Clean Water Act (33 U.S.C. Section 1251 et seq.); (v) the Clean Air Act (42 U.S.C. Section 7401 et seq.); (vi) the Safe Drinking Water Act (21 U.S.C. Section 349; 42 U.S.C. Section 201 and Section 300f et seq.); (vii) the National Environmental Policy Act of 1969 (42 U.S.C. Section 4321); (viii) the Superfund Amendment and Reauthorization Act of 1986 (codified in scattered sections of 10 U.S.C., 29 U.S.C., 33 U.S.C. and 42 U.S.C.); (ix) the Uncontrolled Hazardous Substance Sites Law, 38 M.R.S.A. Section 1361 et seq., as applicable; (x) the Hazardous Matter Control Law, 38 M.R.S.A. Section 1317, et seq., as applicable; (xi) the Maine Hazardous Waste, Septage and Solid Waste Management Act, 38 M.R.S.A. Section 1301 et seq., as applicable; (xii) the Reduction of Toxics Use, Waste and Release Law, 38 M.R.S.A. Section 2301 et seq., as applicable; and (xiii) the Site Location of Development Law, 38 M.R.S.A. Section 481 et seq., as applicable. (b) "Hazardous Materials" shall mean each and every element, compound, chemical mixture, contaminant, pollutant, material, waste or other substance which is defined, determined or identified as hazardous or toxic under any Environmental Law. Without limiting the generality of the foregoing, the term shall mean and include: (i) "hazardous substances" as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Superfund Amendment and Reauthorization Act of 1986, or Title III of the Superfund Amendment and Reauthorization Act, each as amended, and regulations promulgated thereunder; (ii) "hazardous waste" as defined in the Resource Conservation and Recovery Act of 1976, as amended, and regulations promulgated thereunder; (iii) "hazardous materials" as defined in the Hazardous Materials Transportation Act, as amended, and regulations promulgated thereunder; and (iv) "chemical substance or mixture" as defined in the Toxic Substances Control Act, as amended, and regulations promulgated thereunder. (c) "Indemnified Parties" shall mean each of the Lenders, their respective parents, subsidiaries and affiliates, each of their respective shareholders, directors, officers, employees and agents, and the successors and assigns of any of them; and "Indemnified Party" shall mean any one of the Indemnified Parties. (d) "Release" shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, storing, escaping, leaching, dumping, or discarding, burying, abandoning, or disposing into the environment. (e) "Threat of Release" shall mean a substantial likelihood of a Release which requires action to prevent or mitigate damage to the environment which may result from such Release. 2. Indemnity Agreement. Borrower and Guarantor, each jointly and severally, covenant and agree, at their sole cost and expense, to indemnify, defend (at trial and appellate levels and with attorneys, consultants and experts acceptable to Lenders) and hold each Indemnified Party harmless against and from any and all liens, damages, losses, liabilities, obligations, settlement payments, penalties, assessments, citations, directives, claims, litigation, demands, defenses, judgments, suits, proceedings, costs, disbursements or expenses of any kind or of any nature whatsoever (including, without limitation, reasonable attorneys', consultants' and experts' fees and disbursements incurred in investigating, defending against, settling or prosecuting any claim, litigation or proceeding) which may at any time be imposed upon, incurred by or asserted or awarded against such Indemnified Party or the Property and, and arising directly or indirectly from or out of: (A) the Release or Threat of Release of any Hazardous Materials on, in, under or affecting all or any portion of the Property or any surrounding areas, regardless of whether or not caused by or within the control of Borrower, first occurring prior to the payment in full of the Obligations; (B) the violation of any Environmental Laws relating to or affecting the Property or the Borrower, whether or not caused by or within the control of Borrower, first occurring prior to the payment in full of the Obligations; (C) the failure of Borrower or Guarantor to comply fully with the terms and conditions of this Agreement; (D) the violation of any Environmental Laws in connection with other real property of Borrower which gives or may give rise to any rights whatsoever in any party with respect to the Property by virtue of any Environmental Laws, first occurring prior to the payment in full of the Obligations; or (E) the enforcement of this Agreement, including, without limitation, (i) the costs of assessment, containment and/or removal of any and all Hazardous Materials from all or any portion of the Property or any surrounding areas, (ii) the costs of any actions taken in response to a Release or Threat of Release of any Hazardous Materials on, in, under or affecting all or any portion of the Property or any surrounding areas to prevent or minimize such Release or Threat of Release so that it does not migrate or otherwise cause or threaten danger to present or future public health, safety, welfare or the environment, and (iii) costs incurred to comply with the Environmental Laws in connection with all or any portion of the Property or any surrounding areas. Borrower's and Guarantor's obligations hereunder are separate and distinct from Borrower's and Guarantor's obligations under the "Loan Documents" (as hereinafter defined), and Lenders' and the other Indemnified Parties' rights under this Agreement shall be in addition to all rights of Agent and Lenders under the Security Documents, the Note, the Loan Agreement and under any other documents or instruments evidencing, securing or relating to the Loan (the Security Documents, the Note, the Loan Agreement and such other documents or instruments, as amended or modified from time to time, being herein referred to as the "Loan Documents"), and payments by Borrower or Guarantor under this Agreement shall not reduce Borrower's or Guarantor's obligations and liabilities under any of the Loan Documents. 3. Survival. (a) The indemnity set forth above in Paragraph 2 shall survive the repayment of the Loan and any exercise of any remedies under the Security Documents, including without limitation, any remedy in the nature of foreclosure, and shall not merge with any assignment or conveyance given by Borrower to Agent or Lenders in lieu of foreclosure. (b) It is agreed and intended by Borrower, Guarantor and Lenders that the indemnity set forth above in Paragraph 2 may be assigned or otherwise transferred by each Lender to its successors and assigns and to any subsequent purchaser of all or any portion of the Collateral or Property by, through or under Agent or Lenders, without notice to Borrower or Guarantor and without any further consent of Borrower or Guarantor. To the extent consent of any such assignment or transfer is required by law, advance consent to any such assignment or transfer is hereby given by Borrower and Guarantor in order to maximize the extent and effect of the indemnity given hereby. 4. No Waiver. The liabilities of Borrower and Guarantor under this Agreement shall in no way be limited or impaired by, and Borrower and Guarantor hereby consent to and agree to be bound by, any amendment or modification of the provisions of the Loan Documents to or with Lenders by Borrower or Guarantor or any person who succeeds Borrower as owner of any portion of the Collateral or Property Owner as owner of the Property. In addition, notwithstanding any terms of any of the Loan Documents to the contrary, the liability of Borrower and Guarantor under this Agreement shall in no way be limited or impaired by: (i) any extensions of time for performance required by any of the Loan Documents; (ii) any sale, assignment or foreclosure of the Note or the Security Documents or any sale or transfer of all or part of the Collateral or the Property; (iii) any exculpatory provision in any of the Loan Documents limiting Lenders' recourse to property encumbered by the Security Documents or to any other security, or limiting Lenders' rights to a deficiency judgment against Borrower; (iv) the accuracy or inaccuracy of the representations and warranties made by Borrower or Guarantor under any of the Loan Documents; (v) the release of Borrower or Guarantor or any other person from performance or observance of any of the agreements, covenants, terms or conditions contained in the Loan Documents by operation of law, Lenders' voluntary act, or otherwise; (vi) the release or substitution, in whole or in part, of any security for the Note; or (vii) Lenders' failure to record the Security Documents or file any UCC-1 financing statements (or Lenders' improper recording or filing of any thereof) or to otherwise perfect, protect, secure or insure any security interest or lien given as security for the Note; and, in any such case, whether with or without notice to Borrower or Guarantor and with or without consideration. 5. Waiver by Borrower. BORROWER AND GUARANTOR WAIVE ANY RIGHT OR CLAIM OF RIGHT TO CAUSE A MARSHALING OF BORROWER'S OR GUARANTOR'S ASSETS OR TO CAUSE LENDERS TO PROCEED AGAINST ANY OF THE SECURITY FOR THE LOAN BEFORE PROCEEDING UNDER THIS AGREEMENT AGAINST BORROWER AND GUARANTOR OR TO PROCEED AGAINST BORROWER AND GUARANTOR IN ANY PARTICULAR ORDER. BORROWER AND GUARANTOR AGREE THAT ANY PAYMENTS REQUIRED TO BE MADE HEREUNDER SHALL BECOME DUE ON DEMAND. BORROWER AND GUARANTOR EXPRESSLY WAIVE AND RELINQUISH ALL RIGHTS AND REMEDIES (INCLUDING ANY RIGHTS OF SUBROGATION) ACCORDED BY APPLICABLE LAW TO INDEMNITORS. 6. Delay. No delay on Lenders' part in exercising any right, power or privilege under any of the Loan Documents shall operate as a waiver of any privilege, power or right hereunder. 7. Releases. Any one or more of Borrower and Guarantor or any other party liable upon or in respect of this Agreement or the Loan may be released without affecting the liability of any party not so released. 8. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original. Said counterparts shall constitute but one and the same instrument and shall be binding upon each of the undersigned individually as fully and completely as if all had signed but one instrument so that the joint and several liability of each of the undersigned hereunder shall be unaffected by the failure of any of the undersigned to execute any or all of the said counterparts. 9. Notices. Each notice, demand, election or request provided for or permitted to be given pursuant to this Agreement shall be given in the manner provided in the Loan Agreement. 10. Amendments. No provision of this Agreement may be changed, waived, discharged or terminated orally, by telephone or by any other means except by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought. 11. Binding Effect. Except as herein provided, this Agreement shall be binding upon Borrower and Guarantor and their respective successors, successors-in-title and assigns, and shall inure to the benefit of Lenders, the other Indemnified Parties, and their respective successors and assigns. Notwithstanding the foregoing, Borrower and Guarantor, without the prior written consent of Lenders in each instance, may not assign, transfer or set over to another, in whole or in part, all or any part of its or their benefits, rights, duties and obligations hereunder, including, but not limited to, performance of and compliance with conditions hereof. 12. GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, AND INTERPRETED AND DETERMINED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). BORROWER AND GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY (A) SUBMIT TO PERSONAL JURISDICTION IN THE STATE OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND (B) WAIVE ANY AND ALL PERSONAL RIGHTS UNDER THE LAWS OF ANY STATE (I) TO THE RIGHT, IF ANY, TO TRIAL BY JURY, OR (II) TO OBJECT TO JURISDICTION WITHIN THE STATE OF NEW YORK OR VENUE IN ANY PARTICULAR FORUM (INCLUDING FEDERAL) WITHIN THE STATE OF NEW YORK. BORROWER AND GUARANTOR AGREE THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO BORROWER AND GUARANTOR AT THE ADDRESSES SET FORTH IN THE LOAN AGREEMENT, AND SERVICE SO MADE SHALL BE COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL BE SO MAILED. NOTHING CONTAINED HEREIN, HOWEVER, SHALL PREVENT LENDERS FROM BRINGING ANY SUIT, ACTION OR PROCEEDING OR EXERCISING ANY RIGHTS AGAINST ANY SECURITY AND AGAINST BORROWER OR GUARANTOR PERSONALLY, AND AGAINST ANY PROPERTY OF BORROWER, WITHIN ANY OTHER STATE. INITIATING SUCH SUIT, ACTION OR PROCEEDING OR TAKING SUCH ACTION IN ANY STATE SHALL IN NO EVENT CONSTITUTE A WAIVER OF THE AGREEMENT CONTAINED HEREIN THAT THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE RIGHTS AND OBLIGATIONS OF BORROWER, AND GUARANTOR AND LENDERS HEREUNDER OR OF THE SUBMISSION HEREIN MADE BY BORROWER AND GUARANTOR TO PERSONAL JURISDICTION WITHIN THE STATE OF NEW YORK. 13. Recourse. Notwithstanding anything to the contrary contained herein or in any other Loan Document, the obligations of WHWEL Real Estate Limited Partnership under this Agreement whether arising under this Agreement or otherwise in connection with any of the Loan Documents, shall be without recourse to any limited partner of WHWEL Real Estate Limited Partnership and no such person shall have any liability with respect thereto. IN WITNESS WHEREOF, Borrower and Guarantor have caused this Agreement to be executed under seal as of the day and year first written above. BORROWER: WELLSFORD WHITEHALL PROPERTIES II, L.L.C., a Delaware limited liability company By: Wellsford Commercial Properties Trust, a Maryland real estate investment trust, its manager By: /s/ Gregory F. Hughes ------------------------------- Name: Gregory F. Hughes Title: CFO & Treasurer [SIGNATURES CONTINUED ON FOLLOWING PAGE] GUARANTOR: WELLSFORD COMMERCIAL PROPERTIES TRUST, a Maryland real estate investment trust By: /s/ Gregory F. Hughes --------------------------- Name: Gregory F. Hughes Title: CFO & Treasurer [SIGNATURES CONTINUED ON FOLLOWING PAGE] WHWEL REAL ESTATE LIMITED PARTNERSHIP By:WHATR Gen-Par, Inc., General Partner By: /s/ Alan S. Kava --------------------------- Name: Alan S. Kava Title: Vice President EX-10.44 13 NOMURA CONDITIONAL GUARANTY OF PAYMENT -------------------------------------- ($75,000,000 Loan - Nomura Properties) FOR AND IN CONSIDERATION OF the sum of Ten and No/100 Dollars ($10.00) and other good and valuable consideration paid or delivered to the undersigned WELLSFORD COMMERCIAL PROPERTIES TRUST, a Maryland real estate investment trust ("WCPT"), WHWEL REAL ESTATE LIMITED PARTNERSHIP ("WHWEL"), WELLSFORD REAL PROPERTIES, INC., a Maryland corporation ("WRPI"), WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP V ("Whitehall V"), WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP VI ("Whitehall VI"), WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP VII ("Whitehall VII"), and WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP VIII ("Whitehall VIII", and together with Whitehall V, Whitehall VI and Whitehall VII, collectively, "Whitehall"), each a Delaware limited partnership (WCPT, WHWEL, WRPI and Whitehall are hereinafter referred to collectively as "Guarantor"), the receipt and sufficiency whereof is hereby acknowledged by Guarantor, and for the purpose of seeking to induce BANKBOSTON, N.A., a national banking association ("BKB"), and GOLDMAN SACHS MORTGAGE COMPMANY ("Goldman Sachs"; BKB and Goldman Sachs are hereinafter collectively referred to as "Lender", which term shall also include each other Bank which may now or hereafter become party to the "Credit Agreement" (as hereinafter defined) and shall also include any such individual Bank acting as agent for all of the Banks), to extend credit or otherwise provide financial accommodations to WELLSFORD/WHITEHALL PROPERTIES II, L.L.C., a Delaware limited liability company (hereinafter referred to as "Borrower"), which extension of credit and provision of financial accommodations will be to the direct interest, advantage and benefit of Guarantor, Guarantor does hereby, jointly and severally, absolutely and irrevocably guarantee to Lender: (a) subject to the provisions of Paragraphs 24 and 25, below, the full and prompt payment when due, whether by acceleration or otherwise, either before or after maturity thereof, of those certain Notes dated July __, 1998 made by Borrower to the order of the Banks in the aggregate principal face amount of Seventy-Five Million and No/100 Dollars ($75,000,000.00) (hereinafter referred to collectively as the "Bank Notes"), together with interest as provided in the Bank Notes, together with any replacements, supplements, renewals, modifications, consolidations, restatements and extensions thereof; and (b) subject to the provisions of Paragraphs 24 and 25, below, the full and prompt payment when due, whether by acceleration or otherwise, either before or after maturity thereof, of each other note as may be issued under that certain Mezzanine Loan Agreement dated July ___, 1998 among Borrower, BKB, for itself and as agent, Goldman Sachs, and the other lenders now or hereafter a party thereto (hereinafter referred to as the "Credit Agreement"), together with interest as provided in each such note, together with any replacements, supplements, renewals, modifications, consolidations, restatements and extensions thereof (the Bank Notes and each of the notes described in this subparagraph (b) is hereinafter referred to collectively as the "Note"); and (c) subject to the terms of Paragraphs 24 and 25 below, the full and prompt payment of all other monetary obligations of Borrower to Lender under the terms of the Credit Agreement, together with any replacements, supplements, renewals, modifications, consolidations, restatements and extensions thereof; and (d) subject to the terms of Paragraphs 24 and 25 below, the full and prompt payment of any and all other monetary obligations of Borrower to Lender under the Security Documents, together with any replacements, supplements, renewals, modifications, consolidations, restatements and extensions thereof; and (e) subject to the terms of Paragraphs 24 and 25 below, the full and prompt payment of any and all other monetary obligations of Borrower to Lender under any other agreements, documents or instruments now or hereafter evidencing, securing or otherwise relating to the indebtedness evidenced by the Note or the Credit Agreement (the Note, the Security Documents, the Credit Agreement and said other agreements, documents and instruments, are hereinafter collectively referred to as the "Loan Documents" and individually referred to as a "Loan Document"). All terms used herein and not otherwise defined herein shall have the meanings set forth in the Credit Agreement. 1. Agreement to Pay; Costs of Collection. Guarantor does hereby agree that, subject to the terms of Paragraphs 24 and 25 below, below, if the Note is not paid by Borrower in accordance with its terms (including all applicable grace periods), or if any and all sums which are now or may hereafter become due from Borrower to Lender under the Loan Documents are not paid by Borrower in accordance with their terms (including all applicable grace periods), Guarantor will immediately make such payments. Guarantor further agrees to pay Lender on demand all reasonable costs and expenses (including court costs and reasonable attorneys' fees and disbursements) paid or incurred by Lender in endeavoring to enforce this Guaranty, and until paid to Lender, such sums shall bear interest at the default rate set forth in the Credit Agreement unless collection from Guarantor of interest at such rate would be contrary to applicable law, in which event such sums shall bear interest at the highest rate which may be collected from Guarantor under applicable law. 2. Reinstatement of Refunded Payments. If, for any reason, any payment to Lender of any of the obligations guaranteed hereunder is required to be refunded by Lender to Borrower, or paid or turned over by Lender to any other person, including, without limitation, by reason of the operation of bankruptcy, reorganization, receivership or insolvency laws or similar laws of general application relating to creditors' rights and remedies now or hereafter enacted, Guarantor agrees to pay the amount so required to be refunded, paid or turned over (hereinafter referred to as the "Turnover Payment"), the obligations of Guarantor shall not be treated as having been discharged by the original payment to Lender giving rise to the Turnover Payment, and this Guaranty shall be treated as having remained in full force and effect for any such Turnover Payment so made by Lender, as well as for any amounts not theretofore paid to Lender on account of such obligations, but only to the extent that Guarantor otherwise would have been liable for the payment of the same hereunder. 3. Rights of Lender to Deal with Collateral, Borrower and Other Persons. Guarantor hereby consents and agrees that Lender may at any time, and from time to time, without thereby releasing Guarantor from any liability hereunder and without notice to or further consent from Guarantor, either with or without consideration: release or surrender any lien or other security of any kind or nature whatsoever held by it or by any person, firm or corporation on its behalf or for its account, securing any indebtedness or liability hereby guaranteed; substitute for any collateral so held by it, other collateral of like kind, or of any kind; modify the terms of the Note or the Loan Documents; extend or renew the Note for any period; grant releases, compromises and indulgences with respect to the Note or the Loan Documents and to any persons or entities now or hereafter liable thereunder or hereunder; release any other Guarantor, surety, endorser or accommodation party of the Note, the Security Documents or any other Loan Documents; or take or fail to take any action of any type whatsoever. No such action which Lender shall take or fail to take in connection with the Note or the Loan Documents, or any of them, or any security for the payment of the indebtedness of Borrower to Lender or for the performance of any obligations or undertakings of Borrower, nor any course of dealing with Borrower or any other person, shall release Guarantor's obligations hereunder, affect this Guaranty in any way or afford Guarantor any recourse against Lender. The provisions of this Guaranty shall extend and be applicable to all replacements, supplements, renewals, amendments, extensions, consolidations, restatements and modifications of the Note and the Loan Documents, and any and all references herein to the Note and the Loan Documents shall be deemed to include any such replacements, supplements, renewals, extensions, amendments, consolidations, restatements or modifications thereof. 4. No Contest with Lender; Subordination. So long as any obligation hereby guaranteed remains unpaid or undischarged, Guarantor will not, by paying any sum recoverable hereunder (whether or not demanded by Lender) or by any means or on any other ground, claim any set-off or counterclaim against Borrower in respect of any liability of Guarantor to Borrower or, in proceedings under federal bankruptcy law or insolvency proceedings of any nature, prove in competition with Lender in respect of any payment hereunder or be entitled to have the benefit of any counterclaim or proof of claim or dividend or payment by or on behalf of Borrower or the benefit of any other security for any obligation hereby guaranteed which, now or hereafter, Lender may hold or in which it may have any share. Guarantor hereby expressly waives any right of contribution from or indemnity against Borrower, whether at law or in equity, arising from any payments made by Guarantor pursuant to the terms of this Guaranty, and Guarantor acknowledges that Guarantor has no right whatsoever to proceed against Borrower for reimbursement of any such payments. In connection with the foregoing, Guarantor expressly waives any and all rights of subrogation to Lender against Borrower, and Guarantor hereby waives any rights to enforce any remedy which Lender may have against Borrower and any rights to participate in any collateral for Borrower's obligations under the Loan Documents. Guarantor hereby subordinates any and all indebtedness of Borrower now or hereafter owed to Guarantor to all indebtedness of Borrower to Lender, and agrees with Lender that (a) Guarantor shall not demand or accept any payment from Borrower on account of such indebtedness, (b) Guarantor shall not claim any offset or other reduction of Guarantor's obligations hereunder because of any such indebtedness, and (c) Guarantor shall not take any action to obtain any interest in any of the security described in and encumbered by the Loan Documents because of any such indebtedness; provided, however, that, if Lender so requests, such indebtedness shall be collected, enforced and received by Guarantor as trustee for Lender and be paid over to Lender on account of the indebtedness of Borrower to Lender, but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty except to the extent the principal amount of such outstanding indebtedness shall have been reduced by such payment. 5. Waiver of Defenses. Guarantor hereby agrees that its obligations hereunder shall not be affected or impaired by, and hereby waives and agrees not to assert or take advantage of any defense based on: (a) the incapacity or lack of authority of Borrower or any other person or entity, the death or disability of Borrower or any Guarantor or any other person or entity, or the failure of Lender to file or enforce a claim against the estate (either in administration, bankruptcy or in any other proceeding) of Borrower or any Guarantor or any other person or entity; (b) the dissolution or termination of existence of Borrower or any other Person; (c) the voluntary or involuntary liquidation, sale or other disposition of all or substantially all of the assets of Borrower or any other Person; (d) the voluntary or involuntary receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, assignment, composition, or readjustment of, or any similar proceeding affecting Borrower, any Guarantor, Property Owner, WASH, WASH Manager, Wells Avenue Holdings or any of Borrower's, any Guarantor's, Property Owner's, WASH's, WASH Manager's or Wells Avenue Holdings' properties or assets; (e) the damage, destruction, condemnation, foreclosure or surrender of all or any part of the Mezzanine Property or any Collateral; (f) the failure of Lender to give notice of the existence, creation or incurring of any new or additional indebtedness or obligation or of any action or nonaction on the part of any other person whomsoever in connection with any obligation hereby guaranteed; (g) any failure or delay of Lender to commence an action against Borrower or any other Person, to assert or enforce any remedies against Borrower under the Note or the Loan Documents, or to realize upon any security; (h) any failure of any duty on the part of Lender to disclose to Guarantor any facts it may now or hereafter know regarding Borrower, the Property Owner, WASH or any other Person, or the Mezzanine Property or the property encumbered by the Security Documents, whether such facts materially increase the risk to Guarantor or not; (i) failure to accept or give notice of acceptance of this Guaranty by Lender; (j) failure to make or give notice of presentment and demand for payment of any of the indebtedness or performance of any of the obligations hereby guaranteed; (k) failure to make or give protest and notice of dishonor or of default to Guarantor or to any other party with respect to the indebtedness or performance of obligations hereby guaranteed; (l) any and all other notices whatsoever to which Guarantor might otherwise be entitled; (m) any lack of diligence by Lender in collection, protection or realization upon any collateral securing the payment of the indebtedness or performance of obligations hereby guaranteed; (n) the invalidity or unenforceability of the Note or any of the Loan Documents; (o) the compromise, settlement, release or termination of any or all of the obligations of Borrower under the Note or the Loan Documents; (p) any transfer by Borrower or any other Person of all or any part of the security encumbered by the Loan Documents; (q) the failure of Lender to perfect any security or to extend or renew the perfection of any security; or (r) to the fullest extent permitted by law, any other legal, equitable or surety defenses whatsoever to which Guarantor might otherwise be entitled, it being the intention that the obligations of Guarantor hereunder are absolute, unconditional (subject to the terms of Paragraphs 24 and 25, below) and irrevocable. 6. Guaranty of Payment and Not of Performance or Collection. This is a Guaranty of payment and not of performance or collection. Subject to the terms of Paragraphs 24 and 25, below, the liability of Guarantor under this Guaranty shall be primary, direct and immediate and not conditional or contingent upon the pursuit of any remedies against Borrower or any other person, nor against securities or liens available to Lender, its successors, successors in title, endorsees or assigns. Guarantor hereby waives any right to require that an action be brought against Borrower or any other person or to require that resort be had to any security or to any balance of any deposit account or credit on the books of Lender in favor of Borrower or any other person. 7. Rights and Remedies of Lender. In the event of an Event of Default under the Note or the Loan Documents, or any of them, Lender shall have the right to enforce its rights, powers and remedies thereunder or hereunder or under any other agreement, document or instrument now or hereafter evidencing, securing or otherwise relating to the indebtedness evidenced by the Note or secured by the Loan Documents, in any order, and all rights, powers and remedies available to Lender in such event shall be nonexclusive and cumulative of all other rights, powers and remedies provided thereunder or hereunder or by law or in equity. Accordingly, Guarantor hereby authorizes and empowers Lender upon the occurrence of any Event of Default under the Note or the Loan Documents, at its sole discretion, and without notice to Guarantor, to exercise any right or remedy which Lender may have, including, but not limited to, judicial foreclosure, exercise of rights of power of sale, acceptance of an assignment in lieu of foreclosure, appointment of a receiver, exercise of remedies against personal property, or enforcement of any assignment of leases, as to any security, whether real, personal or intangible. At any public or private sale of any security or collateral for any indebtedness or any part thereof guaranteed hereby, whether by foreclosure or otherwise, Lender may, in its discretion, purchase all or any part of such security or collateral so sold or offered for sale for its own account and may apply against the amount bid therefor all or any part of the balance due it pursuant to the terms of the Note or Security Documents or any other Loan Document without prejudice to Lender's remedies hereunder against Guarantor for deficiencies. If the indebtedness guaranteed hereby is partially paid by reason of the election of Lender to pursue any of the remedies available to Lender, or if such indebtedness is otherwise partially paid, this Guaranty shall nevertheless remain in full force and effect, and Guarantor shall remain liable for the entire balance of the indebtedness guaranteed hereby (subject, however, to the provisions of Paragraphs 24 and 25 below) even though any rights which Guarantor may have against Borrower may be destroyed or diminished by the exercise of any such remedy. 8. Application of Payments. Guarantor hereby authorizes Lender, without notice to Guarantor, to apply all payments and credits received from Borrower or from Guarantor or realized from any security in such manner and in such priority as set forth in the Credit Agreement. 9. Business Failure, Bankruptcy or Insolvency. In the event of the business failure of a Guarantor or if there shall be pending any bankruptcy or insolvency case or proceeding with respect to a Guarantor under federal bankruptcy law or any other applicable law or in connection with the insolvency of a Guarantor, or if a liquidator, receiver, or trustee shall have been appointed for a Guarantor or a Guarantor's properties or assets, Lender may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of Lender allowed in any proceedings relative to such Guarantor, or any of such Guarantor's properties or assets, and, irrespective of whether the indebtedness or other obligations of Borrower guaranteed hereby or the obligations of such Guarantor hereunder shall then be due and payable, by declaration or otherwise, Lender shall be entitled and empowered to file and prove a claim for the whole amount of any sum or sums owing by such Guarantor with respect to the indebtedness or other obligations of Borrower guaranteed hereby, and to collect and receive any moneys or other property payable or deliverable on any such claim. Guarantor covenants and agrees that upon the commencement of a voluntary or involuntary bankruptcy proceeding by or against Borrower, Guarantor shall not seek a supplemental stay or otherwise pursuant to Section 105 of the Bankruptcy Code or any other provision of the Bankruptcy Code, or any other debtor relief law (whether statutory, common law, case law, or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may be or become applicable, to stay, interdict, condition, reduce or inhibit the ability of Lender to enforce any rights of Lender against Guarantor by virtue of this Guaranty or otherwise. 10. Financial Statements and Other Information. Each Guarantor hereby independently represents and warrants to Lender that all financial statements heretofore delivered by it to Lender are true and correct in all material respects, have been prepared in accordance with generally accepted accounting principles consistently applied, and fairly present its financial condition as of the date thereof; that no material adverse change has occurred in its assets or financial condition as reflected therein since the date thereof; and that it has no liabilities or known contingent liabilities involving material amounts which are not reflected in such financial statements or referred to in the notes thereto other than its obligations under this Guaranty. Each Guarantor independently agrees that until all indebtedness guaranteed hereby has been completely repaid and all obligations and undertakings of Borrower and Guarantor under, by reason of, or pursuant to the Note and the Loan Documents have been completely performed and no Lender has any further obligation to make Loans to Borrower (or until the Assignment of Interests has been terminated as provided therein, provided that no "Triggering Event" (as hereinafter defined" has occurred), it will promptly deliver to Lender upon written (but not more often than quarterly) demand its then most recent financial statements readily available (provided that such financial statements shall be prepared and updated not less frequently than annually) detailing its assets and liabilities certified by it, in form and substance reasonably acceptable to Lender. The financial statements and other reports and information delivered by Guarantor to Lender hereunder will be treated as confidential by each Lender, and each assignee and participant hereunder and each potential assignee or participant hereunder, and such parties for themselves agree not to disclose such information to any Person, provided that such information may be disclosed to any of the following in connection with their participation in the transactions contemplated by the Loan Documents: directors, officers, employees, representatives, legal counsel, accountants and prospective investors of any of such Persons, it being understood that such Persons shall be informed of the confidential nature of such information and shall agree to treat such information confidentially. Notwithstanding the foregoing, such Persons shall be permitted to disclose such information (a) to the extent required by law, (b) to the extent such confidential information becomes publicly available other than as a result of the breach of this Guaranty, (c) to the extent such information becomes available to any of such Persons on a non-confidential basis, or (d) to the extent necessary to enforce the Loan Documents (provided that Lender shall use reasonable efforts to cause such financial statements, reports and information to remain confidential). 11. Covenants of Guarantor. Each Guarantor independently hereby covenants and agrees with Lender that until all indebtedness guaranteed hereby has been completely repaid and all obligations and undertakings of Borrower and Guarantor under, by reason of, or pursuant to the Note and the Loan Documents have been completely performed, and the Lenders have no further obligations to make Loans to Borrower (or until the Assignment of Interests has been terminated as provided therein, provided that no "Triggering Event" (as hereinafter defined) has occurred): (a) it will cause to be done all things necessary to preserve and keep in full force and effect its legal existence, rights and franchises, to effect and maintain all required foreign qualifications, licensing, domestication or authorization, and to comply in all material respects with all applicable laws and regulations with respect to the foregoing; (b) it will keep complete, proper and accurate records and books of account in which full, true and correct entries will be made in accordance with generally accepted accounting principles consistent with the preparation of the financial statements heretofore delivered to Lender and will maintain adequate accounts and reserves for all taxes (including income taxes), all depreciation and amortization of its properties, all other contingencies, and all other proper reserves in the same manner, and to the same extent, that it has, to the extent applicable, kept and maintained it records and books and maintained accounts and reserves for the foregoing; and (c) it will not make or permit to be made, by voluntary or involuntary means, any transfer or encumbrance of its direct or indirect interest in Borrower, or any dilution of its direct or indirect interest in Borrower, which would violate the provisions of Section 8.11 of the Credit Agreement. 12. [Intentionally Omitted]. 13. Changes in Writing; No Revocation. This Guaranty may not be changed orally, and no obligation of Guarantor can be released or waived by Lender except by a writing signed by a duly authorized officer of Lender. This Guaranty shall be irrevocable by Guarantor until all indebtedness guaranteed hereby has been completely repaid and the Lenders have no further obligation to advance Loans to Borrower. Notwithstanding anything contained in this Guaranty or any of the Loan Documents to the contrary, this Guaranty shall terminate and be of no further force or effect upon the earlier to occur of (i) payment to Lender by Guarantor of the "Allocable Loan Amount" (as hereinafter defined) and (ii) any termination of the Assignment of Interests either pursuant to the terms thereof or by mutual agreement of Borrower and Lender provided that no "Triggering Event" (as hereinafter defined) has occurred. 14. Notices. All notices, demands or requests provided for or permitted to be given pursuant to this Guaranty (hereinafter in this paragraph referred to as "Notice") must be in writing and shall be deemed to have been properly given or served by personal delivery or by sending same by overnight courier or by depositing the same in the United States Mail, postpaid and registered or certified, return receipt requested, at the addresses set forth below. Each Notice shall be effective upon being delivered personally or upon being sent by overnight courier or upon being deposited in the United States Mail as aforesaid. The time period in which a response to any such Notice must be given or any action taken with respect thereto, however, shall commence to run from the date of receipt if personally delivered or sent by overnight courier or, if so deposited in the United States Mail, the earlier of three (3) business days following such deposit and the date of receipt as disclosed on the return receipt. Rejection or other refusal to accept or the inability to deliver because of changed address of which no Notice was given shall be deemed to be receipt of the Notice sent. By giving at least fifteen (15) days prior Notice thereof, Guarantor or Lender shall have the right from time to time and at any time during the term of this Guaranty to change their respective addresses and each shall have the right to specify as its address any other address within the United States of America. For the purposes of this Guaranty: The Address of Lender is: BankBoston, N.A. 100 Federal Street Boston, Massachusetts 02110 Attn: Real Estate Division with a copy to: BankBoston, N.A. 115 Perimeter Center Place, N.E. Suite 500 Atlanta, Georgia 30346 Attn: Jay Johns and a copy to each other Lender which may now or hereafter become a party to the Credit Agreement at such address as may be designated by such Lender. The Address of Guarantor is: Wellsford Commercial Properties Trust 610 Fifth Avenue, Seventh Floor New York, New York 10020 Attn: Greg Hughes and Wellsford Real Properties, Inc. 610 Fifth Avenue, Seventh Floor New York, New York 10020 Attn: Greg Hughes with a copy to: Robinson Silverman Pearce Aronsohn & Berman, LLP 1290 Avenue of the Americas New York, New York 10104 Attn: Alan S. Pearce, Esq. and WHWEL Real Estate Limited Partnership 85 Broad Street, 19th Floor New York, New York 10004 Attn: Chief Financial Officer and Whitehall Street Real Estate Limited Partnership V Whitehall Street Real Estate Limited Partnership VI Whitehall Street Real Estate Limited Partnership VII Whitehall Street Real Estate Limited Partnership VIII 85 Broad Street, 19th Floor New York, New York 10004 Attn: Chief Financial Officer with a copy to: Sullivan & Cromwell 125 Broad Street New York, New York 10004 Attn: Anthony J. Colletta, Esq. 15. Governing Law. Guarantor acknowledges and agrees that this Guaranty and the obligations of Guarantor hereunder shall be governed by and interpreted and determined in accordance with the internal laws of the State of New York (excluding the laws applicable to conflicts or choice of law). 16. CONSENT TO JURISDICTION; WAIVERS. GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY (A) SUBMITS TO PERSONAL JURISDICTION IN THE STATE OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY, AND (B) WAIVES ANY AND ALL PERSONAL RIGHTS UNDER THE LAWS OF ANY STATE (I) TO THE RIGHT, IF ANY, TO TRIAL BY JURY, AND (II) TO OBJECT TO JURISDICTION WITHIN THE STATE OF NEW YORK OR VENUE IN ANY PARTICULAR FORUM WITHIN THE STATE OF NEW YORK. NOTHING CONTAINED HEREIN, HOWEVER, SHALL PREVENT LENDER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING OR EXERCISING ANY RIGHTS AGAINST ANY SECURITY AND AGAINST GUARANTOR PERSONALLY, AND AGAINST ANY PROPERTY OF GUARANTOR, WITHIN ANY OTHER STATE. INITIATING SUCH SUIT, ACTION OR PROCEEDING OR TAKING SUCH ACTION IN ANY STATE SHALL IN NO EVENT CONSTITUTE A WAIVER OF THE AGREEMENT CONTAINED HEREIN THAT THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE RIGHTS AND OBLIGATIONS OF GUARANTOR AND LENDER HEREUNDER OR OF THE SUBMISSION HEREIN MADE BY GUARANTOR TO PERSONAL JURISDICTION WITHIN THE STATE OF NEW YORK. 17. Successors and Assigns. The provisions of this Guaranty shall be binding upon Guarantor and its heirs, successors, successors in title, legal representatives, executors, estate and assigns, and shall inure to the benefit of Lender, its successors, successors in title, legal representatives and assigns. 18. Assignment by Lender. Subject to the terms of Section 18.8 of the Credit Agreement, this Guaranty is assignable by Lender in whole or in part in conjunction with any assignment of the Note or portions thereof, and any such assignment hereof or any transfer or assignment of the Note or portions thereof by Lender shall operate to vest in any such assignee the rights and powers, in whole or in part, as appropriate, herein conferred upon and granted to Lender. 19. Severability. If any term or provision of this Guaranty shall be determined to be illegal or unenforceable, all other terms and provisions hereof shall nevertheless remain effective and shall be enforced to the fullest extent permitted by law. 20. Disclosure. Guarantor agrees that in addition to disclosures made in accordance with standard banking practices, any Lender may disclose information obtained by such Lender pursuant to this Guaranty to assignees or participants and potential assignees or participants hereunder, subject to the terms of Paragraph 10 above. 21. No Unwritten Agreements. THIS GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 22. Time of the Essence. Time is of the essence with respect to each and every covenant, agreement and obligation of Guarantor under this Guaranty. 23. [Intentionally Omitted.] 24. Triggering Event. (a) LENDER ACKNOWLEDGES AND AGREES THAT, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS GUARANTY, THE PAYMENT BY GUARANTOR OF ITS OBLIGATIONS UNDER THIS GUARANTY SHALL BE DUE ONLY IN THE EVENT THAT, AND GUARANTOR SHALL HAVE NO LIABILITY HEREUNDER UNLESS AND UNTIL, ONE OR MORE "TRIGGERING EVENTS" (AS THAT TERM IS HEREINAFTER DEFINED) SHALL OCCUR AND, WITH RESPECT TO THE ITEMS DESCRIBED IN CLAUSES (iv) THROUGH (ix) BELOW, ANY OF THE EVENTS DESCRIBED THEREIN IS NOT CURED WITHIN FIVE (5) DAYS AFTER RECEIPT BY GUARANTOR OF WRITTEN NOTICE FROM AGENT OF THE OCCURRENCE OF ANY SUCH EVENT (PROVIDED, HOWEVER, THAT SUCH CURE BY GUARANTOR SHALL NOT BE DEEMED A CURE OF ANY EVENT OF DEFAULT). (b) For the purposes of this Guaranty, the term "Triggering Event" shall mean the occurrence of any one or more of the following events: (i) Any of the Guarantor, the Borrower, WASH, WASH Manager, Wells Avenue Holdings or the Property Owner shall file any voluntary petition under any Chapter of the Bankruptcy Code, or shall in any manner seek any relief, protection, reorganization, liquidation, dissolution or similar relief for debtors under any local, state, federal or other insolvency laws or other laws providing for the relief of debtors, or in equity, or directly or indirectly cause any of the other of such Persons to file any such petition or to seek any such relief; or (ii) Any of the Guarantor, the Borrower, WASH, WASH Manager, Wells Avenue Holdings or the Property Owner (A) shall file, or, directly or indirectly, cause to be filed, any involuntary petition under any Chapter of the Bankruptcy Code against any of such Persons, whether or not any of such Persons joins in such petition, or (B) shall, directly or indirectly, cause any of such Persons to become the subject of any dissolution, liquidation or insolvency proceeding or any other proceeding pursuant to any local, state, federal or other insolvency laws or other laws providing for the relief of debtors, or in equity; (iii) Any of the Guarantor, the Borrower, WASH, WASH Manager, Wells Avenue Holdings or the Property Owner shall, directly or indirectly, cause the Mezzanine Property or the Mezzanine Collateral, or any portion thereof or interest therein, or any interest of such Persons in the Mezzanine Property or the Mezzanine Collateral, to become the property of any bankruptcy, dissolution, liquidation or insolvency proceeding; or (iv) Guarantor, Borrower, WASH, WASH Manager, Wells Avenue Holdings, the Property Owner, or any of them, shall take any action of any kind or nature whatsoever, either directly or indirectly, to oppose, impede, obstruct, hinder, frustrate, enjoin or otherwise interfere with the exercise by Lender of any of Lender's rights and remedies under the Loan Documents, or at law or in equity, other than a "Permitted Defense" (as hereinafter defined) or shall, either directly or indirectly, cause any other person to take any action which, if taken by Guarantor, the Borrower, WASH, WASH Manager, Wells Avenue Holdings or the Property Owner, would constitute a Triggering Event. For the purposes hereof, a "Permitted Defense" shall mean (A) the defense of payment in full of the obligations guaranteed hereby, (B) a defense made in good faith that a Triggering Event has not occurred, or (C) a defense that an Event of Default has not occurred or as to the improper exercise of the remedies of the Lenders under the Loan Documents, provided that (1) the primary purpose of raising such defense is not to delay, inhibit or interfere with the exercise by Lender of its rights and remedies under the Loan Documents, (2) Agent's rights under the Assignment of Interests to exercise all voting and other membership, management, approval or other rights with respect to the Property Owner shall not be opposed, impeded, obstructed, hindered, frustrated, enjoined or otherwise interfered with, and (3) all "Distributions" (as defined in the Assignment of Interests) are paid to Agent for application in accordance with the terms of the Credit Agreement; or (v) Except as expressly permitted in Section 5.3 of the Credit Agreement, there shall occur, whether voluntarily, involuntary or by operation of law, a sale, transfer, assignment, conveyance, option or other disposition of, or any mortgage, hypothecation, encumbrance, financing or refinancing of (A) any assets or properties of WASH, except for (1) the Mezzanine Mortgage Loan, (2) releases of the Mezzanine Property in accordance with the terms of the Credit Agreement, and except as provided in Section 7.21(a) with respect to the replacement of fixtures, equipment, machinery and other personal property by WASH in connection with the operation of the Mezzanine Property in the ordinary course of business, (3) a condemnation of all or any portion of the Mezzanine Property, or (4) a foreclosure of the Mezzanine Property by the Mezzanine Mortgagee, (B) any of the Mezzanine Collateral or any of the Borrower's, the Property Owner's, Wells Avenue Holdings' or WASH Manager's direct or indirect interests, rights or claims in and to WASH (including without limitation any rights to receive distributions from WASH, WASH Manager or Wells Avenue Holdings), (C) any other assets or properties of WASH Manager or Wells Avenue Holdings, (D) any direct or indirect interests, rights or claims of either Borrower, the Property Owner, WASH Manager or Wells Avenue Holdings in WASH, (E) any direct or indirect interests, rights or claims of Borrower in Wells Avenue Holdings, or (F) any direct or indirect interests, rights or claims of Wells Avenue Holdings in WASH Manager; or (vi) WASH shall seek or obtain additional advances from the holder or holders of the Mezzanine Mortgage Loan Documents (provided that the foregoing shall not be deemed violated in the event that the holder or holders of the Mezzanine Mortgage Loan Documents shall make a protective advance or advances for the payment of taxes, insurance premiums or to protect the Mezzanine Property pursuant to the terms of the Nomura Mortgages), or WASH shall modify, amend, terminate, extend or seek a consent or waiver under the Mezzanine Mortgage Loan Documents in any respect without the prior written approval of the Lender (other than an amendment or waiver that would reduce the obligations of WASH to pay principal, interest, loan fees, default interest, late charges, prepayment fees or similar payments thereunder or a waiver of an "Event of Default" under the Mezzanine Mortgage Loan Documents or other occasional waiver of compliance with a term of any of the Mezzanine Mortgage Loan Documents which waiver in each case is not a waiver of future compliance with such term or tantamount to an amendment of the Mezzanine Mortgage Loan Documents, and which waiver does not have a material adverse effect on any of the Borrower, Lender, Property Owner, WASH, WASH Manager, Wells Avenue Holdings, the Collateral, the Mezzanine Collateral or the Mezzanine Property); or (vii) Any of Borrower, Wells Avenue Holdings, WASH, WASH Manager or Property Owner shall modify, amend, cancel, release, surrender, terminate or permit the modification, amendment, cancellation, release, surrender or termination of the Wells Avenue Holdings Organizational Agreements, the WASH Manager Organizational Agreements or the WASH Organizational Agreements other than "Minor Amendments" (as such term is defined in the Assignment of Interests), or dissolve, liquidate, redeem, cancel, wind-up or permit the dissolution, liquidation, redemption, cancellation, winding-up or expiration of WASH, WASH Manager or Wells Avenue Holdings or the Wells Avenue Holdings Organizational Agreements, the WASH Manager Organizational Agreements or the WASH Organizational Agreements, or seek or permit the partition of any of the assets of any of such Persons; or (viii) Any of Borrower, the Property Owner, WASH Manager or Wells Avenue Holdings shall take any action which results in the sale, reduction, cancellation, dilution, diminution, conversion or withdrawal of any direct or indirect interest of such Person in WASH, WASH Manager or Wells Avenue Holdings, as applicable, or omit to take any action necessary to prevent any such sale, cancellation, reduction, dilution, diminution, conversion or withdrawal, or, without limiting the foregoing, consent to or permit to occur the admission of any new member of WASH, WASH Manager or Wells Avenue Holdings, the creation of any new class of interest in WASH, WASH Manager or Wells Avenue Holdings, or the issuance, directly or indirectly, any other equity or beneficial interest in WASH, WASH Manager or Wells Avenue Holdings; or (ix) The Borrower shall breach any of its covenants or agreements contained in Paragraphs 6(i) or 6(j) of the Assignment of Interests, to the full extent of any losses, damages and expenses of Lender on account thereof. (c) No consent or approval which may be given by the Lender pursuant to Section 32(g) of the Credit Agreement shall be deemed to release, diminish or otherwise impair the obligations of Guarantor under this Guaranty or to otherwise affect the determination of whether a Triggering Event has occurred. (d) For the purposes of this Guaranty, in order to determine any loss, damage or expense of Lender, Lender shall not be required to have sold or otherwise disposed of any of the Mezzanine Collateral or any other Collateral. 25. Limitation of Recovery. Without modifying or limiting any provision of this Guaranty or any agreement contained herein, except as Guarantor's liability is otherwise limited as specifically provided in Paragraph 24, above, it is hereby agreed that the amount recoverable from Guarantor under this Guaranty (but not the scope or extent of the liabilities and obligations guaranteed under this Guaranty) shall be limited to (a) the principal balance of the Notes not to exceed an amount equal to $18,569,816.00 (such sum of $18,569,816.00 being hereinafter referred to as the "Allocable Principal Amount"), (b) interest accrued on the principal portion of the Notes described in Paragraph 25(a), (c) any payments or advances of funds made by Lender pursuant to any one or more of the Loan Documents relating directly or indirectly to the Mezzanine Property, the Mezzanine Collateral or the Mezzanine Mortgage Loan, and (d) all expenses (including, but not limited to, reasonable attorneys' fees) paid or incurred by Lender in endeavoring to enforce this Guaranty (such amounts set forth in clauses (a) through (d) inclusive above are hereinafter referred to collectively as the "Allocable Loan Amount"). In the event of any foreclosure sale of the Collateral, the amount recoverable against the Guarantors with respect to any of the Triggering Events, which pursuant to the terms of any subparagraph of Paragraph 24(b) the liability of Guarantors is not specifically limited to the terms thereof, shall be reduced by an amount equal to the amount paid at such foreclosure sale, for the Collateral or portion thereof so sold at the time of such foreclosure sale (Guarantor remaining liable at such foreclosure sale for the deficiency up to the extent of any remaining liability of Guarantor hereunder). 26. Reduction of the Allocable Principal Amount. (a) Notwithstanding anything contained in this Guaranty to the contrary, if and to the extent that one or more of the Mezzanine Properties are released from the lien of the Nomura Mortgage and such Mezzanine Property is released in accordance with the terms of Section 5.3 of the Credit Agreement (including without limitation the payment to Lender of the requisite release price allocable to such portion of the Collateral pursuant to the provisions of Section 5.3 of the Credit Agreement), then the Allocable Principal Amount shall be automatically reduced by an amount equal to one hundred percent (100%) of the Designated Collateral Value allocable to such portion of the Collateral. (b) If and to the extent that any "Distributions" (as defined in the Assignment of Interests) or other sums generated by any one or more of the Mezzanine Properties (including, without limitation, any condemnation awards and/or casualty insurance proceeds) are received by Agent under the Loan Documents after the occurrence and during the continuance of an Event of Default, and are applied by Lender in reduction of the outstanding principal balance of the Notes, then the Allocable Principal Amount shall be automatically reduced by a like amount. 27. Joint and Several Liability. Notwithstanding anything to the contrary herein, the representations, warranties, covenants and agreements made by each of the Persons comprising Guarantor herein, and the liability of each of the Persons comprising Guarantor hereunder, is joint and several subject to the terms of this Paragraph 27; provided, however, that the maximum liability of WRPI and WCPT (collectively, the "Wellsford Entities") on a joint and several basis shall be fifty percent (50%) of the Allocable Loan Amount, and the maximum liability of Whitehall and WHWEL on a joint and several basis shall be fifty percent (50%) of the Allocable Loan Amount; and provided further that, in the event that a Triggering Event shall occur solely as a result of any of the events described in Paragraph 24(b)(i), (ii) or (iii) as to only one or more of the Wellsford Entities, on the one hand, or only one or more of the Whitehall Entities, on the other hand, then the Whitehall Entities shall have no liability hereunder as a result of any such action on the part of any Wellsford Entity, and none of the Wellsford Entities shall have any liability hereunder as a result of any such action on the part of any of the Whitehall Entities. 28. Statement of Discharge. Upon the payment in full of the indebtedness guaranteed hereby and upon the termination of Lender's obligations to advance Loans to Borrower, the Lender shall, upon the written request of any of Whitehall, WRPI or the Borrower, deliver a statement to the Guarantor that the Guarantor's obligations under this Guaranty have been discharged and satisfied and that this Guaranty is terminated (subject to reinstatement as provided herein). IN WITNESS WHEREOF, Guarantor has executed this Guaranty under seal as of the 16th day of July, 1998. WELLSFORD COMMERCIAL PROPERTIES TRUST, a Maryland real estate investment trust By: /s/ Gregory F. Hughes --------------------------------- Name: Gregory F. Hughes Title: CFO & Treasurer [SEAL] WELLSFORD REAL PROPERTIES, INC., a Maryland corporation By: /s/ Gregory F. Hughes ----------------------------------- Name: Gregory F. Hughes Title: CFO & Treasurer [SIGNATURES CONTINUED ON NEXT PAGE] WHWEL REAL ESTATE LIMITED PARTNERSHIP By: WHATR Gen-Par, Inc., General Partner By: /s/ Alan S. Kava -------------------------- Name: Alan S. Kava Title: Vice President Attest: /s/ Ralph Rosenberg ----------------------- Name: Ralph Rosenberg Title: Assistant Secretary WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP V By: WH Advisors, L.P. V By: WH Advisors, Inc. V By: /s/ Alan S. Kava --------------------------- Name: Alan S. Kava Title: Vice President WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP VI By: WH Advisors, L.P. VI By: WH Advisors, Inc. VI By: /s/ Alan S. Kava ---------------------------- Name: Alan S. Kava Title: Vice President WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP VII By: WH Advisors, L.P. VII By: WH Advisors, Inc. VII By: /s/ Alan S. Kava ---------------------------- Name: Alan S. Kava Title: Vice President WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP VIII By: WH Advisors, L.P. VIII By: WH Advisors, Inc. VIII By: /s/ Alan S. Kava ---------------------------- Name: Alan S. Kava Title: Vice President EX-10.45 14 MEZZANINE CONDITIONAL GUARANTY OF PAYMENT ($75,000,000 Loan) FOR AND IN CONSIDERATION OF the sum of Ten and No/100 Dollars ($10.00) and other good and valuable consideration paid or delivered to the undersigned WELLSFORD COMMERCIAL PROPERTIES TRUST, a Maryland real estate investment trust ("WCPT"), WHWEL REAL ESTATE LIMITED PARTNERSHIP ("WHWEL"), WELLSFORD REAL PROPERTIES, INC., a Maryland corporation ("WRPI"), WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP V ("Whitehall V"), WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP VI ("Whitehall VI"), WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP VII ("Whitehall VII"), and WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP VIII ("Whitehall VIII", and together with Whitehall V, Whitehall VI and Whitehall VII, collectively, "Whitehall"), each a Delaware limited partnership (WCPT, WHWEL, WRPI and Whitehall are hereinafter referred to collectively as "Guarantor"), the receipt and sufficiency whereof is hereby acknowledged by Guarantor, and for the purpose of seeking to induce BANKBOSTON, N.A., a national banking association ("BKB"), and GOLDMAN SACHS MORTGAGE COMPANY ("Goldman Sachs"; BKB and Goldman Sachs are hereinafter referred to collectively as "Lender", which term shall also include each other Bank which may now or hereafter become party to the "Credit Agreement" (as hereinafter defined) and shall also include any such individual Bank acting as agent for all of the Banks), to extend credit or otherwise provide financial accommodations to WELLSFORD/WHITEHALL PROPERTIES II, L.L.C., a Delaware limited liability company (hereinafter referred to as "Borrower"), which extension of credit and provision of financial accommodations will be to the direct interest, advantage and benefit of Guarantor, Guarantor does hereby, jointly and severally, absolutely and irrevocably guarantee to Lender: (a) subject to the provisions of Paragraphs 24 and 25, below, the full and prompt payment when due, whether by acceleration or otherwise, either before or after maturity thereof, of those certain Notes dated July 16, 1998 made by Borrower to the order of the Banks in the aggregate principal face amount of Seventy-Five Million and No/100 Dollars ($75,000,000.00) (hereinafter referred to collectively as the "Bank Notes"), together with interest as provided in the Bank Notes, together with any replacements, supplements, renewals, modifications, consolidations, restatements and extensions thereof; and (b) subject to the provisions of Paragraphs 24 and 25, below, the full and prompt payment when due, whether by acceleration or otherwise, either before or after maturity thereof, of each other note as may be issued under that certain Mezzanine Loan Agreement dated July ___, 1998 among Borrower, BKB, for itself and as agent, Goldman Sachs, and the other lenders now or hereafter a party thereto (hereinafter referred to as the "Credit Agreement"), together with interest as provided in each such note, together with any replacements, supplements, renewals, modifications, consolidations, restatements and extensions thereof (the Bank Notes and each of the notes described in this subparagraph (b) is hereinafter referred to collectively as the "Note"); and (c) subject to the terms of Paragraphs 24 and 25 below, the full and prompt payment of all other monetary obligations of Borrower to Lender under the terms of the Credit Agreement, together with any replacements, supplements, renewals, modifications, consolidations, restatements and extensions thereof; and (d) subject to the terms of Paragraphs 24 and 25 below, the full and prompt payment of any and all other monetary obligations of Borrower to Lender under the Security Documents, together with any replacements, supplements, renewals, modifications, consolidations, restatements and extensions thereof; and (e) subject to the terms of Paragraphs 24 and 25 below, the full and prompt payment of any and all other monetary obligations of Borrower to Lender under any other agreements, documents or instruments now or hereafter evidencing, securing or otherwise relating to the indebtedness evidenced by the Note or the Credit Agreement (the Note, the Security Documents, the Credit Agreement and said other agreements, documents and instruments, are hereinafter collectively referred to as the "Loan Documents" and individually referred to as a "Loan Document"). All terms used herein and not otherwise defined herein shall have the meanings set forth in the Credit Agreement. 1. Agreement to Pay; Costs of Collection. Guarantor does hereby agree that, subject to the terms of Paragraphs 24 and 25 below, below, if the Note is not paid by Borrower in accordance with its terms (including all applicable grace periods), or if any and all sums which are now or may hereafter become due from Borrower to Lender under the Loan Documents are not paid by Borrower in accordance with their terms (including all applicable grace periods), Guarantor will immediately make such payments. Guarantor further agrees to pay Lender on demand all reasonable costs and expenses (including court costs and reasonable attorneys' fees and disbursements) paid or incurred by Lender in endeavoring to enforce this Guaranty, and until paid to Lender, such sums shall bear interest at the default rate set forth in the Credit Agreement unless collection from Guarantor of interest at such rate would be contrary to applicable law, in which event such sums shall bear interest at the highest rate which may be collected from Guarantor under applicable law. 2. Reinstatement of Refunded Payments. If, for any reason, any payment to Lender of any of the obligations guaranteed hereunder is required to be refunded by Lender to Borrower, or paid or turned over by Lender to any other person, including, without limitation, by reason of the operation of bankruptcy, reorganization, receivership or insolvency laws or similar laws of general application relating to creditors' rights and remedies now or hereafter enacted, Guarantor agrees to pay the amount so required to be refunded, paid or turned over (hereinafter referred to as the "Turnover Payment"), the obligations of Guarantor shall not be treated as having been discharged by the original payment to Lender giving rise to the Turnover Payment, and this Guaranty shall be treated as having remained in full force and effect for any such Turnover Payment so made by Lender, as well as for any amounts not theretofore paid to Lender on account of such obligations, but only to the extent that Guarantor otherwise would have been liable for the payment of the same hereunder. 3. Rights of Lender to Deal with Collateral, Borrower and Other Persons. Guarantor hereby consents and agrees that Lender may at any time, and from time to time, without thereby releasing Guarantor from any liability hereunder and without notice to or further consent from Guarantor, either with or without consideration: release or surrender any lien or other security of any kind or nature whatsoever held by it or by any person, firm or corporation on its behalf or for its account, securing any indebtedness or liability hereby guaranteed; substitute for any collateral so held by it, other collateral of like kind, or of any kind; modify the terms of the Note or the Loan Documents; extend or renew the Note for any period; grant releases, compromises and indulgences with respect to the Note or the Loan Documents and to any persons or entities now or hereafter liable thereunder or hereunder; release any other Guarantor, surety, endorser or accommodation party of the Note, the Security Documents or any other Loan Documents; or take or fail to take any action of any type whatsoever. No such action which Lender shall take or fail to take in connection with the Note or the Loan Documents, or any of them, or any security for the payment of the indebtedness of Borrower to Lender or for the performance of any obligations or undertakings of Borrower, nor any course of dealing with Borrower or any other person, shall release Guarantor's obligations hereunder, affect this Guaranty in any way or afford Guarantor any recourse against Lender. The provisions of this Guaranty shall extend and be applicable to all replacements, supplements, renewals, amendments, extensions, consolidations, restatements and modifications of the Note and the Loan Documents, and any and all references herein to the Note and the Loan Documents shall be deemed to include any such replacements, supplements, renewals, extensions, amendments, consolidations, restatements or modifications thereof. 4. No Contest with Lender; Subordination. So long as any obligation hereby guaranteed remains unpaid or undischarged, Guarantor will not, by paying any sum recoverable hereunder (whether or not demanded by Lender) or by any means or on any other ground, claim any set-off or counterclaim against Borrower in respect of any liability of Guarantor to Borrower or, in proceedings under federal bankruptcy law or insolvency proceedings of any nature, prove in competition with Lender in respect of any payment hereunder or be entitled to have the benefit of any counterclaim or proof of claim or dividend or payment by or on behalf of Borrower or the benefit of any other security for any obligation hereby guaranteed which, now or hereafter, Lender may hold or in which it may have any share. Guarantor hereby expressly waives any right of contribution from or indemnity against Borrower, whether at law or in equity, arising from any payments made by Guarantor pursuant to the terms of this Guaranty, and Guarantor acknowledges that Guarantor has no right whatsoever to proceed against Borrower for reimbursement of any such payments. In connection with the foregoing, Guarantor expressly waives any and all rights of subrogation to Lender against Borrower, and Guarantor hereby waives any rights to enforce any remedy which Lender may have against Borrower and any rights to participate in any collateral for Borrower's obligations under the Loan Documents. Guarantor hereby subordinates any and all indebtedness of Borrower now or hereafter owed to Guarantor to all indebtedness of Borrower to Lender, and agrees with Lender that (a) Guarantor shall not demand or accept any payment from Borrower on account of such indebtedness, (b) Guarantor shall not claim any offset or other reduction of Guarantor's obligations hereunder because of any such indebtedness, and (c) Guarantor shall not take any action to obtain any interest in any of the security described in and encumbered by the Loan Documents because of any such indebtedness; provided, however, that, if Lender so requests, such indebtedness shall be collected, enforced and received by Guarantor as trustee for Lender and be paid over to Lender on account of the indebtedness of Borrower to Lender, but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty except to the extent the principal amount of such outstanding indebtedness shall have been reduced by such payment. 5. Waiver of Defenses. Guarantor hereby agrees that its obligations hereunder shall not be affected or impaired by, and hereby waives and agrees not to assert or take advantage of any defense based on: (a) the incapacity or lack of authority of Borrower or any other person or entity, the death or disability of Borrower or any Guarantor or any other person or entity, or the failure of Lender to file or enforce a claim against the estate (either in administration, bankruptcy or in any other proceeding) of Borrower or any Guarantor or any other person or entity; (b) the dissolution or termination of existence of Borrower or any other Person; (c) the voluntary or involuntary liquidation, sale or other disposition of all or substantially all of the assets of Borrower or any other Person; (d) the voluntary or involuntary receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, assignment, composition, or readjustment of, or any similar proceeding affecting Borrower, any Guarantor, Property Owner, WASH, WASH Manager, Wells Avenue Holdings or any of Borrower's, any Guarantor's, Property Owner's, WASH's, WASH Manager's or Wells Avenue Holdings' properties or assets; (e) the damage, destruction, condemnation, foreclosure or surrender of all or any part of the Mortgaged Property, the Mezzanine Property or any Collateral; (f) the failure of Lender to give notice of the existence, creation or incurring of any new or additional indebtedness or obligation or of any action or nonaction on the part of any other person whomsoever in connection with any obligation hereby guaranteed; (g) any failure or delay of Lender to commence an action against Borrower or any other Person, to assert or enforce any remedies against Borrower under the Note or the Loan Documents, or to realize upon any security; (h) any failure of any duty on the part of Lender to disclose to Guarantor any facts it may now or hereafter know regarding Borrower, the Property Owner, WASH or any other Person, or the Mortgaged Property, the Mezzanine Property or the property encumbered by the Security Documents, whether such facts materially increase the risk to Guarantor or not; (i) failure to accept or give notice of acceptance of this Guaranty by Lender; (j) failure to make or give notice of presentment and demand for payment of any of the indebtedness or performance of any of the obligations hereby guaranteed; (k) failure to make or give protest and notice of dishonor or of default to Guarantor or to any other party with respect to the indebtedness or performance of obligations hereby guaranteed; (l) any and all other notices whatsoever to which Guarantor might otherwise be entitled; (m) any lack of diligence by Lender in collection, protection or realization upon any collateral securing the payment of the indebtedness or performance of obligations hereby guaranteed; (n) the invalidity or unenforceability of the Note or any of the Loan Documents; (o) the compromise, settlement, release or termination of any or all of the obligations of Borrower under the Note or the Loan Documents; (p) any transfer by Borrower or any other Person of all or any part of the security encumbered by the Loan Documents; (q) the failure of Lender to perfect any security or to extend or renew the perfection of any security; or (r) to the fullest extent permitted by law, any other legal, equitable or surety defenses whatsoever to which Guarantor might otherwise be entitled, it being the intention that the obligations of Guarantor hereunder are absolute, unconditional (subject to the terms of Paragraphs 24 and 25, below) and irrevocable. 6. Guaranty of Payment and Not of Performance or Collection. This is a Guaranty of payment and not of performance or collection. Subject to the terms of Paragraphs 24 and 25, below, the liability of Guarantor under this Guaranty shall be primary, direct and immediate and not conditional or contingent upon the pursuit of any remedies against Borrower or any other person, nor against securities or liens available to Lender, its successors, successors in title, endorsees or assigns. Guarantor hereby waives any right to require that an action be brought against Borrower or any other person or to require that resort be had to any security or to any balance of any deposit account or credit on the books of Lender in favor of Borrower or any other person. 7. Rights and Remedies of Lender. In the event of an Event of Default under the Note or the Loan Documents, or any of them, Lender shall have the right to enforce its rights, powers and remedies thereunder or hereunder or under any other agreement, document or instrument now or hereafter evidencing, securing or otherwise relating to the indebtedness evidenced by the Note or secured by the Loan Documents, in any order, and all rights, powers and remedies available to Lender in such event shall be nonexclusive and cumulative of all other rights, powers and remedies provided thereunder or hereunder or by law or in equity. Accordingly, Guarantor hereby authorizes and empowers Lender upon the occurrence of any Event of Default under the Note or the Loan Documents, at its sole discretion, and without notice to Guarantor, to exercise any right or remedy which Lender may have, including, but not limited to, judicial foreclosure, exercise of rights of power of sale, acceptance of an assignment in lieu of foreclosure, appointment of a receiver, exercise of remedies against personal property, or enforcement of any assignment of leases, as to any security, whether real, personal or intangible. At any public or private sale of any security or collateral for any indebtedness or any part thereof guaranteed hereby, whether by foreclosure or otherwise, Lender may, in its discretion, purchase all or any part of such security or collateral so sold or offered for sale for its own account and may apply against the amount bid therefor all or any part of the balance due it pursuant to the terms of the Note or Security Documents or any other Loan Document without prejudice to Lender's remedies hereunder against Guarantor for deficiencies. If the indebtedness guaranteed hereby is partially paid by reason of the election of Lender to pursue any of the remedies available to Lender, or if such indebtedness is otherwise partially paid, this Guaranty shall nevertheless remain in full force and effect, and Guarantor shall remain liable for the entire balance of the indebtedness guaranteed hereby (subject, however, to the provisions of Paragraphs 24 and 25 below) even though any rights which Guarantor may have against Borrower may be destroyed or diminished by the exercise of any such remedy. 8. Application of Payments. Guarantor hereby authorizes Lender, without notice to Guarantor, to apply all payments and credits received from Borrower or from Guarantor or realized from any security in such manner and in such priority as set forth in the Credit Agreement. 9. Business Failure, Bankruptcy or Insolvency. In the event of the business failure of a Guarantor or if there shall be pending any bankruptcy or insolvency case or proceeding with respect to a Guarantor under federal bankruptcy law or any other applicable law or in connection with the insolvency of a Guarantor, or if a liquidator, receiver, or trustee shall have been appointed for a Guarantor or a Guarantor's properties or assets, Lender may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of Lender allowed in any proceedings relative to such Guarantor, or any of such Guarantor's properties or assets, and, irrespective of whether the indebtedness or other obligations of Borrower guaranteed hereby or the obligations of such Guarantor hereunder shall then be due and payable, by declaration or otherwise, Lender shall be entitled and empowered to file and prove a claim for the whole amount of any sum or sums owing by such Guarantor with respect to the indebtedness or other obligations of Borrower guaranteed hereby, and to collect and receive any moneys or other property payable or deliverable on any such claim. Guarantor covenants and agrees that upon the commencement of a voluntary or involuntary bankruptcy proceeding by or against Borrower, Guarantor shall not seek a supplemental stay or otherwise pursuant to Section 105 of the Bankruptcy Code or any other provision of the Bankruptcy Code, or any other debtor relief law (whether statutory, common law, case law, or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may be or become applicable, to stay, interdict, condition, reduce or inhibit the ability of Lender to enforce any rights of Lender against Guarantor by virtue of this Guaranty or otherwise. 10. Financial Statements and Other Information. Each Guarantor hereby independently represents and warrants to Lender that all financial statements heretofore delivered by it to Lender are true and correct in all material respects, have been prepared in accordance with generally accepted accounting principles consistently applied, and fairly present its financial condition as of the date thereof; that no material adverse change has occurred in its assets or financial condition as reflected therein since the date thereof; and that it has no liabilities or known contingent liabilities involving material amounts which are not reflected in such financial statements or referred to in the notes thereto other than its obligations under this Guaranty. Each Guarantor independently agrees that until all indebtedness guaranteed hereby has been completely repaid and all obligations and undertakings of Borrower and Guarantor under, by reason of, or pursuant to the Note and the Loan Documents have been completely performed and no Lender has any further obligation to make Loans to Borrower (or until the Assignment of Interests has been terminated as provided therein, provided that no "Triggering Event" (as hereinafter defined" has occurred), it will promptly deliver to Lender upon written (but not more often than quarterly) demand its then most recent financial statements readily available (provided that such financial statements shall be prepared and updated not less frequently than annually) detailing its assets and liabilities certified by it, in form and substance reasonably acceptable to Lender. The financial statements and other reports and information delivered by Guarantor to Lender hereunder will be treated as confidential by each Lender, and each assignee and participant hereunder and each potential assignee or participant hereunder, and such parties for themselves agree not to disclose such information to any Person, provided that such information may be disclosed to any of the following in connection with their participation in the transactions contemplated by the Loan Documents: directors, officers, employees, representatives, legal counsel, accountants and prospective investors of any of such Persons, it being understood that such Persons shall be informed of the confidential nature of such information and shall agree to treat such information confidentially. Notwithstanding the foregoing, such Persons shall be permitted to disclose such information (a) to the extent required by law, (b) to the extent such confidential information becomes publicly available other than as a result of the breach of this Guaranty, (c) to the extent such information becomes available to any of such Persons on a non-confidential basis, or (d) to the extent necessary to enforce the Loan Documents (provided that Lender shall use reasonable efforts to cause such financial statements, reports and information to remain confidential). 11. Covenants of Guarantor. Each Guarantor independently hereby covenants and agrees with Lender that until all indebtedness guaranteed hereby has been completely repaid and all obligations and undertakings of Borrower and Guarantor under, by reason of, or pursuant to the Note and the Loan Documents have been completely performed, and the Lenders have no further obligations to make Loans to Borrower (or until the Assignment of Interests has been terminated as provided therein, provided that no "Triggering Event" (as hereinafter defined) has occurred): (a) it will cause to be done all things necessary to preserve and keep in full force and effect its legal existence, rights and franchises, to effect and maintain all required foreign qualifications, licensing, domestication or authorization, and to comply in all material respects with all applicable laws and regulations with respect to the foregoing; (b) it will keep complete, proper and accurate records and books of account in which full, true and correct entries will be made in accordance with generally accepted accounting principles consistent with the preparation of the financial statements heretofore delivered to Lender and will maintain adequate accounts and reserves for all taxes (including income taxes), all depreciation and amortization of its properties, all other contingencies, and all other proper reserves in the same manner, and to the same extent, that it has, to the extent applicable, kept and maintained it records and books and maintained accounts and reserves for the foregoing; and (c) it will not make or permit to be made, by voluntary or involuntary means, any transfer or encumbrance of its direct or indirect interest in Borrower, or any dilution of its direct or indirect interest in Borrower, which would violate the provisions of Section 8.11 of the Credit Agreement. 12. [Intentionally Omitted]. 13. Changes in Writing; No Revocation. This Guaranty may not be changed orally, and no obligation of Guarantor can be released or waived by Lender except by a writing signed by a duly authorized officer of Lender. This Guaranty shall be irrevocable by Guarantor until all indebtedness guaranteed hereby has been completely repaid and the Lenders have no further obligation to advance Loans to Borrower. Notwithstanding anything contained in this Guaranty or any of the Loan Documents to the contrary, this Guaranty shall terminate and be of no further force or effect upon the termination of the Assignment of Interests either pursuant to the terms thereof or by mutual agreement of Borrower and Lender provided that no "Triggering Event" (as hereinafter defined) has occurred. 14. Notices. All notices, demands or requests provided for or permitted to be given pursuant to this Guaranty (hereinafter in this paragraph referred to as "Notice") must be in writing and shall be deemed to have been properly given or served by personal delivery or by sending same by overnight courier or by depositing the same in the United States Mail, postpaid and registered or certified, return receipt requested, at the addresses set forth below. Each Notice shall be effective upon being delivered personally or upon being sent by overnight courier or upon being deposited in the United States Mail as aforesaid. The time period in which a response to any such Notice must be given or any action taken with respect thereto, however, shall commence to run from the date of receipt if personally delivered or sent by overnight courier or, if so deposited in the United States Mail, the earlier of three (3) business days following such deposit and the date of receipt as disclosed on the return receipt. Rejection or other refusal to accept or the inability to deliver because of changed address of which no Notice was given shall be deemed to be receipt of the Notice sent. By giving at least fifteen (15) days prior Notice thereof, Guarantor or Lender shall have the right from time to time and at any time during the term of this Guaranty to change their respective addresses and each shall have the right to specify as its address any other address within the United States of America. For the purposes of this Guaranty: The Address of Lender is: BankBoston, N.A. 100 Federal Street Boston, Massachusetts 02110 Attn: Real Estate Division with a copy to: BankBoston, N.A. 115 Perimeter Center Place, N.E. Suite 500 Atlanta, Georgia 30346 Attn: Jay Johns and a copy to each other Lender which may now or hereafter become a party to the Credit Agreement at such address as may be designated by such Lender. The Address of Guarantor is: Wellsford Commercial Properties Trust 610 Fifth Avenue, Seventh Floor New York, New York 10020 Attn: Greg Hughes and Wellsford Real Properties, Inc. 610 Fifth Avenue, Seventh Floor New York, New York 10020 Attn: Greg Hughes with a copy to: Robinson Silverman Pearce Aronsohn & Berman, LLP 1290 Avenue of the Americas New York, New York 10104 Attn: Alan S. Pearce, Esq. and WHWEL Real Estate Limited Partnership 85 Broad Street, 19th Floor New York, New York 10004 Attn: Chief Financial Officer and Whitehall Street Real Estate Limited Partnership V Whitehall Street Real Estate Limited Partnership VI Whitehall Street Real Estate Limited Partnership VII Whitehall Street Real Estate Limited Partnership VIII 85 Broad Street, 19th Floor New York, New York 10004 Attn: Chief Financial Officer with a copy to: Sullivan & Cromwell 125 Broad Street New York, New York 10004 Attn: Anthony J. Colletta, Esq. 15. Governing Law. Guarantor acknowledges and agrees that this Guaranty and the obligations of Guarantor hereunder shall be governed by and interpreted and determined in accordance with the internal laws of the State of New York (excluding the laws applicable to conflicts or choice of law). 16. CONSENT TO JURISDICTION; WAIVERS. GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY (A) SUBMITS TO PERSONAL JURISDICTION IN THE STATE OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY, AND (B) WAIVES ANY AND ALL PERSONAL RIGHTS UNDER THE LAWS OF ANY STATE (I) TO THE RIGHT, IF ANY, TO TRIAL BY JURY, AND (II) TO OBJECT TO JURISDICTION WITHIN THE STATE OF NEW YORK OR VENUE IN ANY PARTICULAR FORUM WITHIN THE STATE OF NEW YORK. NOTHING CONTAINED HEREIN, HOWEVER, SHALL PREVENT LENDER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING OR EXERCISING ANY RIGHTS AGAINST ANY SECURITY AND AGAINST GUARANTOR PERSONALLY, AND AGAINST ANY PROPERTY OF GUARANTOR, WITHIN ANY OTHER STATE. INITIATING SUCH SUIT, ACTION OR PROCEEDING OR TAKING SUCH ACTION IN ANY STATE SHALL IN NO EVENT CONSTITUTE A WAIVER OF THE AGREEMENT CONTAINED HEREIN THAT THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE RIGHTS AND OBLIGATIONS OF GUARANTOR AND LENDER HEREUNDER OR OF THE SUBMISSION HEREIN MADE BY GUARANTOR TO PERSONAL JURISDICTION WITHIN THE STATE OF NEW YORK. 17. Successors and Assigns. The provisions of this Guaranty shall be binding upon Guarantor and its heirs, successors, successors in title, legal representatives, executors, estate and assigns, and shall inure to the benefit of Lender, its successors, successors in title, legal representatives and assigns. 18. Assignment by Lender. Subject to the terms of Section 18.8 of the Credit Agreement, this Guaranty is assignable by Lender in whole or in part in conjunction with any assignment of the Note or portions thereof, and any such assignment hereof or any transfer or assignment of the Note or portions thereof by Lender shall operate to vest in any such assignee the rights and powers, in whole or in part, as appropriate, herein conferred upon and granted to Lender. 19. Severability. If any term or provision of this Guaranty shall be determined to be illegal or unenforceable, all other terms and provisions hereof shall nevertheless remain effective and shall be enforced to the fullest extent permitted by law. 20. Disclosure. Guarantor agrees that in addition to disclosures made in accordance with standard banking practices, any Lender may disclose information obtained by such Lender pursuant to this Guaranty to assignees or participants and potential assignees or participants hereunder, subject to the terms of Paragraph 10 above. 21. No Unwritten Agreements. THIS GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 22. Time of the Essence. Time is of the essence with respect to each and every covenant, agreement and obligation of Guarantor under this Guaranty. 23. [Intentionally Omitted.] 24. Triggering Event. (a) LENDER ACKNOWLEDGES AND AGREES THAT, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS GUARANTY, THE PAYMENT BY GUARANTOR OF ITS OBLIGATIONS UNDER THIS GUARANTY SHALL BE DUE ONLY IN THE EVENT THAT, AND GUARANTOR SHALL HAVE NO LIABILITY HEREUNDER UNLESS AND UNTIL, ONE OR MORE "TRIGGERING EVENTS" (AS THAT TERM IS HEREINAFTER DEFINED) SHALL OCCUR AND, WITH RESPECT TO THE ITEMS DESCRIBED IN CLAUSES (iv) THROUGH (vii) BELOW, ANY OF THE EVENTS DESCRIBED THEREIN IS NOT CURED WITHIN FIVE (5) DAYS AFTER RECEIPT BY GUARANTOR OF WRITTEN NOTICE FROM AGENT OF THE OCCURRENCE OF ANY SUCH EVENT (PROVIDED, HOWEVER, THAT SUCH CURE BY GUARANTOR SHALL NOT BE DEEMED A CURE OF ANY EVENT OF DEFAULT). (b) For the purposes of this Guaranty, the term "Triggering Event" shall mean the occurrence of any one or more of the following events: (i) Any of the Guarantor, the Borrower or the Property Owner shall file any voluntary petition under any Chapter of the Bankruptcy Code, or shall in any manner seek any relief, protection, reorganization, liquidation, dissolution or similar relief for debtors under any local, state, federal or other insolvency laws or other laws providing for the relief of debtors, or in equity, or directly or indirectly cause any of the other of such Persons to file any such petition or to seek any such relief; or (ii) Any of the Guarantor, the Borrower or the Property Owner (A) shall file, or, directly or indirectly, cause to be filed, any involuntary petition under any Chapter of the Bankruptcy Code against any of such Persons, whether or not any of such Persons joins in such petition, or (B) shall, directly or indirectly, cause any of such Persons to become the subject of any dissolution, liquidation or insolvency proceeding or any other proceeding pursuant to any local, state, federal or other insolvency laws or other laws providing for the relief of debtors, or in equity; (iii) Any of the Guarantor, the Borrower or the Property Owner shall, directly or indirectly, cause the Mortgaged Property or the Collateral, or any portion thereof or interest therein, or any interest of such Persons in the Mortgaged Property or the Collateral, to become the property of any bankruptcy, dissolution, liquidation or insolvency proceeding; or (iv) Except as expressly permitted in Sections 3.2(a), 5.3 and 8.2 of the Credit Agreement, Borrower or Property Owner shall voluntarily sell, transfer, assign, convey or otherwise dispose of or mortgage, hypothecate, finance or refinance any assets or properties of Property Owner except for the Mezzanine Mortgage Loan, the Mortgage Loan or other Indebtedness permitted pursuant to Section 8.1 of the Credit Agreement; or (v) Any of Borrower or Property Owner shall modify, amend, cancel, release, surrender, terminate or permit the modification, amendment, cancellation, release, surrender or termination of the Property Owner Organizational Agreements other than "Minor Amendments" (as such term is defined in the Assignment of Interests), or dissolve, liquidate, redeem, cancel, wind-up or permit the dissolution, liquidation, redemption, cancellation, winding-up or expiration of Property Owner or Property Owner Organizational Agreements, or seek or permit the partition of any of the assets of Property Owner; or (vi) Borrower shall take any action which results in the sale, reduction, cancellation, dilution, diminution, conversion or withdrawal of any direct or indirect interest of Borrower in Property Owner, or omit to take any action necessary to prevent any such sale, cancellation, reduction, dilution, diminution, conversion or withdrawal, or, without limiting the foregoing, consent to or permit to occur the admission of any new member of Property Owner, the creation of any new class of interest in Property Owner or the issuance, directly or indirectly, any other equity or beneficial interest in Property Owner; or (vii) The Borrower shall breach any of its covenants or agreements contained in Paragraphs 6(i) or 6(j) of the Assignment of Interests, to the full extent of any losses, damages and expenses of Lender on account thereof. (c) No consent or approval which may be given by the Lender pursuant to Section 32(g) of the Credit Agreement shall be deemed to release, diminish or otherwise impair the obligations of Guarantor under this Guaranty or to otherwise affect the determination of whether a Triggering Event has occurred. (d) For the purposes of this Guaranty, in order to determine any loss, damage or expense of Lender, Lender shall not be required to have sold or otherwise disposed of any of the Mezzanine Collateral or any other Collateral. 25. Limitation of Recovery. Without modifying or limiting any provision of this Guaranty or any agreement contained herein, except as Guarantor's liability is otherwise limited as specifically provided in Paragraph 24, above, it is hereby agreed that the amount recoverable from Guarantor under this Guaranty (but not the scope or extent of the liabilities and obligations guaranteed under this Guaranty) shall be limited to (a) the principal balance of the Notes (hereinafter referred to as the "Allocable Principal Amount"), (b) interest accrued on the principal portion of the Notes described in Paragraph 25(a), (c) any payments or advances of funds made by Lender pursuant to any one or more of the Loan Documents relating directly or indirectly to the Mortgaged Property, the Mezzanine Property, the Mezzanine Collateral, the Mortgage Loan or the Mezzanine Mortgage Loan, and (d) all expenses (including, but not limited to, reasonable attorneys' fees) paid or incurred by Lender in endeavoring to enforce this Guaranty (such amounts set forth in clauses (a) through (d) inclusive above are hereinafter referred to collectively as the "Allocable Loan Amount"). In the event of any foreclosure sale of the Collateral, the amount recoverable against the Guarantors with respect to any of the Triggering Events, which pursuant to the terms of any subparagraph of Paragraph 24(b) the liability of Guarantors is not specifically limited to the terms thereof, shall be reduced by an amount equal to the amount paid at such foreclosure sale, for the Collateral or portion thereof so sold at the time of such foreclosure sale (Guarantor remaining liable at such foreclosure sale for the deficiency up to the extent of any remaining liability of Guarantor hereunder). The obligations of the Guarantor under this Guaranty are separate and independent obligations of Guarantor and are in addition to the obligations of Guarantor and the rights of Lender under any other guaranty or indemnity given by Guarantor to Lender, and payments made under one guaranty or indemnity or limitations on liability thereunder shall not reduce the liabilities and obligations of Guarantor hereunder. Without limiting the foregoing, the liability of Guarantor hereunder shall not be released, diminished or impaired to the extent that the liability of the Guarantor under the Nomura Conditional Guaranty shall be or shall be deemed to be limited as a result of the occurrence of any Triggering Event as defined in this Guaranty. 26. Limitation Reduction of the Allocable Principal Amount. (a) Notwithstanding anything contained in this Guaranty to the contrary, if and to the extent that one or more of the Mortgaged Properties or the Mezzanine Properties are released from the lien of the Mortgage or Nomura Mortgage, as applicable, and such Mortgaged Property or Mezzanine Property is released in accordance with the terms of Section 5.3 of the Credit Agreement (including without limitation the payment to Lender of the requisite release price allocable to such portion of the Collateral pursuant to the provisions of Section 5.3 of the Credit Agreement), then the Allocable Principal Amount shall be automatically reduced by an amount equal to one hundred percent (100%) of the Designated Collateral Value allocable to such portion of the Collateral. (b) If and to the extent that any "Distributions" (as defined in the Assignment of Interests) or other sums generated by any one or more of the Mortgaged Properties or the Mezzanine Properties (including, without limitation, any condemnation awards and/or casualty insurance proceeds) are received by Agent under the Loan Documents after the occurrence and during the continuance of an Event of Default, and are applied by Lender in reduction of the outstanding principal balance of the Notes, then the Allocable Principal Amount shall be automatically reduced by a like amount. 27. Limitation Joint and Several Liability. Notwithstanding anything to the contrary herein, the representations, warranties, covenants and agreements made by each of the Persons comprising Guarantor herein, and the liability of each of the Persons comprising Guarantor hereunder, is joint and several subject to the terms of this Paragraph 27; provided, however, that the maximum liability of WRPI and WCPT (collectively, the "Wellsford Entities") on a joint and several basis shall be fifty percent (50%) of the Allocable Loan Amount, and the maximum liability of Whitehall and WHWEL on a joint and several basis shall be fifty percent (50%) of the Allocable Loan Amount; and provided further that, in the event that a Triggering Event shall occur solely as a result of any of the events described in Paragraph 24(b)(i), (ii) or (iii) as to only one or more of the Wellsford Entities, on the one hand, or only one or more of the Whitehall Entities, on the other hand, then the Whitehall Entities shall have no liability hereunder as a result of any such action on the part of any Wellsford Entity, and none of the Wellsford Entities shall have any liability hereunder as a result of any such action on the part of any of the Whitehall Entities. 28. Statement of Discharge. Upon the payment in full of the indebtedness guaranteed hereby and upon the termination of Lender's obligations to advance Loans to Borrower, the Lender shall, upon the written request of any of Whitehall, WRPI or the Borrower, deliver a statement to the Guarantor that the Guarantor's obligations under this Guaranty have been discharged and satisfied and that this Guaranty is terminated (subject to reinstatement as provided herein). IN WITNESS WHEREOF, Guarantor has executed this Guaranty under seal as of the 16th day of July, 1998. WELLSFORD COMMERCIAL PROPERTIES TRUST, a Maryland real estate investment trust By:/s/ Gregory F. Hughes ------------------------------------- Name: Gregory F. Hughes Title: CFO & Treasurer [SEAL] WELLSFORD REAL PROPERTIES, INC., a Maryland corporation By:/s/ Gregory F. Hughes ------------------------------------- Name: Gregory F. Hughes Title: CFO & Treasurer WHWEL REAL ESTATE LIMITED PARTNERSHIP By: WHATR Gen-Par, Inc., General Partner By:/s/ Alan S. Kava ---------------------------------- Name: Alan S. Kava Title: Vice President Attest: Ralph F. Rosenberg ------------------------- Name: Ralph F. Rosenberg Title: Assistant Secretary WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP V By: WH Advisors, L.P. V By: WH Advisors, Inc. V By:/s/ Alan S. Kava ---------------------------- Name: Alan S. Kava Title: Vice President WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP VI By: WH Advisors, L.P. VI By: WH Advisors, Inc. VI By:/s/ Alan S. Kava ---------------------------- Name: Alan S. Kava Title: Vice President WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP VII By: WH Advisors, L.P. VII By: WH Advisors, Inc. VII By:/s/ Alan S. Kava ---------------------------- Name: Alan S. Kava Title: Vice President WHITEHALL STREET REAL ESTATE LIMITED PARTNERSHIP VIII By: WH Advisors, L.P. VIII By: WH Advisors, Inc. VIII By:/s/ Alan S. Kava ---------------------------- Name: Alan S. Kava Title: Vice President EX-10.46 15 INDEMNITY AND GUARANTY AGREEMENT -------------------------------- ($75,000,000.00 Loan) THIS INDEMNITY AND GUARANTY AGREEMENT (this "Agreement"), made as of the 16th day of July, 1998, by WELLSFORD COMMERCIAL PROPERTIES TRUST, a Maryland real estate investment trust, and WHWEL REAL ESTATE LIMITED PARTNERSHIP, jointly and severally (said entities being collectively referred to herein as "Indemnitor"), whose address is 610 Fifth Avenue, Seventh Floor, New York, New York 10020, in favor of BANKBOSTON, N.A., a national banking association, individually and as Agent for itself and the other banks which may become parties to the "Loan Agreement" (as hereinafter defined), GOLDMAN SACHS MORTGAGE COMPANY, and each other lender which may now or hereafter become party to the Loan Agreement (together, "Lender"). W I T N E S S E T H: WHEREAS, Wellsford/Whitehall Properties II, L.L.C. ("Borrower"), has obtained loan in the principal amount of up to Seventy-Five Million and No/100 Dollars ($75,000,000.00) (the "Loan") from Lender; WHEREAS, the Loan has been made pursuant to the terms and conditions of that certain Mezzanine Loan Agreement, of even date herewith, by and between Borrower, Agent and Lender (the "Loan Agreement"); WHEREAS, the Loan is evidenced by one or more promissory notes (collectively, the "Note"), and executed by Borrower and payable to the order of Lender and is secured by among other things, the "Security Documents" (as defined in the Loan Agreement and being referred to herein as the "Security Documents"), encumbering the "Collateral" (as defined in the Loan Agreement and being herein referred to as the "Collateral") (the Note, the Security Documents and all other documents and instruments evidencing or securing the Loan, as the same may from time to time be amended, consolidated, restated, extended, renewed or replaced (including without limitation any notes delivered by Borrower pursuant to Section 18.3 of the Loan Agreement), being collectively referred to herein as the "Loan Documents"); and WHEREAS, as a condition to making the Loan to Borrower, Lender has required that Indemnitor indemnify Lender from and against and guarantee payment to Lender of certain matters as set forth herein; and WHEREAS, each of the parties comprising Indemnitor is a direct or indirect owner of a beneficial interest in Borrower, the extension of the Loan to Borrower is of substantial benefit to Indemnitor and, therefore, Indemnitor desires to indemnify Lender from and against and guarantee payment to Lender of such matters. NOW, THEREFORE, to induce Lender to extend the Loan to Borrower and in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Indemnitor hereby covenants and agrees for the benefit of Lender, as follows: 1. Indemnity and Guaranty. Indemnitor hereby assumes liability for, hereby guarantees payment to Lender of, hereby agrees to pay, protect, defend and save Lender harmless from and against, and hereby indemnifies Lender from and against any and all liabilities, obligations, losses, damages, costs and expenses (including, without limitation, attorneys' fees), causes of action, suits, claims, demands and judgments of any nature or description whatsoever (collectively, "Costs") which may at any time be imposed upon, incurred by or awarded against Lender as a result of: (a) Proceeds paid under any insurance policies (or paid as a result of any other claim or cause of action against any person or entity) by reason of damage, loss or destruction to all or any portion of the Collateral, the Mortgaged Property, any other collateral for the Mortgage Loan (including without limitation the Mezzanine Collateral) or the Mezzanine Property, to the full extent of such proceeds not previously delivered to Lender, but which, under the terms of the Loan Documents, should have been delivered to Lender; (b) Proceeds or awards resulting from the condemnation or other taking in lieu of condemnation of all or any portion of the Collateral, the Mortgaged Property, any other collateral for the Mortgage Loan (including without limitation the Mezzanine Collateral) or the Mezzanine Property, to the full extent of such proceeds or awards not previously delivered to Lender, but which, under the terms of the Loan Documents, should have been delivered to Lender; (c) All tenant security deposits or other refundable deposits paid to or held by Borrower, Property Owner, WASH or any other person or entity in connection with leases, license agreements, booking agreements and all other similar agreements entered into for the use and occupancy of all or any portion of the Collateral, the Mortgaged Property or the Mezzanine Property which are not applied in accordance with the terms of the applicable lease or other agreement; (d) Rent, accounts, accounts receivables, fees and other payments received from tenants or any other person or entity under leases, license agreements, booking agreements and all other similar agreements entered into for the use and occupancy of all or any portion of the Collateral, the Mortgaged Property or the Mezzanine Property paid more than one month in advance; (e) Distributions, rents, issues, profits, revenues, accounts, accounts receivable and fees of all or any portion of the Collateral received or applicable to a period after any notice of Default from Lender under the Loan Documents in the event of any Default by Borrower thereunder which are not paid to Lender as required by the Loan Documents; (f) Damage to the Collateral, the Mortgaged Property, any other collateral for the Mortgage Loan (including without limitation the Mezzanine Collateral) or the Mezzanine Property as a result of the intentional misconduct or gross negligence of Borrower, WASH, WASH Manager, Wells Avenue Holdings, Property Owner or any of their respective principals, officers, members or general partners, or any property manager that controls, is controlled by or is under common control with any of such persons, or any removal of the Collateral, the Mortgaged Property, any other collateral for the Mortgage Loan (including without limitation the Mezzanine Collateral) or the Mezzanine Property in violation of the terms of the Loan Documents, to the full extent of the losses or damages incurred by Lender on account of such damage or removal; (g) Borrower, WASH, WASH Manager, Wells Avenue Holdings or Property Owner retaining funds directly or indirectly or making distributions to their respective members as a result of which Borrower, WASH, WASH Manager, Wells Avenue Holdings or Property Owner is unable to pay any valid taxes, assessments, mechanic's liens, materialmen's liens or other liens which could create liens on any portion of the Mortgaged Property, the Mezzanine Property, the assets of WASH Manager or Wells Avenue Holdings or which could create liens on any portion of the Collateral which would be superior to the lien or security title of the Security Documents or the other Loan Documents thereon; and (h) Fraud or intentional misrepresentation by Borrower, WASH, WASH Manager, Wells Avenue Holdings, Property Owner or any of their respective principals, members, officers or general partners, any guarantor, any indemnitor or any agent, employee or other person authorized or apparently authorized to make statements or representations on behalf of Borrower, WASH, WASH Manager, Wells Avenue Holdings, Property Owner, any principal, officer, member or partner of Borrower, WASH, WASH Manager, Wells Avenue Holdings, Property Owner, or any guarantor or any indemnitor, to the full extent of any losses, damages and expenses of Lender on account thereof. This is a guaranty of payment and performance of the matters within the scope of this Agreement and not of collection. The liability of Indemnitor under this Agreement shall be direct and immediate and not conditional or contingent upon the pursuit of any remedies against Borrower or any other person (including, without limitation, other guarantors, if any), nor against the collateral for the Loan. Indemnitor waives any right to require that an action be brought against Borrower or any other person or to require that resort be had to any collateral for the Loan or to any balance of any deposit account or credit on the books of Lender in favor of Borrower or any other person. In the event, on account of the Bankruptcy Reform Act of 1978, as amended, or any other debtor relief law (whether statutory, common law, case law or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may be or become applicable, Borrower shall be relieved of or fail to incur any debt, obligation or liability as provided in the Loan Documents which is the subject matter of this Agreement, Indemnitor shall nevertheless be fully liable therefor to the extent provided in this Agreement. In the event of a default under the Loan Documents which is not cured within any applicable grace or cure period, Lender shall have the right to enforce its rights, powers and remedies (including, without limitation, foreclosure of all or any portion of the collateral for the Loan) thereunder or hereunder, in any order, and all rights, powers and remedies available to Lender in such event shall be non-exclusive and cumulative of all other rights, powers and remedies provided thereunder or hereunder or by law or in equity. If the indebtedness and obligations guaranteed hereby are partially paid or discharged by reason of the exercise of any of the remedies available to Lender, this Agreement shall nevertheless remain in full force and effect, and Indemnitor shall remain liable for all remaining indebtedness and obligations guaranteed hereby to the extent provided in this Agreement, even though any rights which Indemnitor may have against Borrower may be destroyed or diminished by the exercise of any such remedy. Terms used in this Agreement that are not otherwise defined herein shall have the meanings set forth in the Loan Agreement. 2. Indemnification Procedures. (a) If any action shall be brought against Lender based upon any of the matters for which Lender is indemnified hereunder, Lender shall notify Indemnitor in writing thereof and Indemnitor shall promptly assume the defense thereof, including, without limitation, the employment of counsel reasonably acceptable to Lender and the negotiation of any settlement; provided, however, that any failure of Lender to notify Indemnitor of such matter shall not impair or reduce the obligations of Indemnitor hereunder. Lender shall have the right, at the expense of Indemnitor (which expense shall be included in Costs in the event that Lender shall conclude in good faith that a conflict of interest exists), to employ separate counsel in any such action and to participate in the defense thereof. In the event Indemnitor shall fail to discharge or undertake to defend Lender against any claim, loss or liability for which Lender is indemnified hereunder, Lender may, at its sole option and election, defend or settle such claim, loss or liability. The liability of Indemnitor to Lender hereunder shall be conclusively established by such settlement, provided such settlement is made in good faith, the amount of such liability to include both the settlement consideration and the costs and expenses, including, without limitation, attorneys' fees and disbursements, incurred by Lender in effecting such settlement. In such event, such settlement consideration, costs and expenses shall be included in Costs and Indemnitor shall pay the same as hereinafter provided. (b) Indemnitor shall not, without the prior written consent of Lender: (i) settle or compromise any action, suit, proceeding or claim or consent to the entry of any judgment that does not include as an unconditional term thereof the delivery by the claimant or plaintiff to Lender of a full and complete written release of Lender (in form, scope and substance reasonably satisfactory to Lender in its sole discretion) from all liability in respect of such action, suit, proceeding or claim and a dismissal with prejudice of such action, suit, proceeding or claim; or (ii) settle or compromise any action, suit, proceeding or claim in any manner that may adversely affect Lender or obligate Lender to pay any sum or perform any obligation as determined by Lender in its sole discretion. (c) All Costs shall be immediately reimbursable to Lender when and as incurred and, in the event of any litigation, claim or other proceeding, without any requirement of waiting for the ultimate outcome of such litigation, claim or other proceeding, and Indemnitor shall pay to Lender any and all Costs within ten (10) Business Days after written notice from Lender itemizing the amounts thereof incurred to the date of such notice. In addition to any other remedy available for the failure of Indemnitor to periodically pay such Costs, such Costs, if not paid within said ten-day period, shall bear interest at the rate for overdue payments in the Loan Agreement. 3. Reinstatement of Obligations. If at any time all or any part of any payment made by Indemnitor or received by Lender from Indemnitor under or with respect to this Agreement is or must be rescinded or returned for any reason whatsoever (including, but not limited to, the insolvency, bankruptcy or reorganization of Indemnitor or Borrower), then the obligations of Indemnitor hereunder shall, to the extent of the payment rescinded or returned, be deemed to have continued in existence, notwithstanding such previous payment made by Indemnitor, or receipt of payment by Lender, and the obligations of Indemnitor hereunder shall continue to be effective or be reinstated, as the case may be, as to such payment, all as though such previous payment by Indemnitor had never been made. 4. Waivers by Indemnitor. To the extent permitted by law and with respect to matters relating to liabilities arising under this Agreement, Indemnitor hereby waives and agrees not to assert or take advantage of: (a) Any right to require Lender to proceed against Borrower or any other person or to proceed against or exhaust any security held by Lender at any time or to pursue any other remedy in Lender's power or under any other agreement before proceeding against Indemnitor hereunder; (b) Any defense that may arise by reason of the incapacity, lack of authority, death or disability of any other person or persons or the failure of Lender to file or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of any other person or persons; (c) Demand, presentment for payment, notice of nonpayment, protest, notice of protest and all other notices of any kind, or the lack of any thereof, including, without limiting the generality of the foregoing, notice of the existence, creation or incurring of any new or additional indebtedness or obligation or of any action or non-action on the part of Borrower, Lender, any endorser or creditor of Borrower or of Indemnitor or on the part of any other person whomsoever under this or any other instrument in connection with any obligation or evidence of indebtedness held by Lender; (d) Any defense based upon an election of remedies by Lender; (e) Any right or claim or right to cause a marshaling of the assets of Indemnitor; (f) Any principle or provision of law, statutory or otherwise, which is or might be in conflict with the terms and provisions of this Agreement; (g) Any duty on the part of Lender to disclose to Indemnitor any facts Lender may now or hereafter know about Borrower or the Collateral, regardless of whether Lender has reason to believe that any such facts materially increase the risk beyond that which Indemnitor intends to assume or has reason to believe that such facts are unknown to Indemnitor or has a reasonable opportunity to communicate such facts to Indemnitor, it being understood and agreed that Indemnitor is fully responsible for being and keeping informed of the financial condition of Borrower, of the condition of the Collateral and of any and all circumstances bearing on the risk that liability may be incurred by Indemnitor hereunder; (h) Any lack of notice of disposition or of manner of disposition of any collateral for the Loan; (i) Any invalidity, irregularity or unenforceability, in whole or in part, of any one or more of the Loan Documents; (j) Any deficiencies in the collateral for the Loan or any deficiency in the ability of Lender to collect or to obtain performance from any persons or entities now or hereafter liable for the payment and performance of any obligation hereby guaranteed; (k) An assertion or claim that the automatic stay provided by 11 U.S.C. Section 362 (arising upon the voluntary or involuntary bankruptcy proceeding of Borrower) or any other stay provided under any other debtor relief law (whether statutory, common law, case law or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may be or become applicable, shall operate or be interpreted to stay, interdict, condition, reduce or inhibit the ability of Lender to enforce any of its rights, whether now or hereafter required, which Lender may have against Indemnitor or the collateral for the Loan; (l) Any modifications of the Loan Documents or any obligation of Borrower relating to the Loan by operation of law or by action of any court, whether pursuant to the Bankruptcy Reform Act of 1978, as amended, or any other debtor relief law (whether statutory, common law, case law or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, or otherwise; and (m) Any action, occurrence, event or matter consented to by Indemnitor under Section 5(h) hereof, under any other provision hereof, or otherwise. 5. General Provisions. (a) Fully Recourse. All of the terms and provisions of this Agreement are recourse obligations of Indemnitor and not restricted by any limitation on personal liability. Notwithstanding anything to the contrary contained herein or in any other Loan Document, the obligations of WHWEL Real Estate Limited Partnership under this Agreement whether arising under this Agreement or otherwise in connection with any of the Loan Documents, shall be without recourse to any limited partner of WHWEL Real Estate Limited Partnership and no such person shall have any liability with respect thereto. pos Unsecured Obligations. Indemnitor hereby acknowledges that Lender's appraisal of the Collateral is such that Lender is not willing to accept the consequences of the inclusion of Indemnitor's indemnity set forth herein among the obligations secured by the Security Documents and the other Loan Documents and that Lender would not make the Loan but for the unsecured personal liability undertaken by Indemnitor herein. (c) Survival. This Agreement shall be deemed to be continuing in nature and shall remain in full force and effect with respect to the matters covered by this Agreement and shall survive the exercise of any remedy by Lender under the Security Documents or any of the other Loan Documents, including, without limitation, any foreclosure or deed in lieu thereof, even if, as a part of such remedy, the Loan is paid or satisfied in full. (d) No Subrogation; No Recourse Against Lender. Notwithstanding the satisfaction by Indemnitor of any liability hereunder, Indemnitor shall not have any right of subrogation, contribution, reimbursement or indemnity whatsoever or any right of recourse to or with respect to the assets or property of Borrower or to any collateral for the Loan. In connection with the foregoing, Indemnitor expressly waives any and all rights of subrogation to Lender against Borrower, and Indemnitor hereby waives any rights to enforce any remedy which Lender may have against Borrower and any right to participate in any collateral for the Loan. In addition to and without in any way limiting the foregoing, Indemnitor hereby subordinates any and all indebtedness of Borrower now or hereafter owed to Indemnitor to all indebtedness of Borrower to Lender, and agrees with Lender that Indemnitor (i) from and after the occurrence and during the continuance of an Event of Default shall not demand or accept any payment of principal or interest from Borrower, (ii) shall not claim any offset or other reduction of Indemnitor's obligations hereunder because of any such indebtedness and (iii) shall not take any action to obtain any of the collateral from the Loan. Further, Indemnitor shall not have any right of recourse against Lender by reason of any action Lender may take or omit to take under the provisions of this Agreement or under the provisions of any of the Loan Documents. (e) Reservation of Rights. Nothing contained in this Agreement shall prevent or in any way diminish or interfere with any rights or remedies, including, without limitation, the right to contribution, which Lender may have against Borrower, Indemnitor or any other party under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (codified at Title 42 U.S.C. Section 9601 et seq.), as it may be amended from time to time, or any other applicable federal, state or local laws, all such rights being hereby expressly reserved. (f) Financial Statements. Indemnitor hereby agrees, as a material inducement to Lender to make the Loan to Borrower, to furnish to Lender promptly upon demand by Lender current and dated financial statements detailing the assets and liabilities of Indemnitor certified by Indemnitor, in form and substance acceptable to Lender. Indemnitor hereby warrants and represents unto Lender that any and all balance sheets, net worth statements and other financial data which have heretofore been given or may hereafter be given to Lender with respect to Indemnitor did or will at the time of such delivery fairly and accurately present the financial condition of Indemnitor in all material respects. (g) Rights Cumulative; Payments. Lender's rights under this Agreement shall be in addition to all rights of Lender under the Note, the Security Documents and the other Loan Documents. FURTHER, PAYMENTS MADE BY INDEMNITOR UNDER THIS AGREEMENT SHALL NOT REDUCE IN ANY RESPECT BORROWER'S OBLIGATIONS AND LIABILITIES UNDER THE NOTE, THE SECURITY DOCUMENTS AND THE OTHER LOAN DOCUMENTS SHOULD SUCH PAYMENT BE EVER RESCINDED OR RETURNED BY LENDER FOR ANY REASON WHATSOEVER (INCLUDING, BUT NOT LIMITED TO, THE INSOLVENCY, BANKRUPTCY OR REORGANIZATION OF INDEMNITOR). (h) No Limitation on Liability. Indemnitor hereby consents and agrees that Lender may at any time and from time to time without further consent from Indemnitor do any of the following events, and the liability of Indemnitor under this Agreement shall be unconditional and absolute and shall in no way be impaired or limited by any of the following events, whether occurring with or without notice to Indemnitor or with or without consideration: (i) any extensions of time for performance required by any of the Loan Documents or extension or renewal of the Note; (ii) any sale, assignment or foreclosure of the Note, the Security Documents or any of the other Loan Documents or any sale or transfer of the Collateral; (iii) any change in the composition of Borrower, including, without limitation, the withdrawal or removal of Indemnitor from any current or future position of ownership, management or control of Borrower; (iv) the accuracy or inaccuracy of the representations and warranties made by Indemnitor herein or by Borrower in any of the Loan Documents; (v) the release of Borrower or of any other person or entity from performance or observance of any of the agreements, covenants, terms or conditions contained in any of the Loan Documents by operation of law, Lender's voluntary act or otherwise; (vi) the release or substitution in whole or in part of any security for the Loan; (vii) Lender's failure to record the Security Documents or to file any financing statement (or Lender's improper recording or filing thereof) or to otherwise perfect, protect, secure or insure any lien or security interest given as security for the Loan; (viii) the modification of the terms of any one or more of the Loan Documents; or (ix) the taking or failure to take any action of any type whatsoever. No such action which Lender shall take or fail to take in connection with the Loan Documents or any collateral for the Loan, nor any course or dealing with Borrower or any other person, shall limit, impair or release Indemnitor's obligations hereunder, effect this Agreement in any way or afford Indemnitor any recourse against Lender. Nothing contained in Section shall be construed to require Lender to take or refrain from taking any action referred to herein. (i) Entire Agreement; Amendment; Severability. This Agreement contains the entire agreement between the parties respecting the matters herein set forth and supersedes all prior agreements, whether written or oral, between the parties respecting such matters. Any amendments or modifications hereto, in order to be effective, shall be in writing and executed by the parties hereto. A determination that any provision of this Agreement is unenforceable or invalid shall not affect the enforceability or validity of any other provision, and any determination that the application of any provision of this Agreement to any person or circumstance is illegal or unenforceable shall not affect the enforceability or validity of such provision as it may apply to any other persons or circumstances. (j) Governing Law; Binding Effect; Waiver of Acceptance. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, except to the extent that the applicability of any of such laws may now or hereafter be preempted by Federal law, in which case such Federal law shall so govern and be controlling. This Agreement shall bind Indemnitor and the heirs, personal representatives, successors and assigns of Indemnitor and shall inure to the benefit of Lender and the officers, directors, shareholders, agents and employees of Lender and their respective heirs, successors and assigns. Without limiting the foregoing, this Agreement is assignable by Lender in whole or in part in conjunction with any assignment of the Note or portions thereof, and any assignment hereof or any transfer or assignment of the Note or portions thereof by Lender shall operate to vest in any such assignee the rights and powers, in whole or in part, as appropriate, herein conferred upon and granted to Lender. Notwithstanding the foregoing, Indemnitor shall not assign any of its rights or obligations under this Agreement without the prior written consent of Lender, which consent may be withheld by Lender in its sole discretion. Indemnitor hereby waives any acceptance of this Agreement by Lender, and this Agreement shall immediately be binding upon Indemnitor. (k) Notice. All notices, demands, requests or other communications to be sent by one party to the other hereunder or required by law shall be in writing and shall be deemed to have been validly given or served by delivery of the same in person to the intended addressee, or by depositing the same with Federal Express or another reputable private courier service for next business day delivery to the intended addressee at its address set forth on the first page of this Agreement or at such other address as may be designated by such party as herein provided, or by depositing the same in the United States mail, postage prepaid, registered or certified mail, return receipt requested, addressed to the intended addressee at its address set forth on the first page of this Agreement or at such other address as may be designated by such party as herein provided. All notices, demands and requests shall be effective upon such personal delivery, or one (1) business day after being deposited with the private courier service, or two (2) business days after being deposited in the United States mail as required above. Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given as herein required shall be deemed to be receipt of the notice, demand or request sent. By giving to the other party hereto at least fifteen (15) days' prior written notice thereof in accordance with the provisions hereof, the parties hereto shall have the right from time to time to change their respective addresses and each shall have the right to specify as its address any other address within the United States of America. (l) No Waiver; Time of Essence; Business Day. The failure of any party hereto to enforce any right or remedy hereunder, or to promptly enforce any such right or remedy, shall not constitute a waiver thereof nor give rise to any estoppel against such party nor excuse any of the parties hereto from their respective obligations hereunder. Any waiver of such right or remedy must be in writing and signed by the party to be bound. This Agreement is subject to enforcement at law or in equity, including actions for damages or specific performance. Time is of the essence hereof. (m) Captions for Convenience. The captions and headings of the sections and paragraphs of this Agreement are for convenience of reference only and shall not be construed in interpreting the provisions hereof. (n) Attorneys' Fees. In the event it is necessary for Lender to retain the services of an attorney or any other consultants in order to enforce this Agreement, or any portion thereof, Indemnitor agrees to pay to Lender any and all reasonable costs and expenses, including, without limitation, reasonable attorneys' fees, incurred by Lender as a result thereof and such costs, fees and expenses shall be included in Costs. (o) Successive Actions. A separate right of action hereunder shall arise each time Lender acquires knowledge of any matter indemnified or guaranteed by Indemnitor under this Agreement. Separate and successive actions may be brought hereunder to enforce any of the provisions hereof at any time and from time to time. No action hereunder shall preclude any subsequent action, and Indemnitor hereby waives and covenants not to assert any defense in the nature of splitting of causes of action or merger of judgments. (p) Reliance. Lender would not make the Loan to Borrower without this Agreement. Accordingly, Indemnitor intentionally and unconditionally enters into the covenants and agreements as set forth above and understands that, in reliance upon and in consideration of such covenants and agreements, the Loan shall be made and, as part and parcel thereof, specific monetary and other obligations have been, are being and shall be entered into which would not be made or entered into but for such reliance. (q) SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. (1) INDEMNITOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, (A) SUBMITS TO PERSONAL JURISDICTION IN THE STATE OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THIS AGREEMENT, (B) AGREES THAT ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT IN THE STATE OF NEW YORK OR ANY FEDERAL COURT OF COMPETENT JURISDICTION SITTING THEREIN, (C) SUBMITS TO THE JURISDICTION OF SUCH COURTS, AND, (D) TO THE FULLEST EXTENT PERMITTED BY LAW, AGREES THAT NEITHER OF THEM WILL BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM (BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER TO BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER PROPER FORUM). INDEMNITOR FURTHER CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO THE INDEMNITOR AT THE ADDRESS FOR NOTICES DESCRIBED IN SECTION 5(k) HEREOF, AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY LAW). (2) INDEMNITOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES AND FOREVER FORGOES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THIS AGREEMENT OR ANY CONDUCT, ACT OR OMISSION OF LENDER OR INDEMNITOR, OR ANY OF THEIR DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR INDEMNITOR, IN EACH OR THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. (r) Waiver by Indemnitor. Indemnitor covenants and agrees that, upon the commencement of a voluntary or involuntary bankruptcy proceeding by or against Borrower, Indemnitor shall not seek or cause Borrower or any other person or entity to seek a supplemental stay or other relief, whether injunctive or otherwise, pursuant to 11 U.S.C. Section 105 or any other provision of the Bankruptcy Reform Act of 1978, as amended, or any other debtor relief law, (whether statutory, common law, case law or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may be or become applicable, to stay, interdict, condition, reduce or inhibit the ability of Lender to enforce any rights of Lender against Indemnitor by virtue of this Agreement or otherwise. (s) Joint and Several Liability. Notwithstanding anything to the contrary herein, the representations, warranties, covenants and agreements made by each of the persons comprising Indemnitor herein, and the liability of each of the persons comprising Indemnitor hereunder, is joint and several. IN WITNESS WHEREOF, Indemnitor has executed this Indemnity Agreement under seal as of the day and year first above written. WELLSFORD COMMERCIAL PROPERTIES TRUST, a Maryland real estate investment trust By: /s/ Gregory F. Hughes -------------------------------------- Name: Gregory F. Hughes Title: CFO & Treasurer [SIGNATURES CONTINUED ON NEXT PAGE] WHWEL REAL ESTATE LIMITED PARTNERSHIP By: WHATR Gen-Par, Inc., General Partner By:/s/ Alan S. Kava ----------------------------------- Name: Alan S. Kava Title: Vice President EX-10.47 16 REVOLVING CREDIT AGREEMENT DATED AS OF JANUARY 12, 1999 among WELLSFORD FINANCE, INC., as Borrower and BANKBOSTON, N.A., and OTHER LENDERS WHICH MAY BECOME PARTIES TO THIS AGREEMENT, as Lenders and BANKBOSTON, N.A., AS AGENT TABLE OF CONTENTS Section 1. DEFINITIONS AND RULES OF INTERPRETATION. . . . . . . . . . .-1- Section 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . .-1- Section 1.2. Rules of Interpretation.. . . . . . . . . . . . . . . . -16- Section 2. THE REVOLVING CREDIT FACILITY.. . . . . . . . . . . . . . . -16- Section 2.1. Commitment to Lend. . . . . . . . . . . . . . . . . . -16- Section 2.2. Facility Fee. . . . . . . . . . . . . . . . . . . . . -17- Section 2.3. Reduction of Commitment. . . . . . . . . . . . . . . . -17- Section 2.4. Notes. . . . . . . . . . . . . . . . . . . . . . . . . -18- Section 2.6. Requests for Loans. . . . . . . . . . . . . . . . . . -18- Section 2.7. Funds for Loans. . . . . . . . . . . . . . . . . . . . -19- Section 3. REPAYMENT OF THE LOANS. . . . . . . . . . . . . . . . . . . -20- Section 3.1. Stated Maturity. . . . . . . . . . . . . . . . . . . . -20- Section 3.2. Mandatory Prepayments. . . . . . . . . . . . . . . . . -20- Section 3.3. Optional Prepayments. . . . . . . . . . . . . . . . . -20- Section 3.4. Partial Prepayments. . . . . . . . . . . . . . . . . . -21- Section 3.5. Effect of Prepayments. . . . . . . . . . . . . . . . . -21- Section 4. CERTAIN GENERAL PROVISIONS. . . . . . . . . . . . . . . . . -21- Section 4.1. Conversion Options. . . . . . . . . . . . . . . . . . . -21- Section 4.2. Closing Fee. . . . . . . . . . . . . . . . . . . . . . -22- Section 4.3. Agents' Fee. . . . . . . . . . . . . . . . . . . . . . -22- Section 4.4. Funds for Payments. . . . . . . . . . . . . . . . . . . -22- Section 4.5. Computations. . . . . . . . . . . . . . . . . . . . . -22- Section 4.6. Inability to Determine Eurodollar Rate. . . . . . . . -23- Section 4.7. Illegality. . . . . . . . . . . . . . . . . . . . . . -23- Section 4.8. Additional Interest. . . . . . . . . . . . . . . . . . -23- Section 4.9. Additional Costs, Etc. . . . . . . . . . . . . . . . . -24- Section 4.10. Capital Adequacy. . . . . . . . . . . . . . . . . . . -25- Section 4.11. Indemnity of Borrower. . . . . . . . . . . . . . . . -25- Section 4.12. Interest on Overdue Amounts; Late Charge. . . . . . . -25- Section 4.13. Certificate. . . . . . . . . . . . . . . . . . . . . -26- Section 4.14. Limitation on Interest. . . . . . . . . . . . . . . . -26- Section 5. COLLATERAL SECURITY.. . . . . . . . . . . . . . . . . . . . -26- Section 5.1. Collateral. . . . . . . . . . . . . . . . . . . . . . -26- Section 5.2. Market Value. . . . . . . . . . . . . . . . . . . . . . -26- Section 5.3. Release of Collateral. . . . . . . . . . . . . . . . . -27- Section 5.4. Substitute Collateral. . . . . . . . . . . . . . . . . -28- Section 6. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . -29- Section 6.1. Corporate Authority, Etc. . . . . . . . . . . . . . . . -29- Section 6.2. Governmental Approvals. . . . . . . . . . . . . . . . -30- Section 6.3. Title to Properties: Leases. . . . . . . . . . . . . -30- Section 6.4. Financial Statements. . . . . . . . . . . . . . . . . -30- Section 6.5. No Material Changes. . . . . . . . . . . . . . . . . . -30- Section 6.6. Franchises, Patents, Copyrights, Etc. . . . . . . . . -31- Section 6.7. Litigation. . . . . . . . . . . . . . . . . . . . . . -31- Section 6.8. No Materially Adverse Contracts, Etc. . . . . . . . . -31- Section 6.9. Compliance with Other Instruments, Laws, Etc. . . . . -31- Section 6.10. Tax Status. . . . . . . . . . . . . . . . . . . . . . -31- Section 6.11. No Event of Default. . . . . . . . . . . . . . . . . -32- Section 6.12. Holding Company and Investment Company Acts. . . . . -32- Section 6.13. Absence of UCC Financing Statements, Etc. . . . . . . -32- Section 6.14. Setoff, Etc. . . . . . . . . . . . . . . . . . . . . -32- Section 6.15. Certain Transactions. . . . . . . . . . . . . . . . . -32- Section 6.16. Employee Benefit Plans. . . . . . . . . . . . . . . . -32- Section 6.17. ERISA Taxes. . . . . . . . . . . . . . . . . . . . . -33- Section 6.18. Plan Payments. . . . . . . . . . . . . . . . . . . . -33- Section 6.19. Regulations T, U and X. . . . . . . . . . . . . . . . -33- Section 6.20. Subsidiaries. . . . . . . . . . . . . . . . . . . . . -33- Section 6.21. Loan Documents. . . . . . . . . . . . . . . . . . . . -33- Section 6.22. Brokers. . . . . . . . . . . . . . . . . . . . . . . -34- Section 6.23. Fair Consideration. . . . . . . . . . . . . . . . . . -34- Section 6.24. Solvency. . . . . . . . . . . . . . . . . . . . . . . -34- Section 6.25. Other Debt. . . . . . . . . . . . . . . . . . . . . . -34- Section 6.26. Year 2000 Compliant. . . . . . . . . . . . . . . . . -34- Section 6.27. True Sales. . . . . . . . . . . . . . . . . . . . . . -35- Section 7. AFFIRMATIVE COVENANTS OF THE BORROWER.. . . . . . . . . . . -35- Section 7.1. Punctual Payment. . . . . . . . . . . . . . . . . . . -35- Section 7.2. Maintenance of Office. . . . . . . . . . . . . . . . . -35- Section 7.3. Records and Accounts. . . . . . . . . . . . . . . . . -35- Section 7.4. Financial Statements, Certificates and Information. . -35- Section 7.5. Notices.. . . . . . . . . . . . . . . . . . . . . . . . -37- Section 7.6. Existence; Maintenance of Properties. . . . . . . . . . -39- Section 7.7. Insurance. . . . . . . . . . . . . . . . . . . . . . -39- Section 7.8. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . -39- Section 7.9. Inspection of Properties and Books. . . . . . . . . . -40- Section 7.10. Compliance with Laws, Contracts, Licenses, and Permits. . . . . . . . . . . . . . . . . . . . . . . . -40- Section 7.11. Use of Proceeds. . . . . . . . . . . . . . . . . . . -40- Section 7.12. Further Assurances. . . . . . . . . . . . . . . . . . -40- Section 7.13. Business Operations. . . . . . . . . . . . . . . . . -41- Section 7.14. ERISA Compliance. . . . . . . . . . . . . . . . . . . -41- Section 7.15. Distribution of Income to the Borrower. . . . . . . . -41- Section 7.16. More Restrictive Agreements. . . . . . . . . . . . . -41- Section 7.17. Plan Assets, etc. . . . . . . . . . . . . . . . . . . -41- Section 7.18. Determination of Values. . . . . . . . . . . . . . . -42- Section 8. CERTAIN NEGATIVE COVENANTS OF THE BORROWER. . . . . . . . . -42- Section 8.1. Restrictions on Indebtedness. . . . . . . . . . . . . -42- Section 8.2. Restrictions on Liens, Etc. . . . . . . . . . . . . . -43- Section 8.3. Restrictions on Investments. . . . . . . . . . . . . . -43- Section 8.4. Merger, Consolidation. . . . . . . . . . . . . . . . . -44- Section 8.5. Sale and Leaseback. . . . . . . . . . . . . . . . . . -45- Section 8.6. Distributions. . . . . . . . . . . . . . . . . . . . . -45- Section 8.7. Asset Sales. . . . . . . . . . . . . . . . . . . . . . -45- Section 9. FINANCIAL COVENANTS OF BORROWER.. . . . . . . . . . . . . . -45- Section 9.1. Liabilities to Assets Ratio. . . . . . . . . . . . . . -45- Section 9.2. Consolidated EBITDA Coverage. . . . . . . . . . . . . -45- Section 9.3. Borrowing Base. . . . . . . . . . . . . . . . . . . . -46- Section 9.4. Minimum Shareholders' Equity. . . . . . . . . . . . . -46- Section 9.5. Required Equity. . . . . . . . . . . . . . . . . . . . -46- Section 10. CLOSING CONDITIONS. . . . . . . . . . . . . . . . . . . . . -46- Section 10.1. Loan Documents. . . . . . . . . . . . . . . . . . . . -46- Section 10.2. Certified Copies of Organizational Documents. . . . . -47- Section 10.3. Bylaws; Resolutions. . . . . . . . . . . . . . . . . -47- Section 10.4. Incumbency Certificate; Authorized Signers. . . . . . -47- Section 10.5. Opinion of Counsel. . . . . . . . . . . . . . . . . . -47- Section 10.6. Payment of Fees. . . . . . . . . . . . . . . . . . . -47- Section 10.7. Performance; No Default. . . . . . . . . . . . . . . -47- Section 10.8. Representations and Warranties. . . . . . . . . . . . -47- Section 10.9. Proceedings and Documents. . . . . . . . . . . . . . -48- Section 10.10. Collateral Loan Qualification Documents. . . . . . . -48- Section 10.11. Compliance Certificate. . . . . . . . . . . . . . . -48- Section 10.12. Governmental Policy. . . . . . . . . . . . . . . . . -48- Section 10.13. Other. . . . . . . . . . . . . . . . . . . . . . . . -48- Section 11. CONDITIONS TO ALL BORROWINGS. . . . . . . . . . . . . . . -48- Section 11.1. Prior Conditions Satisfied. . . . . . . . . . . . . . -48- Section 11.2. Representations True; No Default. . . . . . . . . . . -48- Section 11.3. No Legal Impediment. . . . . . . . . . . . . . . . . -49- Section 11.4. Governmental Regulation. . . . . . . . . . . . . . . -49- Section 11.5. Proceedings and Documents. . . . . . . . . . . . . . -49- Section 11.6. Borrowing Documents. . . . . . . . . . . . . . . . . -49- Section 12. EVENTS OF DEFAULT; ACCELERATION; ETC. . . . . . . . . . . -49- Section 12.1. Events of Default and Acceleration. . . . . . . . . . -49- Section 12.1A. Limitation of Cure Periods. . . . . . . . . . . . . . -52- Section 12.1B. Certain Cure Periods. . . . . . . . . . . . . . . . . -53- Section 12.2. Termination of Commitments. . . . . . . . . . . . . . -53- Section 12.3. Remedies. . . . . . . . . . . . . . . . . . . . . . . -54- Section 12.4. Distribution of Collateral Proceeds. . . . . . . . . -54- Section 13. SETOFF. . . . . . . . . . . . . . . . . . . . . . . . . . . -55- Section 14. THE AGENT.. . . . . . . . . . . . . . . . . . . . . . . . . -55- Section 14.1. Authorization. . . . . . . . . . . . . . . . . . . . -55- Section 14.2. Employees and Agents. . . . . . . . . . . . . . . . . -55- Section 14.3. No Liability. . . . . . . . . . . . . . . . . . . . . -55- Section 14.4. No Representations. . . . . . . . . . . . . . . . . . -56- Section 14.5. Payments.. . . . . . . . . . . . . . . . . . . . . . . -56- Section 14.6. Holders of Notes. . . . . . . . . . . . . . . . . . . -57- Section 14.7. Indemnity. . . . . . . . . . . . . . . . . . . . . . -57- Section 14.8. Agent as Lender. . . . . . . . . . . . . . . . . . . -57- Section 14.9. Resignation. . . . . . . . . . . . . . . . . . . . . -57- Section 14.10. Duties in the Case of Enforcement. . . . . . . . . . -58- Section 15. EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . -58- Section 16. INDEMNIFICATION.. . . . . . . . . . . . . . . . . . . . . . -59- Section 17. SURVIVAL OF COVENANTS, ETC. . . . . . . . . . . . . . . . -60- Section 18. ASSIGNMENT AND PARTICIPATION. . . . . . . . . . . . . . . . -60- Section 18.1. Conditions to Assignment by Lenders. . . . . . . . . -60- Section 18.2. Register. . . . . . . . . . . . . . . . . . . . . . . -61- Section 18.3. New Notes. . . . . . . . . . . . . . . . . . . . . . -61- Section 18.4. Participations. . . . . . . . . . . . . . . . . . . . -62- Section 18.5. Pledge by Lender. . . . . . . . . . . . . . . . . . . -62- Section 18.6. No Assignment by Borrower. . . . . . . . . . . . . . -62- Section 18.7. Disclosure. . . . . . . . . . . . . . . . . . . . . . -62- Section 19. NOTICES.. . . . . . . . . . . . . . . . . . . . . . . . . . -62- Section 20. RELATIONSHIP. . . . . . . . . . . . . . . . . . . . . . . -64- Section 21. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE. . . . . -64- Section 22. HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . -64- Section 23. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . -64- Section 24. ENTIRE AGREEMENT, ETC.. . . . . . . . . . . . . . . . . . . -65- Section 25. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . -65- Section 26. DEALINGS WITH THE BORROWER. . . . . . . . . . . . . . . . -65- Section 27. CONSENTS, AMENDMENTS, WAIVERS, ETC. . . . . . . . . . . . -65- Section 28. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . -66- Section 29. NO UNWRITTEN AGREEMENTS.. . . . . . . . . . . . . . . . . . -66- Section 30. TIME OF THE ESSENCE. . . . . . . . . . . . . . . . . . . . -66- Section 31. REPLACEMENT NOTES.. . . . . . . . . . . . . . . . . . . . . -67- Section 32. SERVICING.. . . . . . . . . . . . . . . . . . . . . . . . . -67- REVOLVING CREDIT AGREEMENT THIS REVOLVING CREDIT AGREEMENT is made as of the 12th day of January, 1999, by and among WELLSFORD FINANCE, INC., a Maryland corporation having its principal place of business at 535 Madison Avenue, 26th Floor, New York, New York 10022 ("Borrower"), BANKBOSTON, N.A., a national banking association, and the other lending institutions which may become parties hereto pursuant to Section 18 (collectively, the "Lenders"), and BANKBOSTON, N.A., as Agent for the Lenders (the "Agent"). Section 6. DEFINITIONS AND RULES OF INTERPRETATION. Section 6.1. Definitions. The following terms shall have the meanings set forth in this Section l or elsewhere in the provisions of this Agreement referred to below: Abbey Participation Interest. The Participation Interest of the Borrower, pursuant to that certain Loan Participation Agreement dated as of August 28, 1997 between Morgan Guaranty Trust Company of New York and Wellsford Real Properties, Inc., and subsequently assigned to Wellsford Capital ("Capital"), as amended by that certain First Amendment to Participation Agreement dated as of April 17, 1998, as further amended by that certain Letter Agreement dated June 1, 1998, between Morgan and Capital and subsequently assigned to Borrower, in the loan from Morgan Guaranty Trust Company of New York to various borrowers pursuant to a Revolving Credit Agreement dated as of August 28, 1997. Agent. BankBoston, N.A., a national banking association, its successors and assigns, acting as agent for the Lenders. Agents Head Office. The Agents head office located at 100 Federal Street, Boston, Massachusetts 02110, or at such other location as the Agent may designate from time to time by notice to the Borrower and the Lenders. Agents Special Counsel. Long Aldridge & Norman LLP or such other counsel as may be approved by the Agent. Agreement. This Revolving Credit Agreement, including the Schedules and Exhibits hereto. Agreement Regarding Fees. The Agreement Regarding Fees dated of even date herewith between Borrower and BKB. Appraisal. An MAI appraisal of the value of a parcel of Collateral Property, determined on a fair market value basis, performed by an independent appraiser, the form and substance of such appraisal and the identity of the appraiser to be in accordance with regulatory laws and policies (both regulatory and internal) applicable to federally regulated financial institutions, including, without limitation, FIRREA. Balance Sheet Date. September 30, 1998. Base Rate. The higher of (a) the annual rate of interest announced from time to time by BKB at its head office in Boston, Massachusetts as its "base rate", and (b) one-half of one percent (0.5%) above the Federal Funds Effective Rate (rounded upwards, if necessary, to the next one-eighth of one percent). Any change in the rate of interest payable hereunder resulting from a change in the Base Rate shall become effective as of the opening of business on the day on which such change in the Base Rate becomes effective. Base Rate Loans. Those Loans bearing interest calculated by reference to the Base Rate. BKB. BankBoston, N.A., a national banking association. Borrower. As defined in the preamble hereto. Borrowing Base. At any time, the sum of the Designated Collateral Values for each Collateral Loan. Notwithstanding anything herein to the contrary, with respect to any Collateral Loan for which BKB is the Servicer, in no event shall (a) the LTV with respect to any such Collateral Loan exceed 65%, or (b) the Designated Collateral Value for such Collateral Loans exceed thirty percent (30%) of the Designated Collateral Value within the Borrowing Base. Business Day. Any day on which banking institutions in the city in which the Agents Head Office is located are open for the transaction of banking business and, in the case of Eurodollar Rate Loans, which also is a Eurodollar Business Day. Capitalized Lease. A lease under which a Person is the lessee or obligor, the discounted future rental payment obligations under which are required to be capitalized on the balance sheet of the lessee or obligor in accordance with generally accepted accounting principles. Class 1 Collateral Loan. At any time as determined by the Agent, a Collateral Loan which at the time of determination has a Debt Service Coverage Ratio greater than 1.50 to 1 and an LTV of less than 75%. Class 2 Collateral Loan. At any time as determined by the Agent, a Collateral Loan which at the time of determination has a Debt Service Coverage Ratio greater than 1.50 to 1 and an LTV of 75% or greater but not greater than 85%. Closing Date. The first date on which all of the conditions set forth in Section 10 and Section 11 have been satisfied. CMBS. Securities issued pursuant to a securitization of commercial Mortgage Loans. Code. The Internal Revenue Code of 1986, as amended. Collateral. All of the property, rights and interests of the Borrower, which are or are intended to be subject to the security interests, liens and mortgages created by the Security Documents, including, without limitation, the Collateral Notes and the other Collateral Loan Documents. Collateral Assignment. Each of the Collateral Assignment of Documents, Rights and Claims by the Borrower to the Agent for the benefit of the Lenders pursuant to which the Collateral Notes and related documents are pledged to the Agent. Collateral Loans. Each of the Mortgage Loans, Mezzanine Loans, Subordinated Loans, Participation Interests and CMBS that are pledged to the Agent and accepted by the Lenders as Collateral. Collateral Loan Documents. Each of the documents, instruments or other agreements evidencing, securing or otherwise relating to the indebtedness of an applicable Collateral Loan. Collateral Loan Qualification Documents. See Schedule 1.2 hereto. Collateral Notes. Collectively, the Qualifying Collateral Notes that are pledged pursuant to the Collateral Assignments. Collateral Property. Collectively, the real property (including all improvements, buildings, fixtures, building equipment and personal property thereon and all additions, alterations and replacements made at any time with respect to the foregoing) and all other collateral securing repayment of a Collateral Loan (or with respect to a Mezzanine Loan, the equity interests and other collateral pledged to secure repayment of such loan and the real property which is directly or indirectly owned by the Person or Persons pledging the equity interests to secure repayment of a Mezzanine Loan) at any time and, individually, any one such parcel of real property or other collateral. Commitment. With respect to each Lender, the amount set forth on Schedule 1 hereto as the amount of such Lenders Commitment to make or maintain Loans to the Borrower, as the same may be reduced from time to time in accordance with the terms of this Agreement. Commitment Percentage. With respect to each Lender, the percentage set forth on Schedule 1 hereto as such Lenders percentage of the aggregate Commitments of all of the Lenders. Compliance Certificate. See Section 7.4(e). Consolidated or combined. With reference to any term defined herein, that term as applied to the accounts of the Borrower and its Subsidiaries, consolidated or combined in accordance with generally accepted accounting principles. Consolidated EBITDA. With respect to any period, an amount equal to the EBITDA of the Borrower and its Subsidiaries for such period consolidated in accordance with generally accepted accounting principles. The Consolidated EBITDA of the Borrower and its Subsidiaries on the consolidated financial statements of the Borrower and its Subsidiaries shall be adjusted to reflect the Borrowers allocable share of such Consolidated EBITDA for the relevant period or as of the date of determination. Consolidated Total Assets. All assets of the Borrower and its Subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles. All Real Estate shall be valued on an undepreciated cost basis. The assets of the Borrower and its Subsidiaries on the consolidated financial statements of the Borrower and its Subsidiaries shall be adjusted to reflect the Borrowers allocable share of such assets for the relevant period or as of the date of determination. Consolidated Total Liabilities. All liabilities of the Borrower and its Subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles and all Indebtedness of the Borrower and its Subsidiaries, whether or not so classified. The liabilities of the Borrower and its Subsidiaries on the consolidated financial statements of the Borrower and its Subsidiaries shall be adjusted to reflect the Borrowers allocable share of such liabilities for the relevant period or as of the date of determination. Conversion Request. A notice given by the Borrower to the Agent of its election to convert or continue a Loan in accordance with Section 4.1. Debt Offering. The issuance and sale by the Borrower of any debt securities of the Borrower. Debt Service. For any period, the sum of all interest expense and mandatory or scheduled principal payments due and payable during such period, excluding any balloon payments due upon maturity of any Indebtedness. Debt Service Coverage Ratio. For any Collateral Loan, at any time determined by the Agent at the end of any calendar quarter, the ratio (expressed as a percentage) of (a) the net operating income (determined on a cash basis) from a Collateral Property available for the payment of all Debt Service secured, in whole or in part, by such Collateral Property or by direct or indirect beneficial interests therein relating to such Collateral Property (including all senior loans, Subordinated Loans and Mezzanine Loans) for such period to (b) the Debt Service payable with respect to all loans secured, in whole or in part, by such Collateral Property or by direct or indirect beneficial interests therein relating to such Collateral Property (including all senior loans, Subordinated Loans and Mezzanine Loans) for such period. The determination of the Debt Service Coverage Ratio and the components thereof shall, so long as the same shall be determined in good faith, be conclusive and binding absent manifest error. With respect to the Woodlands Notes, the Debt Service Coverage Ratio shall be determined with respect to and the extent of the EBITDA of the Obligors under the Woodlands Notes to the extent the same is included in the interest coverage calculation for such Collateral Loan. With respect to the Abbey Participation Interest, a capital improvement reserve of $0.25 per square foot per annum of net rentable area owned by the borrowers now or hereafter a party to the "Abbey Loan Documents" (as defined in the Collateral Assignment) shall be deducted in determining the net operating income from the Collateral Properties subject thereto. Default. See Section 12.1. Designated Collateral Value. With respect to each Collateral Loan, the sum of (a) the lesser of (i) the Market Value of such Collateral Loan at any time of determination, and (ii) the outstanding principal balance of (or right to payment of principal pursuant to a Participation Interest evidenced by) such Collateral Loan, multiplied by (b) the percentage rate set forth below with respect thereto: Collateral Loan Advance Rate --------------- ------------ Class 1 Collateral Loan Not to exceed 65% Class 2 Collateral Loan Not to exceed 55% The Advance Rate for a Collateral Loan shall be determined by all of the Lenders in their sole discretion (but not to exceed 65%). As of the date hereof, the Woodlands Notes and the Abbey Participation Interest are Class 1 Collateral Loans with an Advance Rate of 65%. The Designated Collateral Value shall be zero for each Collateral Loan: (a) with respect to the Collateral Note or related Collateral Loan Documents (which shall include for the purposes hereof any underlying loan documents that are the subject of a Participation Interest), there shall have occurred a failure to pay when due, or within any applicable period of grace, any obligation thereunder, or a failure to observe or perform any term, covenant or agreement under such Collateral Note or related Collateral Loan Documents for such period of time as would permit (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof; or (b) with respect to which a Subordination Event has occurred; or (c) with respect to which the Debt Service Coverage Ratio is not greater than 1.50 to 1 as of any date of determination and such ratio is not restored within thirty (30) days of such date of determination; or (d) with respect to which the LTV exceeds the percentage specified for the Class of Collateral Loan (that is, Class 1 Collateral Loan or Class 2 Collateral Loan); provided, however, that in the event that the LTV exceeds the percentage specified for a Class 1 Collateral Loan, such Collateral Loan may with the approval of the Agent become a Class 2 Collateral Loan. Distribution. The declaration or payment of any dividend or distribution on or in respect of any shares of the Borrower, other than dividends or distributions payable solely in equity securities of the Borrower; the purchase, redemption, exchange or other retirement of any shares of the Borrower, directly or indirectly through a Subsidiary of the Borrower or otherwise; the return of capital by the Borrower to its shareholders as such; or any other distribution on or in respect of any shares of the Borrower. Dollars or $. Dollars in lawful currency of the United States of America. Domestic Lending Office. Initially, the office of each Lender designated as such in Schedule 1 hereto; thereafter, such other office of such Lender, if any, located within the United States that will be making or maintaining Base Rate Loans. Drawdown Date. The date on which any Loan is made or is to be made, and the date on which any Loan is converted or combined in accordance with Section 4.1. Duff & Phelps. Duff & Phelps Credit Rating Co. or any successor thereto. EBITDA. With respect to any Person (or any asset of any Person) for any period, an amount equal to the sum of (a) the Net Income of such Person (or attributable to such asset) for such period plus (b) depreciation and amortization, interest expense, and any extraordinary or non-recurring losses deducted in calculating such Net Income minus (c) any extraordinary or nonrecurring gains included in calculating such Net Income. Employee Benefit Plan. Any employee benefit plan within the meaning of Section 3(3) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate, other than a Multiemployer Plan. Environmental Laws. Any judgment, decree, order, law, license, rule or regulation pertaining to environmental matters, including without limitation, those arising under the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended, the Superfund Amendments and Reauthorization Act of 1986, the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any state or local statute, regulation, ordinance, order or decree relating to the environment. Equity Offering. The issuance and sale by the Borrower of any of its equity securities. ERISA. The Employee Retirement Income Security Act of 1974, as amended and in effect from time to time. ERISA Affiliate. Any Person which is treated as a single employer with the Borrower under Section 414 of the Code. ERISA Reportable Event. A reportable event with respect to a Guaranteed Pension Plan within the meaning of Section 4043 of ERISA and the regulations promulgated thereunder as to which the requirement of notice has not been waived. Estoppel and Agreement. That certain Estoppel and Agreement dated on or about the date hereof among Borrower, Morgan Guaranty Trust Company of New York and Agent. Eurocurrency Reserve Rate. For any day with respect to a Eurodollar Rate Loan, the maximum rate (expressed as a decimal) at which any lender subject thereto would be required to maintain reserves under Regulation D of the Board of Governors of the Federal Reserve System (or any successor or similar regulations relating to such reserve requirements) against "Eurocurrency Liabilities" (as that term is used in Regulation D or any successor or similar regulation), if such liabilities were outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on and as of the effective date of any change in the Eurocurrency Reserve Rate. Eurodollar Business Day. Any day on which commercial banks are open for international business (including dealings in Dollar deposits) in London or such other eurodollar interbank market as may be selected by the Agent and the Lenders in their sole discretion acting in good faith. Eurodollar Lending Office. Initially, the office of each Lender designated as such in Schedule 1 hereto; thereafter, such other office of such Lender, if any, that shall be making or maintaining Eurodollar Rate Loans. Eurodollar Rate. For any Interest Period with respect to a Eurodollar Rate Loan, the rate per annum equal to the quotient (rounded upwards to the nearest 1/16 of one percent) of (a) the rate at which the Reference Lenders Eurodollar Lending Office is offered Dollar deposits two Eurodollar Business Days prior to the beginning of such Interest Period in whatever interbank eurodollar market may be selected by the Reference Lender in its sole discretion, acting in good faith, for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of the Eurodollar Rate Loan to which such Interest Period applies, divided by (b) a number equal to 1.00 minus the Eurocurrency Reserve Rate. Eurodollar Rate Loans. Loans bearing interest calculated by reference to a Eurodollar Rate. Event of Default. See Section 12.1. Federal Funds Effective Rate. For any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent. Fitch. Fitch Investors Service or any successor thereto. generally accepted accounting principles. Principles that are (a) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, as in effect from time to time and (b) consistently applied with past financial statements of the Borrower adopting the same principles; provided that a certified public accountant would, insofar as the use of such accounting principles is pertinent, be in a position to deliver an unqualified opinion (other than a qualification regarding changes in generally accepted accounting principles) as to financial statements in which such principles have been properly applied. Guaranteed Pension Plan. Any employee pension benefit plan within the meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate the benefits of which are guaranteed on termination in full or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer Plan. Hazardous Substances. Any hazardous waste, as defined by 42 U.S.C. Section 9601(5), any hazardous substances as defined by 42 U.S.C. Section 9601(14), any pollutant or contaminant as defined by 42 U.S.C. Section 9601(33) or any toxic substances, oil or hazardous materials or other chemicals or substances regulated by any Environmental Laws. Indebtedness. All obligations, contingent and otherwise, that in accordance with generally accepted accounting principles should be classified upon the obligors balance sheet as liabilities, or to which reference should be made by footnotes thereto, including in any event and whether or not so classified: (a) all debt and similar monetary obligations, whether direct or indirect (including, without limitation, all obligations evidenced by bonds, debentures, notes or similar debt instruments and subordinated indebtedness); (b) all liabilities secured by any mortgage, pledge, security interest, lien, charge or other encumbrance existing on property owned or acquired subject thereto, whether or not the liability secured thereby shall have been assumed; and (c) all guarantees, endorsements and other contingent obligations whether direct or indirect in respect of indebtedness of others, including contingent obligations that in accordance with generally accepted accounting principles are required to be footnoted on the Borrowers consolidated balance sheets and any obligation to supply funds to or in any manner to invest directly or indirectly in a Person, to purchase indebtedness, or to assure the owner of indebtedness against loss through an agreement to purchase goods, supplies or services for the purpose of enabling the debtor to make payment of the indebtedness held by such owner or otherwise, and the obligation to reimburse the issuer in respect of any letter of credit; (d) any obligation as a lessee or an obligor under a Capitalized Lease; (e) all indebtedness, obligations or other liabilities under or with respect to interest rate swap, collar, cap or other agreements providing interest rate protection and currency exchange or swap obligations; and (f) the Borrowers pro rata share of any of the above-described obligations of its unconsolidated affiliates. Interest Payment Date. As to each Loan, the first day of each calendar month during the term of such Loan. Interest Period. With respect to each Eurodollar Rate Loan (a) initially, the period commencing on the Drawdown Date of such Loan and ending one, two or three months thereafter, and (b) thereafter, each period commencing on the day following the last day of the next preceding Interest Period applicable to such Loan and ending on the last day of one of the periods set forth above, as selected by the Borrower in a Conversion Request; provided that all of the foregoing provisions relating to Interest Periods are subject to the following: (A) if any Interest Period with respect to a Eurodollar Rate Loan would otherwise end on a day that is not a Eurodollar Business Day, that Interest Period shall end and the next Interest Period shall commence on the next preceding or succeeding Eurodollar Business Day as determined conclusively by the Reference Lender in accordance with the then current bank practice in the applicable eurodollar interbank market; (B) if the Borrower shall fail to give notice as provided in Section 4.1, the Borrower shall be deemed to have requested a conversion of the affected Eurodollar Rate Loan to a Base Rate Loan on the last day of the then current Interest Period with respect thereto; and (C) no Interest Period relating to any Eurodollar Rate Loan shall extend beyond the Maturity Date. Investments. With respect to any Person, all shares of capital stock, evidences of Indebtedness and other securities issued by any other Person, all loans, advances, or extensions of credit to, or contributions to the capital of, any other Person, all purchases of the securities or business or integral part of the business of any other Person and commitments and options to make such purchases, all interests in real property, and all other investments; provided, however, that the term "Investment" shall not include (i) equipment, inventory and other tangible personal property acquired in the ordinary course of business, or (ii) current trade and customer accounts receivable for services rendered in the ordinary course of business and payable in accordance with customary trade terms. In determining the aggregate amount of Investments outstanding at any particular time: (a) there shall be included as an Investment all interest accrued with respect to Indebtedness constituting an Investment unless and until such interest is paid; (b) there shall be deducted in respect of each such Investment any amount received as a return of capital (but only by repurchase, redemption, retirement, repayment, liquidating dividend or liquidating distribution); (c) there shall not be deducted in respect of any Investment any amounts received as earnings on such Investment, whether as dividends, interest or otherwise, except that accrued interest included as provided in the foregoing clause (a) may be deducted when paid; and (d) there shall not be deducted from the aggregate amount of Investments any decrease in the value thereof. Lenders. BKB and any other Person who becomes an assignee of any rights of a Lender pursuant to Section 18 (but not including any Participant, as defined in Section 18). Liens. See Section 8.2. Loan Documents. This Agreement, the Notes, the Security Documents, and all other documents, instruments or agreements executed or delivered by or on behalf of the Borrower evidencing or securing the Loans. Loan Request. See Section 2.6. Loans. The aggregate Loans to be made by the Lenders hereunder. LTV. As to any Collateral Loan, at any time determined by the Agent, the ratio (expressed as a percentage) that (x) the aggregate outstanding principal balance of all loans secured in whole or in part by Collateral Property or direct or indirect beneficial interests therein relating to such Collateral Property bears to (y) the value of the Collateral Property securing such loans or to which such loans relate (together with all applicable appurtenant interests and subject to all applicable liens, encumbrances and tenancies) as determined by the Agent in its good faith judgment. The determination of the LTV and components thereof shall, so long as the same shall be determined in good faith, be conclusive and binding absent manifest error. With respect to the Woodlands Notes, the LTV shall be determined with respect to and to the extent of the assets that are included in the "Total Market Value Capitalization" (as defined in the Collateral Loan Documents for the Woodlands Notes) of the Obligors for such Collateral Loan. Majority Lenders. As of any date, the Lender or Lenders whose aggregate Commitment Percentage is equal to or greater than the required percentage, as determined by the Lenders, required to approve such matter, as disclosed by the Agent to the Borrower from time to time. Market Value. With respect to any Collateral Loan, at any time determined by the Majority Lenders, the all-in acquisition cost (if acquired) or the outstanding principal balance (if originated) of a Collateral Loan; provided that in the sole discretion of the Agent, the Market Value of a Collateral Loan may be increased or decreased to equal the price at which such Collateral Loan could be sold to a third-party, as determined by the Majority Lenders in their sole discretion (exercised in good faith), which Market Value may be determined to be zero. The Majority Lenders determination of Market Value shall be conclusive upon the parties absent manifest error. Maturity Date. January 12, 2002, or such earlier date on which the Loans shall become due and payable pursuant to the terms hereof. Mezzanine Loan. A performing loan which is originated or acquired by the Borrower that is secured by a first priority pledge of the equity interests in a special purpose, bankruptcy remote person or other entity approved by the Lenders, which owns, directly or through one or more special purpose, bankruptcy remote entities or other entity approved by the Lenders, one or more income producing multifamily or commercial properties or such other properties as may be approved by the Lenders, which properties are subject to a loan to the property owner secured by a first lien thereon. Mezzanine Note. The original executed promissory note or other evidence of the indebtedness of an Obligor with respect to a Mezzanine Loan. Moodys. Moodys Investor Service Inc. or any successor thereto. Mortgage. The mortgage, deed of trust, deed to secure debt or other similar instrument securing a Mortgage Note, which creates a valid first priority lien or security title on the fee or leasehold interest in real property securing the Mortgage Note and the assignment of rents and leases related thereto. Mortgage Interest Rate. The annual rate of interest payable on a Mortgage Note, Mezzanine Note, Subordinated Loan or a CMBS, which shall be adjusted from time to time with respect to instruments with a variable rate of interest. Contingent interest, participating interest or other interest that is not being paid currently on a monthly basis or quarterly basis, if applicable, shall not be included for the purposes hereof. Mortgage Loan. A performing first priority mortgage loan on one or more multifamily or commercial real estate properties or such other properties as may be approved by the Lenders, which is originated or purchased by Borrower, and which Mortgage Loan includes, without limitation, (i) the indebtedness evidenced by a Mortgage Note and secured by a related Mortgage and (ii) a pledge by Borrower all of its right, title and interest in and to the Collateral Property covered by such Mortgage. Mortgage Note. The original executed promissory note or other evidence of the indebtedness of an Obligor with respect to a Mortgage Loan. Multiemployer Plan. Any multiemployer plan within the meaning of Section 3(37) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate. Net Income (or Deficit). With respect to any Person (or any asset of any Person) for any fiscal period, the net income (or deficit) of such Person (or attributable to such asset), after deduction of all expenses, taxes and other proper charges, determined in accordance with generally accepted accounting principles. Non-Recourse Indebtedness. Indebtedness of a Subsidiary of Borrower which is a special purpose bankruptcy remote entity which is secured by one or more parcels of Real Estate and related personal property or interests therein and is not a general obligation of the Borrower or any Subsidiary, the holder of such Indebtedness having recourse solely to the parcels of Real Estate securing such Indebtedness, the improvements and leases thereon and the rents and profits thereof securing such Indebtedness, subject to such exceptions for fraud, misapplication of rents, environmental issues and other customary matters as Agent may reasonably approve. Notes. See Section 2.4. Notice. See Section 19. Obligations. All indebtedness, obligations and liabilities of the Borrower to any of the Lenders and the Agent, individually or collectively, under this Agreement or any of the other Loan Documents or in respect of any of the Loans or the Notes, or other instruments at any time evidencing any of the foregoing, whether existing on the date of this Agreement or arising or incurred hereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise. Obligor. Collectively, the maker or obligor under a Subordinated Loan or a Mortgage Loan, any issuer, trustee or servicer of a CMBS and the maker or obligor under a Mortgage Loan that has been securitized by such CMBS, any maker or obligor under a Mezzanine Loan and any entity through which such maker or obligor directly or indirectly owns the underlying Collateral Property (including the property owner), and any Person issuing a Participation Certificate and the maker or obligor of the loan which is the subject of such Participation Interest. Outstanding. With respect to the Loans, the aggregate unpaid principal thereof as of any date of determination. PBGC. The Pension Benefit Guaranty Corporation created by Section 4002 of ERISA and any successor entity or entities having similar responsibilities. Participation Certificate. The certificates, instruments or other documents which evidence a Participation Interest. Participation Interest. The right of a person to receive the payment of principal and interest from a financial institution, satisfactory to the Lenders in their sole discretion, by virtue of the purchase by such person of an undivided fractional interest in a Mortgage Loan, Mezzanine Loan or Subordinated Loan originated or acquired by such financial institution. Permitted Liens. Liens, security interests and other encumbrances permitted by Section 8.2. Person. Any individual, corporation, partnership, limited liability company, trust, unincorporated association, business, or other legal entity, and any government or any governmental agency or political subdivision thereof. Plan Assets. Assets of any employee benefit plan subject to Part 4, Subtitle A, Title I of ERISA. Pledge Agreement. Each agreement from time to time in effect in form and substance satisfactory to the Majority Lenders pursuant to which the Borrower may pledge cash, Short-term Investments or other property referred to in clause (iii) of Section 5.1 as part of the Collateral securing the Obligations. Potential Collateral. Any property of the Borrower which is not at the time included in the Collateral and which consists of (i) Qualifying Collateral Notes, (ii) Mortgage Notes, Mezzanine Notes, CMBS, Subordinated Loans or Participation Interests which may become Qualifying Collateral Notes through the approval of all of the Lenders and the completion and delivery of Collateral Loan Qualification Documents, (iii) cash, (iv) Short-term Investments and (v) other property referred to in clause (iii) of Section 5.1. Qualifying Collateral Notes. Collectively, the Woodlands Notes, the Abbey Participation Interest and any other notes, CMBS or Participation Interests held by the Borrower which meet all of the following conditions: (i) no event which with the passage of time or the giving of notice, or both, might constitute a default shall have occurred under the applicable potential Collateral Note or related Collateral Loan Documents (which shall include for the purposes hereof any underlying loan documents that are the subject of a Participation Interest), (ii) the potential Collateral Note and the interest of the Borrower in the related Collateral Loan Documents shall be free and clear of all Liens other than the liens in favor of the Agent, (iii) the underlying Collateral Property shall be an income producing multifamily or commercial real estate project or other property approved by the Lenders and qualify as a Class 1 Collateral Loan or a Class 2 Collateral Loan, and shall not have any material title, survey, environmental or other defects and shall be acceptable to all of the Lenders, (iv) each such note, CMBS or Participation Interests shall have a Mortgage Interest Rate in excess of the interest rate payable hereunder, (v) the Agent shall have received all relative Collateral Loan Qualification Documents, all of which remain in full force and effect, and (vi) all of the Lenders shall have approved the Collateral Loan in the exercise of their sole discretion. Rating Agencies. Collectively Duff & Phelps, Fitch, Moodys and S&P. Real Estate. All real property at any time owned or leased (as lessee or sublessee) by the Borrower or any of its Subsidiaries. Record. The record, including computer records, maintained by the Agent with respect to any Loan referred to in the Notes. Reference Lender. BKB. Register. See Section 18.2. Release. Releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, disposing or dumping or threatened release of Hazardous Substances. Reportable Event. Any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder. S&P. Standard & Poors Corporation or any successor thereto. SEC. The federal Securities and Exchange Commission. Security Documents. Collectively, the Collateral Assignments, any further collateral assignments, pledges, endorsements or powers to the Agent for the benefit of the Lenders, and each Pledge Agreement, including, without limitation, U.C.C.-1 financing statements executed and delivered in connection therewith. Servicer. A servicer or agent which may service a Collateral Loan or any portion thereof. Servicing Agreement. The agreement pursuant to which a Servicer services a Collateral Loan or any portion thereof. Shareholders Equity. At any date, the total consolidated shareholders equity of the Borrower and its Subsidiaries determined in accordance with generally accepted accounting principles. Short-term Investments. Investments described in subsections (a) through (g), inclusive, of Section 8.3. For all purposes of this Agreement and the other Loan Documents, the value of Short-term Investments at any time shall be the current market value thereof determined in a manner reasonably satisfactory to the Majority Lenders. State. A state of the United States of America. Subordination Event. The occurrence of any event or circumstance (including, without limitation, the occurrence of a default or bankruptcy event) which entitles the holder of any loan to be paid prior to or in preference to the holder of a Subordinated Loan. Without limiting the foregoing, with respect to (a) a Mortgage Loan or (b) a Mezzanine Loan or Participation Interest relating to a Mezzanine Loan or a CMBS, the occurrence of any event for such period of time as would permit (assuming the giving of appropriate notice if required) the holder of any mortgage loan or tranche thereof prior to such Mortgage Loan or any loan secured by the Collateral Property underlying such Mezzanine Loan or Participation Interest, as applicable, to accelerate the maturity thereof shall constitute a Subordination Event. Subordinated Loan. A Mortgage Loan, Mezzanine Loan, CMBS or Participation Interest, or portion thereof, with respect to which the right to be paid or the timing of such payment is or may become subordinated or otherwise made inferior or subject to the right of another Person to be paid, whether by contract, priority or otherwise. Subsidiary. Any corporation, association, partnership, limited liability company, trust, or other business or other legal entity of which the designated parent shall at any time own directly or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of votes or controlling interests) of the outstanding Voting Interests. Total Commitment. The sum of the Commitments of the Lenders, as in effect from time to time. As of the date of this Agreement, the Total Commitment is $35,000,000.00 (with BKB having a Commitment of $35,000,000.00), provided that the Total Commitment shall increase up to a maximum of $50,000,000.00 as and when one or more Lenders shall acquire from BKB all or a portion of the additional uncommitted Commitment of $15,000,000.00. Type. As to any Loan, its nature as a Base Rate Loan or a Eurodollar Rate Loan. Voting Interests. Stock or similar ownership interests, of any class or classes (however designated), the holders of which are at the time entitled, as such holders, (a) to vote for the election of a majority of the directors (or persons performing similar functions) of the corporation, association, partnership, trust or other business entity involved, or (b) to control, manage, or conduct the business of the corporation, partnership, association, trust or other business entity involved. Woodlands Notes. Collectively, the Land Company Second Secured Term Loan Note dated December 28, 1998, in the principal face amount of $10,813,008.13 and that certain Commercial Company Second Secured Term Loan Note dated December 28, 1998 in the principal face amount of $4,186,991.87, each made by The Woodlands Commercial Properties Company, L.P. and The Woodlands Land Development Company, L.P. to the order of Borrower. Year 2000 Compliant. All computers, hardware, imbedded microchips, software and material date-affected technology used in Borrowers business operations are able to correctly and effectively store, process and otherwise deal with date data from, into, between and otherwise concerning the twentieth and twenty-first centuries, and otherwise continue to function properly and unimpaired with respect to all calendar dates falling on or after January 1, 2000. Section 6.2. Rules of Interpretation. (a) A reference to any document or agreement shall include such document or agreement as amended, modified or supplemented from time to time in accordance with its terms and the terms of this Agreement. (b) The singular includes the plural and the plural includes the singular. (c) A reference to any law includes any amendment or modification to such law. (d) A reference to any Person includes its permitted successors and permitted assigns. (e) Accounting terms not otherwise defined herein have the meanings assigned to them by generally accepted accounting principles applied on a consistent basis by the accounting entity to which they refer. (f) The words "include", "includes" and "including" are not limiting. (g) The words "approval" and "approved", as the context so determines, means an approval in writing given to the party seeking approval after full and fair disclosure to the party giving approval of all material facts necessary in order to determine whether approval should be granted. (h) All terms not specifically defined herein or by generally accepted accounting principles, which terms are defined in the Uniform Commercial Code as in effect in the State of New York, have the meanings assigned to them therein. (i) Reference to a particular "Section", refers to that section of this Agreement unless otherwise indicated. (j) The words "herein", "hereof", "hereunder" and words of like import shall refer to this Agreement as a whole and not to any particular section or subdivision of this Agreement. Section 7. THE REVOLVING CREDIT FACILITY. Section 7.1. Commitment to Lend. Subject to the terms and conditions set forth in this Agreement, each of the Lenders severally agrees to lend to the Borrower, and the Borrower may borrow (and repay and reborrow) from time to time between the Closing Date and the Maturity Date upon notice by the Borrower to the Agent given in accordance with Section 2.6, such sums as are requested by the Borrower for the purposes set forth in Section 7.11 up to the lesser of (a) a maximum aggregate principal amount outstanding (after giving effect to all amounts requested) at any one time equal to such Lenders Commitment and (b) such Lenders Commitment Percentage of the Borrowing Base; provided, that, in all events no Default or Event of Default shall have occurred and be continuing and the Borrowers financial statements as required pursuant to Section 2.6(iii) shall demonstrate compliance with all covenants set forth therein; and provided, further, that the outstanding principal amount of the Loans (after giving effect to all amounts requested) shall not at any time exceed the Total Commitment. The Loans shall be made pro rata in accordance with each Lenders Commitment Percentage. The Loan Request shall constitute a representation and warranty by the Borrower that all of the conditions set forth in Section 10 and Section 11, in the case of the initial Loan, and Section 11, in the case of all other Loans, have been satisfied on the date of such funding. Notwithstanding anything herein to the contrary, the Lenders shall have no obligation to make Loans to the Borrower in the maximum aggregate principal amount outstanding of more than $35,000,000.00, until the Total Commitment shall be increased, up to a maximum of $50,000,000.00, as and when one or more Lenders shall acquire from BKB all or a portion of the additional uncommitted Commitment of $15,000,000.00. Section 7.2. Facility Fee. The Borrower agrees to pay to the Agent for the accounts of the Lenders in accordance with their respective Commitment Percentages a facility fee calculated at the rate of one-fourth of one percent (1/4%) per annum on the average daily amount by which the Total Commitment exceeds the outstanding principal amount of Loans during each calendar quarter or portion thereof commencing on the date hereof and ending on the Maturity Date. The facility fee shall be payable quarterly in arrears on the first day of each calendar quarter for the immediately preceding calendar quarter or portion thereof, or on any earlier date on which the Commitments shall be reduced or shall terminate as provided in Section 2.3, with a final payment on the Maturity Date. Section 7.3. Reduction of Commitment. The Borrower shall have the right at any time and from time to time upon five Business Days prior written notice to the Agent to reduce by $1,000,000 or an integral multiple of $1,000,000 in excess thereof or to terminate entirely the unborrowed portion of the Commitments, whereupon the Commitments of the Lenders shall be reduced pro rata in accordance with their respective Commitment Percentages of the amount specified in such notice or, as the case may be, terminated, any such reduction to be without penalty (unless such reduction requires repayment of a Eurodollar Rate Loan). Promptly after receiving any notice of the Borrower delivered pursuant to this Section 2.3, the Agent will notify the Lenders of the substance thereof. Upon the effective date of any such reduction or termination, the Borrower shall pay to the Agent for the respective accounts of the Lenders the full amount of any facility fee under Section 2.2 then accrued on the amount of the reduction. No reduction or termination of the Commitments may be reinstated. Notwithstanding the foregoing, in no event shall the Commitments be reduced to less than $25,000,000.00. Section 7.4. Notes. The Loans shall be evidenced by a single promissory note of the Borrower to each Lender in substantially the form of Exhibit A hereto (collectively, the "Notes"), dated as of the Closing Date and completed with appropriate insertions. One Note shall be payable to the order of each Lender in the principal amount equal to such Lenders Commitment or, if less, the outstanding amount of all Loans made by such Lender, plus interest accrued thereon, as set forth below (provided that without increasing the Commitment of BKB, the initial Note delivered to BKB shall be in the principal face amount equal to BKBs Commitment and the remaining uncommitted Commitment of $15,000,000.00). The Borrower irrevocably authorizes the Agent to make or cause to be made, at or about the time of the Drawdown Date of any Loan or at the time of receipt of any payment of principal thereof, an appropriate notation on the Agents Record reflecting the making of such Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Loans set forth on the Agents Record shall be prima facie evidence of the principal amount thereof owing and unpaid to each Lender, but the failure to record, or any error in so recording, any such amount on the Agents Record shall not limit or otherwise affect the obligations of the Borrower hereunder or under any Note to make payments of principal of or interest on any Note when due. Section 7.5. Interest on Loans. (a) Each Base Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the date on which such Base Rate Loan is converted to a Eurodollar Rate Loan at the rate per annum equal to the sum of the Base Rate plus one and three-fourths percent (1.75%). (b) Each Eurodollar Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at the rate per annum equal to the sum of the Eurodollar Rate determined for such Interest Period plus two and three-fourths percent (2.75%). (c) The Borrower promises to pay interest on each Loan in arrears on each Interest Payment Date with respect thereto. (d) Base Rate Loans and Eurodollar Rate Loans may be converted to Loans of the other Type as provided in Section 4.1. Section 7.6. Requests for Loans. Except with respect to the initial Loan, the Borrower shall give to the Agent written notice in the form of Exhibit B hereto (or telephonic notice confirmed in writing in the form of Exhibit B hereto) of each Loan requested hereunder (a "Loan Request") no less than five (5) Business Days prior to the proposed Drawdown Date. The Borrower shall not make a Loan Request more frequently than two times each month. Each such notice shall specify with respect to the requested Loan the proposed principal amount, Drawdown Date, Interest Period (if applicable) and Type. Each such notice shall also contain (i) a statement as to the purpose for which such advance shall be used (which purpose shall be in accordance with the terms of Section 7.11), (ii) a certification by the chief financial or chief accounting officer of the Borrower that the Borrower is and will be in compliance with all covenants under the Loan Documents after giving effect to the making of such Loan, and (iii) a Compliance Certificate prepared using the financial statements of the Borrower most recently provided or required to be provided to the Agent under Section 6.4 or Section 7.4 adjusted in the best good faith estimate of the Borrower to give effect to the proposed advance. Promptly upon receipt of any such notice, the Agent shall notify each of the Lenders thereof. Except as provided in this Section 2.6, each such Loan Request shall be irrevocable and binding on the Borrower and shall obligate the Borrower to accept the Loan requested from the Lenders on the proposed Drawdown Date, provided that, in addition to the Borrowers other remedies against any Lender which fails to advance its proportionate share of a requested Loan, such Loan Request may be revoked by the Borrower by notice received by the Agent no later than the Drawdown Date if any Lender fails to advance its proportionate share of the requested Loan in accordance with the terms of this Agreement, provided further that the Borrower shall be liable in accordance with the terms of this Agreement (including, without limitation, amounts due pursuant to Section 4.8) to any Lender which is prepared to advance its proportionate share of the requested Loan for any costs, expenses or damages incurred by such Lender as a result of the Borrowers election to revoke such Loan Request. Nothing herein shall prevent the Borrower or the funding Lenders from seeking recourse against any Lender that fails to advance its proportionate share of a requested Loan (but not any other Lender) as required by this Agreement for the actual and consequential damages incurred by the Borrower (including, without limitation, amounts required to be paid under this Agreement by the Borrower to any Lender) and such funding Lenders proximately caused by such Lender that has failed to advance its proportionate share, provided that in no event shall such Lender be liable for punitive or exemplary damages. The Borrower may without cost or penalty revoke a Loan Request by delivering notice thereof to each of the Lenders no later than three (3) Business Days prior to the Drawdown Date. Each Loan Request shall be (a) for a Base Rate Loan in a minimum aggregate amount of $1,000,000 or an integral multiple of $100,000 in excess thereof, or (b) for a Eurodollar Rate Loan in a minimum aggregate amount of $2,000,000 or an integral multiple of $100,000 in excess thereof; provided, however, that there shall be no more than five (5) Eurodollar Rate Loans outstanding at any one time. Section 7.7. Funds for Loans. (a) Not later than 1:00 p.m. (Boston time) on the proposed Drawdown Date of any Loans, each of the Lenders will make available to the Agent, at the Agents Head Office, in immediately available funds, the amount of such Lenders Commitment Percentage of the amount of the requested Loans which may be disbursed pursuant to Section 2.1. Upon receipt from each Lender of such amount, and upon receipt of the documents required by Section 10 and Section 11 and the satisfaction of the other conditions set forth therein, to the extent applicable, the Agent will make available to the Borrower the aggregate amount of such Loans made available to the Agent by the Lenders by crediting such amount to the account of the Borrower maintained at the Agents Head Office. The failure or refusal of any Lender to make available to the Agent at the aforesaid time and place on any Drawdown Date the amount of its Commitment Percentage of the requested Loans shall not relieve any other Lender from its several obligation hereunder to make available to the Agent the amount of such other Lenders Commitment Percentage of any requested Loans, including any additional Loans that may be requested subject to the terms and conditions hereof to provide funds to replace those not advanced by the Lender so failing or refusing, provided that the Borrower may by notice received by the Agent no later than the Drawdown Date refuse to accept any Loan which is not fully funded in accordance with the Borrowers Loan Request subject to the terms of Section 2.6. In the event of any such failure or refusal, the Lenders not so failing or refusing shall be entitled to a priority secured position as against the Lender or Lenders so failing or refusing for such Loans as provided in Section 12.4. (b) Unless Agent shall have been notified by any Lender prior to the applicable Drawdown Date that such Lender will not make available to Agent such Lender's pro rata share of a proposed Loan, Agent may in its discretion assume that such Lender has made such Loan available to Agent in accordance with the provisions of this Agreement and Agent may, if it chooses, in reliance upon such assumption make such Loan available to Borrower, and such Lender shall be liable to the Agent for the amount of such advance. Section 8. REPAYMENT OF THE LOANS. Section 8.1. Stated Maturity. The Borrower promises to pay on the Maturity Date, and there shall become absolutely due and payable on the Maturity Date, all of the Loans outstanding on such date, together with any and all accrued and unpaid interest thereon. Section 8.2. Mandatory Prepayments. The Borrower promises to pay principal of the Loans prior to the stated maturity as follows: (a) If at any time the aggregate outstanding principal amount of the Loans exceeds the Total Commitment or the Borrowing Base, then the Borrower shall, subject to Borrowers rights pursuant to Section 12.1B, immediately pay the amount of such excess to the Agent for the respective accounts of the Lenders for application to the Loans, together with any additional interest payable pursuant to Section 4.8. (b) If at any time the Borrower receives a payment or prepayment of or in respect to the principal amount of any Collateral Loan (whether as a result of a voluntary prepayment, the occurrence of a casualty to or condemnation of the property securing such loan (except to the extent such proceeds from a casualty or condemnation are required to be released to the Obligor for repairs or restoration as a result thereof), or otherwise), then the Borrower shall immediately pay such amount to the Agent for the respective accounts of the Lenders for application to the Loans, together with any additional interest payable pursuant to Section 4.8. Section 8.3. Optional Prepayments. The Borrower shall have the right, at the Borrowers election, to prepay the outstanding amount of the Loans, as a whole or in part, at any time without penalty or premium; provided, that the full or partial prepayment of the outstanding amount of any Eurodollar Rate Loans pursuant to this Section 3.3 may be made only on the last day of the Interest Period relating thereto except as otherwise required pursuant to Section 4.7. The Borrower shall give the Agent, no later than 10:00 a.m., Boston time, at least three Business Days prior written notice of any prepayment pursuant to this Section 3.3 of any Base Rate Loans and at least four Eurodollar Business Days notice of any proposed repayment pursuant to this Section 3.3 of Eurodollar Rate Loans, in each case specifying the proposed date of payment of Loans and the principal amount to be paid. Section 8.4. Partial Prepayments. Each partial prepayment of the Loans under Section 3.3 shall be in an integral multiple of $100,000, shall be accompanied by the payment of accrued interest on the principal prepaid to the date of payment and, after payment of such interest, shall be applied, in the absence of instruction by the Borrower, first to the principal of Base Rate Loans and then to the principal of Eurodollar Rate Loans. Section 8.5. Effect of Prepayments. Amounts of the Loans prepaid under Section 3.2 and Section 3.3 prior to the Maturity Date may be reborrowed as provided in Section 2. Section 9. CERTAIN GENERAL PROVISIONS. Section 9.1. Conversion Options. (a) The Borrower may elect from time to time to convert any outstanding Loan to a Loan of another Type and such Loan shall thereafter bear interest as a Base Rate Loan or a Eurodollar Rate Loan, as applicable; provided that (i) with respect to any such conversion of a Eurodollar Rate Loan to a Base Rate Loan, the Borrower shall give the Agent at least three Business Days prior written notice of such election, and such conversion shall only be made on the last day of the Interest Period with respect to such Eurodollar Rate Loan; (ii) with respect to any such conversion of a Base Rate Loan to a Eurodollar Rate Loan, the Borrower shall give the Agent at least four Eurodollar Business Days prior written notice of such election and the Interest Period requested for such Loan, the principal amount of the Loan so converted shall be in a minimum aggregate amount of $2,000,000 or an integral multiple of $100,000 in excess thereof and, after giving effect to the making of such Loan, there shall be no more than five (5) Eurodollar Rate Loans outstanding at any one time; and (iii) no Loan may be converted into a Eurodollar Rate Loan when any Default or Event of Default has occurred and is continuing. All or any part of the outstanding Loans of any Type may be converted as provided herein, provided that no partial conversion shall result in a Base Rate Loan in an aggregate principal amount of less than $1,000,000 or a Eurodollar Rate Loan in an aggregate principal amount of less than $2,000,000 and that the aggregate principal amount of each Loan shall be in an integral multiple of $100,000. On the date on which such conversion is being made, each Lender shall take such action as is necessary to transfer its Commitment Percentage of such Loans to its Domestic Lending Office or its Eurodollar Lending Office, as the case may be. Each Conversion Request relating to the conversion of a Base Rate Loan to a Eurodollar Rate Loan shall be irrevocable by the Borrower. (b) Any Loan may be continued as such Type upon the expiration of an Interest Period with respect thereto by compliance by the Borrower with the terms of Section 4.1; provided that no Eurodollar Rate Loan may be continued as such when any Default of the type described in subsections (a), (b), (c) or (d) of Section 12.1 or Event of Default has occurred and is continuing, but shall be automatically converted to a Base Rate Loan on the last day of the Interest Period relating thereto ending during the continuance of any Default or Event of Default. (c) In the event that the Borrower does not notify the Agent of its election hereunder with respect to any Loan, such Loan shall be automatically converted to a Base Rate Loan at the end of the applicable Interest Period. Section 9.2. Closing Fee. The Borrower agrees to pay, on or before the Closing Date, to BKB a commitment fee as specified in the Agreement Regarding Fees. Section 9.3. Agents Fee. The Borrower shall pay to the Agent, for the Agents own account, an Agents fee as specified in the Agreement Regarding Fees. Section 9.4. Funds for Payments. (a) All payments of principal, interest, facility fees, Agents fees, closing fees and any other amounts due hereunder or under any of the other Loan Documents shall be made to the Agent, for the respective accounts of the Lenders and the Agent, as the case may be, at the Agents Head Office, not later than 1:00 p.m. (Boston time) on the day when due, in each case in immediately available funds. The Agent is hereby authorized to charge the account of the Borrower with BKB, on the dates when the amount thereof shall become due and payable, with the amounts of the principal of and interest on the Loans and all fees, charges, expenses and other amounts owing to the Agent and/or the Lenders under the Loan Documents. (b) All payments by the Borrower hereunder and under any of the other Loan Documents shall be made without setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless the Borrower is compelled by law to make such deduction or withholding. If any such obligation is imposed upon the Borrower with respect to any amount payable by it hereunder or under any of the other Loan Documents, the Borrower will pay to the Agent, for the account of the Lenders or (as the case may be) the Agent, on the date on which such amount is due and payable hereunder or under such other Loan Document, such additional amount in Dollars as shall be necessary to enable the Lenders or the Agent to receive the same net amount which the Lenders or the Agent would have received on such due date had no such obligation been imposed upon the Borrower. The Borrower will deliver promptly to the Agent certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by the Borrower hereunder or under such other Loan Document. Section 9.5. Computations. All computations of interest on the Loans and of other fees to the extent applicable shall be based on a 360-day year and paid for the actual number of days elapsed. Except as otherwise provided in the definition of the term "Interest Period" with respect to Eurodollar Rate Loans, whenever a payment hereunder or under any of the other Loan Documents becomes due on a day that is not a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and interest shall accrue during such extension. The outstanding amount of the Loans as reflected on the records of the Agent from time to time shall be considered prima facie evidence of such amount. Section 9.6. Inability to Determine Eurodollar Rate. In the event that, prior to the commencement of any Interest Period relating to any Eurodollar Rate Loan, the Agent shall determine that adequate and reasonable methods do not exist for ascertaining the Eurodollar Rate for such Interest Period, the Agent shall forthwith give notice of such determination (which shall be conclusive and binding on the Borrower and the Lenders) to the Borrower and the Lenders. In such event (a) any Loan Request with respect to Eurodollar Rate Loans shall be automatically withdrawn and shall be deemed a request for Base Rate Loans and (b) each Eurodollar Rate Loan will automatically, on the last day of the then current Interest Period thereof, become a Base Rate Loan, and the obligations of the Lenders to make Eurodollar Rate Loans shall be suspended until the Agent determines that the circumstances giving rise to such suspension no longer exist, whereupon the Agent shall so notify the Borrower and the Lenders. Section 9.7. Illegality. Notwithstanding any other provisions herein, if any present or future law, regulation, treaty or directive or the interpretation or application thereof shall make it unlawful, or any central bank or other governmental authority having jurisdiction over a Lender or its Eurodollar Lending Office shall assert that it is unlawful, for any Lender to make or maintain Eurodollar Rate Loans, such Lender shall forthwith give notice of such circumstances to the Agent and the Borrower and thereupon (a) the commitment of the Lenders to make Eurodollar Rate Loans or convert Loans of another type to Eurodollar Rate Loans shall forthwith be suspended and (b) the Eurodollar Rate Loans then outstanding shall be converted automatically to Base Rate Loans on the last day of each Interest Period applicable to such Eurodollar Rate Loans or within such earlier period as may be required by law. Section 9.8. Additional Interest. If any Eurodollar Rate Loan or any portion thereof is repaid or is converted to a Base Rate Loan for any reason on a date which is prior to the last day of the Interest Period applicable to such Eurodollar Rate Loan, the Borrower will pay to the Agent upon demand for the account of the Lenders in accordance with their respective Commitment Percentages, in addition to any amounts of interest otherwise payable hereunder, any amounts required to compensate the Lenders for any losses, costs or expenses which may reasonably be incurred as a result of such payment or conversion, including, without limitation, an amount equal to daily interest for the unexpired portion of such Interest Period on the Eurodollar Rate Loan or portion thereof so repaid or converted at a per annum rate equal to the excess, if any, of (a) the interest rate calculated on the basis of the Eurodollar Rate applicable to such Eurodollar Rate Loan minus (b) the yield obtainable by the Agent upon the purchase of debt securities customarily issued by the Treasury of the United States of America which have a maturity date most closely approximating the last day of such Interest Period (it being understood that the purchase of such securities shall not be required in order for such amounts to be payable and that a Lender shall not be obligated or required to have actually obtained funds at the Eurodollar Rate or to have actually reinvested such amount as described above). Section 9.9. Additional Costs, Etc. Notwithstanding anything herein to the contrary, if any future applicable law or any amendment or modification of present applicable law which expression, as used herein, includes statutes, rules and regulations thereunder and legally binding interpretations thereof by any competent court or by any governmental or other regulatory body or official with appropriate jurisdiction charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued to any Lender or the Agent by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), shall: (a) subject any Lender or the Agent to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Agreement, the other Loan Documents, such Lenders Commitment or the Loans (other than taxes based upon or measured by the income or profits of such Lender or the Agent), or (b) materially change the basis of taxation (except for changes in taxes on income or profits) of payments to any Lender of the principal of or the interest on any Loans or any other amounts payable to any Lender under this Agreement or the other Loan Documents, or (c) impose or increase or render applicable any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or loans by, or commitments of an office of any Lender beyond those in effect as of the date hereof, or (d) impose on any Lender or the Agent any other conditions or requirements with respect to this Agreement, the other Loan Documents, the Loans, such Lenders Commitment, or any class of loans or commitments of which any of the Loans or such Lenders Commitment forms a part; and the result of any of the foregoing is (i) to increase the cost to any Lender of making, funding, issuing, renewing, extending or maintaining any of the Loans or such Lenders Commitment, or (ii) to reduce the amount of principal, interest or other amount payable to such Lender or the Agent hereunder on account of such Lenders Commitment or any of the Loans, or (iii) to require such Lender or the Agent to make any payment or to forego any interest or other sum payable hereunder, the amount of which payment or foregone interest or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by such Lender or the Agent from the Borrower hereunder, then, and in each such case, the Borrower will, within fifteen (15) days of demand made by such Lender or (as the case may be) the Agent at any time and from time to time and as often as the occasion therefor may arise, pay to such Lender or the Agent such additional amounts as such Lender or the Agent shall determine in good faith to be sufficient to compensate such Lender or the Agent for such additional cost, reduction, payment or foregone interest or other sum. Each Lender and the Agent in determining such amounts may use any reasonable averaging and attribution methods, generally applied by such Lender or the Agent. Section 9.10. Capital Adequacy. If after the date hereof any Lender determines that (a) the adoption of or change in any law, rule, regulation or guideline regarding capital requirements of general application for banks or bank holding companies or any change in the interpretation or application thereof by any governmental authority charged with the administration thereof, or (b) compliance by such Lender or its parent bank holding company with any future guideline, request or directive of any such entity regarding capital adequacy or any amendment or change in interpretation of any existing guideline, request or directive (whether or not having the force of law), has the effect of reducing the return on such Lenders or such holding companys capital as a consequence of such Lenders commitment to make Loans hereunder to a level below that which such Lender or holding company could have achieved but for such adoption, change or compliance (taking into consideration such Lenders or such holding companys then existing policies with respect to capital adequacy and assuming the full utilization of such entitys capital) by any amount deemed by such Lender to be material, then such Lender may notify the Borrower thereof. The Borrower agrees to pay to such Lender the amount of such reduction in the return on capital as and when such reduction is determined, upon presentation by such Lender of a statement of the amount setting for the Lenders calculation thereof. In determining such amount, such Lender may use any reasonable averaging and attribution methods, generally applied by such Lender or the Agent. Section 9.11. Indemnity of Borrower. The Borrower agrees to indemnify each Lender and to hold each Lender harmless from and against any loss, cost or expense that such Lender may sustain or incur as a consequence of (a) default by the Borrower in payment of the principal amount of or any interest on any Eurodollar Rate Loans as and when due and payable, including any such loss or expense arising from interest or fees payable by such Lender to lenders of funds obtained by it in order to maintain its Eurodollar Rate Loans, or (b) default by the Borrower in making a borrowing or conversion after the Borrower has given (or is deemed to have given) a Loan Request or a Conversion Request; provided, however, that the Borrower shall not be required to so indemnify any Lender pursuant to clause (b) above which fails or refuses to fund its proportionate share of a Loan in accordance with the terms of this Agreement. Section 9.12. Interest on Overdue Amounts; Late Charge. Overdue principal and (to the extent permitted by applicable law) interest on the Loans and all other overdue amounts payable hereunder or under any of the other Loan Documents shall bear interest payable on demand at a rate per annum equal to four percent (4.0%) above the Base Rate from the date due until such amount shall be paid in full (after as well as before judgment). In addition, the Borrower shall pay a late charge equal to three percent (3.0%) of any amount of interest and/or principal payable on the Loans or any other amounts payable hereunder or under the Loan Documents, which is not paid within ten days of the date when due. Section 9.13. Certificate. A certificate setting forth any amounts payable pursuant to Section 4.8, Section 4.9, Section 4.10, Section 4.11 or Section 4.12 and a brief explanation of such amounts which are due, submitted by any Lender or the Agent to the Borrower, shall be conclusive in the absence of manifest error. Section 9.14. Limitation on Interest. Notwithstanding anything in this Agreement to the contrary, all agreements between the Borrower and the Lenders and the Agent, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of any of the Obligations or otherwise, shall the interest contracted for, charged or received by the Lenders exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, interest would otherwise be payable to the Lenders in excess of the maximum lawful amount, the interest payable to the Lenders shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance the Lenders shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal balance of the Obligations and to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal of the Obligations, such excess shall be refunded to the Borrower. All interest paid or agreed to be paid to the Lenders shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal of the Obligations (including the period of any renewal or extension thereof) so that the interest thereon for such full period shall not exceed the maximum amount permitted by applicable law. This section shall control all agreements between the Borrower and the Lenders and the Agent. Section 10. COLLATERAL SECURITY. Section 10.1. Collateral. The Obligations shall be secured by (i) a perfected first priority pledge to the Agent, for the benefit of the Lenders, of the Collateral Loan Documents; (ii) a perfected first priority lien to be held by the Agent for the benefit of the Lenders in cash and Short-term Investments of the Borrower from time to time pledged to the Agent pursuant to one or more Pledge Agreements and (iii) such additional collateral, if any, as the Agent for the benefit of the Lenders from time to time may accept as security for the Obligations with the consent of the Majority Lenders, whether pursuant to Section 5.4 hereof or otherwise, which consent may be given or withheld in the sole discretion of the Majority Lenders. Section 10.2. Market Value. (a) The Majority Lenders shall redetermine the Market Value of each of the Collateral Loans not more frequently than once each 12-month period in order to determine the current Designated Collateral Value of each Collateral Loan and whether a note, Participation Interest or CMBS may be a Qualifying Collateral Note, and the Borrower shall pay to the Agent on demand all reasonable costs of such determination. (b) Notwithstanding the provisions of Section 5.2(a), the Majority Lenders may redetermine the Market Value for the purpose of determining the current Designated Collateral Value of a Collateral Loan or whether a note, Participation Interest or CMBS is a Qualifying Collateral Note (i) at any time following a condemnation of or uninsured casualty to the Collateral Property related to such Collateral Loan, or (ii) in the event that there is a material adverse change to the Borrower or its assets or any Collateral Property. The expense of such determination performed pursuant to this Section 5.2(b) shall be borne by the Borrower. (c) In the event that the Agent shall advise the Borrower, on the basis of any determination pursuant to Section 5.2, that the Designated Collateral Value is insufficient to comply with the requirements of Section 9.3, then until the Designated Collateral Value shall be restored to compliance with Section 9.3 the Lenders shall not be required to make advances under Section 2.1. (d) Notwithstanding the provisions of Section 5.2(a), in the event that the Borrower shall desire to advance additional amounts pursuant to the Abbey Participation Interest, Borrower may request that the Agent and the Majority Lenders redetermine the Market Value of the Abbey Participation Interest for the purpose of determining the current Designated Collateral Value thereof. Such redetermination shall be subject to delivery to the Agent and the Majority Lenders of such evidence as the Agent and the Majority Lenders may require to verify the increase in the Market Value of the Abbey Participation Interest, the LTV and Debt Service Coverage Ratio with respect to the Collateral Properties relating thereto, the continued classification of such Collateral Note as a Class 1 Collateral Loan or Class 2 Collateral Loan, as applicable, and the other requirements of this Agreement for a Collateral Note to be a Qualifying Collateral Note. Section 10.3. Release of Collateral. Provided no Default or Event of Default shall have occurred hereunder and be continuing (or would exist immediately after giving effect to the transactions contemplated by this Section 5.3 except as provided in this Section 5.3), the Agent shall release a Collateral Note from the lien of the Security Documents encumbering the same upon the request of the Borrower and upon the following terms and conditions: (a) The Borrower shall deliver to the Agent written notice of its desire to obtain each such release no later than fifteen (15) days prior to the date on which each such release is to be effected together with evidence satisfactory to the Agent that such release is to facilitate a sale of such Collateral Note to an unrelated third party in a bona-fide arms-length transaction for a cash sales price or a bona-fide refinance; and (b) The Borrower shall submit to the Agent with such request a Compliance Certificate prepared using the financial statements of the Borrower most recently provided or required to be provided to the Agent under Section 6.4 or Section 7.4 adjusted in the best good faith estimate of the Borrower to give effect to the proposed release and demonstrating that no Default or Event of Default with respect to the covenants referred to therein shall exist after giving effect to such release; and (c) The Borrower shall pay all reasonable costs and expenses of the Agent in connection with such release, including without limitation, reasonable attorneys fees; and (d) The Borrower shall pay to the Agent for the account of the Lenders, which payment shall be applied to reduce the outstanding principal balance of the Loans, a release price equal to 105% of the Designated Collateral Value of the Collateral to be released as most recently determined hereunder. Such payment shall be applied to reduce the outstanding principal balance of the Loans; provided, that the Borrower shall not be required to make a payment which would reduce the principal balance below zero. Notwithstanding the foregoing, in the event that the Borrower shall sell to BKB a portion of the Abbey Participation Interest pursuant to a separate transaction, the release price shall be equal to 100% of the Designated Collateral Value as most recently determined hereunder of the Abbey Participation Interest to be released. Section 10.4. Substitute Collateral. (a) The Borrower from time to time may, by written request to the Agent who shall promptly notify the Lenders, request that certain Potential Collateral owned by the Borrower be included as Collateral to secure the Obligations and for the purpose of increasing the Borrowing Base or replacing existing Collateral. Notwithstanding the foregoing, no Potential Collateral shall be included as Collateral unless and until the following conditions precedent shall have been satisfied: (i) such proposed collateral shall be a Qualifying Collateral Note; and (ii) the Borrower shall have executed and delivered to the Agent all Collateral Loan Qualification Documents or other instruments, documents, or agreements, including Uniform Commercial Code financing statements, as the Agent shall deem necessary or desirable to perfect a first priority security interest in, or lien on, such Potential Collateral, all of which instruments, documents or agreements shall be in form and substance satisfactory to the Agent in its sole discretion. The Borrower acknowledges that the decision of all of the Lenders to grant or withhold their consent to the acceptance of additional or substitute Potential Collateral under this Section 5.4 shall be based entirely on such factors as the Lenders deem relevant in their sole discretion, including, without limitation, those enumerated in clauses (i) through (iii) hereinabove, and such consent may be granted or withheld solely at the discretion of all of the Lenders. The Agent shall have fifteen (15) days from the date of the receipt of all of the foregoing to advise the Borrower whether the Majority Lenders have approved the acceptance of such Potential Collateral as Collateral. (b) In connection with each such addition or substitution, the Borrower, within fifteen (15) days of the Borrower's request to add such assets to the Collateral, shall pay to the Agent for the account of the Lenders a review fee of $5,000.00 for each asset to be added to be split equally by the Lenders, without regard to their respective Commitment Percentages. Section 11. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to the Agent and the Lenders as follows. Section 11.1. Corporate Authority, Etc. (a) Incorporation; Good Standing. The Borrower (i) is a corporation duly organized pursuant to its organizational documents and amendments thereto filed with the Secretary of State of Maryland, and is validly existing and in good standing under the laws of the State of Maryland, (ii) has all requisite power to own its property and conduct its business as now conducted and as presently contemplated, and (iii) is in good standing as a foreign entity and is duly authorized to do business in each jurisdiction where a failure to be so qualified in such other jurisdiction could have a materially adverse effect on the business, assets or financial condition of the Borrower. (b) Subsidiaries. Each of the Subsidiaries of the Borrower (i) is a corporation, limited partnership, limited liability company or trust duly organized under the laws of its State of organization and is validly existing and in good standing under the laws thereof, (ii) has all requisite power to own its property and conduct its business as now conducted and as presently contemplated and (iii) is in good standing and is duly authorized to do business in each jurisdiction where a failure to be so qualified could have a materially adverse effect on the business, assets or financial condition of the Borrower or such Subsidiary. (c) Authorization. The execution, delivery and performance of this Agreement and the other Loan Documents to which the Borrower is or is to become a party and the transactions contemplated hereby and thereby (i) are within the authority of the Borrower, (ii) have been duly authorized by all necessary proceedings on the part of the Borrower, (iii) do not and will not conflict with or result in any breach or contravention of any provision of law, statute, rule or regulation to which the Borrower is subject or any judgment, order, writ, injunction, license or permit applicable to the Borrower, (iv) do not and will not conflict with or constitute a default (whether with the passage of time or the giving of notice, or both) under any provision of the articles of incorporation , bylaws, or other charter documents of, or any agreement or other instrument binding upon, the Borrower, or any of its properties, and (v) do not and will not result in or require the imposition of any lien or other encumbrance on any of the properties, assets or rights of the Borrower. (d) Enforceability. The execution and delivery of this Agreement and the other Loan Documents to which the Borrower is or is to become a party are valid and legally binding obligations of the Borrower enforceable in accordance with the respective terms and provisions hereof and thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought. Section 11.2. Governmental Approvals. The execution, delivery and performance by the Borrower of this Agreement and the other Loan Documents and the transactions contemplated hereby and thereby do not require the approval or consent of, or filing with, any governmental agency or authority other than those already obtained and the filing of the Security Documents in the appropriate records office with respect thereto. Section 11.3. Title to Properties: Leases. Except as indicated on Schedule 6.3 hereto, the Borrower and its Subsidiaries own all of the assets reflected in the consolidated balance sheet of the Borrower as at the Balance Sheet Date or acquired since that date (except property and assets sold or otherwise disposed of in the ordinary course of business since that date), subject to no rights of others, including any mortgages, leases, conditional sales agreements, title retention agreements, liens or other encumbrances except Permitted Liens. Section 11.4. Financial Statements. The Borrower has furnished to each of the Lenders: (a) the pro forma consolidated balance sheet of the Borrower and its Subsidiaries as of the Balance Sheet Date and their related consolidated statements of income, changes in stockholder equity and cash flows for the fiscal year then ended, certified by the chief financial or chief accounting officer of the Borrower to have been prepared in accordance with generally accepted accounting principles, and (b) an unaudited consolidated balance sheet and an unaudited consolidated statement of income and cash flows of the Borrower and its Subsidiaries for the fiscal quarter of the Borrower ended since the Balance Sheet Date certified by Borrowers chief financial or chief accounting officer to have been prepared in accordance with generally accepted accounting principles consistent with those used in the preparation of the annual audited statements delivered pursuant to subsection (a) above and to fairly present the financial condition of the Borrower and its Subsidiaries as at the close of business on the dates thereof and the results of operations for the fiscal quarter then ended (subject to year-end adjustments). Such balance sheet and statements of income, stockholders equity and cash flows have been prepared in accordance with generally accepted accounting principles and fairly present the financial condition of the Borrower and its Subsidiaries as of such dates and the results of the operations of the Borrower and its Subsidiaries for such periods. There are no liabilities, contingent or otherwise, of the Borrower or any of its Subsidiaries involving material amounts not disclosed in said financial statements and the related notes thereto. Section 11.5. No Material Changes. Since the Balance Sheet Date, there has occurred no materially adverse change in the financial condition or business of the Borrower and its Subsidiaries taken as a whole as shown on or reflected in the consolidated balance sheet of the Borrower as of the Balance Sheet Date, or its consolidated statement of income or cash flows for the fiscal year then ended, other than changes in the ordinary course of business that have not had any materially adverse effect either individually or in the aggregate on the business or financial condition of the Borrower and its Subsidiaries taken as a whole. Section 11.6. Franchises, Patents, Copyrights, Etc. The Borrower and its Subsidiaries possess all franchises, patents, copyrights, trademarks, trade names, service marks, licenses and permits, and rights in respect of the foregoing, adequate for the conduct of their business substantially as now conducted without known conflict with any rights of others. Section 11.7. Litigation. Except as stated on Schedule 6.7 there are no actions, suits, proceedings or investigations of any kind pending or threatened against the Borrower or any of its Subsidiaries before any court, tribunal or administrative agency or board that, if adversely determined, might, either in any case or in the aggregate, materially adversely affect the properties, assets, financial condition or business of the Borrower or materially impair the right of the Borrower to carry on business substantially as now conducted by it, or result in any liability not adequately covered by insurance, or for which adequate reserves are not maintained on the balance sheet of the Borrower, or which question the validity of this Agreement or any of the other Loan Documents, any action taken or to be taken pursuant hereto or thereto or any lien or security interest created or intended to be created pursuant hereto or thereto, or which will adversely affect the ability of the Borrower to pay and perform the Obligations in the manner contemplated by this Agreement and the other Loan Documents. Section 11.8. No Materially Adverse Contracts, Etc. Neither the Borrower nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation that has or is expected in the future to have a materially adverse effect on the business, assets or financial condition of the Borrower. Neither the Borrower nor any of its Subsidiaries is a party to any contract or agreement that has or is expected, in the judgment of the officers of such Person, to have any materially adverse effect on the business of the Borrower. Section 11.9. Compliance with Other Instruments, Laws, Etc. Neither the Borrower nor any of its Subsidiaries is in violation of any provision of its charter or other organizational documents, by-laws, or any agreement or instrument to which it may be subject or by which it or any of its properties may be bound or any decree, order, judgment, statute, license, rule or regulation, in any of the foregoing cases in a manner that could result in the imposition of substantial penalties or materially and adversely affect the financial condition, properties or business of the Borrower. Section 11.10. Tax Status. The Borrower and each of its Subsidiaries (a) has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (b) has paid all taxes and other governmental assessments and charges shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and by appropriate proceedings and (c) has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of such Person know of no basis for any such claim. Section 11.11. No Event of Default. No Default or Event of Default has occurred and is continuing. Section 11.12. Holding Company and Investment Company Acts. Neither the Borrower nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935; nor is it an "investment company", or an "affiliated company" or a "principal underwriter" of an "investment company", as such terms are defined in the Investment Company Act of 1940. Section 11.13. Absence of UCC Financing Statements, Etc. Except with respect to Permitted Liens, there is no financing statement, security agreement, chattel mortgage, real estate mortgage or other document filed or recorded with any filing records, registry, or other public office, that purports to cover, affect or give notice of any present or possible future lien on, or security interest or security title in, any property of the Borrower or its Subsidiaries or rights thereunder. Section 11.14. Setoff, Etc. The Collateral and the rights of the Agent and the Lenders with respect to the Collateral are not subject to any setoff, claims, withholdings or other defenses. The Borrower is the owner of the Collateral free from any lien, security interest, encumbrance or other claim or demand, except Permitted Liens. Section 11.15. Certain Transactions. None of the officers, trustees, directors, or employees of the Borrower or any of its Subsidiaries is a party to any transaction with the Borrower or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, trustee, director or such employee or, to the knowledge of the Borrower, any corporation, partnership, trust or other entity in which any officer, trustee, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. Section 11.16. Employee Benefit Plans. The Borrower and each ERISA Affiliate are in compliance in all material respects with ERISA. There has been no Reportable Event with respect to any Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan. There has been no institution of proceedings or any other action by PBGC, the Borrower or any ERISA Affiliate to terminate or withdraw or partially withdraw from any such Plan under any circumstances which could lead to material liabilities to PBGC or, with respect to a Multiemployer Plan, the "Reorganization" or "Insolvency" (as each such term is defined in ERISA) of any such Plan. To the best of the Borrowers knowledge, no "prohibited transaction" (within the meaning of Section 406 of ERISA or Section 4975 of the Code) has occurred with respect to any such Plan, and neither the consummation of the transactions provided for in this Agreement and compliance by the Borrower with the provisions hereof and the other Loan Documents will involve any prohibited transaction. Section 11.17. ERISA Taxes. Neither the Borrower nor any ERISA Affiliate thereof is currently and the Borrower has no reason to believe that the Borrower or any ERISA Affiliate thereof will become subject to any liability (other than routine expenses or contributions relating to the Plans set forth on Schedule 6.17, if timely paid), tax or penalty whatsoever to any person whomsoever, which liability, tax or penalty is directly or indirectly related to any Plans set forth on Schedule 6.17 including, but not limited to, any penalty or liability arising under Title I or Title IV of ERISA, any tax or penalty resulting from a loss of deduction under Sections 404 and 419 of the Code, or any tax or penalty under Chapter 43 of the Code, except such liabilities, taxes or penalties (when taken as a whole) as will not have a material adverse effect on the Borrower or upon its financial condition, assets, business, operations, liabilities or prospects. Section 11.18. Plan Payments. The Borrower and each ERISA Affiliate has made full and timely payment of all amounts (i) required to be contributed under the terms of each Plan set forth on Schedule 6.17 and applicable law and (ii) required to be paid as expenses of each Plan set forth on Schedule 6.17. No Plan set forth on Schedule 6.17 would have an "amount of unfunded benefit liabilities" (as defined in Section 4001(a)(18) of ERISA) if such Plan were terminated as of the date on which this representation and warranty is made. Section 11.19. Regulations T, U and X. No portion of any Loan is to be used for the purpose of purchasing or carrying any "margin security" or "margin stock" as such terms are used in Regulations T, U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 220, 221 and 224. Section 11.20. Subsidiaries. Schedule 6.20 sets forth all of the Subsidiaries of the Borrower. The form and jurisdiction of organization of each of the Subsidiaries, and the Borrowers and each other Persons ownership interest therein, is set forth in said Schedule 6.20. Section 11.21. Loan Documents. All of the representations and warranties of the Borrower made in the Loan Documents to which it is a party or any document or instrument delivered to the Agent or the Lenders pursuant to or in connection with any of such Loan Documents are true and correct in all material respects, and no such party has failed to disclose such information as is necessary to make such representations and warranties not misleading. The information, reports, financial statements, exhibits and schedules (excluding projections which have been proposed in good faith) furnished by the Borrower to the Agent and the Lenders in connection with the negotiation, preparation or delivery of this Agreement and the other Loan Documents or included herein or therein or delivered pursuant hereto or thereto, do not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements herein or therein not misleading; provided that the foregoing representation shall not apply to the accuracy of any reports prepared by third parties not affiliated with Borrower (although Borrower has no reason to believe that the Agent and the Lenders may not rely on the accuracy thereof). All written information furnished after the date hereof by the Borrower to the Agent or the Lenders in connection with this Agreement and the other Loan Documents and the transactions contemplated hereby and thereby will be true, correct and accurate in every material respect and shall not omit to state any material fact necessary to make the statements herein or therein not misleading, or (in the case of projections) based on reasonable estimates, on the date as of which such information is stated or certified; provided that the foregoing representation shall not apply to the accuracy of any reports prepared by third parties not affiliated with Borrower (although Borrower shall disclose to Agent and the Lenders if it has any reason to believe that the Agent and the Lenders may not rely on the accuracy thereof). Section 11.22. Brokers. Neither the Borrower nor any of its Subsidiaries has engaged or otherwise dealt with any broker, finder or similar entity in connection with this Agreement or the Loans contemplated hereunder. Section 11.23. Fair Consideration. The Borrower, by receiving the benefits under this Agreement, is receiving "reasonably equivalent value" within the meaning of Section 548 of the Bankruptcy Code, Title 11, U.S.C.A. and "fair consideration" within the meaning of Consolidated Laws of New York Annotated, Chapter 12, Article 10, Section 272 in exchange for the delivery of the Security Documents to Agent. Section 11.24. Solvency. As of the Closing Date and after giving affect to the transactions contemplated by this Agreement and the other Loan Documents, including all of the Loans made or to be made hereunder, the Borrower is not insolvent on a balance sheet basis, the sum of the Borrowers assets exceeds the sum of the Borrowers liabilities, the Borrower is able to pay its debts as they become due, and the Borrower has sufficient capital to carry on its business. Section 11.25. Other Debt. Neither the Borrower nor any of their respective Subsidiaries is in default in the payment of any other Indebtedness or under any agreement, mortgage, deed of trust, security agreement, financing agreement, indenture or lease to which any of them is a party. The Borrower is not a party to or bound by any agreement, instrument or indenture that may require the subordination in right or time of payment of any of the Obligations to any other indebtedness or obligation of the Borrower. The Borrower has provided to the Agent copies of all agreements, mortgages, deeds of trust, financing agreements or other material agreements binding upon Borrower or its properties and entered into by such Person as of the date of this Agreement with respect to any Indebtedness of such Person. Section 11.26. Year 2000 Compliant. Borrower has (i) undertaken a detailed inventory, review and assessment of all areas within its business and operations that could be adversely affected by the failure to be Year 2000 Compliant on a timely basis, (ii) developed a detailed plan and timeline for becoming Year 2000 Compliant on a timely basis, and (iii) to date, implemented that plan in accordance with that timetable in all material aspects. Borrower reasonably anticipates that it will be Year 2000 Compliant by September 30, 1999 or such earlier date as is necessary to avoid any material disruption of Borrowers business and has committed and will commit reasonably adequate resources to be Year 2000 Compliant. Section 11.27. True Sales. Any Collateral Loan originated by an originator other than the Borrower has been conveyed to the Borrower pursuant to a true and legal sale. Section 12. AFFIRMATIVE COVENANTS OF THE BORROWER. The Borrower covenants and agrees that, so long as any Loan or Note is outstanding or any Lender has any obligation to make any Loans: Section 12.1. Punctual Payment. The Borrower will duly and punctually pay or cause to be paid the principal and interest on the Loans and all interest and fees provided for in this Agreement, all in accordance with the terms of this Agreement and the Notes as well as all other sums owing pursuant to the Loan Documents. Section 12.2. Maintenance of Office. The Borrower will maintain its chief executive office at 535 Madison Avenue, 26th Floor, New York County, New York, New York, or at such other place in the United States of America as the Borrower shall designate upon prior written notice to the Agent and the Lenders, where notices, presentations and demands to or upon the Borrower in respect of the Loan Documents may be given or made. Section 12.3. Records and Accounts. The Borrower will (a) keep, and cause each of its Subsidiaries to keep, true and accurate records and books of account in which full, true and correct entries will be made in accordance with generally accepted accounting principles and (b) maintain adequate accounts and reserves for all taxes (including income taxes), depreciation and amortization of its properties and the properties of its Subsidiaries, contingencies and other reserves. Neither the Borrower nor any of its Subsidiaries shall, without the prior written consent of the Majority Lenders, (x) make any material changes to the accounting procedures used by such Person in preparing the financial statements and other information described in Section 6.4 (excluding the conversion of a Subsidiary's accounting procedures such that they are consistent with the Borrower's accounting procedures) or (y) change its fiscal year. Section 12.4. Financial Statements, Certificates and Information. The Borrower will deliver or cause to be delivered to each of the Lenders: (a) as soon as practicable, but in any event not later than 90 days after the end of each fiscal year of the Borrower, copies of the unaudited consolidated balance sheet of the Borrower and its Subsidiaries at the end of such year, and the related unaudited consolidated statements of income, changes in shareholders equity and cash flows for such year, each setting forth in comparative form the figures for the previous fiscal year and all such statements to be in reasonable detail, prepared in accordance with generally accepted accounting principles, together with a certification by the principal financial or accounting officer of the Borrower that the information contained in such financial statements fairly presents the financial position of the Borrower and its Subsidiaries on the date thereof (provided that the Agent may require that such balance sheet and statement be audited by an accounting firm approved by Agent (such approval not to be unreasonably withheld) at any time that Agent has reasonable grounds to request the same (including, without limitation, at any time that the Compliance Certificate indicates that the Borrower is at or near minimum compliance with the financial covenants in this Agreement) and any other information the Lenders may need to complete a financial analysis of the Borrower; or as soon as practicable, but in any event not later than 45 days after the end of each fiscal quarter of the Borrower (including the fourth quarter), copies of the unaudited consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such quarter, and the related unaudited consolidated statements of income, changes in shareholders equity and cash flows for the portion of the Borrowers fiscal year then elapsed, all in reasonable detail and prepared in accordance with generally accepted accounting principles, together with a certification by the principal financial or accounting officer of the Borrower that the information contained in such financial statements fairly presents the financial position of the Borrower and its Subsidiaries on the date thereof (subject to year-end adjustments); (c) if the Borrower becomes a reporting company, copies of any documents or reports filed by the Borrower with the SEC simultaneously with delivery thereof to the SEC; (d) as soon as practicable, but in any event not later than 45 days after the end of each fiscal quarter of the Borrower (including the fourth fiscal quarter in each year), copies of a consolidated statement of EBITDA for such fiscal quarter for the Borrower and its Subsidiaries, prepared in a manner reasonable satisfactory to the Agent, together with a certification by the Borrowers chief financial or chief accounting officer that the information contained in such statement fairly presents the EBITDA of the Borrower and its Subsidiaries for such period; (e) simultaneously with the delivery of the financial statements referred to in subsections (a) and (b) above, a statement (a "Compliance Certificate") certified by the principal financial or accounting officer of the Borrower in the form of Exhibit C hereto setting forth in reasonable detail computations evidencing compliance with the covenants contained in Section 9 and including the Borrowing Base worksheet attached thereto, and (if applicable) reconciliations to reflect changes in generally accepted accounting principles since the Balance Sheet Date; (f) concurrently with the delivery of the financial statements described in subsections (b) and (c) above, a certificate signed by the President or Chief Financial Officer of the Borrower to the effect that, having read this Agreement, and based upon an examination which they deem sufficient to enable them to make an informed statement, there does not exist any Default or Event of Default, or if such Default or Event of Default has occurred, specifying the facts with respect thereto; (g) contemporaneously with the filing, mailing or releasing thereof, copies of all press releases and all material of a financial nature sent to all of the stockholders of the Borrower; (h) promptly after they are filed with the Internal Revenue Service, copies of all annual federal income tax returns and amendments thereto of the Borrower; (i) as soon as practicable, but in any event not later than five (5) Business Days after the Borrower acquires knowledge of the same, the occurrence of any event or development which would cause any of the Collateral Notes to no longer be Qualifying Collateral Notes hereunder, which might cause the Designated Collateral Value with respect thereto to be reduced or which may adversely affect any of the Collateral; (j) a copy of any rent roll, operating statements, budget, financial statement or other report Borrower shall receive from any Obligor or Servicer with respect to an item of Collateral within fifteen (15) days after Borrowers receipt thereof; (k) on or before the 45th day after each fiscal quarter of the Borrower with respect to the Collateral Loans serviced by Borrower and on or before the third (3rd) day after Borrowers receipt of such information from any Servicer with respect to the Collateral Loans serviced by any other Servicer, a computer readable file containing servicing information, including without limitation those fields specified by Agent from time to time (including beginning balance, interest, principal, paid-to-date and ending balances for each asset constituting Collateral and delinquencies), on a loan-by-loan basis and in the aggregate, provided, Borrower agrees to use its best efforts to obtain such information within such 45-day period from any Servicer; and (l) from time to time such other financial data and information in the possession of the Borrower (including without limitation auditors management letters, property inspection and environmental reports and information as to zoning and other legal and regulatory changes affecting the Borrower) as the Agent may reasonably request. Section 12.5. Notices. (a) Defaults. The Borrower will promptly notify the Agent in writing of the occurrence of any Default or Event of Default. If any Person shall give any notice or take any other action in respect of a claimed default (whether or not constituting an Event of Default) under this Agreement or under any note, evidence of indebtedness, indenture or other obligation to which or with respect to which the Borrower or any of its Subsidiaries is a party or obligor, whether as principal or surety, and such default would permit the holder of such note or obligation or other evidence of indebtedness to accelerate the maturity thereof, which acceleration would have a material adverse effect on the Borrower, the Borrower shall forthwith give written notice thereof to the Agent and each of the Lenders, describing the notice or action and the nature of the claimed default. (b) Environmental Events. The Borrower will promptly give notice to the Agent (i) upon the Borrower obtaining knowledge of any potential or known Release, or threat of Release, of any Hazardous Substances at or from any Collateral Property; (ii) of any violation of any Environmental Law that the Borrower or any of its Subsidiaries or, upon the Borrower obtaining knowledge thereof, any Obligor, reports in writing or is reportable by such Person in writing (or for which any written report supplemental to any oral report is made) to any federal, state or local environmental agency and (iii) upon becoming aware thereof, of any inquiry, proceeding, investigation, or other action, including a notice from any agency of potential environmental liability, of any federal, state or local environmental agency or board, that in either case involves any Collateral Property or has the potential to materially affect the assets, liabilities, financial conditions or operations of the Borrower, any Subsidiary of the Borrower or any Obligor or the Agents liens on the Collateral pursuant to the Security Documents. (c) Notification of Claims Against Collateral. The Borrower will, immediately upon becoming aware thereof, notify the Agent in writing of any setoff, claims (including, with respect to any Collateral Property, environmental claims), withholdings or other defenses to which any of the Collateral, or the rights of the Agent or the Lenders with respect to the Collateral, are subject. (d) Notice of Litigation and Judgments. The Borrower will give notice to the Agent in writing within 15 days of becoming aware of any litigation or proceedings threatened in writing or any pending litigation and proceedings affecting the Borrower or any of its Subsidiaries or to which the Borrower or any of its Subsidiaries is or is to become a party involving an uninsured claim against the Borrower or any of its Subsidiaries that could reasonably be expected to have a materially adverse effect on the Borrower and stating the nature and status of such litigation or proceedings. The Borrower will give notice to the Agent, in writing, in form and detail satisfactory to the Agent and each of the Lenders, within ten days of any judgment not covered by insurance, whether final or otherwise, against the Borrower or any of its Subsidiaries in an amount in excess of $250,000. (e) Notice of Proposed Sales, Encumbrances, Refinance or Transfer of Property. The Borrower will give notice to the Agent of any proposed or completed sale, encumbrance, refinance or transfer of (i) any Real Estate or other Investment described in Section 8.3(i) of the Borrower or its Subsidiaries within any fiscal quarter of the Borrower and (ii) any Collateral Property (to the extent Borrower knows of the same), such notice to be submitted together with the Compliance Certificate provided or required to be provided to the Lenders under Section 7.4 with respect to such fiscal quarter. The Compliance Certificate shall with respect to any proposed or completed sale, encumbrance, refinance or transfer be adjusted in the best good-faith estimate of the Borrower to give effect to such sale, encumbrance, refinance or transfer and demonstrate that no Default or Event of Default with respect to the covenants referred to therein shall exist after giving effect to such sale, encumbrance, refinance or transfer. Notwithstanding the foregoing, in the event of any sale, encumbrance, refinance or transfer of any Real Estate or other Investment described in Section 8.3(i) of the Borrower or its Subsidiaries involving an amount in excess of $5,000,000.00, the Borrower shall promptly give notice to the Agent of such transaction, which notice shall be accompanied by a Compliance Certificate prepared using the financial statements of the Borrower most recently provided or required to be provided to the Lenders under Section 6.4 or Section 7.4 adjusted as provided in the preceding sentence. (f) Notice of Casualty or Condemnation. With respect to any Collateral pledged to Agent hereunder, the Borrower will give notice to the Agent immediately upon receipt of notice or knowledge that the underlying Collateral Property securing the applicable Collateral Loan as to which it relates has been materially damaged by waste, fire, earthquake or earth movement, windstorm, flood, tornado or other casualty, or otherwise damaged so as to materially affect adversely the value thereof, or that any material portion of such property has been taken by, or is threatened to be taken by, eminent domain or other condemnation proceeding. (g) Notification of Lenders. Promptly after receiving any notice under this Section 7.5, the Agent will forward a copy thereof to each of the Lenders, together with copies of any certificates or other written information that accompanied such notice. Section 12.6. Existence; Maintenance of Properties. (a) The Borrower will do or cause to be done all things necessary to preserve and keep in full force and effect its existence as a Maryland corporation. The Borrower will cause each of its Subsidiaries to do or cause to be done all things necessary to preserve and keep in full force and effect its legal existence. The Borrower will do or cause to be done all things necessary to preserve and keep in full force all of its rights and franchises and those of its Subsidiaries. The Borrower will, and will cause each of its Subsidiaries to, continue to engage primarily in the respective businesses now conducted by each of them and in related businesses. (b) The Borrower (i) will cause all of its owned or leased properties and those of its Subsidiaries used or useful in the conduct of its business or the business of its Subsidiaries to be maintained and kept in good condition, repair and working order (ordinary wear and tear excepted) and supplied with all necessary equipment, and (ii) will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof in all cases in which the failure so to do would have a material adverse effect on the condition of the applicable owned or leased property or on the financial condition, assets or operations of the Borrower. Section 12.7. Insurance. The Borrower, at its expense, will procure and maintain or cause to be procured and maintained, insurance covering the Borrower and its Subsidiaries and their respective properties in such amounts and against such risks and casualties as are customary for businesses similar to the Borrower. Section 12.8. Taxes. The Borrower and each Subsidiary will duly pay and discharge, or cause to be paid and discharged, before the same shall become overdue, all taxes, assessments and other governmental charges imposed upon it, its Real Estate, its sales and activities, or any part thereof, or upon the income or profits therefrom, as well as all claims for labor, materials, or supplies that if unpaid might by law become a lien or charge upon any of its property; provided that any such tax, assessment, charge, levy or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings and if the Borrower or such Subsidiary shall have set aside on its books adequate reserves with respect thereto; and provided, further, that forthwith upon the commencement of proceedings to foreclose any lien that may have attached as security therefor, the Borrower and each Subsidiary of the Borrower either (i) will provide a bond issued by a surety reasonably acceptable to the Majority Lenders and sufficient to stay all such proceedings or (ii) if no such bond is provided, will pay each such tax, assessment, charge, levy or claim. Section 12.9. Inspection of Properties and Books. The Borrower shall permit the Lenders, through the Agent or any representative designated by the Agent, at the Borrowers expense to visit and inspect any of the properties of the Borrower or any of its Subsidiaries, to examine the books of account of the Borrower and its Subsidiaries (and to make copies thereof and extracts therefrom) and to discuss the affairs, finances and accounts of the Borrower and its Subsidiaries with, and to be advised as to the same by, its officers, all at such reasonable times and intervals as the Agent or any Lender may reasonably request. The Lenders shall use good faith efforts to coordinate such visits and inspections so as to minimize the interference with and disruption to the Borrowers normal business operations. Section 12.10. Compliance with Laws, Contracts, Licenses, and Permits. The Borrower will comply with, and will cause each of its Subsidiaries to comply in all respects with (i) all applicable laws and regulations now or hereafter in effect wherever its business is conducted, including all Environmental Laws, (ii) the provisions of its corporate charter, and other charter documents and bylaws, (iii) all agreements and instruments to which it is a party or by which it or any of its properties may be bound, (iv) all applicable decrees, orders, and judgments, and (v) all licenses and permits required by applicable laws and regulations for the conduct of its business or the ownership, use or operation of its properties. If at any time while any Loan or Note is outstanding or the Lenders have any obligation to make Loans hereunder, any authorization, consent, approval, permit or license from any officer, agency or instrumentality of any government shall become necessary or required in order that the Borrower may fulfill any of its obligations hereunder, the Borrower will immediately take or cause to be taken all steps necessary to obtain such authorization, consent, approval, permit or license and furnish the Agent and the Lenders with evidence thereof. Section 12.11. Use of Proceeds. The Borrower will use the proceeds of the Loans solely to provide financing (a) for the acquisition or origination of the Investments described in Section 8.3(i), (b) for reasonable transaction costs related to the transactions referred to in the preceding clause (a), and (c) for such other purposes of the Borrower as the Majority Lenders in their discretion may approve in writing from time to time. Section 12.12. Further Assurances. The Borrower will cooperate with, and will cause each of its Subsidiaries to cooperate with, the Agent and the Lenders and execute such further instruments and documents as the Lenders or the Agent shall reasonably request to carry out to their satisfaction the transactions contemplated by this Agreement and the other Loan Documents. Section 12.13. Business Operations. The Borrower shall operate its business as described in the business plan provided to the Agent and in compliance with the terms and conditions of this Agreement and the Loan Documents. Section 12.14. ERISA Compliance. The Borrower will not permit the present value of all employee benefits vested in all Employee Benefit Plans, Multiemployer Plans and Guaranteed Pension Plans maintained by the Borrower and any ERISA Affiliate thereof to exceed the present value of the assets allocable to such vested benefits by an amount greater than $500,000.00 in the aggregate. Neither the Borrower nor any ERISA Affiliate thereof will at any time permit any such Plan maintained by it to engage in any "prohibited transaction" as such term is defined in Section 4975 of the Code or Section 406 of ERISA, incur any "accumulated funding deficiency" as such term is defined in Section 302 of ERISA, whether or not waived, or terminate any such Plan in any manner which could result in the imposition of a lien on the property of the Borrower pursuant to Section 4068 of ERISA. Section 12.15. Distribution of Income to the Borrower. The Borrower shall cause all of its Subsidiaries to promptly distribute to the Borrower (but not less frequently than once each fiscal quarter of the Borrower), whether in the form of dividends, distributions or otherwise, all profits, proceeds or other income relating to or arising from its Subsidiaries use, operation, financing, refinancing, sale or other disposition of their respective assets and properties after (a) the payment by each Subsidiary of its operating expenses and debt service for such quarter and (b) the establishment of reasonable reserves for the payment of operating expenses not paid on at least a quarterly basis and capital improvements to be made to such Subsidiarys assets and properties approved by such Subsidiary in the ordinary course of business consistent with its past practices. Section 12.16. More Restrictive Agreements. Without limiting the terms of Section 8.1, should the Borrower enter into or modify any agreements or documents pertaining to any existing or future Indebtedness, Debt Offering or Equity Offering, which agreements or documents include covenants (whether affirmative or negative), warranties, representations, defaults or events of default (or any other provision which may have the same practical effect as any of the foregoing) which are individually or in the aggregate more restrictive against the Borrower or its Subsidiaries than those set forth herein or in any of the other Loan Documents, the Borrower shall promptly notify the Agent and, if requested by the Majority Lenders, the Borrower, the Agent, and the Majority Lenders shall promptly amend this Agreement and the other Loan Documents to include some or all of such more restrictive provisions as determined by the Majority Lenders in their sole discretion. Section 12.17. Plan Assets, etc. The Borrower will do, or cause to be done, all things necessary to ensure that the Borrower will not be deemed to hold Plan Assets at any time. Each owner of an equity interest in Borrower has certified to Borrower and the Lenders, and Borrower shall require each proposed transferee of any equity interest in Borrower, as a condition precedent to such transfer, to certify to Borrower and the Lenders, that the source of funds used or to be used by it to acquire its interest in Borrower are not assets of any plan subject to Title I of ERISA or Section 4975 of the code and are not deemed to be assets of any plan under the U.S. Department of Labors plan asset regulations. Borrower has provided the Agent with a copy of each such certification from each owner of an equity interest in Borrower and will promptly provide the Agent with a copy of each such certification from each proposed transferree. Section 12.18. Determination of Values. Borrower shall promptly cooperate with the Agent or the Majority Lenders in their determination of the Debt Service Coverage Ratio, LTV and Market Value of each Collateral Loan, including the delivery to the Agent of all information and documentation in the possession of the Borrower regarding such Collateral Loan or Collateral Property or otherwise required by the Agent or the Majority Lenders in their sole discretion. Section 13. CERTAIN NEGATIVE COVENANTS OF THE BORROWER. The Borrower covenants and agrees that, so long as any Loan or Note is outstanding or any of the Lenders has any obligation to make any Loans: Section 13.1. Restrictions on Indebtedness. The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any Indebtedness other than: (a) Indebtedness to the Lenders arising under any of the Loan Documents; (b) current liabilities of the Borrower or its Subsidiaries incurred in the ordinary course of business but not incurred through (i) the borrowing of money, or (ii) the obtaining of credit except for credit on an open account basis customarily extended and in fact extended in connection with normal purchases of goods and services; (c) Indebtedness in respect of taxes, assessments, governmental charges or levies and claims for labor, materials and supplies to the extent that payment therefor shall not at the time be required to be made in accordance with the provisions of Section 7.8; (d) Indebtedness in respect of judgments or awards that have been in force for less than the applicable period for taking an appeal so long as execution is not levied thereunder or in respect of which the Borrower or the relevant Subsidiary shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review; (e) endorsements for collection, deposit or negotiation and warranties of products or services, in each case incurred in the ordinary course of business; and (f) Non-recourse Indebtedness of any Subsidiary of the Borrower that is a special purpose bankruptcy remote entity, provided that none of such Subsidiaries shall incur any Indebtedness pursuant to this Section 8.1(f) unless the Borrower shall have provided to the Agent a statement that no Default or Event of Default exists and a Compliance Certificate demonstrating that the Borrower will be in compliance with its covenants referred to therein after giving effect to such incurrence. Section 13.2. Restrictions on Liens, Etc. The Borrower will not, and will not permit any of its Subsidiaries to, (a) create or incur or suffer to be created or incurred or to exist any lien, encumbrance, mortgage, pledge, negative pledge, charge, restriction or other security interest of any kind upon any of its property or assets of any character whether now owned or hereafter acquired, or upon the income or profits therefrom; (b) transfer any of its property or assets or the income or profits therefrom for the purpose of subjecting the same to the payment of Indebtedness or performance of any other obligation in priority to payment of its general creditors; (c) acquire, or agree or have an option to acquire, any property or assets upon conditional sale or other title retention or purchase money security agreement, device or arrangement; (d) suffer to exist for a period of more than 30 days after the same shall have been incurred any Indebtedness or claim or demand against it that if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be given any priority whatsoever over its general creditors; (e) sell, assign, pledge or otherwise transfer any accounts, contract rights, general intangibles, chattel paper or instruments, with or without recourse; or (f) incur or maintain any obligation to any holder of Indebtedness of the Borrower or such Subsidiary which prohibits the creation or maintenance of any lien securing the Obligations (collectively "Liens"); provided that the Borrower and any Subsidiary of the Borrower may create or incur or suffer to be created or incurred or to exist: (ii liens on properties to secure taxes, assessments and other governmental charges or claims for labor, material or supplies in respect of obligations not overdue; (ii) deposits or pledges made in connection with, or to secure payment of, workers compensation, unemployment insurance, old age pensions or other social security obligations; (iii) liens on properties other than the Collateral in respect of judgments, awards or indebtedness, the Indebtedness with respect to which is permitted by Section 8.1(d) or (f); and (iv) liens in favor of the Agent and the Lenders under the Loan Documents. Section 13.3. Restrictions on Investments. The Borrower will not, and will not permit any of its Subsidiaries to, make or permit to exist or to remain outstanding any Investment except Investments in: (a) marketable direct or guaranteed obligations of the United States of America that mature within one (1) year from the date of purchase by the Borrower or its Subsidiary; (b) marketable direct obligations of any of the following: Federal Home Loan Mortgage Corporation, Student Loan Marketing Association, Federal Home Loan Banks, Federal National Mortgage Association, Government National Mortgage Association, Bank for Cooperatives, Federal Intermediate Credit Banks, Federal Financing Banks, Export-Import Bank of the United States, Federal Land Banks, or any other agency or instrumentality of the United States of America; (c) demand deposits, certificates of deposit, bankers acceptances and time deposits of United States banks having total assets in excess of $100,000,000; provided, however, that the aggregate amount at any time so invested with any single bank having total assets of less than $1,000,000,000 will not exceed $200,000; (d) securities commonly known as "commercial paper" issued by a corporation organized and existing under the laws of the United States of America or any State which at the time of purchase are rated by Moodys Investors Service, Inc. or by Standard & Poors Corporation at not less than "P 1" if then rated by Moodys Investors Service, Inc., and not less than "A 1", if then rated by Standard & Poors Corporation; (e) mortgage-backed securities guaranteed by the Government National Mortgage Association, the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation and other mortgage-backed bonds which at the time of purchase are rated by Moodys Investors Service, Inc. or by Standard & Poors Corporation at not less than "Aa" if then rated by Moodys Investors Service, Inc. and not less than "AA" if then rated by Standard & Poors Corporation; (f) repurchase agreements having a term not greater than 90 days and fully secured by securities described in the foregoing subsection (a), (b) or (e) with banks described in the foregoing subsection (c) or with financial institutions or other corporations having total assets in excess of $500,000,000; (g) shares of so-called "money market funds" registered with the SEC under the Investment Company Act of 1940 which maintain a level per-share value, invest principally in investments described in the foregoing subsections (a) through (f) and have total assets in excess of $50,000,000; (h) Investments in Subsidiaries of the Borrower; and (i) Investments in Mortgage Loans, Mezzanine Loans, Participation Interests, CMBS and Subordinated Loans. Section 13.4. Merger, Consolidation. The Borrower will not, and will not permit any of its Subsidiaries to, become a party to any merger, consolidation or other business combination, or agree to effect any asset acquisition, stock acquisition or other acquisition without the prior written consent of the Majority Lenders except (i) the merger or consolidation of one or more of the Subsidiaries of the Borrower with and into the Borrower and (ii) the merger or consolidation of two or more Subsidiaries of the Borrower. Section 13.5. Sale and Leaseback. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any arrangement, directly or indirectly, whereby the Borrower or any Subsidiary of the Borrower shall sell or transfer any Real Estate owned by it in order that then or thereafter the Borrower or any Subsidiary shall lease back such Real Estate. Section 13.6. Distributions. The Borrower shall not make any Distributions which would cause it to violate any of the following covenants: (a) Borrower shall not pay any Distribution if such Distribution is in excess of the amount which, when added to the amount of all other Distributions paid in the same fiscal quarter and the preceding three (3) fiscal quarters, would exceed fifty percent (50%) of the sum of (i) its Net Income plus (ii) depreciation deducted in calculating such Net Income for such period; (b) The Borrower shall make no Distributions in the event that an Event of Default shall have occurred and be continuing or a Default or Event of Default would be created after giving effect to such Distribution. Section 13.7. Asset Sales. Neither the Borrower nor any Subsidiary of the Borrower shall sell, transfer or otherwise dispose of any Real Estate or any Investment described in Section 8.3(i) (except for the granting of Permitted Liens) unless there shall have been delivered to the Lenders a statement that no Default or Event of Default exists and a Compliance Certificate demonstrating that the Borrower will be in compliance with its covenants referred to therein after giving effect to such sale, transfer or other disposition. Section 14. FINANCIAL COVENANTS OF BORROWER. The Borrower covenants and agrees that, so long as any Loan or Note is outstanding or any Lender has any obligation to make any Loans it will comply with the following: Section 14.1. Liabilities to Assets Ratio. The Borrower will not, at the end of any fiscal quarter, permit the ratio of Consolidated Total Liabilities to Consolidated Total Assets of the Borrower and its Subsidiaries to exceed 0.65 to 1. Section 14.2. Consolidated EBITDA Coverage. The Borrower will not, at the end of any fiscal quarter, permit its Consolidated EBITDA for (a) each of the first three fiscal quarters after the date hereof (with the first such quarter ending March 31, 1999) and (b) each twelve month period ending on the last day of the fourth fiscal quarter after the date hereof and the last day of each fiscal quarter thereafter, to be less than 1.5 times the Debt Service of the Borrower and its Subsidiaries for such period. Section 14.3. Borrowing Base. The Borrower will not permit the outstanding principal balance of the Loans as of the date of determination to be greater than the Borrowing Base as of the date of determination. Section 14.4. Minimum Shareholders' Equity. (a) The Borrower will not permit the Shareholders Equity for the period commencing on the date hereof through and including December 31, 1999 to be less than the sum of (i) $20,000,000.00 plus (ii) eighty-five percent (85%) of the net proceeds from any Equity Offering after December 31, 1998 plus (iii) fifty percent (50%) of the sum of (A) all Net Income (or Deficit) from December 31, 1998 plus (B) depreciation deducted in calculating such Net Income (or Deficit) from December 31, 1998. (b) The Borrower will not permit the Shareholders Equity for the period commencing January 1, 2000 through and including December 31, 2000 to be less than the sum of (i) the greater of (A) $30,000,000.00 and (B) the Shareholders Equity as of December 31, 1999 plus (ii) eighty-five percent (85%) of the net proceeds from any Equity Offering after December 31, 1999 plus (iii) fifty percent (50%) of the sum of (A) all Net Income (or Deficit) from December 31, 1999 plus (B) depreciation deducted in calculating such Net Income (or Deficit) from December 31, 1999. (c) The Borrower will not for the period commencing on January 1, 2001 and continuing thereafter permit the Shareholders' Equity to be less than the sum of (i) the greater of (A) $50,000,000.00 and (B) the Shareholders' Equity as of December 31, 2000 plus (ii) eighty-five percent (85%) of the net proceeds from any Equity Offering after December 31, 2000 plus (iii) fifty percent (50%) of the sum of (A) all Net Income (or Deficit) from December 31, 2000 plus (B) depreciation deducted in calculating such Net Income (or Deficit) from December 31, 2000. Section 14.5. Required Equity. The Borrower shall not permit the ratio of (a) the aggregate Indebtedness without duplication of the Borrower and its Subsidiaries pursuant to Section 8.1(a) and (f), to (b) the aggregate all-in acquisition cost (or principal balance of originated loans) of the assets of the Borrower and its Subsidiaries on a consolidated basis, to exceed 0.65 to 1. Section 15. CLOSING CONDITIONS. The obligations of the Agent and the Lenders to make the initial Loans shall be subject to the satisfaction of the following conditions precedent on or prior to January 12, 1999: Section 15.1. Loan Documents. Each of the Loan Documents shall have been duly executed and delivered by the respective parties thereto, shall be in full force and effect and shall be in form and substance satisfactory to the Majority Lenders. The Agent shall have received a fully executed copy of each such document, except that each Lender shall have received a fully executed counterpart of its Note. Each of the Collateral Notes shall have been endorsed to and delivered to the Agent. Section 15.2. Certified Copies of Organizational Documents. The Agent shall have received from the Borrower a copy, certified as of a recent date by the appropriate officer of the State in which the Borrower is organized, and by a duly authorized officer of the Borrower to be true and complete, of the articles of incorporation or other organizational documents of the Borrower or its qualification to do business, as applicable, as in effect on such date of certification. Section 15.3. Bylaws; Resolutions. All action on the part of the Borrower necessary for the valid execution, delivery and performance by the Borrower of the Loan Documents to which it is or is to become a party shall have been duly and effectively taken, and evidence thereof satisfactory to the Agent shall have been provided to the Agent. The Agent shall have received from the Borrower true copies of its bylaws and the resolutions adopted by its board of directors or other governing body authorizing the transactions described herein, each certified by its secretary or other duly authorized officer as of a recent date to be true and complete. Section 15.4. Incumbency Certificate; Authorized Signers. The Agent shall have received from the Borrower an incumbency certificate, dated as of the Closing Date, signed by a duly authorized officer of the Borrower and giving the name and bearing a specimen signature of each individual who shall be authorized: (a) to sign, in the name and on behalf of the Borrower, each of the Loan Documents to which the Borrower is or is to become a party; (b) in the case of the Borrower to make Loan and Conversion Requests; and (c) to give notices and to take other action on behalf of the Borrower under the Loan Documents. Section 15.5. Opinion of Counsel. The Agent shall have received a favorable opinion addressed to the Lenders and the Agent and dated as of the Closing Date, in form and substance satisfactory to the Lenders and the Agent, from Robinson, Silverman, Pearce, Aronsohn & Berman, counsel of the Borrower, as to such matters as the Agent shall reasonably request. Section 15.6. Payment of Fees. The Borrower shall have paid to the Agent the commitment fee pursuant to Section 4.2. Section 15.7. Performance; No Default. The Borrower shall have performed and complied with all terms and conditions herein required to be performed or complied with by it on or prior to the Closing Date, and on the Closing Date there shall exist no Default or Event of Default. Section 15.8. Representations and Warranties. The representations and warranties made by the Borrower in the Loan Documents or otherwise made by or on behalf of any Borrower or any Subsidiary thereof, in connection therewith or after the date thereof shall have been true and correct in all material respects when made and shall also be true and correct in all material respects on the Closing Date. Section 15.9. Proceedings and Documents. All proceedings in connection with the transactions contemplated by this Agreement and the other Loan Documents shall be reasonably satisfactory to the Agent and the Agents Special Counsel in form and substance, and the Agent shall have received all information and such counterpart originals or certified copies of such documents and such other certificates, opinions or documents as the Agent and the Agents Special Counsel may reasonably require. Section 15.10. Collateral Loan Qualification Documents. The Collateral Loan Qualification Documents for each Collateral Loan included in the Collateral as of the Closing Date shall have been delivered to the Agent. Section 15.11. Compliance Certificate. A Compliance Certificate dated as of the date of the Closing Date demonstrating compliance with each of the covenants calculated therein as of the most recent fiscal quarter end for which the Borrower has provided financial statements under Section 6.4 adjusted in the best good faith estimate of the Borrower dated as of the date of the Closing Date shall have been delivered to the Agent. Section 15.12. Governmental Policy. Each Lender shall have determined that there have been no material changes in governmental regulations or policy affecting the Lenders or the Borrower. Section 15.13. Other. The Agent shall have reviewed such other documents, instruments, certificates, opinions, assurances, consents and approvals as the Agent or the Agents Special Counsel may reasonably have requested. Section 16. CONDITIONS TO ALL BORROWINGS. The obligations of the Lenders to make any Loan, whether on or after the Closing Date, shall also be subject to the satisfaction of the following conditions precedent: Section 16.1. Prior Conditions Satisfied. All conditions set forth in Section 10 shall continue to be satisfied as of the date upon which any Loan is to be made. Section mposs Representations True; No Default. Each of the representations and warranties contained in this Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with this Agreement shall be true as of the date as of which they were made and shall also be true at and as of the time of the making of such Loan, with the same effect as if made at and as of that time (except to the extent of changes resulting from transactions contemplated or permitted by this Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and except to the extent that such representations and warranties relate expressly to an earlier date) and no Default or Event of Default shall have occurred and be continuing. The Agent shall have received a certificate of the Borrower signed by an authorized officer of the Borrower to such effect. Section 16.3. No Legal Impediment. No change shall have occurred in any law or regulations thereunder or interpretations thereof that in the reasonable opinion of any Lender would make it illegal for such Lender to make such Loan. Section 16.4. Governmental Regulation. Each Lender shall have received such statements in substance and form reasonably satisfactory to such Lender as such Lender shall require for the purpose of compliance with any applicable regulations of the Comptroller of the Currency or the Board of Governors of the Federal Reserve System. Section 16.5. Proceedings and Documents. All proceedings in connection with the Loan shall be satisfactory in substance and in form to the Agent, and the Agent shall have received all information and such counterpart originals or certified or other copies of such documents as the Agent may reasonably request. Section 16.6. Borrowing Documents. In the case of any request for a Loan, the Agent shall have received a copy of each of the following: (a) the request for a Loan required by Section 2.6 in the form of Exhibit B hereto, fully completed; and (b) the Compliance Certificate required by clause (iii) of Section 2.6 prepared in a manner reasonably acceptable to the Agent. Section 17. EVENTS OF DEFAULT; ACCELERATION; ETC. Section 17.1. Events of Default and Acceleration. If any of the following events ("Events of Default" or, if the giving of notice or the lapse of time or both is required, then, prior to such notice or lapse of time, "Defaults") shall occur: (a) the Borrower shall fail to pay any principal of the Loans when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment; (b) the Borrower shall fail to pay any interest on the Loans or any other sums due hereunder or under any of the other Loan Documents, when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment; (c) the Borrower shall fail to comply with any covenant contained in Section 9.3, in which event, subject to the provisions of Section 12.1A, the Borrower shall have the cure period or periods provided in Section 12.1B; (d) the Borrower shall fail to comply with any covenant contained in Section 9.1, Section 9.2, Section 9.4 or Section 9.5 and such failure shall continue for 30 Business Days after written notice thereof shall have been given to the Borrower by the Agent; (e) the Borrower, any of its Subsidiaries or any other party shall fail to perform any other term, covenant or agreement contained herein or in any of the other Loan Documents (other than those specified in this Section 12.1); (f) any representation or warranty of the Borrower or any of its Subsidiaries in this Agreement or any other Loan Document, or in any report, certificate, financial statement, request for a Loan, or in any other document or instrument delivered pursuant to or in connection with this Agreement, any advance of a Loan or any of the other Loan Documents shall prove to have been false in any material respect upon the date when made or deemed to have been made or repeated; (g) the Borrower or any of its Subsidiaries shall fail to pay at maturity, or within any applicable period of grace, any obligation for borrowed money or credit received, or fail to observe or perform any material term, covenant or agreement contained in any agreement by which it is bound, evidencing or securing any such borrowed money or credit received for such period of time as would permit (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof; provided that the events described in this Section 12.1(g) shall not constitute an Event of Default unless such failure to perform, together with other failures to perform as described in this Section 12.1(g), involve singly or in the aggregate obligations for borrowed money or credit received totaling in excess of $5,000,000.00; (h) the Borrower or any of its Subsidiaries, (A) shall make an assignment for the benefit of creditors, or admit in writing its general inability to pay or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver of the Borrower or any of its Subsidiaries or of any substantial part of the assets of any thereof, (B) shall commence any case or other proceeding relating to the Borrower or any of its Subsidiaries under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or (C) shall take any action to authorize or in furtherance of any of the foregoing; (i) a petition or application shall be filed for the appointment of a trustee or other custodian, liquidator or receiver of the Borrower or any of its Subsidiaries or any substantial part of the assets of any thereof, or a case or other proceeding shall be commenced against the Borrower or any of its Subsidiaries under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, and the Borrower or any of its Subsidiaries shall indicate its approval thereof, consent thereto or acquiescence therein or such petition, application, case or proceeding shall not have been dismissed within 60 days following the filing or commencement thereof; (j) a decree or order is entered appointing any such trustee, custodian, liquidator or receiver or adjudicating the Borrower or any of its Subsidiaries bankrupt or insolvent, or approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of the Borrower or any of its Subsidiaries, in each case of the foregoing in an involuntary case under federal bankruptcy laws as now or hereafter constituted; (k) there shall remain in force, undischarged, unsatisfied and unstayed, for more than 60 days, whether or not consecutive, any uninsured final judgment against the Borrower or any of its Subsidiaries that, with other outstanding uninsured final judgments, undischarged, against the Borrower or any of its Subsidiaries exceeds in the aggregate $1,000,000.00; (l) if any of the Loan Documents shall be canceled, terminated, revoked or rescinded otherwise than in accordance with the terms thereof or with the express prior written agreement, consent or approval of the Lenders, or any action at law, suit in equity or other legal proceeding to cancel, revoke or rescind any of the Loan Documents shall be commenced by or on behalf of the Borrower or any of its Subsidiaries or any of their respective holders of Voting Interests, or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or issue a judgment, order, decree or ruling to the effect that, any one or more of the Loan Documents is illegal, invalid or unenforceable in accordance with the terms thereof in any material respect as determined by the Majority Lenders; (m) any dissolution, termination, partial or complete liquidation, merger or consolidation of the Borrower or any of its Subsidiaries, or any sale, transfer or other disposition of the assets of the Borrower or any of its Subsidiaries, other than as permitted under the terms of this Agreement or the other Loan Documents; (n) any suit or proceeding shall be filed against the Borrower, any of its Subsidiaries, any Collateral or any Collateral Property which in the good faith business judgment of the Majority Lenders after giving consideration to the likelihood of success of such suit or proceeding and the availability of insurance to cover any judgment with respect thereto and based on the information available to them, if adversely determined, would have a materially adverse affect on the ability of the Borrower to perform each and every one of their respective obligations under and by virtue of the Loan Documents; (o) the Borrower shall be indicted for a federal crime, a punishment for which could include the forfeiture of any assets of the Borrower included in the Collateral; (p) Jeffrey H. Lynford shall cease to be the Chairman of the Board of, or Edward Lowenthal shall cease to be the President of, the Borrower, and a competent and experienced successor for such Person shall not be approved by the Majority Lenders within six (6) months of such event; or (q) with respect to any Guaranteed Pension Plan, an ERISA Reportable Event shall have occurred and the Majority Lenders shall have determined in their reasonable discretion that such event reasonably could be expected to result in liability of any of the Borrower to the PBGC or such Guaranteed Pension Plan in an aggregate amount exceeding $1,000,000 and such event in the circumstances occurring reasonably could constitute grounds for the termination of such Guaranteed Pension Plan by the PBGC or for the appointment by the appropriate United States District Court of a trustee to administer such Guaranteed Pension Plan; or a trustee shall have been appointed by the United States District Court to administer such Plan; or the PBGC shall have instituted proceedings to terminate such Guaranteed Pension Plan; then, and in any such event, the Agent may, and upon the request of the Majority Lenders shall, by notice in writing to the Borrower declare all amounts owing with respect to this Agreement, the Notes and the other Loan Documents to be, and they shall thereupon forthwith become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower; provided that in the event of any Event of Default specified in Section 12.1(h), Section 12.1(i) or Section 12.1(j), all such amounts shall become immediately due and payable automatically and without any requirement of notice from any of the Lenders or the Agent. Section 12.1A. Limitation of Cure Periods. (a) Notwithstanding anything contained in Section 12.1 to the contrary, (i) no Event of Default shall exist hereunder upon the occurrence of any failure described in Section 12.1(b) in the event that the Borrower cures such default within five (5) days following receipt of written notice of such default, provided, however, that Borrower shall not be entitled to receive more than two (2) notices in the aggregate pursuant to this clause (i) in any period of 365 days ending on the date of any such occurrence of default, and provided further that no such cure period shall apply to any payments due upon the maturity of the Notes, and (ii) no Event of Default shall exist hereunder upon the occurrence of any failure described in Section 12.1(e) in the event that the Borrower cures such default with thirty (30) days following receipt of written notice of such default, provided that the provisions of this clause (ii) shall not pertain to defaults consisting of a failure to provide insurance as required by Section 7.7, to any default consisting of a failure to comply with Section 7.4(e), or to any default excluded from any provision of cure of defaults contained in any other of the Loan Documents. (b) Notwithstanding the provisions of subsections (c) and (d) of Section 12.1 or of Section 12.1B, the cure periods provided therein shall not be allowed and the occurrence of a Default thereunder immediately shall constitute an Event of Default for all purposes of this Agreement and the other Loan Documents if, within the period of twelve months immediately preceding the occurrence of such Default, there shall have occurred two periods of cure or portions thereof under any one or more than one of said subsections. Section 12.1B. Certain Cure Periods. (a) In the event that there shall occur any Default under Section 12.1(c), then within five Business Days after receipt of notice of such Default from the Agent or the Majority Lenders the Borrower may elect to cure such Default by providing additional Collateral consisting of Potential Collateral, and/or to reduce the Total Commitment and reduce the outstanding Loans, in which event such actions shall be completed not later than 15 days following the date on which the Borrower is notified that the Majority Lenders have approved the Borrowers proposed actions (provided that upon the occurrence of any event which may cause a Default to occur under Section 12.1(c) which is also a Default under any of the Loan Documents for which no notice or right to cure is provided, an Event of Default shall occur for which no right to cure under this Section 12.1B shall be available). The Borrowers notice of its election pursuant to the preceding sentence shall be delivered to the Agent within the period of five Business Days provided above. Within five Business Days after receipt of such advice, the Majority Lenders shall advise the Borrower as to whether in their good faith judgment the actions proposed by the Borrower are sufficient to cure such Default without the creation of any other Default hereunder. In the event that the Majority Lenders determine that Borrowers proposal is insufficient to cure such Default or is otherwise not in accordance with the terms of this Agreement, the Borrower within an additional three Business Days after such negative notice may submit to the Agent an alternative plan or evidence establishing that the Borrowers original election was sufficient. In the event that within the times provided herein the Borrower shall have failed to provide evidence satisfactory to the Majority Lenders that Borrowers proposed actions are sufficient to cure such Default in accordance with the terms hereof, the cure period shall terminate and such Default immediately shall constitute an Event of Default. (b) In the event that the Borrower shall elect in whole or in part under subsection 12.1B(a) to provide additional Collateral, the promissory note or Partipation Interest or CMBS to be added to the Collateral shall be a Qualifying Collateral Note and on or prior to the expiration of the 15-day period each of the Collateral Loan Qualification Documents shall have been completed and provided to the Agent for the benefit of the Lenders. Section 17.2. Termination of Commitments. If any one or more Events of Default specified in Section 12.1(h), Section 12.1(i) or Section 12.1(j) shall occur, then immediately and without any action on the part of the Agent or any Lender any unused portion of the credit hereunder shall terminate and the Lenders shall be relieved of all obligations to make Loans to the Borrower. If any other Event of Default shall have occurred and be continuing, the Agent, upon the election of the Majority Lenders, may by notice to the Borrower terminate the obligation to make Loans to the Borrower. No termination under this Section 12.2 shall relieve the Borrower of its obligations to the Lenders arising under this Agreement or the other Loan Documents. Section 17.3. Remedies. In case any one or more of the Events of Default shall have occurred and be continuing, and whether or not the Lenders shall have accelerated the maturity of the Loans pursuant to Section 12.1, the Agent on behalf of the Lenders, may, with the consent of the Majority Lenders but not otherwise, proceed to protect and enforce their rights and remedies under this Agreement, the Notes or any of the other Loan Documents by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Agreement and the other Loan Documents or any instrument pursuant to which the Obligations are evidenced, including to the full extent permitted by applicable law the obtaining of the ex parte appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right. No remedy herein conferred upon the Agent or the holder of any Note is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of law. Section 17.4. Distribution of Collateral Proceeds. In the event that, following the occurrence or during the continuance of any Event of Default, any monies are received in connection with the enforcement of any of the Security Documents, or otherwise with respect to the realization upon any of the Collateral, such monies shall be distributed for application as follows: (a) First, to the payment of, or (as the case may be) the reimbursement of, the Agent for or in respect of all reasonable costs, expenses, disbursements and losses which shall have been incurred or sustained by the Agent to protect or preserve the collateral or in connection with the collection of such monies by the Agent, for the exercise, protection or enforcement by the Agent of all or any of the rights, remedies, powers and privileges of the Agent under this Agreement or any of the other Loan Documents or in respect of the Collateral or in support of any provision of adequate indemnity to the Agent against any taxes or liens which by law shall have, or may have, priority over the rights of the Agent to such monies; (b) Second, to all other Obligations in such order or preference as the Majority Lenders shall determine; provided, however, that (i) distributions in respect of such Obligations shall be made pari passu among Obligations with respect to the Agents fee payable pursuant to Section 4.3 and all other Obligations, (ii) in the event that any Lender shall have wrongfully failed or refused to make an advance under Section 2.7 and such failure or refusal shall be continuing, advances made by other Lenders during the pendency of such failure or refusal shall be entitled to be repaid as to principal and accrued interest in priority to the other Obligations described in this subsection (b), and (iii) Obligations owing to the Lenders with respect to each type of Obligation such as interest, principal, fees and expenses, shall be made among the Lenders pro rata; and provided, further that the Majority Lenders may in their discretion make proper allowance to take into account any Obligations not then due and payable; and (c) Third, the excess, if any, shall be returned to the Borrower or to such other Persons as are entitled thereto. Section 18. SETOFF. Regardless of the adequacy of any collateral, during the continuance of any Event of Default, any deposits (general or specific, time or demand, provisional or final, regardless of currency, maturity, or the branch of where such deposits are held) or other sums credited by or due from any of the Lenders to the Borrower and any securities or other property of the Borrower in the possession of such Lender may be applied to or set off against the payment of Obligations and any and all other liabilities, direct, or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, of the Borrower to such Lender. Each of the Lenders agrees with each other Lender that if such Lender shall receive from the Borrower, whether by voluntary payment, exercise of the right of setoff, or otherwise, and shall retain and apply to the payment of the Note or Notes held by such Lender any amount in excess of its ratable portion of the payments received by all of the Lenders with respect to the Notes held by all of the Lenders, such Lender will make such disposition and arrangements with the other Lenders with respect to such excess, either by way of distribution, pro tanto assignment of claims, subrogation or otherwise as shall result in each Lender receiving in respect of the Notes held by it its proportionate payment as contemplated by this Agreement; provided that if all or any part of such excess payment is thereafter recovered from such Lender, such disposition and arrangements shall be rescinded and the amount restored to the extent of such recovery, but without interest. Section 19. THE AGENT. Section 19.1. Authorization. The Agent is authorized to take such action on behalf of each of the Lenders and to exercise all such powers as are hereunder and under any of the other Loan Documents and any related documents delegated to the Agent, together with such powers as are reasonably incident thereto, provided that no duties or responsibilities not expressly assumed herein or therein shall be implied to have been assumed by the Agent. The obligations of Agent hereunder are primarily administrative in nature, and nothing contained in this Agreement or any of the other Loan Documents shall be construed to constitute the Agent as a trustee for any Lender or to create any agency or fiduciary relationship. The Borrower and any other Person shall be entitled to conclusively rely on a statement from the Agent that it has the authority to act for and bind the Lenders pursuant to this Agreement and the other Loan Documents. Section 19.2. Employees and Agents. The Agent may exercise its powers and execute its duties by or through employees or agents and shall be entitled to take, and to rely on, advice of counsel concerning all matters pertaining to its rights and duties under this Agreement and the other Loan Documents. The Agent may utilize the services of such Persons as the Agent may reasonably determine, and all reasonable fees and expenses of any such Persons shall be paid by the Borrower. Section 19.3. No Liability. Neither the Agent nor any of its shareholders, directors, officers or employees nor any other Person assisting them in their duties nor any agent, or employee thereof, shall be liable for any waiver, consent or approval given or any action taken, or omitted to be taken, in good faith by it or them hereunder or under any of the other Loan Documents, or in connection herewith or therewith, or be responsible for the consequences of any oversight or error of judgment whatsoever, except that the Agent or such other Person, as the case may be, may be liable for losses due to its willful misconduct or gross negligence. Section 19.4. No Representations. The Agent shall not be responsible for the execution or validity or enforceability of this Agreement, the Notes, any of the other Loan Documents or any instrument at any time constituting, or intended to constitute, collateral security for the Notes, or for the value of any such collateral security or for the validity, enforceability or collectability of any such amounts owing with respect to the Notes, or for any recitals or statements, warranties or representations made herein or in any of the other Loan Documents or in any certificate or instrument hereafter furnished to it by or on behalf of the Borrower or any of its Subsidiaries, or be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements herein or in any other of the Loan Documents. The Agent shall not be bound to ascertain whether any notice, consent, waiver or request delivered to it by the Borrower or any holder of any of the Notes shall have been duly authorized or is true, accurate and complete. The Agent has not made nor does it now make any representations or warranties, express or implied, nor does it assume any liability to the Lenders, with respect to the creditworthiness or financial condition of the Borrower or any of its Subsidiaries. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender, and based upon such information and documents as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender, based upon such information and documents as it deems appropriate at the time, continue to make its own credit analysis and decisions in taking or not taking action under this Agreement and the other Loan Documents. Section 19.5. Payments. (a) A payment by the Borrower to the Agent hereunder or under any of the other Loan Documents for the account of any Lender shall constitute a payment to such Lender. The Agent agrees to distribute to each Lender not later than one Business Day after the Agents receipt of good funds, determined in accordance with the Agents customary practices, such Lenders pro rata share of payments received by the Agent for the account of the Lenders except as otherwise expressly provided herein or in any of the other Loan Documents. (b) If in the opinion of the Agent the distribution of any amount received by it in such capacity hereunder, under the Notes or under any of the other Loan Documents might involve it in liability, it may refrain from making distribution until its right to make distribution shall have been adjudicated by a court of competent jurisdiction. If a court of competent jurisdiction shall adjudge that any amount received and distributed by the Agent is to be repaid or in the event that any amount received pursuant to the Estoppel and Agreement and distributed by the Agent is to be repaid pursuant to the Estoppel and Agreement, each Person to whom any such distribution shall have been made shall either repay to the Agent its proportionate share of the amount so adjudged or required to be repaid or shall pay over the same in such manner and to such Persons as shall be determined by such court or as required by the Estoppel and Agreement, as applicable. (c) Notwithstanding anything to the contrary contained in this Agreement or any of the other Loan Documents, any Lender that fails (i) to make available to the Agent its pro rata share of any Loan or (ii) to comply with the provisions of Section 13 with respect to making dispositions and arrangements with the other Lenders, where such Lenders share of any payment received, whether by setoff or otherwise, is in excess of its pro rata share of such payments due and payable to all of the Lenders, in each case as, when and to the full extent required by the provisions of this Agreement, shall be deemed delinquent (a "Delinquent Lender") and shall be deemed a Delinquent Lender until such time as such delinquency is satisfied. A Delinquent Lender shall be deemed to have assigned any and all payments due to it from the Borrower, whether on account of outstanding Loans, interest, fees or otherwise, to the remaining nondelinquent Lenders for application to, and reduction of, their respective pro rata shares of all outstanding Loans. The Delinquent Lender hereby authorizes the Agent to distribute such payments to the nondelinquent Lenders in proportion to their respective pro rata shares of all outstanding Loans. A Delinquent Lender shall be deemed to have satisfied in full a delinquency when and if, as a result of application of the assigned payments to all outstanding Loans of the nondelinquent Lenders or as a result of other payments by the Delinquent Lenders to the nondelinquent Lenders, the Lenders respective pro rata shares of all outstanding Loans have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency. Section 19.6. Holders of Notes. Subject to the terms of Article 18, the Agent may deem and treat the payee of any Note as the absolute owner or purchaser thereof for all purposes hereof until it shall have been furnished in writing with a different name by such payee or by a subsequent holder, assignee or transferee. Section 19.7. Indemnity. The Lenders ratably agree hereby to indemnify and hold harmless the Agent from and against any and all claims, actions and suits (whether groundless or otherwise), losses, damages, costs, expenses (including any expenses for which the Agent has not been reimbursed by the Borrower as required by Section 15), and liabilities of every nature and character arising out of or related to this Agreement, the Notes, or any of the other Loan Documents or the transactions contemplated or evidenced hereby or thereby, or the Agents actions taken hereunder or thereunder, except to the extent that any of the same shall be directly caused by the Agents willful misconduct or gross negligence. Section 19.8. Agent as Lender. In its individual capacity, BKB shall have the same obligations and the same rights, powers and privileges in respect to its Commitment and the Loans made by it, and as the holder of any of the Notes as it would have were it not also the Agent. Section 19.9. Resignation. The Agent may resign at any time by giving 60 days prior written notice thereof to the Lenders and the Borrower. Upon any such resignation, the Majority Lenders shall have the right to appoint as a successor Agent any Lender or any other sophisticated investor knowledgeable in the lending on or ownership of property similar to the Collateral. Unless a Default or Event of Default shall have occurred and be continuing, such successor Agent shall be reasonably acceptable to the Borrower. If no successor Agent shall have been so appointed by the Majority Lenders and shall have accepted such appointment within 30 days after the retiring Agents giving of notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a Lender or any other sophisticated investor knowledgeable in the lending on or ownership of property similar to the Collateral. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder as Agent. After any retiring Agents resignation, the provisions of this Agreement and the other Loan Documents shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. Section 19.10. Duties in the Case of Enforcement. In case one or more Events of Default have occurred and shall be continuing, and whether or not acceleration of the Obligations shall have occurred, the Agent shall, if (a) so requested by the Majority Lenders and (b) the Lenders have provided to the Agent such additional indemnities and assurances against expenses and liabilities as the Agent may reasonably request, proceed to enforce the provisions of the Security Documents authorizing the sale or other disposition of all or any part of the Collateral and exercise all or any such other legal and equitable and other rights or remedies as it may have in respect of such Collateral. The Majority Lenders may direct the Agent in writing as to the method and the extent of any such sale or other disposition, the Lenders hereby agreeing to indemnify and hold the Agent harmless from all liabilities incurred in respect of all actions taken or omitted in accordance with such directions, provided that the Agent need not comply with any such direction to the extent that the Agent reasonably believes the Agents compliance with such direction to be unlawful or commercially unreasonable in any applicable jurisdiction. Section 20. EXPENSES. The Borrower agrees to pay (a) the reasonable costs of producing and reproducing this Agreement, the other Loan Documents and the other agreements and instruments mentioned herein, (b) any taxes (including any interest and penalties in respect thereto) payable by the Agent or any of the Lenders (other than taxes based upon the Agents or any Lenders gross or net income, except that the Agent and the Lenders shall be entitled to indemnification for any and all amounts paid by them in respect of taxes based on income or other taxes assessed by any State in which Collateral is located, such indemnification to be limited to taxes due solely on account of the granting of Collateral under the Security Documents and to be net of any credit allowed to the indemnified party from any other State on account of the payment or incurrence of such tax by such indemnified party), including any recording, mortgage, documentary or intangibles taxes in connection with the Security Documents and other Loan Documents, or other taxes payable on or with respect to the transactions contemplated by this Agreement, including any such taxes payable by the Agent or any of the Lenders after the Closing Date (the Borrower hereby agreeing to indemnify the Agent and each Lender with respect thereto), (c) all reasonable internal charges of the Agent (determined in good faith and in accordance with the Agents internal policies applicable generally to its customers) for commercial finance exams and the reasonable fees, expenses and disbursements of the counsel to the Agent, counsel for the Majority Lenders and any local counsel to the Agent incurred in connection with the preparation, administration or interpretation of the Loan Documents and other instruments mentioned herein (excluding, however, the preparation of agreements evidencing participations granted under Section 18.4), the review of any additional or substitute Collateral, each closing hereunder, and amendments, modifications, approvals, consents or waivers hereto or hereunder, (d) the reasonable fees, expenses and disbursements of the Agent incurred by the Agent in connection with the preparation, administration or interpretation of the Loan Documents and other instruments mentioned herein, and the making of each advance hereunder, (e) all reasonable out-of-pocket expenses (including reasonable attorneys fees and costs, which attorneys may be employees of any Lender or the Agent and the fees and costs of appraisers, engineers, investment bankers or other experts retained by any Lender or the Agent) incurred by any Lender or the Agent in connection with (i) the enforcement of or preservation of rights under any of the Loan Documents against the Borrower or the administration thereof after the occurrence of a Default or Event of Default and (ii) any litigation, proceeding or dispute whether arising hereunder or otherwise, in any way related to the Agents or any of the Lenders relationship with the Borrower, (f) all reasonable fees, expenses and disbursements of any Lender or the Agent incurred in connection with U.C.C. searches or U.C.C. filings, and (g) all reasonable fees and expenses (including reasonable attorneys fees and costs) incurred by BKB in connection with the assignment of Commitments and interests in the Loans pursuant to Section 18.1. The covenants of this Section 15 shall survive payment or satisfaction of payment of amounts owing with respect to the Notes. Section 21. INDEMNIFICATION. The Borrower agrees to indemnify and hold harmless the Agent and the Lenders and each director, officer, employee, agent and Person who controls the Agent or any Lender from and against any and all claims, actions and suits, whether groundless or otherwise, and from and against any and all liabilities, losses, damages and expenses of every nature and character arising out of or relating to this Agreement or any of the other Loan Documents or the transactions contemplated hereby and thereby including, without limitation, (a) any leasing fees and any brokerage, finders or similar fees asserted against any Person indemnified under this Section 16 based upon any agreement, arrangement or action made or taken, or alleged to have been made or taken, by the Borrower or any of its Subsidiaries, (b) any condition of the Collateral Property, (c) any actual or proposed use by the Borrower of the proceeds of any of the Loans, (d) any actual or alleged infringement of any patent, copyright, trademark, service mark or similar right of the Borrower or any of its Subsidiaries comprised in the Collateral, (e) the Borrower entering into or performing this Agreement or any of the other Loan Documents, (f) any actual or alleged violation of any law, ordinance, code, order, rule, regulation, approval, consent, permit or license (including usury laws, consumer credit loans, truth in lending laws, and the Real Estate Settlement Procedures Act) relating to the Collateral, or (g) with respect to the Borrower and its Subsidiaries and their respective properties and assets, the violation of any Environmental Law, the Release or threatened Release of any Hazardous Substances or any action, suit, proceeding or investigation brought or threatened with respect to any Hazardous Substances (including, but not limited to claims with respect to wrongful death, personal injury or damage to property), in each case including, without limitation, the reasonable fees and disbursements of counsel and allocated costs of internal counsel incurred in connection with any such investigation, litigation or other proceeding; provided, however, that the Borrower shall not be obligated under this Section 16 to indemnify any Person for liabilities arising from such Persons own gross negligence or willful misconduct. In litigation, or the preparation therefor, the Lenders and the Agent shall be entitled to select a single law firm as their own counsel and, in addition to the foregoing indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses of such counsel. If, and to the extent that the obligations of the Borrower under this Section 16 are unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment in satisfaction of such obligations which is permissible under applicable law. The provisions of this Section 16 shall survive the repayment of the Loans and the termination of the obligations of the Lenders hereunder. Section 22. SURVIVAL OF COVENANTS, ETC. All covenants, agreements, representations and warranties made herein, in the Notes, in any of the other Loan Documents or in any documents or other papers delivered by or on behalf of the Borrower or any of its Subsidiaries pursuant hereto or thereto shall be deemed to have been relied upon by the Lenders and the Agent, notwithstanding any investigation heretofore or hereafter made by any of them, and shall survive the making by the Lenders of any of the Loans, as herein contemplated, and shall continue in full force and effect so long as any amount due under this Agreement or the Notes or any of the other Loan Documents remains outstanding or any Lender has any obligation to make any Loans. The indemnification obligations of the Borrower provided herein and the other Loan Documents shall survive the full repayment of amounts due and the termination of the obligations of the Lenders hereunder and thereunder to the extent provided herein and therein. All statements contained in any certificate or other paper delivered to any Lender or the Agent at any time by or on behalf of the Borrower or any of its Subsidiaries pursuant hereto or in connection with the transactions contemplated hereby shall constitute representations and warranties by the Borrower or such Subsidiary hereunder. Section 23. ASSIGNMENT AND PARTICIPATION. Section 23.1. Conditions to Assignment by Lenders. Except as provided herein, each Lender may assign to one or more banks or other entities all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitment Percentage and Commitment and the same portion of the Loans at the time owing to it, and the Notes held by it); provided that (a) the Agent shall have given its prior written consent to such assignment, which consent shall not be unreasonably withheld (provided that such consent shall not be required for any assignment to another Lender, to a bank which is under common control with the assigning Lender or to a wholly-owned Subsidiary of such Lender provided that such assignee shall remain a wholly-owned Subsidiary of such Lender), (b) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Lenders rights and obligations under this Agreement, (c) the parties to such assignment shall execute and deliver to the Agent, for recording in the Register (as hereinafter defined), a notice of such assignment, together with any Notes subject to such assignment, (d) in no event shall any voting, consent or approval rights of a Lender be assigned to any Person controlling, controlled by or under common control with, or which is not otherwise free from influence or control by, the Borrower, which rights shall instead be allocated pro rata among the other remaining Lenders, (e) such assignee shall have a net worth or unfunded capital commitments as of the date of such assignment of not less than $500,000,000 unless otherwise approved by the Agent and Borrower and (f) such assignee shall acquire an interest in the Loans of not less than $10,000,000.00. No such assignment shall be made without the prior consent of the Borrower, which consent shall not be unreasonably withheld or delayed; provided that such consent shall not be required in the event that a Default or Event of Default shall have occurred. Upon such execution, delivery, acceptance and recording, of such notice of assignment, (i) the assignee thereunder shall be a party hereto and all other Loan Documents executed by the Lenders and, to the extent provided in such assignment, have the rights and obligations of a Lender hereunder, (ii) the assigning Lender shall, to the extent provided in such assignment and upon payment to the Agent of the registration fee referred to in Section 18.2, be released from its obligations under this Agreement, and (iii) the Agent may unilaterally amend Schedule 1 to reflect such assignment. In connection with each assignment, the assignee shall represent and warrant to the Agent, the assignor and each other Lender as to whether such assignee is controlling, controlled by, under common control with or is not otherwise free from influence or control by, the Borrower. Section 23.2. Register. The Agent shall maintain a copy of each assignment delivered to it and a register or similar list (the "Register") for the recordation of the names and addresses of the Lenders and the Commitment Percentages of, and principal amount of the Loans owing to the Lenders from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and the Lenders at any reasonable time and from time to time upon reasonable prior notice. Upon each such recordation, the assigning Lender agrees to pay to the Agent a registration fee in the sum of $2,000. Section 23.3. New Notes. Upon its receipt of an assignment executed by the parties to such assignment, together with each Note subject to such assignment, the Agent shall (a) record the information contained therein in the Register, and (b) give prompt notice thereof to the Borrower and the Lenders (other than the assigning Lender). Within five Business Days after receipt of such notice, the Borrower, at its own expense, shall execute and deliver to the Agent, in exchange for each surrendered Note, a new Note to the order of such assignee in an amount equal to the amount assumed by such assignee pursuant to such assignment and, if the assigning Lender has retained some portion of its obligations hereunder, a new Note to the order of the assigning Lender in an amount equal to the amount retained by it hereunder. Such new Notes shall provide that they are replacements for the surrendered Notes, shall be in an aggregate principal amount equal to the aggregate principal amount of the surrendered Notes, shall be dated the effective date of such assignment and shall otherwise be in substantially the form of the assigned Notes. The surrendered Notes shall be canceled and returned to the Borrower. Section 23.4. Participations. Each Lender may sell participations to one or more banks or other entities in all or a portion of such Lenders rights and obligations under this Agreement and the other Loan Documents; provided that (a) any such sale or participation shall not affect the rights and duties of the selling Lender hereunder to the Borrower, (b) such sale and participation shall not entitle such participant any rights or privileges under this Agreement or the Loan Documents (including, without limitation, the right to approve waivers, amendments or modifications), (c) such participant shall have no direct rights against the Borrower except the rights granted to the Lenders pursuant to Section 13, (d) such sale is effected in accordance with all applicable laws, and (e) such participant shall not be a Person controlling, controlled by or under common control with, or which is not otherwise free from influence or control by, the Borrower or any of its Subsidiaries. Section 23.5. Pledge by Lender. Any Lender may at any time pledge all or any portion of its interest and rights under this Agreement (including all or any portion of its Note) to any of the twelve Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341 or to such other Person as the Agent may approve to secure obligations of such Lender. No such pledge or the enforcement thereof shall release the pledgor Lender from its obligations hereunder or under any of the other Loan Documents. Section 23.6. No Assignment by Borrower. The Borrower shall not assign or transfer any of its rights or obligations under any of the Loan Documents without the prior written consent of each of the Lenders. Section 23.7. Disclosure. The Borrower agrees that in addition to disclosures made in accordance with standard lending practices any Lender may disclose information obtained by such Lender pursuant to this Agreement to assignees or participants and potential assignees or participants hereunder. Section 24. NOTICES. Each notice, demand, election or request provided for or permitted to be given pursuant to this Agreement (hereinafter in this Section 19 referred to as "Notice"), but specifically excluding to the maximum extent permitted by law any notices of the institution or commencement of foreclosure proceedings, must be in writing and shall be deemed to have been properly given or served by personal delivery or by sending same by overnight courier or by depositing same in the United States Mail, postpaid and registered or certified, return receipt requested, or as expressly permitted herein, by telegraph, telecopy, telefax or telex, and addressed as follows: If to the Agent or BKB: BankBoston, N.A. 100 Federal Street Boston, Massachusetts 02110 Attn: Real Estate Division With a copy to: BankBoston, N.A. 115 Perimeter Center Place, N.E. Suite 500 Atlanta, Georgia 30346 Attn: Mr. Jay Johns Telecopy No.: 770/390-8434 If to the Borrower: Wellsford Finance, Inc. 535 Madison Avenue 26th Floor New York, New York 10022 Attn: Gregory F. Hughes With a copy to: Alan S. Pearce, Esq. Robinson Silverman Pearce Aronsohn & Berman LLP 1290 Avenue of the Americas New York, New York 10104 if to another Lender now a party to this Agreement, to the address set forth on the signature page hereto, and to each other Lender which may hereafter become a party to this Agreement at such address as may be designated by such Lender. Each Notice shall be effective upon being personally delivered or upon being sent by overnight courier or upon being deposited in the United States Mail as aforesaid. The time period in which a response to such Notice must be given or any action taken with respect thereto (if any), however, shall commence to run from the date of receipt if personally delivered or sent by overnight courier, or if so deposited in the United States Mail, the earlier of three (3) Business Days following such deposit or the date of receipt as disclosed on the return receipt. Rejection or other refusal to accept or the inability to deliver because of changed address for which no notice was given shall be deemed to be receipt of the Notice sent. By giving at least fifteen (15) days prior Notice thereof, the Borrower, a Lender or Agent shall have the right from time to time and at any time during the term of this Agreement to change their respective addresses and each shall have the right to specify as its address any other address within the United States of America. Section 25. RELATIONSHIP. Neither the Agent nor any Lender has any fiduciary relationship with or fiduciary duty to Borrower arising out of or in connection with this Agreement or the other Loan Documents, or the transactions contemplated hereunder or thereunder. The relationship between each Lender and the Borrower is solely that of a lender and borrower, and nothing contained herein or in any of the other Loan Documents shall in any manner be construed as making the parties hereto partners, joint venturers or any other relationship other than lender and borrower. Section 26. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE. THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN, ARE CONTRACTS UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SUCH STATE (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BRING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN Section 19. THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT. Section 27. HEADINGS. The captions in this Agreement are for convenience of reference only and shall not define or limit the provisions hereof. Section 28. COUNTERPARTS. This Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. Section 29. ENTIRE AGREEMENT, ETC. The Loan Documents and any other documents executed in connection herewith or therewith express the entire understanding of the parties with respect to the transactions contemplated hereby. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated, except as provided in Section 27. Section 30. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT AND THE LENDERS HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY NOTE OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. THE BORROWER (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY LENDERS OR THE AGENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH LENDER OR THE AGENT WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT THE AGENT AND THE LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH THEY ARE PARTIES BY, AMONG OTHER THINGS, THE WAIVER AND CERTIFICATIONS CONTAINED IN THIS Section 25. BORROWER ACKNOWLEDGES THAT IT HAS HAD AN OPPORTUNITY TO REVIEW THIS Section 25 WITH ITS LEGAL COUNSEL AND THAT BORROWER AGREES TO THE FOREGOING AS ITS FREE, KNOWING AND VOLUNTARY ACT. Section 31. DEALINGS WITH THE BORROWER. The Lenders and their affiliates may accept deposits from, extend credit to and generally engage in any kind of banking, trust or other business with the Borrower, its Subsidiaries or any of their affiliates regardless of the capacity of the Lender hereunder. Section 32. CONSENTS, AMENDMENTS, WAIVERS, ETC. Except as otherwise expressly provided in this Agreement, any consent or approval required or permitted by this Agreement may be given, and any term of this Agreement or of any other instrument related hereto or mentioned herein may be amended, and the performance or observance by the Borrower of any terms of this Agreement or such other instrument or the continuance of any Default or Event of Default may be waived (either generally or in a particular instance and either retroactively or prospectively) with, but only with, the written consent of the Majority Lenders. Notwithstanding the foregoing, none of the following may occur without the written consent of each Lender: a change in the rate of interest on and the term of the Notes; a change in the amount of the Commitments of the Lenders (except as provided in Section 18.1); a forgiveness, reduction or waiver of the principal of any unpaid Loan or any interest thereon or fee payable under the Loan Documents; a change in the amount of any fee payable to a Lender hereunder; the postponement of any date fixed for any payment of principal of or interest on the Loan; an extension of the Maturity Date; a change in the manner of distribution of any payments to the Lenders or the Agent; the release of the Borrower or any Collateral except as otherwise provided herein; an amendment of the definition of Majority Lenders or of any requirement for consent by all of the Lenders; any modification to require a Lender to fund a pro rata share of a request for an advance of the Loan made by the Borrower other than based on its Commitment Percentage; an amendment to this Section 27; an amendment of the definition of Majority Lenders; or an amendment of any provision of this Agreement or the Loan Documents which requires the approval of all of the Lenders or the Majority Lenders to require a lesser number of Lenders to approve such action. The amount of the Agents fee payable for the Agents account and the provisions of Section 14 may not be amended without the written consent of the Agent. No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of the Agent or any Lender in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon the Borrower shall entitle the Borrower to other or further notice or demand in similar or other circumstances. Section 33. SEVERABILITY. The provisions of this Agreement are severable, and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Agreement in any jurisdiction. Section 34. NO UNWRITTEN AGREEMENTS. THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. Section 35. TIME OF THE ESSENCE. Time is of the essence with respect to each and every covenant, agreement and obligation of the Borrower under this Agreement and the other Loan Documents. Section 36. REPLACEMENT NOTES. Upon receipt of evidence reasonably satisfactory to Borrower of the loss, theft, destruction or mutilation of any Note, and in the case of any such loss, theft or destruction, upon delivery of an indemnity agreement reasonably satisfactory to Borrower or, in the case of any such mutilation, upon surrender and cancellation of the applicable Note, Borrower will execute and deliver, in lieu thereof, a replacement Note, identical in form and substance to the applicable Note and dated as of the date of the applicable Note and upon such execution and delivery all references in the Loan Documents to such Note shall be deemed to refer to such replacement Note. Section 37. SERVICING. (a) Borrower covenants to maintain or cause the servicing of the Collateral to be maintained with respect to each type of Collateral pledged to Agent hereunder in conformity with accepted and prudent servicing practices in the industry for such same type of Collateral and in a manner at least equal in quality to the servicing Borrower provides for assets similar to such Collateral which it owns. (b) If the Collateral, or any portion thereof, is serviced by Borrower, (i) Borrower agrees that Agent is the collateral assignee of all servicing records, including but not limited to any and all servicing agreements, files, documents, records, data bases, computer tapes, copies of computer tapes, proof of insurance coverage, insurance policies, appraisals, other closing documentation, payment history records, and any other records relating to or evidencing the servicing of such Collateral (the "Servicing Records"), and (ii) Borrower grants Agent a security interest in all servicing fees and rights relating to such Collateral and all Servicing Records to secure the obligation of Borrower or its designee to service in conformity with this section and any other obligation of Borrower to Agent and the Lenders. Borrower covenants to safeguard such Servicing Records and to deliver them promptly to Agent or its designee upon Agents request. (c) If the Collateral, or any portion thereof, is serviced by a third party Servicer, Borrower (i) shall provide a copy of the servicing agreement to Agent, which shall be in form and substance acceptable to Agent (the "Servicing Agreement"); and (ii) hereby irrevocably assigns to Agent and Agents successors and assigns all right, title, interest of Borrower in, to and under, and the benefits of, any Servicing Agreement with respect to such Collateral. Any successor to the Servicer shall be approved in writing by the Agent prior to such successor's assumption of servicing obligations with respect to such Collateral. (d) Borrower shall provide to Agent a letter from Borrower (if Borrower is the Servicer) or the Servicer, as the case may be, to the effect that upon the occurrence of an Event of Default, Agent may terminate any Servicing Agreement and transfer servicing to its designee, at no cost or expense to Agent, it being agreed that Borrower will pay any and all fees required to terminate the Servicing Agreement and to effectuate the transfer of servicing to the designee of Agent. (e) Borrower shall cause the Servicer to provide a copy of each report notice sent to Borrower to be sent to Agent concurrently therewith. IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as a sealed instrument as of the date first set forth above. WELLSFORD FINANCE INC., a Maryland corporation By: /s/ Gregory F. Hughes ------------------------------ Title: Vice President & Treasurer [CORPORATE SEAL] BANKBOSTON, N.A., a national banking association, individually and as Agent By: /s/ Jay John ---------------------------------- Title: Vice President [BANK SEAL] EXHIBIT A --------- FORM OF NOTE $______________ January __, 1999 FOR VALUE RECEIVED, the undersigned WELLSFORD FINANCE, INC., a Maryland corporation, hereby promises to pay to ____________________________________ or order, in accordance with the terms of that certain Revolving Credit Agreement dated as of January 12, 1999 (the "Credit Agreement"), as from time to time in effect, among the undersigned, BankBoston, N.A., for itself and as Agent, and such other Lenders as may be from time to time named therein, to the extent not sooner paid, on or before the Maturity Date, the principal sum of ____________________________ DOLLARS ($______________), or such amount as may be advanced by the payee hereof under the Credit Agreement with daily interest from the date hereof, computed as provided in the Credit Agreement, on the principal amount hereof from time to time unpaid, at a rate per annum on each portion of the principal amount which shall at all times be equal to the rate of interest applicable to such portion in accordance with the Credit Agreement, and with interest on overdue principal and, to the extent permitted by applicable law, on overdue installments of interest and late charges at the rates provided in the Credit Agreement. Interest shall be payable on the dates specified in the Credit Agreement, except that all accrued interest shall be paid at the stated or accelerated maturity hereof or upon the prepayment in full hereof. Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Credit Agreement. Payments hereunder shall be made to BankBoston, N.A., as Agent for the payee hereof, 100 Federal Street, Boston, Massachusetts 02110. This Note is one of one or more Notes evidencing borrowings under and is entitled to the benefits and subject to the provisions of the Credit Agreement. The principal of this Note may be due and payable in whole or in part prior to the maturity date stated above and is subject to mandatory prepayment in the amounts and under the circumstances set forth in the Credit Agreement, and may be prepaid in whole or from time to time in part, all as set forth in the Credit Agreement. Notwithstanding anything in this Note to the contrary, all agreements between the Borrower and the Lenders and the Agent, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of any of the Obligations or otherwise, shall the interest contracted for, charged or received by the Lenders exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, interest would otherwise be payable to the Lenders in excess of the maximum lawful amount, the interest payable to the Lenders shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance the Lenders shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal balance of the Obligations and to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal of the Obligations, such excess shall be refunded to the Borrower. All interest paid or agreed to be paid to the Lenders shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal of the Obligations (including the period of any renewal or extension thereof) so that the interest thereon for such full period shall not exceed the maximum amount permitted by applicable law. This paragraph shall control all agreements between the Borrower and the Lenders and the Agent. In case an Event of Default shall occur, the entire principal amount of this Note may become or be declared due and payable in the manner and with the effect provided in said Credit Agreement. This Note shall be governed by and construed in accordance with the laws of the State of New York (without giving effect to the conflict of laws rules of any jurisdiction). The undersigned maker and all guarantors and endorsers, hereby waive presentment, demand, notice, protest, notice of intention to accelerate the indebtedness evidenced hereby, notice of acceleration of the indebtedness evidenced hereby and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, except as specifically otherwise provided in the Credit Agreement, and assent to extensions of time of payment or forbearance or other indulgence without notice. IN WITNESS WHEREOF the undersigned has by its duly authorized officers, executed this Note under seal as of the day and year first above written. WELLSFORD FINANCE, INC. By: _________________________ Title: [CORPORATE SEAL] EXHIBIT B --------- FORM OF REQUEST FOR LOAN BankBoston, N.A.,as Agent 115 Perimeter Center Place, N.E. Suite 500 Atlanta, Georgia 30346 Attn: Mr. Jay Johns Ladies and Gentlemen: Pursuant to the provisions of Section 2.6 of the Revolving Credit Agreement dated as of January 12, 1999, as from time to time in effect (the "Credit Agreement"), among Wellsford Finance, Inc. (the "Borrower"), BankBoston, N.A., for itself and as Agent, and the other Lenders from time to time party thereto, the Borrower hereby requests and certifies as follows: 1. Loan. The Borrower hereby requests a Loan under Section 2.1 of the Credit Agreement: Principal Amount: $ Type (Eurodollar, Base Rate): Drawdown Date: , 19 Interest Period: by credit to the general account of the Borrower with the Agent at the Agents Head Office. 2. Use of Proceeds. Such Loan shall be used for the following purposes permitted by Section 7.11 of the Credit Agreement: [Describe] 3. No Default. The undersigned chief financial or chief accounting officer of the Borrower certifies that the Borrower is and will be in compliance with all covenants under the Loan Documents after giving effect to the making of the Loan requested hereby. Attached to this Request for Loan is a Compliance Certificate prepared using the financial statements of the Borrower most recently provided or required to be provided under Section 6.4 or Section 7.4 of the Credit Agreement adjusted in the best good-faith estimate of the Borrower to give effect to the making of the Loan requested hereby. 4. Representations True. Each of the representations and warranties made by or on behalf of the Borrower and its Subsidiaries contained in the Credit Agreement, in the other Loan Documents or in any document or instrument delivered pursuant to or in connection with the Credit Agreement was true as of the date as of which it was made and shall also be true at and as of the Drawdown Date for the Loan requested hereby, with the same effect as if made at and as of such Drawdown Date (except to the extent of changes resulting from transactions contemplated or permitted by the Credit Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and except to the extent that such representations and warranties relate expressly to an earlier date) and no Default or Event of Default has occurred and is continuing. 5. Other Conditions. All other conditions to the making of the Loan requested hereby set forth in Section 11 of the Credit Agreement have been satisfied. (Reference title insurance "date down", if applicable.) 6. Drawdown Date. Except to the extent, if any, specified by notice actually received by the Agent prior to the Drawdown Date specified above, the foregoing representations and warranties shall be deemed to have been made by the Borrower on and as of such Drawdown Date. 7. Definitions. Terms defined in the Credit Agreement are used herein with the meanings so defined. IN WITNESS WHEREOF, I have hereunto set my hand this _____ day of _______________, 199___. WELLSFORD FINANCE, INC. By: __________________________ Chief Financial or Chief Accounting Officer EXHIBIT C --------- FORM OF COMPLIANCE CERTIFICATE BankBoston, N.A., for itself and as Agent 115 Perimeter Center Place, N.E. Suite 500 Atlanta, Georgia 30346 Attn: Mr. Jay Johns Ladies and Gentlemen: Reference is made to the Revolving Credit Agreement dated as of January 12, 1999 (the "Credit Agreement") by and among Wellsford Finance, Inc. (the "Borrower"), BankBoston, N.A., for itself and as Agent, and the other Lenders from time to time party thereto. Terms defined in the Credit Agreement and not otherwise defined herein are used herein as defined in the Credit Agreement. Pursuant to the Credit Agreement, the Borrower is furnishing to you herewith (or has most recently furnished to you) the financial statements of the Borrower and its Subsidiaries for the fiscal period ended _______________ (the "Balance Sheet Date"). Such financial statements have been prepared in accordance with generally accepted accounting principles and present fairly the financial position of the Borrower and the Subsidiaries covered thereby at the date thereof and the results of their operations for the periods covered thereby, subject in the case of interim statements only to normal year-end audit adjustments. This certificate is submitted in compliance with requirements of Section 2.6(iii), Section 5.3(b), Section 7.4(e), Section 7.5(e), Section 10.11 or Section 11.6(b) of the Credit Agreement. If this certificate is provided under a provision other than Section 7.4(e), the calculations provided below are made using the financial statements of the Borrower and its Subsidiaries as of the Balance Sheet Date adjusted in the best good-faith estimate of the Borrower to give effect to the making of a Loan, extension of the Maturity Date, acquisition or disposition of property or other event that occasions the preparation of this certificate; and the nature of such event and the Borrowers estimate of its effects are set forth in reasonable detail in an attachment hereto. The undersigned officer of the Borrower is its chief financial or chief accounting officer. The undersigned officer has caused the provisions of the Credit Agreement to be reviewed and has no knowledge of any Default or Event of Default. (Note: If the signer does have knowledge of any Default or Event of Default, the form of certificate should be revised to specify the Default or Event of Default, the nature thereof and the actions taken, being taken or proposed to be taken by the Borrower with respect thereto.) The Borrower is providing the following information to demonstrate compliance as of the date hereof with the following covenants: I. Section 9.1. Liabilities to Assets Ratio. A. Consolidated Total Liabilities per balance sheet $____________ B. Consolidated Total Assets per balance sheet $____________ Ratio of A to B may not exceed 0.65 to 1. II. Section 9.2. Consolidated EBITDA Coverage. A. Consolidated EBITDA = Consolidated Net Income for most recent quarter $____________ Plus depreciation and amortization $____________ Plus interest expense $____________ Plus extraordinary or non-recurring losses $____________ Minus extraordinary or non- recurring gains ($__________) Subtotal for most recent quarter $___________ Consolidated EBITDA for three prior quarters: Quarter ended __________ $___________ Quarter ended __________ $___________ Quarter ended __________ $___________ Total $___________ B. Debt Service for four prior quarters $___________ C. Ratio of A to B A must equal or exceed 1.5 times B $___________ III. Section 9.3. Borrowing Base. A. Total outstanding principal balance of Loans (after giving effect to any Loan Request) $__________ B. Borrowing Base Sum of Designated Collateral Values $__________ (Attach Borrowing Base worksheet) Total $ _________ Ratio of A to B may not be more than 1 to 1. IV. Section 9.4. Minimum Shareholders Equity A. Shareholders Equity $ _________ FOR THE PERIOD COMMENCING THE DATE OF THIS AGREEMENT THROUGH AND INCLUDING DECEMBER 31, 1999. B. 85% of net proceeds from any Equity Offering after December 31, 1998 $ _________ C. 50% of Net Income (or Deficit) plus depreciation deducted in calculating such Net Income (or deficit) from December 31, 1998 $_________ Total $ _________ A must equal or exceed the sum of $20,000,000.00 plus B plus C. FOR THE PERIOD COMMENCING JANUARY 1, 2000 THROUGH AND INCLUDING DECEMBER 31, 2000 D. Greater of Shareholders Equity as of $ _________ December 31, 1999 and $30,000,000.00 E. 85% of net proceeds from any Equity Offering $ _________ after December 31, 1999 F. 50% of Net Income (or Deficit) plus depreciation $ _________ deducted in calculating such Net Income (or deficit) from December 31, 1999 Total $ _________ A must equal or exceed the sum of D plus E plus F. FOR THE PERIOD FROM AND AFTER JANUARY 1, 2001 G. Greater of Shareholders Equity as of December 31, $ _________ 2000 and $50,000,000.00 H. 85% of net proceeds from any Equity Offering $ _________ after December 31, 2000 I. 50% of Net Income (or Deficit) plus depreciation $ _________ deducted in calculating such Net Income (or deficit) from December 31, 2000 Total $ _________ A must equal or exceed the sum of H plus I plus J. V. Section 9.5. Required Equity A. Indebtedness pursuant to this Agreement (Section 8.1(a)) $ _________ Plus Non-Recourse Indebtedness (Section 8.1(f)) $ _________ Total $ _________ B. Aggregate all-in acquisition cost (or principal $ _________ balance of originated loans) of assets of Borrower and its Subsidiaries Ratio of A to B A may not exceed 0.65 of B SCHEDULE 1 ---------- LENDERS AND COMMITMENTS Name and Address Commitment Commitment Percentage - ---------------- ---------- --------------------- BankBoston, N.A. $35,000,000 100% 100 Federal Street Boston, Massachusetts 02110 Attn: Real Estate Division Eurodollar Lending Office Same as above Total Commitment $35,000,000 100% - ---------------- SCHEDULE 1.2 ------------ COLLATERAL LOAN QUALIFICATION DOCUMENTS With respect to each proposed Collateral Loan, each of the following: (a) Collateral Loan Documents. True and correct originals (or with the approval of the Agent, copies) of all of the Collateral Loan Documents, duly executed and delivered by the respective parties thereto and recorded in the appropriate public records, as applicable. (b) Security Documents. Such Security Documents relating to the Collateral Loan Documents as the Agent shall require and all original stock certificates, limited liability company certificates, CMBS certificates and such other assignments, certificates, instruments, powers or other documents as Agent may require to perfect a security interest in the Collateral Loan and the underlying collateral for such Collateral Loan, in form and substance satisfactory to the Agent and duly executed and delivered by the respective parties thereto. Without limiting the foregoing, each Mortgage Note, Mezzanine Note, CMBS, Participation Certificate or other collateral note or instrument shall have been endorsed to and delivered to Agent. (c) Project Description. A narrative description of the proposed Collateral Loan, the underlying collateral (real property, equity interests) securing the same and the terms of any subordination agreement relating thereto. Such description shall also include a discussion of all material underwriting risks or other material information that has come to the attention of Borrower, based on reasonable inquiries and diligence under the circumstances, that would be considered as a materially negative factor or a defect in the loan documentation or closing deliveries to a reasonable institutional lender in determining whether to originate or acquire the Collateral in question. (d) Investment Committee Report. The investment committee report of the Borrower with respect to the acquisition or origination of the applicable Collateral Loan. (e) Enforceability Opinion. The favorable legal opinion of counsel to the Borrower reasonably acceptable to the Agent addressed to the Lenders and Agent and in form and substance satisfactory to the Agent as to the enforceability of such Security Documents and such other matters as the Agent shall reasonably request. (f) Perfection of Liens. Evidence reasonably satisfactory to the Agent that the Security Documents are effective to create in favor of the Agent a legal, valid and enforceable first lien and security interest in the Collateral Loan Documents for such Collateral Loan and that all filings, recordings, deliveries of instruments and other actions necessary or desirable to protect and preserve such liens or security interests have been duly effected. (g) Survey. If delivered or available to the Borrower, a copy of the survey of the real estate securing such Collateral Loan. (h) Title Insurance. If delivered or available to the Borrower, a copy of the mortgagee title insurance policy covering the real estate securing such Collateral Loan (or owners title insurance policy with respect to a Mezzanine Loan), including all endorsements thereto. (i) UCC Certification. A certification to the Agent from a title insurance company or other person satisfactory to the Agent that a search of the public records designated by the Agent disclosed no conditional sales contracts, security agreements, chattel mortgages, leases of personalty, financing statements or title retention agreements which affect any property, rights or interests of the Borrower that are or are intended to be subject to the security interest, assignments, and liens created by the Security Documents relating to the Collateral Loan Documents except to the extent that the same are discharged as of the Closing Date. (j) Third Party Reports. If delivered or available to the Borrower, copies of third party studies or reports relating to the underlying real estate securing such Collateral Loan, including without limitation: (i) Phase I environmental report and assessment of the presence of asbestos or asbestos - containing materials, and a Phase II or other follow-up report if recommended by the Phase I or other report; (ii) current Appraisal; (iii) building inspection report; and (iv) operations and maintenance plan with respect to asbestos - containing materials. (k) Operating Statements; Financial Statements. Operating statements for the underlying real estate securing such Collateral Loan, current and proposed operating and capital budgets, and balance sheets and other financial statements for each Obligor. (l) Rent Roll. A current rent roll for the underlying real estate securing such Collateral Loan. (m) LTV; Debt Service Coverage Ratio. Information concerning the LTV and Debt Service Coverage Ratio for such Collateral Loan. (n) Affiliate Transactions. A statement indicating any relationship of Borrower or any of its affiliates with the potential Obligor or any of its affiliates. (o) Servicing Agreement. A copy of any Servicing Agreement relating to such Collateral Loan. (p) Participation. With respect to any Participation Interest, a copy of the underlying loan documents to which such Collateral Loan relates. (q) Additional Documents. Such other documents, certificates, reports, opinions or assurances as the Agent may reasonably require in its discretion. SCHEDULE 6.3 ------------ TITLE TO PROPERTIES; LEASES None. SCHEDULE 6.7 ------------ LITIGATION None. SCHEDULE 6.17 ------------- ERISA PLANS None. SCHEDULE 6.20 ------------- SUBSIDIARIES OF THE BORROWER None.0 EX-10.48 17 NOTE $ 50,000,000.00 January 12, 1999 FOR VALUE RECEIVED, the undersigned WELLSFORD FINANCE, INC., a Maryland corporation, hereby promises to pay to BANKBOSTON, N.A. or order, in accordance with the terms of that certain Revolving Credit Agreement dated as of January 12, 1999 (the "Credit Agreement"), as from time to time in effect, among the undersigned, BankBoston, N.A., for itself and as Agent, and such other Lenders as may be from time to time named therein, to the extent not sooner paid, on or before the Maturity Date, the principal sum of FIFTY MILLION AND NO/100 DOLLARS ($50,000,000.00), or such amount as may be advanced by the payee hereof under the Credit Agreement with daily interest from the date hereof, computed as provided in the Credit Agreement, on the principal amount hereof from time to time unpaid, at a rate per annum on each portion of the principal amount which shall at all times be equal to the rate of interest applicable to such portion in accordance with the Credit Agreement, and with interest on overdue principal and, to the extent permitted by applicable law, on overdue installments of interest and late charges at the rates provided in the Credit Agreement. Interest shall be payable on the dates specified in the Credit Agreement, except that all accrued interest shall be paid at the stated or accelerated maturity hereof or upon the prepayment in full hereof. Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Credit Agreement. Payments hereunder shall be made to BankBoston, N.A., as Agent for the payee hereof, 100 Federal Street, Boston, Massachusetts 02110. This Note is one of one or more Notes evidencing borrowings under and is entitled to the benefits and subject to the provisions of the Credit Agreement. The principal of this Note may be due and payable in whole or in part prior to the maturity date stated above and is subject to mandatory prepayment in the amounts and under the circumstances set forth in the Credit Agreement, and may be prepaid in whole or from time to time in part, all as set forth in the Credit Agreement. Notwithstanding anything in this Note to the contrary, all agreements between the Borrower and the Lenders and the Agent, whether now existing or hereafter arising and whether written or oral, are hereby limited so that in no contingency, whether by reason of acceleration of the maturity of any of the Obligations or otherwise, shall the interest contracted for, charged or received by the Lenders exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, interest would otherwise be payable to the Lenders in excess of the maximum lawful amount, the interest payable to the Lenders shall be reduced to the maximum amount permitted under applicable law; and if from any circumstance the Lenders shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal balance of the Obligations and to the payment of interest or, if such excessive interest exceeds the unpaid balance of principal of the Obligations, such excess shall be refunded to the Borrower. All interest paid or agreed to be paid to the Lenders shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal of the Obligations (including the period of any renewal or extension thereof) so that the interest thereon for such full period shall not exceed the maximum amount permitted by applicable law. This paragraph shall control all agreements between the Borrower and the Lenders and the Agent. In case an Event of Default shall occur, the entire principal amount of this Note may become or be declared due and payable in the manner and with the effect provided in said Credit Agreement. This Note shall be governed by and construed in accordance with the laws of the State of New York (without giving effect to the conflict of laws rules of any jurisdiction). The undersigned maker and all guarantors and endorsers, hereby waive presentment, demand, notice, protest, notice of intention to accelerate the indebtedness evidenced hereby, notice of acceleration of the indebtedness evidenced hereby and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, except as specifically otherwise provided in the Credit Agreement, and assent to extensions of time of payment or forbearance or other indulgence without notice. IN WITNESS WHEREOF the undersigned has by its duly authorized officers, executed this Note under seal as of the day and year first above written. WELLSFORD FINANCE, INC. By: /s/ Gregory F. Hughes --------------------------------- Title: Vice President and Treasurer [CORPORATE SEAL] EX-10.49 18 COLLATERAL ASSIGNMENT OF DOCUMENTS, RIGHTS AND CLAIMS ----------------------------------------------------- THIS COLLATERAL ASSIGNMENT OF DOCUMENTS, RIGHTS AND CLAIMS (hereinafter referred to as this "Assignment"), made as of the 12th day of January, 1999, by WELLSFORD FINANCE, INC., a Maryland corporation ("Borrower"), to BANKBOSTON, N.A., a national banking association, as Agent for itself, and the other lending institutions (collectively, the "Lenders") which may become parties to the Credit Agreement (as hereinafter defined) (in such capacity, "Agent"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Lenders have agreed to provide a revolving credit facility (the "Loan") to Borrower pursuant to the Credit Agreement, which Loan is evidenced by the Notes (as hereinafter defined); and WHEREAS, as additional security for the Loan, Borrower desires to assign to Agent, for the benefit of the Lenders, and grant to Agent, for the benefit of the Lenders, a security interest in and to, all of Borrower's right, title, equity and interest in and to the Collateral (as hereinafter defined); NOW THEREFORE, for and in consideration of the sum of Ten and No/100 Dollars ($10.00), the mutual covenants and promises herein contained, and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, Borrower and Agent do hereby covenant and agree as follows: ARTICLE ONE ----------- DEFINITIONS ----------- 1.01 In addition to such other terms as are elsewhere defined herein, the following terms shall have the following meanings, as used in this Assignment and in any exhibits attached hereto, unless the context requires otherwise: "Abbey Loan" shall mean that certain revolving credit loan evidenced by the Abbey Loan Documents. "Abbey Loan Documents" shall mean that certain Revolving Credit Agreement between Morgan and the various entities named therein as "Borrower" dated August 28, 1997, as amended by that certain Amendment to Revolving Credit Agreement dated April 6, 1998 between Morgan and the various entities named therein as "Borrower", and as further amended by that certain Second Amendment to Revolving Credit Agreement dated December 23, 1998 between Morgan and the various entities named therein as "Borrower" and such other documents described on Exhibit "B" attached hereto, and each other document executed after the date hereof evidencing, securing or otherwise relating to the transactions contemplated thereby, as the same may be varied, extended, supplemented, consolidated, amended, replaced, renewed, modified or restated. "BKB" shall mean BankBoston, N.A., a national banking association. "Assignment and Acceptance Agreement" shall mean that certain Assignment and Acceptance Agreement between Borrower and Agent. "Collateral" shall mean collectively, all of the Borrower's right, title, equity and interest in and to: (a) The participation agreements, participation certificates, notes, deeds of trust, assignments, pledges, financing statements and other documents and instruments described on Exhibit "A" attached hereto and made a part hereof, including, without limitation, the Collateral Notes, Collateral Participation Documents, Collateral Deeds of Trust, the Collateral Security Documents and all rights and interests thereunder, together with any and all amendments, modifications, consolidations, replacements, renewals, restatements or supplements thereto; and (b) All security for the indebtedness or other obligations evidenced by the documents and instruments described in Section 1.01(a) above, including without limitation the Property, and all liens, security interests and title of Borrower with respect thereto; and (c) All documents evidencing the documents and instruments described in Section 1.01(a) above or any security therefor or guaranties thereof, all title insurance (whether evidenced by policies, commitments or otherwise) issued with respect to the Property and to any other security for the documents and instruments described in Section 1.01(a) above, all accounts, funds, participation interests, lockboxes, leases, books, files, records, programs, ledger books, computer tapes arising from or created in connection with such documents and instruments and all other instruments, documents, agreements and writings now or hereafter executed by, in favor of or for the benefit of Borrower or any prior holder of such documents and instruments in connection with any of the foregoing, and all other documents now or hereafter delivered or to be delivered to or for the benefit of Borrower or any prior holder of such documents and instruments under the documents and instruments described in Section 1.01(a) above (all of said Collateral Notes, Collateral Participation Documents, Collateral Deeds of Trust, Collateral Security Documents and other documents, policies, instruments and agreements, and any and all additions, renewals, extensions, amendments, modifications, consolidations, restatements or supplements thereto of any of the foregoing, being hereinafter referred to collectively as the "Collateral Documents"); and (d) All payments of any kind or nature whatsoever, now or hereafter due and to become due under the Collateral Documents, all collections thereon and all other amounts paid thereunder, including without limitation all prepayments under the Collateral Documents, and all other cash and non-cash proceeds of the Collateral Documents, or of any other collateral for the obligations of Obligor under the Collateral Documents and on account of any claim, rights or choses in action against Obligor or otherwise pursuant to the Collateral Documents held by Borrower; and (e) All claims, rights and privileges obtained by Borrower in connection with the making of the loan to the Woodlands Borrowers or the purchase of the Junior Participation from Morgan evidenced by the Collateral Documents, together with the Property and all other property described in the Collateral Documents, and all the powers, options, privileges, immunities, claims, actions and causes of action contained in or arising from any of the foregoing; (f) All present and future accounts, general intangibles, contract rights, chattel paper or instruments arising out of or with respect to any of the foregoing; (g) Any and all renewals and extensions of any of the foregoing and any and all replacements or substitutions for any of the foregoing; and (h) All proceeds and products of the foregoing of every type. "Collateral Deeds of Trust" shall mean collectively, the deeds of trust, mortgages and deeds to secure debt described as item 4 and 8 on Exhibit "A" attached hereto and made a part hereof as the same may now or hereafter be modified, amended, extended, renewed, consolidated, restated or supplemented. "Collateral Notes" shall mean, collectively, the Commercial Company Second Secured Term Loan Note and the Land Company Second Secured Term Loan Note as the same may now or hereafter be modified, amended, extended, renewed, consolidated, restated or supplemented. "Collateral Participation Documents" shall mean, collectively, the Participation Agreement, the Participation Certificate and the Abbey Loan Documents. "Collateral Security Documents" shall mean, collectively, the pledge agreements, the stock pledge agreements, collateral assignments, credit agreement and other instruments and documents described as items 1-16 on Exhibit "A" attached hereto. "Commercial Company Second Secured Term Loan Note" shall mean that certain Commercial Company Second Secured Term Loan Note dated December 28, 1998 in the principal face amount of $4,186,991.87 by the Woodlands Borrowers to the order of Borrower. "Credit Agreement" shall mean the Revolving Credit Agreement dated of even date herewith among Borrower, BKB, the other lending institutions which may become parties thereto and Agent, as originally executed, or if varied, extended, supplemented, consolidated, amended or restated from time to time as so varied, extended, supplemented, consolidated, amended or restated. "Default" shall mean any event which, with the giving of notice or the lapse of time, or both, would become an Event of Default. "Event of Default" shall mean (a) any default in the payment or performance of the obligations of Borrower hereunder, or (b) any representation or warranty of Borrower hereunder proving to be untrue in any material respect upon the date when made or deemed to have been made or repeated, or (c) any Event of Default under the Credit Agreement, or (d) any default shall exist or an event which with the passage of time or the giving of notice, or both, might constitute a default shall have occurred under the Collateral Documents or the Abbey Loan Documents or any of them (there shall be no right to cure an Event of Default under (d), above.) "Junior Participation" shall have the meaning given such term in the Participation Agreement. "Land Company Second Secured Term Loan Note" shall mean that certain Land Company Second Secured Term Loan Note dated December 28, 1998 in the principal face amount of $10,813,008.13 made by the Woodlands Borrowers to the order of Borrower. "Loan Documents" shall have the meaning given to such term in the Credit Agreement. "Morgan" shall mean Morgan Guaranty Trust Company of New York, a New York banking corporation. "Notes" shall have the meaning given such term in the Credit Agreement. "Obligations" shall mean: (a) The debt evidenced by the Notes together with interest as therein provided; (b) The full and prompt and payment and performance of all of the provisions, agreements, covenants and obligations contained in the Credit Agreement; (c) The full and prompt payment and performance of all of the provisions, agreements, covenants and obligations herein contained and contained in any other of the Loan Documents, and the payment of all other sums therein covenanted to be paid; and (d) Any and all additional advances made by Agent or any Lender to protect or preserve the Collateral or the security interest created hereby. "Obligor" shall mean, individually and collectively, the Woodlands Borrowers, Morgan, each respective obligor or payor under the Abbey Loan Documents, and each respective obligor or payor under the other Collateral Documents. "Participation Agreement" shall mean that certain Loan Participation Agreement dated as of August 28, 1997 between Morgan and Wellsford Real Properties, Inc., ("WRP") as assigned to Wellsford Capital ("Capital"), as amended by that certain First Amendment to Participation Agreement, dated April 17, 1998 between Capital and Morgan, and as subsequently assigned to Borrower, as the same may be varied, extended, supplemented, consolidated, amended or restated from time to time. "Participation Certificate" shall mean that certain Loan Participation Certificate from Morgan to WRP, as assigned to Capital, as assigned to Borrower which certifies the amount of the funds outstanding and unpaid pursuant to the Participation Agreement. "Property" shall mean the real and personal property encumbered by the Collateral Documents and the Abbey Loan Documents. "Woodlands Borrowers" shall mean collectively The Woodlands Commercial Properties Company, L.P. and The Woodlands Land Development Company, L.P. "Woodlands Credit Agreement" shall mean that certain First Amended and Restated Master Credit Agreement dated as of December 30, 1997, effective as of July 31, 1997 by and among the Woodlands Borrowers, BankBoston, N.A., individually and as Agent, Morgan Stanley Senior Funding, Inc. and the other banks from time to time party thereto as originally executed, or if varied, extended, supplemented, consolidated, amended or restated from time to time as so varied, extended, supplemented, consolidated, amended or restated. ARTICLE TWO ----------- ASSIGNMENT ---------- 2.01 Assignment of, and Grant of Security Interest in, the Collateral. As security for the full and prompt payment and performance by Borrower of the Obligations, Borrower hereby transfers, assigns, pledges, conveys to, grants a security interest in, and deposits with, Agent, for the benefit of Lenders, the Collateral and all right, title, equity and interest of Borrower in and to the Collateral. It is the intention of the parties hereto that Agent shall have a continuing, general lien upon, security title to and security interest in the Collateral for the benefit of Lenders. 2.02 Terms of Assignment. It is acknowledged and agreed by the parties hereto that Agent shall have sole and exclusive possession of the Collateral and that this Assignment constitutes a present and current assignment of all the Collateral and is effective upon the execution and delivery hereof. Payments under or with respect to the Collateral shall be made as follows: (a) Except as hereinafter specifically set forth, Borrower shall have no right to receive payments made under or with respect to the Collateral, and all such payments shall be delivered directly by Obligor or any other party liable thereon to Agent for the benefit of Lenders. (b) If Borrower shall receive any payments made under or with respect to the Collateral, Borrower shall hold all such payments in trust for Agent, will not co-mingle such payments with other funds of Borrower, and will immediately pay and deliver in kind, all such payments directly to Agent for application by Agent and Lenders in satisfaction of the Obligations in such order as Agent and Lenders shall determine in accordance with the applicable provisions of the Credit Agreement. (c) Borrower hereby agrees for the benefit of Obligor that all payments actually received by Agent shall be deemed payments to Borrower by Obligor. Agent and Lenders shall apply any and all such payments actually received by Agent in satisfaction of the Obligations in such order as Agent and Lenders shall determine in accordance with the applicable provisions of the Credit Agreement. Agent shall return to Borrower that portion of any payments actually received by Agent from Obligor which Agent determines, in the exercise of its sole discretion, is not needed to repay the Obligations. (d) In furtherance of the foregoing, Borrower does hereby notify and direct Obligor that all payments under or with respect to the Collateral shall be made directly to Agent at the address of Agent set forth in the Credit Agreement. Notwithstanding anything in this Section 2.02 to the contrary, so long as no Event of Default has occurred, Borrower shall have a license (revocable upon the occurrence of an Event of Default) to collect, but no more than one (1) month prior to accrual, all amounts payable and to be applied as current interest under the Collateral Notes or any other Collateral Document or payments made by Morgan under the Participation Agreement with respect to payments of interest under the Abbey Loan Documents; it being understood and agreed that such license shall not extend to other amounts payable under the Collateral Notes, the Collateral Participation Documents or other Collateral Documents, including, without limitation, any voluntary or involuntary payment of principal or amounts attributable to principal paid under the Abbey Loan Documents. ARTICLE THREE ------------- COVENANTS, REPRESENTATIONS AND WARRANTIES OF BORROWER ----------------------------------------------------- Borrower hereby warrants and represents to, and covenants and agrees with, Agent as follows: 3.01 Delivery of Collateral The original of each Collateral Note, endorsed by Borrower, and the original of each Collateral Participation Document, has been delivered to Agent. All actions required under any Collateral Note, Collateral Participation Document or any other Collateral Document and applicable law have been duly taken in order to constitute Borrower the holder of the Collateral Notes, Collateral Participation Documents and the Collateral Documents and to constitute Agent the holder of a first priority security interest in each Collateral Note, Collateral Participation Document and Collateral Document. None of the Collateral Notes, Collateral Participation Documents, Collateral Deeds of Trust, Collateral Security Documents and other Collateral Documents has been amended, modified, consolidated, supplemented or replaced except as expressly described on Exhibit "A" attached hereto. 3.02 Enforceability of This Assignment. This Assignment constitutes the legal, valid and binding obligation of Borrower enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws generally affecting the rights of creditors. 3.03 Right to Execute This Assignment. There are no restrictions on the transfer of the Collateral, and Borrower has full right, power and authority to enter into, deliver and execute this Assignment. The execution and delivery of this Assignment, and the consummation of the transactions contemplated herein, and the fulfillment of, and the compliance with, the terms and conditions of this Assignment do not and will not (i) violate or conflict with any of the terms or provisions of the Collateral; (ii) violate any provision of any judicial or administrative order, award, judgment or decree applicable to Borrower, the Collateral or the Property; or (iii) conflict with, result in a breach of or a right to cancel, or constitute a default under, the articles of incorporation or by-laws of Borrower, or any agreement or instrument to which Borrower is a party or by which Borrower, the Collateral or the Property is bound. 3.04 No Amendment of Collateral. Borrower shall not (i) make any additional loans or advances which would be evidenced or secured by the Collateral Notes and Collateral Deeds of Trust except for protective advances thereunder; or (ii) make any additional loans or advances which would be evidenced or secured by the Collateral Participation Documents except for advances expressly required pursuant to the terms of the Participation Agreement, and shall not abandon, alter, amend, cancel, modify, release, relinquish, supplement, surrender, terminate or waive, and shall not enter into or give any agreement, approval or consent with respect to, any of the Collateral or any part thereof or any interest therein or any collateral for the obligations evidenced by the Collateral Notes, Collateral Participation Documents or other Collateral Documents, and any attempt to do so without the prior written consent of Agent shall be void and ineffective. 3.05 Pending Litigation. There are no actions, suits or proceedings pending, or to the knowledge of Borrower, threatened against or affecting Borrower, Maker, the Collateral or the Property, or any of them at law or in equity, or before or by any government authority. 3.06 No Defenses. The assignment of the Collateral pursuant to this Assignment creates no defense to the payment thereof and is effective to convey to Agent, for the benefit of Lenders, all rights of Borrower to collect the Collateral. 3.07 Information About Collateral. The names, amounts owing, due dates and other facts furnished to Agent with respect to any of the Collateral have been and will be correctly stated. Borrower shall, immediately upon request by Agent, execute and deliver to Agent a sworn affidavit setting forth in detail any and all amounts or payments received by Borrower with respect to the Collateral or any portion thereof during any period specified by Agent or such other reports or information in such form and detail as Agent shall request from time to time. Borrower shall promptly forward to Agent copies of all financial or property information, loan documents, budgets, leases, leasing reports, rent rolls, insurance certificates and policies, default notices, acceleration notices and all other communications or information received by Borrower or any agent or servicer for Borrower from Maker or from any other party, or sent by Borrower or any agent or servicer for Borrower or Morgan, relating to the Collateral and/or Maker and/or the Property. All records of Borrower relative to the Collateral are and will be kept at the office of Borrower located in New York County, New York. Borrower shall give Agent not fewer than thirty (30) days prior written notice of any proposed change in Borrower's name and any proposed change in the location of the Collateral or of such records, and Borrower will not, without the prior written consent of Agent, move the Collateral or such records to a location outside of New York County, New York or keep duplicate records with respect to the Collateral at any address outside such county. Nothing contained in this subparagraph shall be construed so as to prevent Borrower from keeping material abstracted from the books and records described herein at any of its offices as necessity or convenience dictates. 3.08 Good Title. Borrower is and shall remain the sole, lawful and beneficial owner of the Collateral free and clear of all liens, restrictions, claims, pledges and encumbrances whatsoever and has the full and complete right, power and authority to create a security interest in the Collateral in favor of Agent in accordance with the terms and provisions of this Assignment. The security interest in the Collateral created hereunder constitutes and will at all times continue to constitute a valid and enforceable first priority perfected security interest in the Collateral in favor of Agent, free and clear of all liens, claims, encumbrances and rights of others. Borrower has made no contract or arrangement of any kind or type whatsoever (whether oral or written, formal or informal), the performance of which by the other party thereto could give rise to a lien on the Collateral. Borrower at all times will defend the Collateral and its proceeds against the claims and demands of all third persons at any time claiming any interest in the Collateral adverse to Agent's interest in the Collateral as granted hereunder. 3.09 Status of the Collateral. The Collateral is valid and enforceable in accordance with its terms, subject to insolvency, bankruptcy, moratorium and other laws affecting creditors' rights generally, and is in compliance with all applicable laws. The Collateral Documents create a valid, enforceable and perfected first priority lien and security interest in all collateral covered thereby, and the Borrower shall take such actions as are necessary (including, without limitation, the filing of continuation statements) to cause the Collateral Documents to remain a valid, enforceable and perfected first priority lien and security interest therein. 3.10 No Future Encumbrance or Transfer. Borrower shall not encumber, pledge, anticipate, borrow against, or create any right of offset against the Collateral, and shall not transfer, assign, sell, dispose of, pledge, or convey, option, mortgage, hypothecate or encumber all or any portion of the Collateral. 3.11 Consents. Any and all consents required to be obtained in connection with the execution, delivery and performance of this Assignment, including without limitation any such consents required by the Participation Documents or the other Collateral Documents, have been obtained. Without limiting the generality of the foregoing, the execution, delivery and performance of all obligations under this Assignment do not and will not require any authorization, consent, approval, order, license or permit from, or filing, registration, or qualification with, or exemption from any of the foregoing from, any governmental agency or other person. 3.12 Perfection of Security Interest. (a) For the purposes of Article 9-401 of the New York Uniform Commercial Code, the principal place of business of Borrower is located in New York County, New York. In the event that Borrower has more than one place of business in the State of New York, its chief executive office is located in New York County, New York. In order to perfect the pledge and security interests granted herein against Borrower, U.C.C. Financing Statements must be filed with Secretary of State of New York and the Office of the Register of the City of New York, New York County. (b) Borrower shall, at the request of Agent, execute, acknowledge, and deliver all such further assignments, security agreements, financing statements, endorsements, and assurances as Agent from time to time may require for the better assuring, conveying, assigning and confirming to Agent the Collateral and the rights hereby conveyed or assigned or intended now or hereafter to be conveyed or assigned, and for carrying out the intention or facilitating the performance of the terms of this Assignment, and upon any failure by Borrower so to do, Agent may make, execute, record, file, rerecord and/or refile, acknowledge and deliver any and all such further assignments, security agreements, financing statements, endorsements and assurances for and in the name of Borrower, and Borrower hereby irrevocably appoints Agent the agent and attorney-in-fact with full power of substitutions of Borrower so to do. This power is coupled with an interest. Without limiting the generality of the foregoing, Borrower will obtain such waivers of lien, estoppel certificates or subordination agreements as Lender may require to insure the priority of its security interest in the Collateral. Borrower also shall furnish to Agent such evidence as Agent reasonably may require from time to time to confirm the value of the Collateral. 3.13 Collateral Compliance and Defense. Borrower shall remain liable and comply with all obligations of Borrower under the Collateral and all other contracts, agreements and instruments related thereto to the extent set forth therein and to the same extent as if this Assignment had not been executed. Borrower, at its sole cost and expense, shall defend any claims against the Collateral or any action that might affect the Collateral or any interest therein. The exercise by Agent of any of its rights hereunder shall not release Maker from any of its duties or obligations under the Collateral or any contracts, agreements and instruments related thereto. 3.14 Protecting Collateral. Borrower will, but only with the prior written approval of Agent, diligently and in good faith do all things and take all actions, including, without limitation, bringing appropriate actions against any Maker which are necessary or desirable to enforce the obligations of such Maker to make all payments under the Collateral Documents to which it is a party, and to protect and preserve the interest of Agent under this Assignment. Borrower shall pay all taxes and other charges against the Collateral, shall not use the Property or the Collateral illegally, and shall not suffer to exist any loss, theft, damage or destruction of the Property or the Collateral or levy, seizure or attachment of the Property or the Collateral. 3.15 Rights Under Participation Agreement. Borrower shall take all steps necessary to preserve its rights to service the Abbey Loan pursuant to paragraph 4 of the Participation Agreement and shall provide Agent with evidence of same before Borrower's rights expire thereunder. Borrower shall not propose a servicing plan or asset audit to Morgan with respect to the Abbey Loan without the prior written approval of Agent. Borrower shall not exercise any of its rights to service the Abbey Loan without the prior written approval of Agent. 3.16 Borrower Conduct. Borrower has done no act or omitted to do any act which might prevent Agent from, or limit Agent in, acting under any of the provisions herein. 3.17 No Offset. The Collateral Notes and Collateral Participation Documents evidence bona fide indebtedness or obligations owing to Borrower by Maker, and no Maker has any rights to setoff, counterclaim or defenses with respect to the payment or performance of any obligations under the Collateral Documents. 3.18 No Event of Default Under Loan Documents. No Default or Event of Default by Borrower or any other party exists under this Assignment, and no event has occurred and is continuing which with notice or the passage of time or both would constitute a Default or Event of Default hereunder or under any of the other Loan Documents. 3.19 Custody of Collateral. Agent's duty with reference to the Collateral shall be solely to use slight care in the custody and preservation of the Collateral, which shall not include any steps necessary to preserve rights against prior parties. 3.20 Related Documents. There are no documents or agreements which conflict with or vary the terms of the Collateral Documents, and there are no other documents which have not been delivered to Agent which affect or in any way relate to the Collateral Documents. 3.21 No Maker Default. Each Maker is the sole obligor and grantor under the Collateral to which it is a party as reflected on Exhibit "A" attached hereto, and no event or circumstance has occurred which, with the passage of time or the giving of notice, or both, might constitute a default under any of the terms, covenants or conditions of the Collateral. In the event of a default of any nature under the terms and conditions of the Collateral or the Collateral Documents, Borrower shall promptly deliver to Agent written notice of such default, which notice shall specify in reasonable detail the nature of such default. 3.22 No Event of Default Under the Abbey Loan Documents. To the best of Borrower's knowledge and belief, no Default or Event of Default exists under any of the Abbey Loan Documents. In the event Borrower becomes aware of a default of any nature under the terms and conditions of the Abbey Loan Documents, Borrower shall promptly deliver to Agent written notice of such default which notice shall specify in reasonable detail the nature of the default. 3.23 No Prepayment. No prepayment (or with respect to the Junior Participation, any payment attributable to the payment of principal under the Abbey Loan Documents) with respect to the Collateral has been collected or received by Borrower. No prepayment of the indebtedness or obligations evidenced by the Collateral Documents will be collected or received by Borrower without the prior written consent of Agent except for such prepayment as may be expressly permitted by the terms of the Collateral Documents. 3.24 Collateral Notes Indebtedness. As of the date hereof, the aggregate unpaid principal balance of the Commercial Company Second Secured Term Loan Note is $4,186,991.87, and the aggregate unpaid principal balance of the Land Company Second Secured Term Loan Note is $10,813,008.13. 3.25 Abbey Loan Indebtedness. As of January 7, 1999, the aggregate outstanding balance of the Abbey Loan is $92,038,700.00, and interest in the amount of $135,607.22 has accrued and remains outstanding under the Abbey Loan Documents. 3.26 Participation Interest. As of January 7, 1999, Borrower's "Participation Percentage" (as defined in the Participation Agreement) is fifty percent (50%), and the outstanding principal amount of the Junior Participation is $46,019,350.00. 3.27 Re-Advance Amount. As of the date hereof, no amounts have been re- advanced under the Abbey Loan Agreement within the meaning of Section 2.01(a) thereof. 3.28 Other Participation Interests. No Bank Junior Participation (as defined in the Participation Agreement) or Senior Default Interest (as defined in the Participation Agreement) currently exist. 3.29 Modifications. Borrower shall not enter into any modification or amendment of the Collateral Documents nor shall it consent to any modification, amendment or waiver of the Abbey Loan Documents without obtaining the prior written consent of Agent. 3.30 No Abbey Loan Encumbrances. Borrower shall not consent to the transfer, assignment, sale, disposition of, pledge, conveyance, option, mortgage, hypothecation or encumbrance of all or any portion of the property secured by the Abbey Loan Documents without obtaining the prior written consent of Agent. 3.31 Change in Collateral Value. Borrower shall promptly notify Agent of any change in the "Collateral Value" (as defined in the Abbey Loan Agreement). 3.32 Actions by Morgan. Borrower shall promptly notify Agent of any actions, amendments or waivers contemplated by Morgan under the Abbey Loan Documents and the Participation Agreement. 3.33 Additions; Substitutions. If Borrower shall at any time be entitled to receive or shall receive any cash, certificate or other property, option or right, upon, in respect of, as an addition to, or in substitution or exchange for any of the Collateral or as a result of the exercise of any rights or remedies under the Collateral Documents, whether for value paid by Borrower or otherwise, Borrower agrees that the same shall be deemed to be Collateral and shall be delivered directly to Agent in each case accompanied by proper instruments of encumbrance or assignment (including without limitation a deed of trust, mortgage or security deed) as reasonably required by Agent duly executed by Borrower in such a form as may be required by Agent to be held by Agent subject to the terms hereof, as further security for the Obligations (except as otherwise provided herein with respect to the application of the foregoing to the Obligations). If Borrower receives any of the foregoing directly, Borrower agrees to hold such cash or other property in trust for the benefit of Agent, and to surrender such cash or other property to Agent immediately. ARTICLE FOUR ------------ ACTION BY AGENT --------------- 4.01 Action by Agent. Whether or not an Event of Default has occurred and whether or not Agent is the absolute owner of the Collateral: (a) Agent may take such action as Agent may deem necessary to protect the Collateral or its security interest therein, Agent being hereby authorized to pay, purchase, contest and compromise any encumbrance, charge or lien which in the judgment of Agent appears to be prior or superior to its security interest, and in exercising any such powers and authority to pay necessary expenses, employ counsel and pay attorney's fees. (b) Agent shall be under no duty or obligation to (i) preserve, process, develop, maintain or protect the Collateral or any of Borrower's rights or interests therein, or (ii) make or give any notices of default (except as may be specifically required herein), presentments, demands for performance, notices of non-performance or dishonor, protests, notices of protests or notices of any other nature whatsoever in connection with the Collateral on behalf of Borrower or any other person having any interest therein; and Agent does not assume and shall not be obligated to perform the obligations of Borrower, if any, with respect to the Collateral. Agent may, at any time and from time to time, without notice or demand and at the expense of Borrower, make requests for information concerning the Collateral from any obligor thereon. (c) Agent may, at its sole option, make advances to protect the Collateral and its security therein, or for any reason for which Borrower is permitted under the terms of the Collateral Documents to make advances, and any such advances made by Agent shall be deemed advanced under the Collateral Documents, increasing the indebtedness evidenced and secured thereby, and also shall be deemed advances under the Loan Documents, increasing the Obligations. (d) Agent may at any time compromise, transfer and assign the Collateral or any portion thereof and this Assignment. (e) Agent shall have the right to attend any meetings or to be a party to any conference calls or other communications between Borrower and Morgan and/or the Obligors under the Abbey Loan Documents with respect to Borrower's servicing rights under the Participation Agreement or actions to be taken by Morgan pursuant to the Abbey Loan Documents, and Borrower agrees that it shall give Agent not less than 48 hours prior notice of such meetings, conference calls or other communications. 4.02 Default under the Participation Agreement. Notwithstanding anything herein to the contrary, the Borrower hereby expressly agrees that any failure to perform any of the covenants or obligations, or failure to exercise any rights or take such actions necessary to permit Borrower to exercise such rights, of Borrower under the Participation Agreement (collectively a "Participation Default") shall constitute and be deemed to be an Event of Default under this Agreement and the other Loan Documents for which no right to cure shall be available. Without limiting the foregoing, a Participation Default shall conclusively be deemed to have occurred upon the declaration, statement or notice from Morgan as to the existence or occurrence of a Participation Default. The Agent shall have the right, but not the obligation, to pay any sums or to take any action which the Agent deems necessary or advisable to cure any Participation Default (whether or not the Borrower is undertaking efforts to cure such Participation Default or the same is a Participation Default or Event of Default hereunder), and such payment or such action is hereby authorized by the Borrower, and any sum so paid and any expense incurred by the Agent in taking any such action shall be evidenced and secured by this Agreement and shall be immediately due and payable by Borrower to the Agent with interest at the rate for overdue amounts set forth in Section 4.12 of the Credit Agreement until paid. The Agent shall be authorized to take such actions upon the assertion by Morgan of the existence of such Participation Default without any duty to inquire or determine whether such Participation Default exists. 4.03 Relationship to Assignment and Acceptance Agreement. Borrower and Agent acknowledge and agree that (i) the Assignment and Acceptance Agreement is being executed pursuant to and in connection with this Assignment, and (ii) upon the occurrence of an Event of Default, the Agent may insert the effective date into the Assignment and Acceptance Agreement and deliver the same to the "Agent" under the Woodlands Credit Agreement. 4.04 Attorney-In-Fact. Borrower hereby nominates and irrevocably designates and appoints Agent its true and lawful agent and attorney-in-fact with full power of substitution, which appointment is coupled with an interest either in the name of Agent or in the name of Borrower, at Borrower's sole cost and expense, to take any or all of the following actions: (a) To do all acts and things and execute all documents which Agent may deem necessary or advisable to perfect and continue perfected the security interest created by this Assignment and to preserve, process, develop, maintain and protect the Collateral and the value thereof and Agent's interest therein, including, without limitation, preparing, signing, filing and recording, for Borrower in Borrower's name, or for Borrower on behalf of any Maker, any financing statement covering or constituting a part of the Collateral; (b) To do any and every act which Borrower is obligated to do under this Assignment; (c) Whether before or after the occurrence of an Event of Default, to ask for, demand, sue for, attach, levy, settle, compromise, collect, compound, recover, receive and give receipt and acquittances for any and all sums owing or which may become due with respect to the Collateral; to endorse, in the name of Borrower, all checks, notes, drafts, money orders, evidences of payment, or other instruments received in payment of, or on account of, the Collateral or any portion thereof; and to take any and all actions as Agent may deem necessary or desirable in order to realize upon the Collateral, or any portion thereof, including, without limitation, making any statements and doing or taking any acts on behalf of Borrower which are otherwise required of Borrower under the terms of the Collateral or any portion thereof as conditions precedent to the payment of the obligations evidenced by, or to the exercise of, the Collateral or any portion thereof; and to exercise any rights and remedies available under the Collateral Documents and to execute any document or instrument which Agent may deem necessary or desirable in connection therewith, including pleadings, consent orders, stipulations, and other documents and instruments which Agent may deem necessary or desirable in connection with judicial or nonjudicial foreclosure of the Collateral Deeds of Trust or any deed of trust or other security agreement included within the Collateral Documents or other legal actions or proceedings with respect to the Collateral. In addition, Borrower hereby irrevocably designates and appoints Agent its true and lawful attorney-in-fact with full power of substitution either in the name of Agent or Borrower which power is coupled with an interest to (i) sign Borrower's name on any Collateral, drafts against account debtors, assignments, any proof of claim in any bankruptcy or other insolvency proceeding involving any account debtor, any notice of lien, claim of lien or assignment or satisfaction of lien, or on any financing statement or continuation statement under the Uniform Commercial Code; (ii) send verifications of accounts receivable to any account debtor; and (iii) in connection with a transfer of the Collateral as described above sign in Borrower's name any documents necessary to transfer title to the Collateral to Agent or any third party. (d) To endorse and transfer the Collateral upon foreclosure; provided, however, that Agent shall be under no obligation whatsoever to take any of the foregoing actions or to exercise any of the foregoing authority or power, and Agent shall have no liability or responsibility for any act or omission taken with respect thereto. All of said rights and powers may be exercised by Agent at any time, whether or not an Event of Default has occurred and whether or not Agent is the absolute owner of the Collateral. The foregoing appointment of the Agent as Borrower's attorney-in-fact is irrevocable, coupled with an interest, with full power of substitution and cannot be revoked by insolvency, reorganization, merger, consolidation or otherwise. All acts of said power of attorney are hereby ratified and approved and Agent shall not be liable for any mistake of law or fact made in connection therewith. 4.05 Necessity for Agent Action or Consent. So long as this Assignment shall be held by Agent as security for the Obligations, (a) no approval, consent, election, waiver or other matter which is given or required or permitted to be given or which inures to the benefit of Borrower under the Collateral Documents shall be deemed to have been given unless and until given by Agent; (b) any matter which is to be established or determined to the satisfaction of Borrower, or which is accepted or required to be accepted by Borrower, shall not be deemed to have been so established, determined or accepted unless and until so established, determined or accepted by Agent; (c) any matter which is to be received by, delivered to, assigned to or held by Borrower, including any notice to Borrower under the Collateral Documents, shall be deemed to have been received, delivered, assigned or held only when so received, delivered, assigned or held by or to Agent; (d) nothing contained in any of the Collateral Documents may be modified, amended or waived in any manner or respect whatsoever without the consent of Agent, and any such attempted modification, amendment or waiver without such consent shall be null and void; (e) no Collateral may be released without the execution of the documentation of release by Agent, and any attempted release without such execution by Agent shall be null and void; and (f) any exercise of discretion or rights by Borrower, any requirements imposed or to be imposed, or permitted to be imposed, by Borrower hereunder, shall be deemed to have been exercised or imposed only when so exercised or imposed by Agent. The rights of Agent under this section may be exercised by Agent solely at the option of Agent or the Agent upon the direction of the Majority Lenders (as defined in the Credit Agreement) in accordance with the Credit Agreement, and Agent shall have no obligation to give any consent or take any other action whatsoever contemplated hereby. Without implying any limitation upon the scope of Section 7.01 hereof, it is specifically noted that the provisions of Section 7.01 hereof apply, without limitation, to any action or failure to act on the part of Lender with respect to the matters contemplated by this Section 4.03. ARTICLE FIVE ------------ ENFORCEMENT OF COLLATERAL DOCUMENTS ----------------------------------- Borrower acknowledges and agrees that Agent at all times, whether or not an Event of Default has occurred and whether or not Agent is the absolute owner of the Collateral, shall have the right, but not the obligation, to exercise and enforce, in its own name or in Borrower's name, any or all rights and remedies of Borrower under the Collateral Documents to the exclusion of Borrower, including but not limited to the right to inspect the Property, to receive information and documents, to declare due the indebtedness secured by the Collateral Documents upon the occurrence of a default thereunder, to grant or withhold approvals, to service the Abbey Loan upon the occurrence of an event of default thereunder and to exercise discretion with respect to any matter. Borrower shall not exercise or attempt to exercise any such right or remedy except at the written request of Agent and only in strict accordance with the instructions of Agent. Agent may, at its option, enforce or conduct any action for foreclosure (including nonjudicial foreclosure)under the Collateral Documents in its own name or in the name of Borrower, and Borrower specifically consents to any foreclosure (including nonjudicial foreclosure) under any or all of the Collateral Documents or any other action taken by Agent even though such action may release any person from personal liability on any of the Collateral Documents. Upon the exercise by Agent of any such remedies, any amount bid by Agent or any Lender at any sale of any of the Property or any other Collateral for the Collateral Note or Collateral Participation Documents may, at the option of Agent or such Lender, be deemed to be a credit bid of the indebtedness evidenced by the Collateral Note or the obligations payable under the Collateral Participation Documents and the indebtedness evidenced by the Note, or either or both of them; Agent shall be entitled to set off the amount of any such bid against any such indebtedness, all at the election of Agent, in its sole discretion; and any or all proceeds of the Collateral Note or Collateral Participation Documents may be applied against the indebtedness evidenced by the Note in such order as Agent and the Majority Banks shall elect in accordance with the Credit Agreement, and Agent or any Lender shall hold any property obtained by Agent or such Lender at any such sale free and clear of any interest or claims of Borrower, regardless of whether Agent shall have exercised any remedy under this Assignment with respect to any of the Collateral Documents, or shall have sold any of the Collateral Documents or obtained absolute title thereto pursuant to its rights and remedies under the Uniform Commercial Code. Borrower hereby agrees to pay to Agent, immediately upon demand, all costs and expenses, including without limitation attorney's fees, incurred by Agent in connection with the enforcement or foreclosure of any Collateral Documents, with interest from the date of expenditure at the rate for overdue payments specified in the Credit Agreement, to the extent permitted by applicable laws. ARTICLE SIX ----------- REMEDIES -------- 6.01 Remedies. Upon the occurrence of any Event of Default, without prejudice to the rights of Agent to enforce claims against Borrower for damages for failure to fulfill any of its obligations under any of the Loan Documents, Agent, for the benefit of the Lenders, shall have, in addition to all other rights and remedies that Agent may have under this Assignment and by law, all of the rights and remedies hereinafter set forth, and it may exercise without further notice to Borrower, except as may be specifically required herein or in the other Loan Documents, any action deemed by Agent to be necessary or appropriate to the enforcement of the rights and remedies of Agent under the Assignment and the Loan Documents, including the exercise of any one, more, or all of the following remedies, in its sole discretion, without thereby waiving any of the others: (a) Agent shall have the right immediately to exercise all of its rights and remedies provided under the Notes, and any of the other Loan Documents. (b) Agent shall have the right to collect and to continue to collect all payments on the Collateral; to renew, extend, modify, amend, accelerate, accept partial payments on, make allowances and adjustments and issue credits with respect to, release, settle, compromise, compound, collect or otherwise liquidate, on terms acceptable to Agent, in whole or in part, the Collateral and any amounts owing thereon or any guaranty or security therefor; to enter into any other agreement relating to or affecting the Collateral; to give all consents, waivers and ratifications in respect of the Collateral and exercise all other rights, powers and remedies and otherwise act with respect thereto as if it were the owner thereof; and to enforce payments and prosecute any action or proceeding with respect to any and all of the Collateral and take or bring, in Agent's name or in the name of Borrower, all steps, actions, suits or proceedings deemed by Agent necessary or desirable to affect collection of or to realize upon the Collateral. (c) Agent shall have all of the rights and remedies of a secured party under the Uniform Commercial Code as in effect at that time, including, without limitation, the right to take possession of any of the Collateral, and to sell or otherwise dispose of the same. (d) Agent shall have all of the rights and remedies of a lender under applicable general or statutory law. (e) Agent shall have the right to foreclose the liens and security interests created under this Assignment or under any other agreement relating to the Collateral by any available judicial procedure or without judicial process; and to sell, assign, lease or otherwise dispose of the Collateral or any part thereof, either at public or private sale, in lots or in bulk, for cash, on credit or for future delivery, or otherwise, with or without representations or warranties, and upon such terms as shall be acceptable to Agent in its sole discretion. 6.02 Sale of Collateral. In the event Agent shall determine to sell the Collateral or any portion thereof, any such sale shall be held at such time or times and at such place or places as Agent may determine in the exercise of its sole discretion. Agent or any Lender may bid (which bid may be, in whole or in part, in the form of cancellation of Obligations) for and purchase for the account of Agent or such Lender or any nominee of Agent or such Lender the whole or any part of the Collateral. In the event that Agent or a Lender is the successful bidder at any public or private sale of the Collateral or any portion thereof, the amount bid by Agent or such Lender may be credited against the obligations as provided in Section 6.03. Agent shall not be obligated to make any sale of the Collateral if it shall determine not to do so regardless of the fact that notice of sale of the Collateral may have been given. Agent may, without notice or publication, adjourn any public sale from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. Any requirement of sending reasonable notice to Borrower, including, but not limited to, notice of the intended disposition of all or any portion of the Collateral, shall be deemed met if such notice is given to Borrower pursuant to the Credit Agreement at least ten (10) days before such disposition. Upon consummation of any sale of the Collateral, Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the Collateral sold absolutely free from claim or right on the part of Borrower, and Borrower hereby waives to the extent permitted by law all rights of redemption, stay and appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. 6.03 Application of Net Proceeds. The net cash proceeds resulting from the collection, liquidation, sale, lease or other disposition of the Collateral shall be applied to the payment and satisfaction, pro tanto, of the Obligations as provided in the Credit Agreement. 6.04 No Limitation of Remedies. No remedy conferred upon or reserved to Agent herein or in any of the Loan Documents or in the Collateral is intended to be exclusive of any other remedy conferred upon or reserved to Agent under such instruments or under any applicable laws. Each such remedy shall be cumulative and concurrent and shall be in addition to each and every other remedy now or hereafter existing under such instruments or at law or in equity. No delay or omission by Agent to exercise any right, power or remedy provided in this Assignment, the Note, or the other Loan Documents or otherwise accruing upon any Event of Default shall impair in any manner any such right, power or remedy, or shall be construed to be a waiver of any such default or acquiescence therein, and each and every right, power and remedy of Agent may be exercised from time as often as may be deemed expedient by Agent. 6.05 Rights Independent; Adequacy of Collateral. The security interest created hereunder is independent of any other security for the Obligations or the obligations of any other party or any guarantor, and upon the occurrence of an Event of Default hereunder, Agent may proceed in the enforcement hereof independently of any other right or remedy that Agent may at any time hold with respect to the Obligations or any other security or guaranty therefor. Agent may file a separate action or actions against Borrower hereunder, whether action is brought and prosecuted with respect to any other security or against any other party or any guarantor, or whether any other party or any guarantor is joined in any such action or actions. 6.06 Performance of Borrower's Obligations. If Borrower fails to perform any agreement or covenant contained in this Assignment beyond any applicable period for notice and cure, Agent may itself perform, or cause to be performed, any agreement or covenant of Borrower contained in this Assignment which Borrower shall fail to perform, and the cost of such performance, together with any reasonable expenses, including reasonable attorneys' fees actually incurred (including attorneys' fees incurred in any appeal) by Agent in connection therewith, shall be payable by Borrower upon demand and shall constitute a part of the Obligations and shall bear interest at the rate for overdue amounts as set forth in the Credit Agreement. ARTICLE SEVEN -------------- GENERAL CONDITIONS ------------------ 7.01 Indemnification. It is specifically understood and agreed that this Assignment shall not operate to place any responsibility or obligation whatsoever upon Agent, and that in accepting this Assignment, Agent neither assumes nor agrees to perform at any time whatsoever any obligation or duty of Borrower with respect to the Collateral, all of which obligations and duties shall be and remain with and upon Borrower. In furtherance of this Assignment, Borrower has delivered the Assignment and Acceptance Agreement to Agent, and it is specifically understood that in accepting the Assignment and Acceptance Agreement, Agent neither assumes nor agrees to perform any obligation or duty of Borrower with respect to the Assignment and Acceptance Agreement unless and until Agent exercises its rights pursuant to Section 4.03 of this Assignment. Borrower agrees to release, indemnify, defend and to hold harmless, and does hereby release, indemnify, defend and hold harmless, Agent and Lenders from and against any and all liabilities, obligations, claims, damages, penalties, causes of action, costs and expenses (including, without limitation, attorneys fees and expenses) imposed upon or incurred by Agent or any Lender by reason of this Assignment and any claim and demand whatsoever which may be asserted against Agent by reason of any alleged obligation or undertaking to be performed or discharged by Agent under or by reason of this Assignment. In the event Agent or any Lender incurs any such liability, obligation, claim, damage, penalty, costs or expenses under or by reason of this Assignment, or in the defense of any claims or demands arising out of or in connection with this Assignment, the amount of such liability, obligation, claim, damage, penalty, cost or expense shall be added to the Obligations, shall bear interest at the rate for overdue payments specified in the Credit Agreement from the date incurred until paid and shall be due and payable immediately upon demand. 7.02 Further Assurances. Borrower agrees to do such further acts and things, and to execute and deliver such additional conveyances, assignments, agreements, documents and instruments as Agent may at any time request in connection with the administration or enforcement of this Assignment or related to the Collateral or any part thereof or in order to better assure and confirm unto Agent its rights, powers and remedies hereunder. Without limiting the generality of the foregoing, at any time and from time to time, upon request by Agent, Borrower will make, execute and deliver, or cause to be made, executed and delivered, to Agent and, where appropriate, cause to be recorded and/or filed and from time to time thereafter to be re-recorded and/or refiled at such time and in such offices and places as shall be deemed desirable by Agent, any and all such other and further assignments, endorsements, deeds to secure debt, mortgages, deeds of trust, security agreements, financing statements, continuation statements, instruments of further assurance, certificates and other documents as may, in the opinion of Agent, be necessary or desirable in order to effectuate, complete, or perfect, or to continue and preserve (a) the obligations of Borrower under this Assignment and (b) the security interest created by this Assignment as a first and prior security interest upon the Collateral. Upon any failure by Borrower so to do, Agent may make, execute, record, file, re-record and/or refile any and all such assignments, endorsements, deeds to secure debt, mortgages, deeds of trust, security agreements, financing statements, continuation statements, instruments, certificates, and documents for and in the name of Borrower, and Borrower hereby irrevocably appoints Agent the agent and attorney-in-fact with full power of substitution of Borrower so to do. This power is coupled with an interest. 7.03 Expenses and Costs of Agent. Borrower agrees to pay to Agent all advances, charges, costs and expenses, including all reasonable attorney's fees, incurred or paid by Agent in exercising any right, power or remedy conferred by this Assignment, or in the enforcement thereof, whether or not an action is filed hereon, together with interest from the date of the expenditure at the rate for overdue payments specified in the Credit Agreement, to the extent permitted by applicable law, it being specifically understood and agreed by Borrower that all such advances, charges, costs and expenses shall constitute Obligations. 7.04 Release of Collateral and Termination. Upon the payment and satisfaction in full of the Obligations and the termination of the obligation of the Lenders to make further advances to Borrower under the Credit Agreement, Agent, upon receipt of written request therefor from Borrower and at Borrower's expense, shall execute and deliver to Borrower such documents as may be necessary to release the liens and interests on the Collateral created by this Assignment. 7.05 Security Interest Absolute. All rights of Agent, and the security interests hereunder, and all of the obligations secured hereby, shall be absolute and unconditional, irrespective of: (a) Any lack of validity or enforceability of the Loan Documents or any other agreement or instrument relating thereto; (b) Any change in the time (including the extension of the maturity date of the Notes), manner or place of payment of, or in any other term of, all or any of the Obligations or any other amendment or waiver of or any consent to any departure from the Loan Documents; (c) Any exchange, release or nonperfection of any other collateral for the Obligations, or any release or amendment or waiver of or consent to departure from any of the Loan Documents with respect to all or any part of the Obligations; or (d) Any other circumstance (other than payment of the Obligations in full) that might otherwise constitute a defense available to, or a discharge of, Borrower or any third party for the Obligations or any part thereof. 7.06 Amendments and Waivers. No amendment or waiver of any provision of this Assignment nor consent to any departure therefrom shall in any event be effective unless the same shall be in writing and signed by Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No delay or omission of Agent to exercise any right, power or remedy accruing upon any Event of Default shall exhaust or impair any such right, power or remedy or shall be construed to be a waiver of any such Event of Default, or acquiescence therein; and every right, power and remedy given by this Assignment to Agent may be exercised from time to time and as often as may be deemed expedient by Agent. Failure on the part of Agent to complain of any act or failure to act which constitutes an Event of Default, irrespective of how long such failure continues, shall not constitute a waiver by Agent of Agent's rights hereunder or impair any rights, powers or remedies consequent on any Event of Default. Borrower hereby waives to the extent permitted by law all rights which Borrower has or may have under and by virtue of the Uniform Commercial Code as enacted in the State of New York, and any federal, state, county or municipal statute, regulation, ordinance, Constitution or charter, now or hereafter existing, similar in effect thereto providing any right of Borrower to notice and to a judicial hearing prior to seizure by Agent of any of the Collateral. Borrower hereby waives and renounces for itself, its heirs, successors and assigns, all rights to the benefits of any statute of limitations and any moratorium, reinstatement, marshaling, forbearance, valuation, stay, extension, homestead, redemption and appraisement now provided or which may hereafter be provided by the Constitution and laws of the United States and of any state thereof, both as to itself and in and to all of its property, real and personal, against the enforcement of this Agreement and the collection of any of the Obligations. 7.07 Survival of Certain Agreements. Notwithstanding the repayment of the Obligations and the cancellation or transfer of the Loan Documents, or any foreclosure of or other realization upon the Collateral, the agreement of Borrower contained herein or in any of the other Loan Documents to pay the costs and expenses of Agent or the Lenders in connection with the Loan and all agreements of Borrower contained herein or in any of the other Loan Documents to indemnify and/or hold harmless Agent or the Lenders shall continue in full force and effect so long as there exists any possibility of expense or liability on the part of Agent or the Lenders. 7.08 Law Governing. THIS ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK. 7.09 Communications. All communications required or permitted under the terms of this Agreement shall be given in the manner set forth in the Credit Agreement. 7.10 Incorporation. The following provisions of the Credit Agreement are hereby incorporated by reference as though fully set forth herein: Sections 22, 27, 28, 29 and 30. IN WITNESS WHEREOF, Borrower has executed this Assignment under seal, as of the day and year first above written. WELLSFORD FINANCE, INC., a Maryland corporation By: /s/ Gregory F. Hughes -------------------------------- Name: Gregory F. Hughes Title: Vice President and Treasurer [CORPORATE SEAL] WITNESS: The undersigned has executed this Collateral Assignment solely for the purpose of witnessing the grant of power of attorney by Borrower to Agent, as described in this Collateral Assignment. Kim B. Ezzy ------------------------------------- Print Name STATE OF NEW YORK ) ) COUNTY OF NEW YORK ) The foregoing instrument was acknowledged before me this 11th day of January, 1999, by GREGORY F. HUGHES, as Treasurer, of Wellsford Finance, Inc., a Maryland corporation. WITNESS MY HAND and official seal. My commission expires: /s/ Kevin A. Carey --------------------------------- Notary Public STATE OF NEW YORK ) ) COUNTY OF NEW YORK ) The foregoing instrument was acknowledged before me this 11th day of January, 1999, by KIM B. EZZY. WITNESS MY HAND and official seal. My commission expires: /s/ Kevin A. Carey ---------------------------------- Notary Public EXHIBIT "A" COLLATERAL DOCUMENTS -------------------- 1. First Amended and Restated Master Credit Agreement dated December 30, 1997, effective as of July 31, 1997, among The Woodlands Commercial Properties Company, L.P. ("Commercial Company"), The Woodlands Land Development Company, L.P. ("Land Company"), and BankBoston, N.A., individually and as Agent ("Agent"), Morgan Stanley Senior Funding, Inc., as Documentation Agent, and the other lending institutions which may now be or hereafter become parties thereto. 2. Commercial Company Second Secured Term Loan Note dated December 28, 1998 made by Commercial Company and Land Company to the order of Wellsford Finance, Inc. ("Borrower"). 3. Land Company Second Secured Term Note dated December 28, 1998 made by Commercial Company and Land Company to the order of Borrower. 4. Deed of Trust and Security Agreement dated as of July 31, 1997 by Commercial Company for the benefit of Agent. 5. Assignment of Leases and Rents dated as of July 31, 1997 by Commercial Company to Agent. 6. Collateral Assignment of Interests dated as of July 31, 1997 by Commercial Company in favor of Agent. 7. Assignment of Deed of Trust and Security Agreement and other Collateral Documents dated as of December 30, 1997 by BankBoston, N.A., as Agent and BankBoston, N.A., as Agent. 8. First Amendment to Deed of Trust and Security Agreement and certain other Collateral Documents dated December 30, 1997 by and between Commercial Company, Land Company and Agent. 9. Amended and Restated Cash Collateral Account Agreement dated as of December 30, 1997, effective as of July 31, 1997 by and among Commercial Company, Land Company and Agent. 10. Amended and Restated Collateral Assignment of Documents dated December 30, 1997 by Commercial Company and Land Company to Agent. 11. Collateral Assignment of Documents dated December 30, 1997 by Commercial Company and Land Company to Agent. 12. Amended and Restated Indemnity Agreement Regarding Hazardous Materials dated December 30, 1997 by Commercial Company and Land Company for the benefit of Agent. 13. Amended and Restated Agreement Regarding Negative Pledge dated December 30, 1997 by Crescent Real Estate Equities Limited Partnership, The Morgan Stanley Real Estate Fund II, L.P. and Crescent Operating, Inc. in favor of Agent. 14. Intercreditor Agreement dated December 30, 1997 effective as of July 31, 1997 by and between BankBoston, N.A., for itself and as Agent, Morgan Stanley Senior Funding Inc., and the other lenders a party thereto. 15. UCC-1 Financing Statement naming The Woodlands Land Development Company, L.P. as Debtor and BankBoston, N.A., as Agent, as secured party filed with Texas Secretary of State. 16. UCC-1 Financing Statement naming The Woodlands Land Development Company, L.P. as Debtor and BankBoston, N.A., as Agent, as secured party filed with Tarrant County, Texas Clerk. 17. Loan Participation Agreement dated as of August 28, 1997 between Morgan Guaranty Trust Company of New York ("Morgan") and Wellsford Real Properties, Inc. ("WRP"). 18. Assignment and Acceptance Agreement dated March 27, 1998, between WRP and Wellsford Capital ("Capital"). 19. First Amendment to Participation Agreement, dated April 7, 1998, between Capital and Morgan. 20. Assignment and Acceptance Agreement dated December 28, 1998, between Capital and Borrower. 21. Loan Participation Certificate dated December 28, 1998 from Morgan to WRP. All rights, remedies, collateral instruments or other documents made or granted in favor of Borrower or its predecessors in interest in connection with the loans evidenced by the Loan Agreement described in Item 1, above, and the Participation Agreement described in Item 17, above and secured by the documents described in Items 2-16 and 18-21 above, (collectively the "Loans"), including, without limitation: (i) all guaranties, pledges, security interests, mortgages, deeds of trust, assignments of rents, assignments of management agreement, assignments of stock or partnership units, financing statements, or other rights, interests or collateral securing or guaranteeing payment of such Loans; and (ii) all other rights and remedies of the Borrower in connection with the Loans, whether provided by contract or otherwise available under applicable law or in equity, including, without limitation, all rights and remedies provided under any loan agreements, security agreements, indemnities, letters of credit, title insurance policies, fire and casualty insurance policies, flood hazard insurance policies, life insurance policies, escrow, accounts, certificates of deposit, proceeds, claims (including proofs of claim), demands, causes of action and judgments in favor of Borrower or its predecessors in interest relating to the Loans, or other instruments or documents made, issued or delivered to or in favor of Borrower or its predecessors in interest in connection with the Loans, all as the same may have been amended from time to time. EXHIBIT "B" ABBEY LOAN DOCUMENTS - -------------------- EX-10.50 19 - ---------------------------------------------------------------------------- LIMITED LIABILITY COMPANY OPERATING AGREEMENT OF WELLSFORD/WHITEHALL PROPERTIES II, L.L.C. Dated as of July 16th, 1998 - ---------------------------------------------------------------------------- TABLE OF CONTENTS Page ARTICLE I. DEFINITIONS 1.1. Definitions 1 1.2. Terms Generally 17 ARTICLE II. THE COMPANY AND ITS BUSINESS 2.1. Company Name 17 2.2. Term 17 2.3. Filing of Certificate and Amendments 17 2.4. Purpose and Business; Powers; Scope of Members' Authority 18 2.5. Principal Office; Registered Agent 18 2.6. Names and Addresses of Members 18 2.7. Pre-Closing Costs 18 2.8. Post-Closing Receipts 18 ARTICLE III. MANAGEMENT OF COMPANY BUSINESS; POWERS AND DUTIES OF THE MANAGER; MAJOR DECISIONS 3.1. Management and Control 19 3.2. Enumeration of Specific Duties 20 3.3. No Authority to Hire Employees 23 3.4. Decisions Requiring Approval of the Management Committee 23 3.5. Management Committee 27 3.6. Limited Authorization 30 3.7. Members Shall Not Have Power to Bind Company 30 3.8. Status as "Operating Company"; Participation in Management by Members 31 ARTICLE IV. RIGHTS AND DUTIES OF MEMBERS 4.1. Use of Company Property 31 4.2. Exclusivity; Other Activities of the Members 31 4.3. Indemnification with Respect to the Manager 35 4.4. Compensation of Members and Affiliates 36 4.5. Investment Representations 36 4.6. Dealing with Members 37 4.7. Designation of Tax Matters Member 37 ARTICLE V. CAPITAL CONTRIBUTIONS, LOANS AND LIABILITIES 5.1. Initial Capital Contributions and Capital Accounts of the Members 38 5.2. Additional Capital Contributions 46 5.3. Failure to Fund Capital Contributions 46 5.4. Dilution for Failure to Fund Capital Calls 47 5.5. Capital of the Company 48 5.6. Liability of Members 48 5.7. Return of Capital Contribution 49 5.8. Calculation of Members' Percentage Interest and Members' Series A Preferred Percentage Interest 49 5.9. Issuance of Additional Membership Units 49 5.10. Arbitration 50 ARTICLE VI. CAPITAL ACCOUNTS, PROFITS AND LOSSES AND ALLOCATIONS 6.1. Capital Accounts 50 6.2. Profits and Losses 51 ARTICLE VII. APPLICATIONS AND DISTRIBUTIONS OF AVAILABLE CASH 7.1. Applications and Distributions 55 7.2. Restoration of Excess Distributions 57 7.3. Liquidation 57 7.4. Repayment of Member Loans 57 7.5. Revisions to Reflect Issuance of Additional Membership Interests 58 7.6. Initial Public Offering; Sale of Units 58 ARTICLE VIII. TRANSFER OF COMPANY INTERESTS 8.1. Limitations on Assignments of Interests by Members 59 8.2. Sale of Properties, the Company or its Subsidiaries 60 8.2A Indemnification of Saracen 63 8.3. Conversion Right 68 8.4. Certain Transfer Provisions 70 8.5. Assignment Binding on Company 71 8.6. Bankruptcy of a Member 71 8.7. Substituted Members 71 8.8. Acceptance of Prior Acts 71 8.9. Additional Limitations 71 8.10. Tag Along Rights 72 ARTICLE IX. MANAGER 9.1. Removal of Manager 72 9.2. Fees 73 ARTICLE X. TERMINATION OF COMPANY; LIQUIDATION AND DISTRIBUTION OF ASSETS 10.1. Dissolution and Termination 73 10.2. Distribution Upon Liquidation 74 10.3. Sale of Company Assets 74 ARTICLE XI. BOOKS, RECORDS, BUDGETS AND REPORTS 11.1. Books of Account 74 11.2. Availability of Books of Account 75 11.3. Financial Reports and Statements; Annual Budgets 75 11.4. Accounting Expenses 76 11.5. Bank Account 76 11.6. Fidelity Bonds and Insurance 76 ARTICLE XII. AMENDMENTS 12.1. Amendments 77 ARTICLE XIII. MISCELLANEOUS 13.1. Further Assurances 78 13.2. Notices 78 13.3. Headings and Captions 78 13.4. Variance of Pronouns 78 13.5. Counterparts 78 13.6. GOVERNING LAW 79 13.7. Partition 79 13.8. Invalidity 79 13.9. Successors and Assigns 79 13.10. Entire Agreement 79 13.11. No Brokers 79 13.12. Maintenance as a Separate Entity 79 13.13. Confidentiality 80 13.14. Power of Attorney 80 13.15. Time of the Essence 81 13.16. No Third Party Beneficiaries 81 13.17. Exculpation 81 13.18. Consent of Saracen 81 EXHIBITS EXHIBIT A Transaction Summary EXHIBIT B-1 Description of Real Property Contributed by Whitehall EXHIBIT B-2 Description of Personal, Tangible and Intangible Property Contributed by Whitehall EXHIBIT B-3 Description of Excluded Assets EXHIBIT B-4 Whitehall Properties EXHIBIT B-5 Whitehall Additional Properties EXHIBIT C-1 Description of Real Property Contributed by WCPT EXHIBIT C-2 Description of Personal, Tangible and Intangible Property Contributed by WCPT EXHIBIT C-3 Description of Excluded Assets EXHIBIT C-4 WCPT Properties EXHIBIT E-1 Representations and Warranties of Whitehall EXHIBIT E-2 Representations and Warranties of WCPT EXHIBIT E-3 Representations and Warranties of Whitehall Concerning the Whitehall Additional Properties EXHIBIT F Terms of Series A Preferred Membership Units EXHIBIT G Form of Registration Rights Agreement SCHEDULES SCHEDULE 1 Addition Members SCHEDULE 2.6 Names and Addresses of Members SCHEDULE 2.9 Certain Post-Closing Expenses SCHEDULE 3.2(a)(vi) Approved Leases and Lease Documentation SCHEDULE 5.1(h) Capital Accounts, Membership Units and Series A Preferred Membership Units LIMITED LIABILITY COMPANY OPERATING AGREEMENT OF WELLSFORD/WHITEHALL PROPERTIES II, L.L.C. This LIMITED LIABILITY COMPANY OPERATING AGREEMENT is made and entered into as of July 16th, 1998 by and among WHWEL Real Estate Limited Partnership, a Delaware limited partnership ("Whitehall"), Wellsford Commercial Properties Trust, a Maryland real estate investment trust ("WCPT") and the additional Members set forth on Schedule 1 annexed hereto. Collectively, the additional Members set forth on Schedule 1 annexed hereto shall be referred to herein as "Saracen" or the "Saracen Members". R E C I T A L S WHEREAS, Whitehall and WCPT entered into that certain Limited Liability Company Operating Agreement of Wellsford/Whitehall Properties, L.L.C., a Delaware limited liability company ("WWP") and predecessor in interest to Wellsford/Whitehall Properties II, L.L.C., dated as of August 28, 1997, as amended by Amendment No. 1 to the Limited Liability Company Operating Agreement of WWP, dated as of December 31, 1997, and as further amended to reflect the addition of Saracen as a Member of the Company by the Amended and Restated Limited Liability Company Operating Agreement of WWP, dated as of May 15, 1998 (the "WWP Agreement"); WHEREAS, contemporaneously with the execution of this Agreement, the following transactions took place: (1) WCPT, Whitehall and each of the Saracen Members contributed their undivided Interests in WWP to Wellsford/Whitehall Properties II, L.L.C. in exchange for equivalent Interests in Wellsford/ Whitehall Properties II, L.L.C. (the "WWP Contribution"), and (2) WWP merged with and into Wellsford/Whitehall Holdings, L.L.C., a Delaware limited liability company ("Holdings") and wholly owned subsidiary of WWP, with Holdings being the surviving entity; and WHEREAS, Wellsford/Whitehall Properties II, L.L.C. intends to continue the business and purpose of WWP and acquire, hold, develop, redevelop and operate real estate assets directly or indirectly through one or more Subsidiaries. NOW, THEREFORE, in order to carry out their intent as expressed above and in consideration of the mutual agreements hereinafter contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby covenant and agree as follows: ARTICLE I. DEFINITIONS 1.1. Definitions. As used in this Agreement and the Exhibits, Schedules and Annexes hereto, the following terms shall have the meanings set forth below: "Act" shall mean the Delaware Limited Liability Company Act (6 Del. C. Section 18-101 et seq.), as amended from time to time. "Additional Closing" shall mean the consummation of the transactions whereby the Company acquired the Whitehall Additional Properties. "Additional Closing Date" shall mean the date upon which the Additional Closing occurred. "Administration Fee" shall mean the administration fee in the amount of $300,000 per annum payable in four $75,000 installments quarterly in arrears to WRP for so long as WRP (or an Affiliate of WRP) shall provide services in connection with the administration of the Company. The Administration Fee shall be prorated for partial years or quarters commencing on September 30, 1997. "Affiliate" shall mean with respect to any Person (i) any other Person that directly or indirectly through one or more intermediaries controls or is controlled by or is under common control with such Person, (ii) any other Person owning or controlling 10% or more of the outstanding voting securities of, or other ownership interests in, such Person, (iii) any officer, director or member of such Person and (iv) if such Person is an officer, director or member of any company, the company for which such Person acts in any such capacity. For purposes of this definition and Section 8.1(c), "control," when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "agreed net fair market value" shall have the meaning set forth in Section 6.1(b). "Agreement" shall mean this Limited Liability Company Operating Agreement, as it may hereafter be amended or modified from time to time. "Annual Capital Budget" shall have the meaning set forth in Section 11.3(c). "Annual Operating Budget" shall have the meaning set forth in Section 11.3(c). "Applicable Closing Date" shall have the meaning set forth in Section 8.2(c). "Appointing Member" shall have the meaning set forth in Section 3.5(c). "Approved Budget" shall mean, with respect to each Property, the Annual Capital Budget and Annual Operating Budget for such Property for the Budget Year in question, in each case which has been approved by the Management Committee. "Asserted Deficiency" shall have the meaning set forth in Section 8.2A. "Asset Management Agreement" shall mean the Asset Management Agreement dated as of the Saracen Closing Date between WWP and the Asset Manager. "Asset Manager" shall mean Saracen Partners, LLC, a Massachusetts limited liability company formed and owned by William F. Rand, III, Dominic J. Saraceno, Kurt W. Saraceno and Carleton G. Tarpinian, and designated as the asset manger under the Asset Management Agreement. "Assumed Financing" shall mean the credit facility made available to WHATR Real Estate Limited Partnership pursuant to the Loan Agreement dated as of May 14, 1997 by and among WHATR Real Estate Limited Partnership, Goldman Sachs Mortgage Company, as syndication agent and lender, and the other lenders from time to time parties thereto. "Available Cash" shall mean, for any fiscal period, the excess, if any, of (A) the sum of (i) the amount of all cash receipts of the Company during such period from whatever source, other than Capital Proceeds, and (ii) any cash reserves of the Company existing at the start of such period (other than reserves funded with Capital Proceeds) over (B) the sum of (i) all cash amounts paid or payable (without duplication) in such period on account of expenses and capital expenditures incurred in connection with the Company's business (including, without limitation, general operating expenses, taxes and amortization or interest on any debt of the Company) and (ii) such cash reserves which may be required for the working capital and future needs of the Company in an amount approved by the Management Committee or, failing such approval, in an amount equal to the cash reserves of the Company existing at the start of such period. Notwithstanding the foregoing, "Available Cash" for any fiscal period shall be increased by the amount of any cash payment or reserve described in clause (B) above that was made by the Company during such fiscal period to the extent the Company had obtained Capital Proceeds for the payment of the related expenditure. "Back-to-Back Debt" shall mean any Indebtedness incurred by the Company that (i) is issued exclusively to WCPT, (ii) is issued simultaneously with the issuance by WCPT of Funding Debt that has identical terms (including principal amount, interest rate, payment amounts and frequency, maturity date, covenants and defaults) to the Back-to-Back Debt issued by the Company and (iii) is funded by WCPT exclusively through the issuance of such Funding Debt. "Bankruptcy" shall mean, with respect to the affected party, (i) the adjudication that such party is bankrupt or insolvent, or the entry of a final and nonappealable order for relief under Title 11 of the United States Code or any other applicable federal or state bankruptcy or insolvency law, (ii) the admission by such party of its inability to pay its debts as they mature, (iii) the making by it of an assignment for the benefit of creditors, (iv) the filing by it of a petition in bankruptcy or a petition for relief under Title 11 of the United States Code or any other applicable federal or state bankruptcy or insolvency law, (v) the expiration of sixty (60) days after the filing of an involuntary petition under Title 11 of the United States Code, an application for the appointment of a receiver for the assets of such party, or an involuntary petition seeking liquidation, reorganization, arrangement or readjustment of its debts under any other federal or state insolvency law, provided that the same shall not have been vacated, set aside or stayed within such sixty (60)-day period, (vi) the imposition of a judicial or statutory lien on all or a substantial part of its assets unless such lien is discharged or vacated or the enforcement thereof stayed within sixty (60) days after its effective date, (vii) the filing by such party of an answer or other pleading admitting or failing to contest the material allegations of a petition filed against it in any proceeding of the nature described in clause (iv) above, and (viii) the expiration of sixty (60) days after the commencement of any stay referred to in clause (v) or (vi) above provided that the subject of such stay shall not have been vacated or set aside within such sixty (60)-day period. "Book Value" with respect to any Company Asset shall mean its adjusted basis for federal income tax purposes, except that the initial Book Value of any asset contributed by a Member to the Company shall be an amount equal to the fair market value of such asset, as determined by the Initial Members (which shall be $141,850,000, with respect to the Saracen Contributed Assets), and such Book Value shall thereafter be adjusted in a manner consistent with Treasury Regulations Section 1.704-l(b)(2)(iv)(g) for revaluations pursuant to Section 6.1(b) and for the Depreciation taken into account with respect to such asset. "Breach Notice" shall have the meaning set forth in Section 5.1(l). "Budget Year" shall mean the period beginning on the Initial Closing Date and ending on December 31, 1997; and beginning January 1, 1998, "Budget Year" shall mean a period beginning on January 1, 1998 and ending on December 31, 1998 and any successive yearly period thereafter. "Business Day" shall mean any day other than a Saturday, Sunday or any other day on which banks in New York are required or permitted to be closed. "Business Plan" shall mean, with respect to any Property, the master business plan (which shall include the Annual Capital Budget, Annual Operating Budget, the Leasing Plan and Marketing Plan) for such Property prepared annually by the Manager and approved by the Management Committee, setting forth the operating strategy and estimated receipts and expenditures for the period covered by the Business Plan; provided that, the initial Business Plan for any Saracen Property for calendar year 1998 shall be the business plan for such property prepared by or on behalf of the relevant Saracen Current Owner, a copy of which shall have been provided to and approved by the Management Committee prior to the Saracen Closing. The Business Plans may be amended or replaced from time to time with the approval of the Management Committee. "Capital Account" when used in respect of any Member shall mean the Capital Account maintained for such Member in accordance with Section 6.1, as said Capital Account may be increased or decreased from time to time pursuant to the terms of Section 6.1. "Capital Call" shall mean any written notice to the Initial Members delivered in accordance with Section 5.2 hereof requesting a contribution in cash to the Company, which notice shall state the total amount of the required contributions by such Initial Members and each Initial Member's pro rata share of such total based on such Initial Member's Percentage Interest. "Capital Contribution" when used with respect to any Member shall mean the amount of capital contributed by such Member to the Company in accordance with Article V (other than pursuant to Sections 5.1(c), (e), (i), (j) and (l)) of this Agreement or, prior to the WWP Contribution, in accordance with Article V (other than pursuant to Sections 5.1(c), (e), (i), (j) and (l)) of the WWP Agreement. "Capital Event" means any of the following: (A) Shares or other capital stock of WCPT are issued or sold in a public offering and are thereafter publicly traded or (B) WCPT or the Company engages in (i) a merger (including a triangular merger), consolidation or other combination with or into another Person (or such Person's subsidiary) whose equity interests are publicly traded or (ii) the direct or indirect sale, lease, exchange or other transfer of all or substantially all of its assets in one transaction or a series of related transactions with another Person (or such Person's subsidiary) whose equity interests are publicly traded. "Capital Proceeds" shall mean the net amount of cash proceeds of the Company (including the net amount of cash proceeds received from an Affiliate) from the occurrence of one or more of the following events: (i) a merger (including a triangular merger), consolidation or other combination with or into another Person, (ii) the direct or indirect sale, lease, exchange or other disposition or transfer of any Company Assets, (iii) an eminent domain taking, insurance recovery or condemnation award, (iv) any refinancing or borrowing by the Company or its Affiliates, (v) any issuance of equity securities of the Company or its Affiliates; and (vi) Capital Contributions. "Capital Proceeds Distribution Amount" shall have the meaning set forth in Section 7.1(f). "Cause" shall mean (a) fraud, criminal felony indictment, gross negligence or willful misconduct by WCPT, WRP or any of Jeffrey H. Lynford, Edward Lowenthal or Gregory Hughes (or any successor occupying one or more of the officer positions currently occupied by any of them in WCPT or WRP) if such fraud, criminal felony indictment, gross negligence or willful misconduct relates to any action or omission in connection with the business of the Company or any of its Subsidiaries, (b) failure of WCPT to fund any Capital Call in accordance with Section 5.2(b) (but not Section 5.2(a)), (c) a breach of Section 4.2 by WCPT or its Affiliate or (d) the occurrence of any Bankruptcy with respect to WCPT or WRP. "Certificate of Formation" shall mean the Certificate of Formation of the Company filed with the State of Delaware on August 18, 1997, as the same may hereafter be amended and/or restated from time to time. "Code" shall mean the Internal Revenue Code of 1986, as amended, or any corresponding provision(s) of succeeding law. "Committee Representative" shall mean each individual appointed from time to time by Whitehall, WCPT or any other Member pursuant to Section 3.5 or, if applicable, pursuant to the Series A Terms, and "Committee Representatives" shall mean all of such individuals, collectively. "Common Distribution Amount" shall mean, for any calendar quarter, the Distribution Amount plus the Capital Proceeds Distribution Amount, if any, for and including such calendar quarter less all amounts paid under Section 7.1(a-2)(i) for and including such calendar quarter. "Company" shall mean at any time prior to the date hereof, WWP, and at any time after the date hereof the "Company" shall mean Wellsford/Whitehall Properties II, L.L.C., a Delaware limited liability company, as said Company may from time to time be hereafter constituted. "Company Assets" shall mean all right, title and interest of the Company in and to all or any portion of the assets of the Company and any property (real or personal) or estate acquired in exchange therefor or in connection therewith. "Company Nonrecourse Debt" shall have the meaning set forth in Treasury Regulation Section 1.704-2(i)(2). "Consolidation Transaction" shall have the meaning set forth in Section 8.2A. "Contributee" shall have the meaning set forth in the Contribution Agreement. "Contributing Member" shall have the meaning set forth in Section 5.3. "Contributor" shall have the meaning set forth in the Contribution Agreement. "Contribution Agreement" shall mean the Contribution Agreement dated as of February 12, 1998, as amended by Amendment No. 1 to the Contribution Agreement dated as of May 15, 1998, among the Company and the Saracen Current Owners (including certain Affiliates of the Saracen Current Owners). "Conversion Factor" shall mean 1.0; provided that, if WCPT (i) declares or pays a dividend on its outstanding Shares in Shares or makes a distribution to all holders of its outstanding Shares in Shares, or (ii) subdivides its outstanding Shares, or (iii) combines its outstanding Shares into a smaller number of Shares, the Conversion Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the numerator of which shall be the number of Shares issued and outstanding on the record date for such dividend, distribution, subdivision, combination, or other action (assuming for such purposes that such dividend, distribution, subdivision, combination or other action has occurred as of such time) and the denominator of which shall be the actual number of Shares (determined without the above assumption) issued and outstanding on the record date for such dividend, distribution, subdivision, combination or other action. Whitehall's and Saracen's agreement to the foregoing definition of "Conversion Factor" contained herein is based upon the agreement of WCPT and WRP not to take any action which would have a dilutive effect on the value of the Shares as compared to the value of the Membership Units (so that the value of one Share would be less than the value of one Membership Unit). In the event that any such action is nevertheless taken by or on behalf of WCPT or its shareholders, the Conversion Factor set forth in the first sentence of this definition shall be adjusted in the manner set forth in the proviso in the first sentence of this definition or, if otherwise applicable, in the same manner and in the same instances provided in Article 6 of the Warrant Agreement (except that no such adjustment shall be made if and to the extent that WCPT distributes to its shareholders amounts received from the Company on account of its Interest or the Promote). Any adjustment to the Conversion Factor shall become effective immediately after the effective date of the event retroactive to the record date, if any, for the event giving rise thereto, it being intended that (x) adjustments to the Conversion Factor are to be made to avoid unintended dilution or anti-dilution as a result of transactions in which Shares are issued, redeemed or exchanged without a corresponding issuance, redemption or exchange of Membership Units and (y) if a specified redemption date shall fall between the record date and the effective date of any event of the type described above, that the Conversion Factor applicable to such redemption shall be adjusted to take into account such event. "Conversion Right" shall have the meaning set forth in Section 8.3. "Converted Units" shall mean the number of Series A Preferred Membership Units outstanding times 1.34. "Cumulative Distribution Amount" shall mean, for any calendar quarter, the cumulative quarterly Distribution Amounts theretofore distributed during the then current calendar year, plus the Distribution Amount for the quarter for which the Cumulative Distribution Amount is being determined. "Damages" shall have the meaning set forth in Section 5.1(c). "Debtor Member" shall have the meaning set forth in Section 7.4. "Declaration of Trust" shall mean the amended and restated declaration of trust of WCPT filed with the State Department of Assessment and Taxation of the State of Maryland on August 25, 1997, as the same may be restated and amended from time to time. "Deemed Value Per Membership Unit" shall mean (i) on the Saracen Closing Date and prior to the date any New Member acquires Membership Units, $16.22 (sixteen dollars and twenty-two cents), and (ii) on and after the date any New Member acquires Membership Units, an amount equal to the quotient (expressed as a dollar amount) of (x) the sum of the cash plus the agreed net fair market value of property contributed to the Company by the Person who most recently became a New Member (including on such date), which amount was solely attributable to the Membership Units issued and referred to in clause (y) below, divided by (y) the total number of Membership Units issued to such New Member in respect of such contributions. "Default Rate" shall mean an interest rate equal to the lesser of (i) 15% per annum and (ii) the maximum rate permitted by law. "Depreciation" shall mean, with respect to any Fiscal Year, all deductions attributable to depreciation or cost recovery with respect to Company Assets, including any improvements made thereto and any tangible personal property located therein, or amortization of the cost of any intan- gible property or other assets acquired by the Company, which have a useful life exceeding one year, provided, however, that with respect to any Company Asset whose tax basis differs from its Book Value at the beginning of such Fiscal Year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Book Value as the depreciation, amortization or other cost recovery deduction for such period with respect to such asset for federal income tax purposes bears to its adjusted tax basis as of the beginning of such Fiscal Year; provided, however, that if the federal income tax depreciation, amortization or other cost recovery deduction for such Fiscal Year is zero, Depreciation shall be determined using any reasonable method selected by the Management Committee. "Determination Date" shall have the meaning set forth in Section 7.6(b). "Dispute Notice" shall have the meaning set forth in Section 5.1(c). "Distribution Amount" shall have the meaning set forth in Section 7.1(a). "End Date" shall have the meaning set forth in Section 8.2A(a)(i). "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "Extraordinary Transaction" shall mean, with respect to any Person, the occurrence of one or more of the following events: (i) a merger (including a triangular merger), consolidation or other combination with or into another Person; (ii) the direct or indirect sale, lease, exchange or other transfer of all or substantially all of its assets in one transaction or a series of related transactions; (iii) any reclassification, recapitalization or change of its outstanding equity interests (other than a change in par value, or from par value to no par value, or as a result of a split, dividend or similar subdivision); (iv) any issuance of equity securities of such Person in exchange for assets (other than an issuance of securities for cash or an issuance of securities pursuant to an employee benefit plan); (v) any change of control (as defined below) of such Person or (vi) the adoption of any plan of liquidation or dissolution of such Person. For purposes of this definition, "change of control" with respect to any Person means (a) the acquisition by another Person of more than 20% of the voting stock in such Person or (b) the change in membership of a majority of such Person's board of directors. "Failed Contribution" shall have the meaning set forth in Section 5.3. "Fiscal Year" shall mean the fiscal year of the Company, which shall be the calendar year; but upon termination of the Company, "Fiscal Year" shall mean the period from the end of the last preceding Fiscal Year to the date of such termination. "Funding Debt" shall mean any Indebtedness incurred by WCPT in compliance with the terms and provisions of Section 4.2(g). "Holdings" shall have the meaning set forth in the third paragraph of this Agreement. "Hub Target Market" shall mean the Commonwealth of Massachusetts and the States of Maine, New Hampshire, Rhode Island and Vermont. "Indebtedness" shall mean, with respect to any Person, (i) all indebtedness and obligations of or assumed by such Person in respect of money borrowed (including any indebtedness which is non-recourse to the credit of such Person but which is secured by a Lien on any asset of such Person) or evidenced by a promissory note, bond, debenture, letter of credit reimbursement agreement or other written obligations to pay money for borrowed money; (ii) any indebtedness or obligation of others secured by a Lien on any asset of such Person, whether or not such indebtedness or obligation is assumed by such Person; (iii) any guaranty, endorsement, suretyship or other undertaking pursuant to which such Person may be liable on account of any obligation of any third party other than a Subsidiary; (iv) indebtedness for the deferred purchase price of property or services; (v) obligations of such Person incurred in connection with entering into a Lease which, in accordance with generally accepted accounting principles, should be capitalized; and (vi) the indebtedness or obligations of a partnership or joint venture in which such Person is a general partner or joint venturer. "Initial Capital Contribution" shall mean those capital contributions made pursuant to Section 5.1(a) and (d). "Initial Closing" shall mean the transactions whereby the Company and/or its Subsidiaries acquired the WCPT Contributed Assets and the Whitehall Contributed Assets in exchange for Membership Units. "Initial Closing Date" shall mean August 28, 1997, the date upon which the Initial Closing occurred. "Initial Closing Date Prorations" shall have the meaning set forth in Section 2.9(b). "Initial Members" shall mean WCPT and Whitehall. "Initial Member's Percentage Interest" shall mean with respect to either Initial Member, the ratio, expressed as a percentage, of such Initial Member's current Percentage Interest to the aggregate current Percentage Interests of the Initial Members. "Institutional Lender" shall mean an Affiliate of any Member and/or any one or more of the following other entities, provided that for any such other entity to qualify as an Institutional Lender hereunder, such other entity, together with its Affiliates, must have total assets of at least $5,000,000,000 and stockholders' equity or net worth of at least $250,000,000 (or, in either case, the equivalent thereof in a foreign currency) as of the date the loan is made: a savings bank, a savings and loan association, a commercial bank or trust company, an insurance company subject to regulation by any governmental authority or body, a real estate investment trust, a union, governmental or secular employees welfare, benefit, pension or retirement fund, a pension fund property unit trust (whether authorized or unauthorized), an investment company or trust, a merchant or investment bank or any other entity generally viewed as an institutional lender. In each of the foregoing cases, such Affiliate or other entity shall constitute an Institutional Lender whether (i) acting for itself or (ii) as trustee, in a fiduciary, management or advisory capacity or, in the case of a bank, as agent bank, for any number of lenders, so long as in the case of clause (ii) the day-to-day management decisions relating to the loan are either exercised by or recommended by such Institutional Lender and, during the life of the loan, such Institutional Lender shall only be removed from its clause (ii) capacity if it is replaced by another Institutional Lender also so acting under clause (ii). "Insurance Program" shall have the meaning set forth in Section 3.4. "Interest" shall mean the entire interest of a Member in the Company at any particular time, including the Percentage Interest and Series A Preferred Percentage Interest of such Member, together with the right of such Member to any and all benefits to which a Member may be entitled as provided in this Agreement, together with the obligations of such Member to comply with all the terms and provisions of this Agreement. The Interest of any Member may be expressed as a number of Membership Units or Series A Preferred Membership Units, or a combination thereof. "Internal Rate of Return" shall mean, with respect to any Member, that such Member has achieved an internal rate of return of a specified percentage per annum, which shall occur when the total Capital Contributions made from time to time by such Member under this Agreement or the WWP Agreement are returned to such Member together with an annual return equal to such specified percentage calculated commencing on the date such Capital Contributions are or were made under this Agreement or the WWP Agreement and compounded annually to the extent not paid on a current basis, taking into account the timing and amounts of all previous Capital Contributions by such Member to the Company and all previous distributions by the Company to such Member under this Agreement or the WWP Agreement. For purposes of computing such internal rate of return, any Capital Contribution made by such Member and any distribution of funds received by such Member at any time during a month shall be deemed to be made or received on the first day of such month. Notwithstanding anything to the contrary contained herein, the WWP Contribution shall not be deemed to be a Capital Contribution for purposes of computing such Internal Rate of Return. In addition, solely for purposes of calculating the Internal Rate of Return in Sections 7.1(b)(ii) and 7.1(b)(iii), the amount of each Initial Member's Capital Contributions as of the Initial Closing Date shall be deemed to be such Member's actual Capital Contributions as of the Initial Closing Date less such Initial Member's Percentage Interest (as of the Initial Closing Date) multiplied by $1 million. "IRS" shall mean the Internal Revenue Service. "Leasing Plan" shall mean, with respect to any Property, the leasing guidelines prepared by the Manager for each type of planned use of such Property (e.g. commercial, industrial or retail) containing parameters for minimum rents, tenant allowances, operating expense recaptures, financial condition of tenants, free rent, lease assignments and assumptions, overages and tenant improvements to the extent such information is available and pertinent. "Lien" shall mean any lien, mortgage, charge, restriction, option, right of first refusal or offer, contractual restriction on transfer, security interest, tax lien, pledge, encumbrance, conditional sale or title retention arrangement, or any other claim of any kind or nature against any Property securing any Indebtedness, or any agreement to create or confer any of the foregoing, in each case whether arising by agreement or under any statute or law or otherwise. "Losses" shall have the meaning set forth in Section 6.2(a). "Major Decisions" shall have the meaning set forth in Section 3.4. "Management Committee" shall have the meaning set forth in Section 3.5 hereof. "Manager" (i) shall mean WCPT upon the execution and delivery hereof, (ii) except as set forth in clause (iii) below, if for any reason WCPT ceases to be the Manager, shall thereafter mean another Person appointed by the Management Committee or (iii) if WCPT ceases to be the Manager pursuant to Section 9.1, shall thereafter mean another Person appointed by Whitehall. "Mandatory Capital Call" shall mean a Capital Call for any capital contributions that would be required pursuant to Section 5.2(a). "Marketing Period" shall have the meaning set forth in Section 8.2(e). "Marketing Plan" shall mean, with respect to any Property or appropriate part thereof, the comprehensive plan for marketing and leasing the space in such Property, which plan shall be submitted by the Manager to, and approved by, the Management Committee; provided that, the initial Marketing Plan for any Saracen Property for calendar year 1998 shall be the marketing plan for such property prepared by or on behalf of the relevant Saracen Current Owner, a copy of which shall have been provided to and approved by the Management Committee prior to the Saracen Closing. "Member-Funded Debt" shall mean any non-recourse debt of the Company which is loaned or guaranteed by any Member and/or is treated as Member non-recourse debt with respect to a Member under Treasury Regulations Section 1.704-2(b)(4). "Member Loan" shall mean any loan made by a Member to another Member pursuant to Section 5.3(b). "Members" shall mean Whitehall and WCPT (for as long as such Persons are still members of the Company), their successors and permitted assigns and any other members admitted to the Company in accordance with Article VIII. "Membership Capital Accounts" shall have the meaning set forth in Section 6.1(f). "Membership Unit" shall mean a fractional, undivided share of the Interest of all Members issued pursuant to Section 5.1(h) or Section 5.9 hereof, but shall not include the Series A Preferred Membership Units. As of the date hereof, there shall be considered to be 8,748,844 Membership Units outstanding, with each Membership Unit representing a .000011430% Percentage Interest in the Company. The Management Committee may create and authorize the issuance of new membership interests and may designate one or more new classes of membership interests and establish the designations, preferences and relative, participating, optional or other special rights, powers and duties of each class of membership interests. The number of Membership Units owned by any Member may be expressed as such Member's Percentage Interest. The Membership Units are not intended to be characterized as "securities" for any purpose (including any securities laws). "Minimum Gain" shall mean an amount equal to the excess of the principal amount of debt, for which no Member is liable ("non-recourse debt"), secured by Company Assets, over the adjusted basis of such Company Assets which represents the minimum taxable gain which would be recognized by the Company if the non-recourse debt were foreclosed upon and the Company Assets were transferred to the creditor in satisfaction thereof, and which is referred to as "minimum gain" in Treasury Regulations Sec- tion 1.704-1(b)(4)(iv). A Member's share of Minimum Gain shall be determined pursuant to the above-cited Treasury Regulations. "Necessary Expenditure" shall mean, (i) to the extent Available Cash is not sufficient to pay for any expenditure whether or not of a recurring nature (x) that is necessary, in the reasonable discretion of either the Manager or Whitehall, to preserve or protect the assets of the Company, including, without limitation, real estate taxes, insurance payments, costs of restoring the assets of the Company after a casualty or condemnation thereof, costs of any capital expenditure necessary to protect the structural integrity of any asset of the Company or human health or safety, utility costs, costs of compliance with law, payments on or of contractual obligations and debts of the Company, tenant improvements and leasing commissions, or (y) that is required to effectuate or pay for any cost, expense or transaction provided for in an Approved Budget and (ii) to the extent Available Cash is not sufficient to repay the WRP Loans in full at maturity. "net equity" shall mean, with respect to an entity, the book value (before depreciation) of such entity's assets less the liabilities of such entity, and, with respect to any property, the book value (before depreciation) of such property less the liabilities with respect to such property. "New Member" shall mean any Member other than one of the Initial Members or Saracen. Any New Member may be issued a new class of membership interests with such classifications and designations as the Management Committee shall determine. "Nomura Loan" shall mean that certain loan made by Nomura Asset Capital Corporation to Wells Senior Holdings LLC in the original principal amount of $69,000,000.00 as evidenced by the documents and instruments described on Exhibit C annexed to the Contribution Agreement. "Nomura Properties" shall mean, collectively, (x) each of the parcels of land described on Exhibits B-1 through Exhibits B-5 annexed to the Contribution Agreement and the improvements located on such land, and (y) the Dedham Place Condominium Unit and all of the Appurtenant Interests (as such term is defined in the Condominium Documents) relating to the Dedham Place Condominium Unit; each of the foregoing being commonly known, respectively, as 333 Elm Street, Norfolk, Massachusetts; 128 Technology Center, Westwood, Massachusetts; 201 University Avenue, Westwood, Massachusetts; 7/57 Wells Avenue, Newton Massachusetts; 75/85/95 Wells Avenue, Newton, Massachusetts; and Dedham Place, Dedham, Massachusetts. "Non-Contributing Member" shall have the meaning set forth in Section 5.3. "Non-Nomura Properties" shall mean, collectively, each of the parcels of land described on Exhibits B-6 through Exhibits B-13 annexed to the Contribution Agreement and the improvements located on such land, and commonly known as 74 Turner Street, Waltham, Massachusetts; 60 Turner Street, Waltham, Massachusetts; 70 Wells Avenue, Newton, Massachusetts; 100 Wells Avenue, Newton, Massachusetts; 150 Wells Avenue, Newton, Massachusetts; 160 Wells Avenue, Newton, Massachusetts; and 2331 Congress Street, Portland, Maine. "Non-Recourse Liability" shall mean a liability that is a non- recourse liability within the meaning set forth in Treasury Regulation Section 1.752-1(a)(2) and a qualified non-recourse financing within the meaning of Section 465(b)(6) of the Code. "Non-Triggering Party" shall have the meaning set forth in Section 8.2(a). "Non-Triggering Saracen Transfer" shall have the meaning set forth in Section 8.2A(a)(ii). "Notice of Conversion" shall mean a Notice of Conversion substantially in the form of Exhibit D. "Objection Notice" shall have the meaning set forth in Section 11.3(c). "Offer" shall have the meaning set forth in Section 8.2(b). "Office Property" shall mean any office building property, including, without limitation, a research and development facility or a mixed-use complex, not less than 40% of the rentable square footage of which is used for offices and/or research and development space. "Operational Decisions" shall have the meaning set forth in Section 3.4.B. "Organizational Document" of a Person shall mean (i) with respect to a corporation, such Person's certificate of incorporation and by-laws, and any shareholder agreement, voting trust or similar arrangement applicable to any of such Person's authorized shares of capital stock, (ii) with respect to a partnership, such Person's certificate of limited partnership, partnership agreement, voting trusts or similar arrangements applicable to any of its partnership interests or (iii) with respect to a limited liability company, such Person's certificate of formation, limited liability company agreement or other document affecting the rights of holders of limited liability company interests. "Payments" shall have the meaning set forth in Section 8.2A. "Percentage Interest" shall mean the percentage interest listed for each Member in Schedule 5.1(h) with respect to its Membership Units, as the same may be adjusted pursuant to the terms of this Agreement. "Permitted Liens" shall mean (i) Liens for taxes and other similar charges not yet due or Liens for taxes being contested in good faith by appropriate proceedings for which adequate reserves have been established (and as to which the property subject to such Lien is not yet subject to foreclosure, sale or loss on account thereof); (ii) Liens in respect of property imposed by law arising in the ordinary course of business such as materialmen's, mechanics', warehousemen's and other like Liens; provided that such Liens secure only amounts not yet due and payable or amounts being contested in good faith by appropriate proceedings for which adequate reserves have been established (and as to which the property subject to such lien is not yet subject to foreclosure, sale or loss on account thereof); (iii) easements, rights-of-way, restrictions (including zoning restrictions), defects or irregularities in title and other similar charges or encumbrances not, in any material respect, interfering with the ordinary conduct of business at the relevant property; (iv) leases or subleases granted to others, whether existing now or hereafter entered into, in the ordinary course of business; (v) any attachment or judgment lien, unless the judgment it secures shall not, within thirty (30) days after the entry thereof, have been discharged or execution thereof stayed pending appeal, or shall not have been discharged within thirty (30) days after the expiration of any such stay and (vi) any Lien set forth on Schedule B (or any equivalent schedule) as an exception to the title insurance policies insuring the title of the Company or any of its Subsidiaries in and to the Properties. "Person" shall mean any individual, partnership, corporation, limited liability company, trust or other legal entity. "Plan Asset Regulation" shall mean the Department of Labor Regulation Section 2510.3-101, as amended. "Pledgee" shall have the meaning set forth in Section 8.1(b). "Profits" shall have the meaning set forth in Section 6.2(a). "Preferred Distribution" shall mean an amount equal to 6% per annum of the Preferred Value, calculated on a cumulative basis for each calendar quarter during a calendar year (i.e., from the first day of the year (or, in the first year, the Saracen Closing Date) through the end of the calendar quarter for which the Preferred Distribution is being determined). "Preferred Distribution Amount" shall mean, for any calendar quarter, an amount equal to (A) the greater of (i) the Preferred Distribution and (ii) an amount equal to (x) the Preferred Percentage times (y) the Cumulative Distribution Amount less all distributions made pursuant to Section 7.1(a-2)(i)(A) of this Agreement or Section 7.1(a-2)(i)(A) of the WWP Agreement with respect to the then current calendar year, less (B) all distributions theretofore made pursuant to Section 7.1(a-2)(i)(B) of this Agreement or Section 7.1(a-2)(i)(B) of the WWP Agreement with respect to the then current calendar year. "Preferred Holders" shall have the meaning set forth in Section 3.5(c)(i). "Preferred Limitation" shall mean, with respect to any calendar year, the sum of the Unpaid Preferred Distribution (as of the first day of such calendar year) and the Preferred Distribution Amount for such calendar year. The parties agree that, for purposes of calculating the Preferred Limitation, the Cumulative Distribution Amount shall be calculated based only on actual cash distributions made pursuant to Section 7.1. "Preferred Percentage" shall mean a fraction (expressed as a percentage), the numerator of which is the number of Converted Units and the denominator of which is the number of Total Units. "Preferred Value" shall mean an amount equal to the product of $25 and the number of Series A Preferred Membership Units outstanding. "Promote" shall mean the aggregate distributions that would be made to the Manager pursuant to Sections 7.1(b)(iii)(y), 7.1(b)(iv)(y), 7.1(c)(iii)(y) and 7.1(c)(iv)(y). "Property" and "Properties" shall have the meanings set forth in Section 2.4(a). "Property Loan" shall mean any bridge, permanent or construction financing obtained by the Company or any of its Subsidiaries in accordance with the provisions hereof relating to one or more Properties which may be secured by a mortgage, or similar security in the nature of a mortgage, on such Properties, and which is to be entered into for the purpose of financing or refinancing the acquisition, construction, development, and/or operation of such Properties. The term "Property Loan" shall also include the Assumed Financing. "publicly traded" means listed or admitted to trading on the New York Stock Exchange, the American Stock Exchange or another national securities exchange or designated for quotation on the NASDAQ National Market, or any successor to any of the foregoing. "recapture income" shall have the meaning set forth in the Code and the applicable Treasury Regulations. "Replacement Property" shall have the meaning set forth in Section 8.2A. "Required Amortization" shall have the meaning set forth in Section 8.2A(a)(ii). "Required Committee Approval" shall mean, with respect to any Major Decision, the affirmative approval of no fewer than two Committee Representatives appointed by each Appointing Member, and with respect to any Operational Decision, the affirmative approval of no fewer than one Committee Representative appointed by each Appointing Member. During a Preferential Distribution Non-Payment (as defined in the Series A Terms), "Required Committee Approval" shall mean, with respect to any Major Decision or Operational Decision, the affirmative approval of a majority of Committee Representatives then having voting, consent, approval or determination rights on the Management Committee, provided, however, that during a Preferential Distribution Non-Payment (as defined in the Series A Terms), any Major Decision or Operational Decision which would require the Initial Members to make additional Capital Contributions (other than pursuant to Section 5.2(a) below) shall require the applicable Required Committee Approval referred to in the immediately preceding sentence. "Rights" shall mean any rights, options, warrants or convertible or exchangeable securities (or instruments exchangeable or convertible into any of the foregoing) that in any case entitle the holder to subscribe for or purchase or otherwise receive one or more Shares or any other securities or property of WCPT. "Sales Notice" shall have the meaning set forth in Section 8.2(a). "Sales Response Notice" shall have the meaning set forth in Section 8.2(c). "Saracen" or "Saracen Members" shall mean the Members set forth on Schedule 1 annexed hereto. "Saracen Closing" shall mean the transactions whereby the Company and/or its Subsidiaries acquired the Saracen Contributed Assets in exchange for cash, the assumption of certain liabilities, Membership Units, Series A Preferred Membership Units and other good and valuable consideration in accordance with the terms hereof and the terms of the Contribution Agreement. "Saracen Closing Date" shall mean May 15, 1998, the date upon which the Saracen Closing occurred. "Saracen Contributed Assets" shall have the meaning set forth in Section 5.1(k). "Saracen Current Owners" shall mean Wells Avenue Senior Holdings LLC, 150 Wells Avenue Realty Trust, River Park Realty Trust, Seventy Wells Avenue LLC, Newton Acquisition LLC I, Saracen Portland L.L.C., KSA Newton Acquisition Limited Partnership II, KSA Newton Limited Partnership I and Dominic J. Saraceno. "Saracen Debt Reduction Event" shall have the meaning set forth in Section 8.2A(a)(iv). "Saracen Gain" shall have the meaning set forth in Section 8.2A(a)(iii). "Saracen Gain Recognition" shall have the meaning set forth in Section 8.2A(a)(iii). "Saracen Indemnitee Member" shall have the meaning set forth in Section 8.2A(a)(iii). "Saracen Properties" shall mean the Nomura Properties, the 72 River Park Property and the Non-Nomura Properties. "Series A Capital Accounts" shall have the meaning set forth in Section 6.1(f). "Series A Preferred Membership Units" shall mean the Company's Series A 6% Convertible Preferred Membership Units with a liquidation preference per unit equal to $25, which shall have the rights, preferences and privileges as set forth in the Series A Terms. "Series A Preferred Percentage Interest" shall mean the percentage interest listed for each Member in Schedule 5.1(h) with respect to its Series A Preferred Membership Units, as the same may be adjusted pursuant to the terms of this Agreement. "Series A Terms" shall mean the terms of the Company's Series A 6% Convertible Preferred Membership Units as set forth in Exhibit F annexed hereto. "700 Atrium Purchase Contract" shall mean the Purchase Contract between S/A - 700 Atrium Drive Limited Partnership and WHMAB Real Estate Limited Partnership, dated as of June 30, 1997. "72 River Park Property" shall mean the parcel of land and the improvements located on such land, and commonly known as 72 River Park, Needham, Massachusetts. "Share" shall mean a share of beneficial interest (or other comparable equity interest) of WCPT. If there is more than one class or series of Shares, the term "Shares" shall, as the context requires, be deemed to refer to the class or series of Shares that correspond to the class or series of Membership Interests for which the reference to Shares is made. "Shares Amount" shall mean a number of Shares equal to the product of the number of Membership Units offered for conversion times the Conversion Factor; provided that, if WCPT, at any time, issues any Rights to the holders of Shares, then the Shares Amount shall also include such Rights that a holder of that number of Shares would have been entitled to receive. "Specified Conversion Date" shall mean the tenth Business Day after receipt by WCPT of a Notice of Conversion. "Subsidiary" shall mean any Person more than 50% owned, directly or indirectly, by the Company and over which the Company has management control. No Subsidiary may be a corporation without the consent of the Management Committee. As of the date hereof, "Subsidiary" shall mean, Wellsford/Whitehall Holdings, L.L.C., Wells Avenue Holdings L.L.C., Wells Avenue Senior Holdings LLC, WASH Manager L.L.C. and WEL/WH Convention Managers, L.L.C. "Substituted Member" shall mean any Person admitted to the Company as a Member pursuant to the provisions of Section 8.7. "Successor Company" shall have the meaning set forth in Section 8.2A. "Tag Along Election Notice" shall have the meaning set forth in Section 8.10. "Tag Along Notice" shall have the meaning set forth in Section 8.10. "Tag Along Transaction" shall have the meaning set forth in Section 8.10. "Target Territory" shall mean the Commonwealths of Massachusetts and Virginia and the States of Connecticut, Delaware, Maine, Maryland, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont, the greater metropolitan region (including central business district and suburban markets) of Washington, D.C. and each other greater metropolitan region (including central business district and suburban markets) in which the Company and/or its Subsidiaries own one or more Office Properties having a total purchase price of $15 million in the aggregate. "Tax Liability Reserve Account" shall have the meaning set forth in Section 8.2A(c). "Tax Returns" shall have the meaning set forth in Section 8.2A(a)(xi). "Third Party" shall have the meaning set forth in Section 8.2(a). "Third Party Offer" shall have the meaning set forth in Section 8.2(f). "Third Party Offer Price" shall have the meaning set forth in Section 8.2(f). "Third Party Response Notice" shall have the meaning set forth in Section 8.2(g). "Total Price" shall have the meaning set forth in Section 8.2(a). "Total Units" shall mean the number of Membership Units outstanding plus the number of Converted Units. "Transfer" shall have the meaning set forth in Section 8.1(a). "Treasury Regulations" shall mean the regulations promulgated under the Code, as such regulations are in effect on the date hereof. "Triggering Party" shall have the meaning set forth in Section 8.2(a). "Unpaid Preferred Distribution" means, for any calendar quarter, an amount determined as of the close of the preceding calendar year equal to (A) the sum of the Preferred Distribution Amounts for such preceding calendar year and all prior years, less (B) the sum of all distributions made pursuant to Section 7.1(a-2)(i) of this Agreement or Section 7.1(a-2)(i) of the WWP Agreement with respect to such preceding calendar year and all prior years, less (C) all distributions theretofore made pursuant to Section 7.1(a- 2)(i)(A) of this Agreement or Section 7.1(a-2)(i)(A) of the WWP Agreement with respect to the then current year. "Warrant Agreement" shall mean the Warrant Agreement dated as of the Initial Closing Date between WRP and United States Trust Company of New York, as warrant agent, as such agreement may be amended or restated from time to time. "WCPT" shall have the meaning set forth in the first paragraph of this Agreement. "WCPT Contributed Assets" shall have the meaning set forth in Section 5.1(d). "WCPT Current Owners" shall mean North American Medical Research Corp., Wellsford Wayne Corp., Wellsford Chatham Corp. and Wellsford Greenbrook Corp. "WCPT IPO" shall have the meaning set forth in Section 8.3(e). "WCPT Properties" shall mean each of the real properties listed on Exhibit C-4. "Whitehall" shall have the meaning set forth in the first paragraph of this Agreement. "Whitehall Additional Contributed Assets" shall have the meaning set forth in Section 5.1(i). "Whitehall Additional Properties" shall mean each of the real properties listed on Exhibit B-5. "Whitehall Contributed Assets" shall have the meaning set forth in Section 5.1(a). "Whitehall Current Owners" shall mean WHATR Real Estate Limited Partnership, WHPKS Real Estate Limited Partnership and WHMAB Real Estate Limited Partnership. "Whitehall Properties" shall mean each of the real properties listed on Exhibit B-4. "Whitehall Registration Statement" shall have the meaning set forth in Section 8.3(e). "WRP" shall mean Wellsford Real Properties, Inc., a Maryland corporation. "WRP At-Market Shares" shall mean the shares of WRP issued to Whitehall pursuant to the WRP Letter Agreement in exchange for Membership Units owned by Whitehall. "WRP Letter Agreement" shall mean the letter agreement, dated as of the Initial Closing Date, between Whitehall and WRP concerning the conversion of Whitehall's Membership Units into WRP At-Market Shares. "WRP Loans" shall have the meaning set forth in Section 3.4. "WRP Shares" shall mean shares of common stock, $.01 par value per share, of WRP. "WRP Warrants" shall mean the warrants issued on the Initial Closing Date to Whitehall by WRP pursuant to the Warrant Agreement. "WWP" shall have the meaning set forth in the second paragraph of this Agreement. "WWP Agreement" shall have the meaning set forth in the second paragraph of this Agreement. "WWP Contribution" shall have the meaning set forth in the third paragraph of this Agreement. 1.2. Terms Generally. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article and include both the plural and the singular; (b) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; and (c) the words "including" and "include" and other words of similar import shall be deemed to be followed by the phrase "without limitation." ARTICLE II. THE COMPANY AND ITS BUSINESS 2.1. Company Name. The business of the Company shall be conducted under the name of "Wellsford/Whitehall Properties II, L.L.C." in the State of Delaware and under such name or such assumed names as the Management Committee deems necessary or appropriate to comply with the requirements of any other jurisdiction in which the Company may be required to qualify. 2.2. Term. The term of the Company will commence on the date of this Agreement and shall continue in full force and effect until December 31, 2045, unless sooner terminated or dissolved as hereinafter provided. 2.3. Filing of Certificate and Amendments. The Manager shall (and shall have the power and authority to) execute and file the Certificate of Formation and any required amendments thereto and do all other acts requisite for the constitution of the Company as a limited liability company pursuant to the laws of the State of Delaware or any other applicable law and for enabling the Company or its Subsidiaries to conduct business in each jurisdiction where the Properties are located. 2.4. Purpose and Business; Powers; Scope of Members' Authority. (a) The Company is organized primarily for the purpose of directly or indirectly acquiring, owning, financing, managing, maintaining, operating, improving, developing and selling real property (each real property owned by the Company or one of its Subsidiaries, together with all improvements thereon and personal property owned by the Company or its Subsidiary related thereto, a "Property", and all properties collectively, the "Properties"). After giving effect to the Initial Closing, the Properties were the real properties set forth on Exhibit B-4 and Exhibit C-4, after giving effect to the Additional Closing, the Properties were the real properties set forth on Exhibit B-4, Exhibit C-4 and Exhibit B-5, and after giving effect to the Saracen Closing, the Properties were the real properties set forth on Exhibit B-4, Exhibit C-4 and Exhibit B-5 hereto and Exhibit B to the Contribution Agreement. Subject to the other terms and conditions of this Agreement, the Company is empowered to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described herein and for the protection and benefit of the Company and its Subsidiaries, including, without limitation, full power and authority, directly or through its Subsidiaries, to enter into, perform and carry out contracts of any kind, borrow money and issue evidences of indebtedness whether or not secured by mortgage, deed of trust, pledge or other lien, acquire, own, manage, improve and develop any Property, and lease, sell, transfer and dispose of any Property. The Company will at all times operate in a manner so as to be exempt from the provisions of the Investment Company Act of 1940, as amended. (b) Except as otherwise expressly and specifically provided in this Agreement, no Member shall have any authority to bind or act for, or assume any obligations or responsibility on behalf of, any other Member. Neither the Company nor any Member shall, by virtue of executing this Agree- ment, be responsible or liable for any indebtedness or obligation of the other Members or otherwise relating to any Property incurred or arising either before or after the execution of this Agreement, except as to those joint responsibilities, liabilities, indebtedness, or obligations expressly assumed by the Company as of the date of this Agreement or incurred thereafter pursuant to and as limited by the terms of this Agreement. 2.5. Principal Office; Registered Agent. The principal office of the Company shall be 610 Fifth Avenue, New York, New York 10020. The Company may change its place of business to such location or locations as may at any time or from time to time be determined by the Management Committee. The mailing address of the Company shall be c/o Wellsford Commercial Properties Trust, 610 Fifth Avenue, New York, New York 10020, or such other address as may be selected from time to time by the Management Committee. The Company shall maintain a registered office at The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The name and address of the Company's registered agent is The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. 2.6. Names and Addresses of Members. The names and addresses of the Members are as set forth on Schedule 2.6 hereto. 2.7. Pre-Closing Costs. Except as otherwise provided herein to the contrary, each of the Members will bear all costs and expenses incurred by such Member prior to the date hereof, including, without limitation, all costs and expenses (including transfer and recordation taxes with respect to properties transferred by such Member) relating to the contribution of assets to the Company in connection with the Initial Closing. 2.8. Post-Closing Receipts. (a) The Subsidiaries of the Company shall be entitled to receive, and WCPT shall pay to the Company if received by WCPT or any of its Affiliates, all income with respect to the WCPT Properties that is received on or after the Initial Closing Date which relates to any event or period after the Initial Closing, provided that WCPT shall be entitled to receive, and the Company and its Subsidiaries shall pay to WCPT if received by any of them, all rents and other receivables with respect to the WCPT Properties owing by tenants or other Persons at the WCPT Properties which accrued prior to the Initial Closing unless and to the extent any amounts are then due and payable by the payor of such income to the Company or one of its Subsidiaries on account of any period after the Initial Closing and such payment is not specifically designated to be applied to amounts owing which relate to events or periods prior to the Initial Closing. (b) The Subsidiaries of the Company shall be entitled to receive, and Whitehall shall pay to the Company if received by Whitehall or any of its Affiliates, all income with respect to the Whitehall Properties that is received on or after the Initial Closing Date which relates to any event or period after the Initial Closing, provided that Whitehall shall be entitled to receive, and the Company and its Subsidiaries shall pay to Whitehall if received by any of them, all rents and other receivables with respect to the Whitehall Properties owing by tenants or other Persons at the Whitehall Properties which accrued prior to the Initial Closing unless and to the extent any amounts are then due and payable by the payor of such income to the Company or one of its Subsidiaries on account of any period after the Initial Closing and such payment is not specifically designated to be applied to amounts owing which relate to events or periods prior to the Initial Closing. (c) The Subsidiaries of the Company shall be entitled to receive, and Whitehall shall pay to the Company if received by Whitehall or any of its Affiliates, all income with respect to the Whitehall Additional Properties that is received on or after the Additional Closing Date which relates to any event or period after the Additional Closing, provided that Whitehall shall be entitled to receive, and the Company and its Subsidiaries shall pay to Whitehall if received by any of them, all rents and other receivables with respect to the Whitehall Properties owing by tenants or other Persons at the Whitehall Additional Properties which accrued prior to the Additional Closing unless and to the extent any amounts are then due and payable by the payor of such income to the Company or one of its Subsidiaries on account of any period after the Additional Closing and such payment is not specifically designated to be applied to amounts owing which relate to events or periods prior to the Additional Closing. ARTICLE III. MANAGEMENT OF COMPANY BUSINESS; POWERS AND DUTIES OF THE MANAGER; MAJOR DECISIONS 3.1. Management and Control. (a) Except as otherwise specifically set forth in this Agreement, including, without limitation, Sections 3.1(c), 3.2, 3.3, 3.4, 3.5 and 3.6, the Manager shall have the right, power and authority to conduct the business and affairs of the Company (whether for the Company itself or where the Company is acting in its capacity as a direct or indirect member, partner or owner of any Subsidiary) and to do all things necessary to carry on the business of the Company, and is hereby authorized to take any action of any kind and to do anything and everything the Manager deems necessary or appropriate in accordance with the provisions of this Agreement and applicable law. The Manager shall have the authority to carry out the Business Plan approved by the Management Committee for each Property subject to the limitations therein and in the Approved Budget. (b) As long as WCPT shall be the Manager, WCPT agrees to cause experienced and qualified personnel of WRP (or an Affiliate of WRP) to supervise the business of the Company and to devote such time to the business of the Company and its Subsidiaries as may be necessary to carry out the business and purpose of the Company and its Subsidiaries in a prudent and efficient manner. (c) The Manager shall not, without the prior approval of the Management Committee, take any action on behalf of or in the name of the Company (whether for the Company itself or where the Company is acting in its capacity as a direct or indirect member, partner or owner of any Subsidiary), or enter into any commitment or obligation binding upon the Company, except for (i) actions authorized under this Agreement and (ii) actions authorized by the Members or the Management Committee in the manner set forth herein. The Manager shall indemnify and hold harmless the Company, its Subsidiaries and the Members and their Affiliates from and against any and all claims, demands, losses, damages, liabilities, lawsuits and other proceedings, judgments and awards, and costs and expenses (including but not limited to reasonable attorneys' fees) arising, directly or indirectly, in whole or in part, out of any breach of the provisions of this Section 3.1(c) by the Manager or its Affiliates. (d) The Management Committee shall have the full and exclusive right, power and authority to act on behalf of the Company (whether the Company is acting in its own behalf or in its capacity as a direct or indirect member, partner or owner of any Subsidiary) to the extent provided herein, including, without limitation, Sections 3.4, 3.5 and 3.7. 3.2. Enumeration of Specific Duties. (a) Subject to the other provisions of this Article III, the Manager shall have the right, power, authority and (to the extent there are available funds from the Company or the appropriate Subsidiary) duty, all at the Company's expense, to manage the day-to-day business of the Company and the Subsidiaries and to implement the decisions made and the actions authorized for and on behalf of the Company by the Management Committee, including, without limitation, all of the following: (i) applying for and using diligent efforts to obtain any and all necessary consents, approvals and permits required for the occupancy and operation of each Property; (ii) supervising and managing the performance of all contrac- tors performing work (including construction) including direct observation, inspection and supervision during the progress thereof; making final inspection of the completed work and approving bills for payment; obtaining the necessary receipts, releases, waivers, discharges and assurances to keep each Property free from mechanics' and material- men's liens and other claims; (iii) paying, before delinquency and prior to the addition of interest or penalties, all taxes, assessments and other impositions applicable to each Property and other assets owned by the Company and its Subsidiaries, and undertaking any action or proceeding seeking to reduce such taxes, assessments or other impositions; (iv) procuring all necessary insurance to the extent available at commercially reasonable rates for the Company and its Subsidiaries in accordance with the Insurance Program adopted by the Company from time to time pursuant to clause (b) of the definition of "Operational Decision" set forth in Section 3.4.B. below (provided that the Manager shall increase any insurance coverage carried by the Company and its Subsidiaries or procure any additional insurance coverage (whether or not provided for in the Insurance Program) if required under the terms of any Property Loan or if requested to do so by the Management Committee to the extent it is commercially reasonable to do so); causing the Members to be named as additional insureds on all liability policies maintained by the Company and its Subsidiaries; deli- vering to the members of the Management Committee copies of all insurance policies maintained by the Company and its Subsidiaries from time to time, including renewals or replacements of any expiring policies prior to the expiration thereof; (v) verifying that appropriate insurance (including any required by the terms of any Property Loan) is maintained by each contractor performing work on a Property; (vi) executing and delivering leases and other legal documents necessary to carry out the business of the Company and its Subsidiaries (which legal documents shall have first been approved by the Management Committee if its approval is required pursuant to this Agreement, including, without limitation, Section 3.4 below) provided that, the Management Committee shall be deemed to have approved the legal documents and tenants in respect of the leases described on Schedule 3.2(a)(vi); (vii) demanding, receiving, acknowledging and instituting legal action for recovery of any and all revenues, receipts and considerations due and payable to the Company or its Subsidiaries, in accordance with prudent business practices; (viii) keeping all books of account and other records of the Company and its Subsidiaries and delivering all reports in the manner provided in Article XI below and maintaining (or causing to be maintained) books of account and other records of the Subsidiaries separate and distinct from the books and records of the Company; (ix) maintaining all funds of the Company in a Company bank account in the manner provided in Article XI below, which funds shall not be commingled with the funds of the Subsidiaries or any other Person, conducting any and all banking transactions on behalf of the Company and adjusting and settling checking, savings, and other accounts with such institutions as the Management Committee shall deem appropriate; (x) delivering to the Management Committee members copies of any notices received from lenders, or other persons with whom the Company or its Subsidiaries have material contractual obligations, alleging any material deficiencies or defaults by the Company or its Subsidiaries under the said contractual arrangements; (xi) protecting and preserving the title and interests of the Company (and its Subsidiaries) in the Properties and all other assets of the Company, including keeping each Property and all other assets of the Company and its Subsidiaries free from mechanics' and materialmen's liens; (xii) coordinating the defense of any claims, demands, suits or legal proceedings made or instituted against the Company (or its Subsidiaries) or the Members (as members of the Company) by other parties, through legal counsel for the Company engaged in accordance with the terms of this Agreement; giving the members of the Management Committee prompt notice of the receipt of any material claim or demand or the commencement of any suit or legal proceeding and, upon request, promptly providing the members of the Management Committee all information relevant or necessary thereto; (xiii) monitoring and complying with (A) the terms and provisions of any restrictive covenants or easement agreements affecting any Property or any portion thereof, and any and all contracts entered into or assumed by the Company (or its Subsidiaries), including, without limitation, the exceptions noted in any title policy and (B) the terms and provisions of any note, mortgage and other loan documents assumed or executed by the Company or any Subsidiary, including any Property Loan documents; (xiv) coordinating the marketing and leasing of each Property; (xv) paying (or causing to be paid), prior to delinquency, all insurance premiums, debts and other obligations of the Company and its Subsidiaries, including amounts due under any loans to the Company or its Subsidiaries and costs of construction, operation and maintenance of each Property; (xvi) at Company expense (except as otherwise provided herein) and subject to the provisions of this Agreement, operating, maintaining and otherwise managing each Property in an efficient manner and at all times maintaining an organization sufficient to enable it to carry out all of its duties, obligations and functions as Manager under this Agreement, and rendering advice concerning sales and rental values in the manner set forth in this Agreement; (xvii) during the term of this Agreement, complying with all present and future laws, ordinances, orders, rules, regulations and requirements of all federal, state and municipal governments, courts, departments, commissions, boards and officers, the requirements of any insurance policy (or any insurer thereunder) covering any Property, any national or local Board of Fire Underwriters, or any other body exercising functions similar to those of any of the foregoing, which may be applicable to any Property and the operation and management thereof, and, when appropriate and prudent to do so, contesting the validity or application of any such law, ordinance, order, rule, regulation or requirement; (xviii) performing all other services reasonably necessary or required for the ownership, development, maintenance, marketing and operation by the Company or its Subsidiaries of each Property or otherwise required to be performed by the Manager pursuant to this Agreement and not otherwise prohibited hereunder; (xix) requesting the Management Committee's consent to any matter which the Company (or any Subsidiary) has the right to consent to, waive or approve under or with respect to the partnership agreement or other governing instrument of any Subsidiary to the extent such matter would require the approval or consent of the Management Committee hereunder; (xx) delivering to each member of the Management Committee promptly upon its receipt, copies of all (1) material summonses and complaints served on the Company or any Subsidiary, (2) notices of default on any loan or other indebtedness of the Company or any of its Subsidiaries or any material contract to which the Company or any Subsidiary is a party and (3) notices of the incurrence of or discovery by the Manager of any Lien against any Property (other than a Permitted Lien); (xxi) executing on behalf of the Company and filing the certificate of formation, certificate of limited partnership or certificate of incorporation for any Subsidiary of the Company (the formation of which has been approved by the Management Committee) and any required amendments thereto and executing the operating company agreement or limited partnership agreement or adopting by-laws of any such Subsidiary and any required amendments thereto to the extent the operative provisions of such agreement or by-laws or amendment has been approved by the Management Committee; and doing all other acts requisite for the constitution of such Subsidiary pursuant to the laws of the State of Delaware or any other applicable law and for enabling such Subsidiary to conduct its business in each jurisdiction where the Properties are located; and (xxii) taking any action directed by the Management Committee (as evidenced by a written consent thereof). (b) The Manager shall devote such time to the Company, its Subsidiaries and their respective businesses as shall be reasonably necessary to conduct the business of the Company and its Subsidiaries in an efficient manner and to carry out the Manager's responsibilities set forth in this Agreement. The Manager shall act and carry out its duties hereunder with reasonable diligence and in a prompt and businesslike manner, exercising such care and skill as a prudent property manager with sophistication and experience in managing and developing real estate assets like the Properties would exercise in dealing with its own property. Provided that the Manager satisfies the standard of care, skill and performance set forth in this paragraph (b), the Manager shall not be deemed to be in default of its duties under this Section 3.2 with respect to its acts or omissions in carrying out such duties. 3.3. No Authority to Hire Employees. The Company and its Subsidiaries shall have no employees and the Manager shall have no authority to hire any employees of the Company or its Subsidiaries. The Manager and/or WRP shall at its own expense (subject to reimbursement as otherwise specifically provided in this Agreement) maintain an organization sufficient to enable the Manager and/or WRP to carry out all its duties, obligations and functions hereunder. Without limiting the generality of the foregoing, the Manager and/or WRP shall maintain, at the Company's (or the applicable Subsidiary's) expense, workers' compensation insurance, employer's liability insurance, fidelity bonds for employees with authority to sign checks or make withdrawals from Company and/or Subsidiary bank accounts, and other appropriate insurance insuring the Company (and each Subsidiary) against any loss due to embezzlement or other dishonest acts or errors or omissions of any employees of the Company, the Manager and/or WRP or any of its Affiliates. 3.4. Decisions Requiring Approval of the Management Committee. Notwithstanding anything to the contrary in this Agreement, no act shall be taken, sum expended, decision made or obligation incurred by the Company (in its own behalf or in its capacity as a member, partner or other equity holder of any Subsidiary) or the Manager with respect to a matter within the scope of any of the Major Decisions or Operational Decisions, unless and until the Required Committee Approval shall have been obtained pursuant to and in accordance with this Section 3.4 and Section 3.5. The provisions of this Agreement relating to the management and control of the business and affairs of the Company shall also be construed to be fully applicable to the management and control of each Subsidiary and any and all matters listed in part A below in this Section 3.4 shall constitute Major Decisions for purposes hereof whether such matter relates to the Company or any Subsidiary of the Company and any and all matters listed in part B below in this Section 3.4 shall constitute Operational Decisions for purposes hereof whether such matter relates to the Company or any Subsidiary of the Company. In the event of any need for consent of the Management Committee to any Major Decision or Operational Decision, the Manager shall make such request of the Management Committee in writing and shall provide each member of the Management Committee with any information reasonably necessary for the Management Committee to make an informed decision. The Manager shall use its reasonable efforts to keep the Management Committee informed of the status of any matter regarding which the Manager intends to request the Management Committee's consent under this Section 3.4. A. The "Major Decisions" are: (a) altering the nature of the business of the Company or its Subsidiaries from the businesses permitted by Section 2.4(a); (b) taking any action in contravention of, amending, modifying or waiving, the provisions of this Agreement or the Certificate of Formation, or taking any action in contravention of, amending, modifying or waiving the provisions of any Organizational Documents for any Subsidiary; (c) making a Capital Call except as permitted by Section 5.2; (d) instituting proceedings to adjudicate the Company or any Subsidiary a bankrupt, or consent to the filing of a bankruptcy proceeding against the Company or any Subsidiary, or file a petition or answer or consent seeking reorganization of the Company or any Subsidiary under the Federal Bankruptcy Act or any other similar applicable federal or state law, or consent to the filing of any such petition against the Company or any Subsidiary, or consent to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of the Company or any Subsidiary or of its property, or make an assignment for the benefit of creditors of the Company or any Subsidiary, or admit the Company's or any Subsidiary's inability to pay its debts generally as they become due; (e) extending the term of the Company or any of its Subsidiaries beyond December 31, 2045; (f) approving any Annual Capital Budget, Annual Operating Budget or Business Plan or modifying (or deviating from) any of the foregoing except to the extent the Manager is so permitted by this Section 3.4); (g) establishing any reserve for the Company in excess of $1 million (less any reserves held by the Company's Subsidiaries other than Property-level reserves) or establishing any Property-level reserves in excess of 0.5% of the book value of the applicable Property (before depreciation); (h) selecting or varying depreciation and accounting methods which would have a material effect on the income, loss, gain or deduction of the Company or any of its Subsidiaries and making any other decisions or elections with respect to federal, state, local or foreign tax matters or other financial purposes; (i) except as WCPT and Whitehall are each permitted by Section 8.2 hereof, directly or indirectly selling, transferring, assigning, hypothecating, pledging or otherwise disposing of all or any portion of any Property or any Subsidiary or any interest in any of the foregoing; (j) extending credit, making loans or becoming or acting as a surety, guarantor, endorser or accommodation endorser (or materially modifying any obligations relating to the foregoing), except in connec- tion with negotiating checks or other instruments received by the Company (or any Subsidiary) and except for immaterial amounts in the ordinary course of business; (k) selecting the Company's or any Subsidiary's accountants and independent auditors (unless such accountants or auditors are Ernst & Young); and approving financial statements prepared by the Company's or any Subsidiary's auditors; (l) making or agreeing to any material changes to the zoning of any Property; and approving the material terms and provisions of any material restrictive covenants or easement agreements (other than utility easements or other non-material easements necessary for the operation or development of a Property) or any material documents establishing a cooperative, condominium or similar association or related entity affecting any Property or any portion thereof; (m) obtaining financing or refinancing for, or otherwise incurring any Indebtedness or issuing any debt or equity securities (including Back-to-Back Debt) of, the Company (or any Subsidiary) or any assets of the Company (or any Subsidiary) including, without limitation, any Property Loan and any financing of the operations of the Company (or any Subsidiary), except for unsecured loans for working capital specifically set forth in an Approved Budget; placing or suffering of any other Lien or encumbrance (other than leases permitted under paragraph (a) of the definition of "Operational Decision" in this Section 3.4) on or affecting any Property or any portion thereof or any other material property or asset owned by the Company (or any Subsidiary) or selling any debt securities of the Company or any Subsidiary in a public or private offering or otherwise (or taking any action which has substantially the same effect or commits the Company or any Subsidiary to any of the foregoing); approving any document (including any amendment, supplement or other modification) containing or evidencing any material modification of any term of any such financing, refinancing or encumbrance which was previously approved by the Management Committee; and approving the terms of a workout of any such financing or refinancing with the lender thereof; (n) approving the admission to the Company of a successor or a New Member or removing any Member, designating or approving the classification of any new class of Membership Units issued to a New Member (and establishing the designations, preferences and relative, participating, optional or other special rights, powers and duties of each class of Membership Units) or approving the admission to any Subsidiary of a successor or an additional partner or member or other equity owner; (o) terminating and dissolving the Company (or causing or consenting to any such action relating to a Subsidiary) except in accordance with Article X below; (p) acquiring any land or other real property or any interest therein; (q) making or approving any material change or modification to the Marketing Plan applicable to any Property, it being agreed that it shall not be deemed to be material if the proposed change (i) was necessitated by the occurrence of an event which was not in the control of the Manager, (ii) relates to a non-discretionary expenditure (e. g., taxes, utilities or insurance) or (iii) would not cause either (1) more than a 5% increase in expenditures or decrease in revenues from the line item in question set forth in the Approved Budget (taking into account all other changes affecting such line item during the same Budget Year not previously approved by the Management Committee); provided that, the amount of such increase or decrease (together with all prior increases in expenditures and decreases in revenues in such Approved Budget) shall not exceed 2% of the total expenditures or revenues, as the case may be, in the Approved Budget or (2) any Property Loan to be in default; (r) modifying the material terms of (i) any loan documentation or (ii) any other material agreement after the same has been approved by the Members or the Management Committee (but only in the case of clause (ii) if the consent of the Management Committee shall have been required as a condition to the Manager's executing such other material agreement); (s) except as WCPT and Whitehall are each permitted by Section 8.2, approving or entering into an Extraordinary Transaction with respect to the Company or any Subsidiary or causing the Company (or any Subsidiary) to sell ownership interests or other securities in a public or private offering or otherwise (or taking any action which has substantially the same effect or commits the Company or any Subsidiary to do any of the foregoing); (t) taking any action or giving or withholding any consent, waiver or approval or exercising any right that is specifically delegated to or requires the approval of the Management Committee pursuant to the terms of this Agreement; or (u) forming any subsidiary of the Company. Notwithstanding anything herein to the contrary, (i) the loans being made and to be made by WRP to the Company (the "WRP Loans") pursuant to the loan documents being entered into simultaneously herewith and said loan documents shall be deemed to have been approved by the Management Committee and (ii) the assumption of the Assumed Financing by the Company and the execution and delivery by the Company of the documentation related thereto shall be deemed to have been approved by the Management Committee. In addition, without the consent of the Management Committee, either of the Initial Members may elect to extend the WRP Loans in accordance with the terms for their Extension Period (as defined in the loan documents evidencing the WRP Loans) and in such instance, WCPT shall have the sole and exclusive right (and is hereby directed) to execute, deliver and perform such mortgages and other documents and take such other actions as may be required pursuant to the loan documents evidencing the WRP Loans. B. The "Operational Decisions" are: (a) executing, modifying, accepting the surrender of or terminating any lease or other arrangement involving the rental, use or occupancy of any Property or any part thereof, except in accordance with the applicable Leasing Plan; provided, however, that the Manager may modify a lease of all or any portion of any Property if such lease would still satisfy the applicable Leasing Plan as modified; and provided further, however, that the Manager may terminate any lease (and bring eviction and legal proceedings against the tenant thereunder) where the tenant has defaulted in its rent payments or is otherwise in material default; (b) approving an insurance program for the Company (and its Subsidiaries) and each Property (the "Insurance Program"); (c) retaining legal counsel for the Company (or its Subsidiaries) in connection with any major financing or other capital event (including a merger, combination or public offering of the Company); (d) taking any action in respect of any Property relating to environmental matters other than to obtain environmental studies and reports and conduct (or arrange for) evaluations and analyses thereof and other than to remediate any environmental contamination or other similar matters as required by law if the cost of such remediation would not exceed $250,000; (e) settling an insurance claim or condemnation action involving a claim in excess of Five Hundred Thousand Dollars ($500,000) or which, when added to all other insurance or condemnation claims during a single calendar year, exceeds One Million Dollars ($1,000,000); (f) unless required pursuant to the terms of any ground lease or mortgage encumbering any Property, deciding whether to repair or rebuild in case of material damage to any of the improvements on such Property, or any part thereof, arising out of a casualty or condemnation (except such emergency repairs as may be necessary to protect such Property); (g) making any expenditure or incurring any cost or obligation which, when added to any other expenditure, cost or obligation of the Company (or its Subsidiaries, as the case may be), either exceeds the applicable Approved Budget applicable to the Budget Year when such expenditure was made or cost or obligation was incurred or exceeds any line items specified in such Approved Budget; provided, however, that the Manager may, without the approval of the Management Committee, make expenditures or incur obligations in excess of an Approved Budget if (i) the making of such expenditure or incurrence of such obligation either (1) was necessitated by the occurrence of an event which was not in the control of the Manager or (2) relates to a non-discretionary expenditure (e.g., taxes, utilities and insurance), (ii) such expenditure or obligation is within a 5% variance from the line item in question set forth in such Approved Budget (taking into account all other expenditures in excess of such line item during the same Budget Year not previously approved by the Management Committee) and the amount of all variances for such Budget Year (including the pending variance) would not exceed 5% of the total expenditures in the Approved Budget and (iii) such expenditure or obligation would not cause the applicable Property Loan, if any, to be in default; (h) giving or withholding any consent, waiver or approval or exercising any right that the Company (or any Subsidiary) has the right to give, withhold or exercise under or with respect to the Organizational Document of any Subsidiary to the extent that the Management Committee would have the right to approve, consent or exercise rights hereunder regarding such matter; (i) entering into any property management, leasing, development or similar agreement. 3.5. Management Committee. (a) A committee consisting of the Committee Representatives (the "Management Committee") is hereby established and is granted the sole and exclusive right, power and authority to make all Major Decisions and Operational Decisions on behalf of the Company and its Subsidiaries, and is hereby authorized to designate an authorized signatory to execute and deliver on behalf of the Company (or to cause the Manager to so execute and deliver) any and all such contracts, certificates, agreements, instruments and other documents, and to take any such action, as the Management Committee deems necessary or appropriate relating to Major Decisions and Operational Decisions. (b) The Manager shall cause such reports as the Management Committee shall reasonably request to be prepared and delivered on a timely basis to the members of the Management Committee. Unless and until a new Approved Budget shall be established, the Company shall operate under the most recent Approved Budget. The Manager may from time to time submit amendments to any Business Plan for the approval of the Management Committee. The Management Committee will meet promptly after the submission of a Business Plan or proposed amendment thereto with the object of reaching some conclusion thereon within not later than thirty (30) days after the submission of the same. (c) (i) Four (4) Committee Representatives shall be appointed by each of Whitehall and WCPT (each in such capacity, an "Appointing Member") and each Committee Representative shall serve at the pleasure of the Appointing Member that appointed such Committee Representative. The Management Committee shall consist of the Committee Representatives appointed by the Appointing Members, the Committee Representatives, if any, appointed by the Saracen Members pursuant to Section 3.5(e)(vi), and the Committee Representatives, if any, appointed by the holders of Series A Preferred Membership Units together with the holders of membership interests ranking on a parity with the Series A Preferred Membership Units with respect to distribution rights (collectively, the "Preferred Holders"), pursuant to the Series A Terms. Whitehall shall cease to be an Appointing Member if it no longer owns Membership Units and/or Shares having an aggregate original cost or fair market value, whichever is greater, of at least $10 million (unless, at such time, the aggregate cost or fair market value, whichever is greater, of WRP's Shares and/or Membership Units (excluding Membership Units owned through WCPT) is also less than $10 million); in which case, all decisions, consents and approvals to be made or given by the Management Committee or the Manager hereunder shall be made exclusively by WCPT and the Preferred Holders, if applicable. If WRP no longer owns Shares and/or Membership Units (excluding Membership Units owned through WCPT) having an aggregate original cost or fair market value, whichever is greater, of at least $10 million (unless, at such time, the aggregate cost or fair market value, whichever is greater, of Whitehall's Membership Units and Shares is also less than $10 million) then, subject to Section 4.2(l) herein, all decisions, consents and approvals to be made or given by the Management Committee or the Manager hereunder described in Section 3.4A(i), (m), (p), (r) and (s) shall be made exclusively by Whitehall and the Preferred Holders, if applicable. (ii) Each Appointing Member, the Saracen Members and the Preferred Holders shall have the power to remove any Committee Representative appointed by it or them and simultaneously to appoint a replacement Committee Representative by delivering notice to the Company and to the other Members five (5) Business Days in advance of such removal and appointment. Vacancies on the Management Committee shall be filled by the Appointing Member, the Saracen Members or the Preferred Holders, as applicable, that appointed the Committee Representative previously holding the position which is then vacant. Each Appointing Member and the Preferred Holders, if applicable, agrees that their respective appointed Committee Representatives shall have the authority to act on behalf of such Appointing Member or the Preferred Holders, if applicable, to effectuate the purposes of this Agreement and to execute documents on their respective behalf (unless such Appointing Member or the Preferred Holders, if applicable, provides to the Appointing Members and to the Preferred Holders, if applicable, written notice to the contrary), except that the Committee Representatives shall not have the authority to appoint successor Committee Representatives. Each Appointing Member's Committee Representatives (and such Committee Representatives appointed by the Preferred Holders, if applicable) shall have the right to rely on the authority of the Appointing Members' Committee Representatives (and such Committee Representatives appointed by the Preferred Holders, if applicable) to act for its designating Appointing Member, or Preferred Holders, as applicable, until such time as it or they receive written notice from such Appointing Members, or Preferred Holders, as applicable, that a Committee Representative has been removed or its authority limited. (iii) The individuals appointed as Committee Representatives must always be Affiliates or employees of their respective Appointing Member or their respective Affiliates. Such individuals shall cease to be Committee Representatives and shall be immediately removed by their respective Appointing Member (or the other Appointing Member if such Appointing Member fails to do so) in the event such individuals cease to be so affiliated with their respective Appointing Member. (iv) The Committee Representatives effective as of the date hereof shall be as follows: Whitehall: Stuart M. Rothenberg, Steven M. Feldman, Ronald L. Bernstein and Todd A. Williams. WCPT: Jeffrey H. Lynford, Edward Lowenthal, Gregory Hughes and Richard Previdi. Saracen: William F. Rand, III and Kurt W. Saraceno, which Committee Representatives shall have been appointed pursuant to Section 3.5(e)(vi) below. (d) The Management Committee shall act with respect to all matters (whether to approve any Major Decision and any Operational Decision or to exercise any other right (or to grant any consent or approval) accorded to the Management Committee hereunder) by Required Committee Approval. Each Committee Representative shall have one (1) vote on all matters that arise before the Management Committee. For avoidance of doubt and notwithstanding anything to the contrary herein, no matter may be approved and no action taken by the Management Committee without Required Committee Approval. (e) (i) The Management Committee shall meet regularly not less often than quarterly. Special meetings of the Management Committee may be called by any Committee Representative having a right to vote at such meeting on at least four (4) Business Days' prior written notice of time and place of such meeting; provided, however, that such notice requirement shall be deemed waived by any Committee Representative who is present at the commencement of any such special meeting. Regular and special meetings may be held at any place designated from time to time by the Manager, including meetings by telephone conference. Six (6) Committee Representatives (at least two of which shall have been appointed by each Appointing Member) shall constitute a quorum for Management Committee action with respect to any Major Decision and three (3) Committee Representatives (at least one of which shall have been appointed by each Appointing Member) shall constitute a quorum for Management Committee action with respect to any Operational Decision, provided, however, that (x) unless at least four (4) Business Days' prior written notice of the time and place of any regular or special meeting is provided to the Committee Representatives appointed by the Saracen Members pursuant to Section 3.5(e)(vi) and, (y) during a Preferential Distribution Non-Payment (as defined in the Series A Terms), unless (A) at least ten (10) Business Days' prior written notice of the time and place of any regular meeting is provided to the Committee Representatives appointed pursuant to Section 4 of the Series A Terms, or (B) at least five (5) Business Days' prior written notice of the time and place of any special meeting is provided to the Committee Representatives appointed pursuant to Section 4 of the Series A Terms, and at least two (2) Business Days prior to any special meeting such Committee Representatives are provided with reasonably sufficient information and documentation to enable them to adequately address the issues presented at the special meeting, even if there are the required number of Committee Representatives present to constitute a quorum for Management Committee action, a quorum will not be deemed to be present at such meeting of the Management Committee and the Management Committee shall not be authorized to take or approve any action, unless one of the Committee Representatives appointed by the Saracen Members pursuant to Section 3.5(e)(vi) and/or one of the Committee Representatives appointed pursuant to Section 4 of the Series A Terms is present at such meeting, as the case may be. (ii) Actions taken or approved by the Management Committee will be evidenced by a written resolution prepared within ten (10) business days of a meeting of the Management Committee by the Manager and approved in writing by the Committee Representatives who were present at such meeting and who adopted such resolutions. (iii) Any action required or permitted to be taken at a meeting of the Management Committee may be taken without a meeting if a written consent setting forth the action so taken is signed by the Committee Representatives whose approval is required to constitute the Required Committee Approval, provided, however that the Appointing Members shall send by telecopy or by Federal Express or other nationally recognized overnight courier service, a copy of the proposed written consent to the Committee Representatives appointed by the Saracen Members pursuant to Section 3.5(e)(vi) herein at least two (2) Business Days prior to the earlier of (i) the effective date of such consent or (ii) the execution by any Committee Representative of such written consent. In the event of any action which is taken, or is to be taken pursuant to a written consent and not pursuant to a vote at a duly called and authorized meeting of the Management Committee, the Manager shall endeavor, in good faith, to solicit input from all Committee Representatives prior to the execution by any Committee Representative of such written consent. Such consent may be in one instrument or in several instruments, and shall have the same force and effect as a vote of such Committee Representatives. An action so taken shall be deemed to have been taken at a meeting held on the effective date so certified. Copies of all such written consents shall be sent to each Initial Member and to Saracen. (iv) Each Committee Representative may authorize any other Committee Representative to act for him or her by proxy on all matters in which a Committee Representative is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. Every proxy must be signed by the Committee Representative. No proxy shall be valid after the expiration of eleven (11) months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Committee Representative executing it, such revocation to be effective upon the Company's receipt of written notice thereof. (v) All out-of-pocket expenses (including travel expenses) incurred by each of the Committee Representatives in connection with their service on the Management Committee shall be borne by the Company. (vi) The Saracen Members have the right to appoint two (2) Committee Representatives to attend and observe any and all quarterly and special meetings of the Management Committee, which initial Committee Representatives are set forth in Section 3.5(c)(iv). All Committee Representatives appointed by the Saracen Members pursuant to this Section 3.5(e)(vi) shall be subject to the prior written approval of the Management Committee, which approval shall not be unreasonably withheld or delayed, provided, however that the Management Committee hereby approves the appointment of Kurt W. Saraceno and William F. Rand, III as the initial Committee Representatives appointed by the Saracen Members. The Saracen Members' right to appoint Committee Representatives pursuant to this Section 3.5(e)(vi) shall cease and the appointment of all Committee Representatives previously appointed by Saracen shall be terminated (A) if Saracen no longer owns Membership Units, Series A Preferred Membership Units and/or Shares having an aggregate original cost or fair market value, whichever is greater, of at least $5 million, or (B) upon the occurrence of a Capital Event. Except as and to the extent set forth in this Agreement, such Committee Representatives appointed by the Saracen Members shall have no voting, consent, approval or determination rights on the Management Committee. 3.6. Limited Authorization. Any provision hereof to the contrary notwithstanding, except for expenditures made and obligations incurred which were (i) previously approved by the Management Committee, (ii) included in an Approved Budget, or (iii) otherwise not required to be approved by the Management Committee in accordance herewith, the Manager shall have no authority to make any expenditure or incur any obligation or liability on behalf of the Company or any Subsidiary. The Manager shall not expend more than the amount which the Manager in good faith believes to be the fair and reasonable market value at the time and place of contracting for any goods purchased or services engaged on behalf of the Company or any Subsidiary. The Manager shall not enter into any agreement or other arrangement for the furnishing to or by the Company or any Subsidiary of goods or services with itself or any Person that is an Affiliate of the Manager unless such agreement or arrangement has been approved by the Management Committee. Notwithstanding anything to the contrary contained herein, the Manager is hereby authorized to make expenditures for emergencies (not to exceed $100,000 per Property per Fiscal Year) to the extent necessary to protect a Property or the occupants thereof from damage or harm; provided that, the Manager notifies the Management Committee in writing of any such expenditure promptly after the incurrence thereof. 3.7. Members Shall Not Have Power to Bind Company. No Member shall transact business for the Company nor shall any Member have the power or authority to sign, act for or bind the Company, all of such powers being vested solely and exclusively in the Manager and the Management Committee, provided that (i) each of Whitehall and WCPT, acting alone, shall have the authority to sell or cause the sale of Properties, Subsidiaries of the Company and/or the Company itself as set forth in Section 8.2, (ii) Whitehall, acting alone, shall have the authority to sell or cause the sale of Properties, Subsidiaries of the Company and/or the Company itself as set forth in Sections 8.2 and 9.1, and (iii) Whitehall shall have the right to appoint a new Manager as provided in Section 9.1. 3.8. Status as "Operating Company"; Participation in Management by Members. The Company intends to operate its business in a manner so as to qualify as an "operating company" for purposes of ERISA and the Plan Asset Regulation. For purposes of ERISA and the Plan Asset Regulation, the Management Committee is intended to be the functional equivalent of a board of directors of a corporation incorporated under the laws of the State of Delaware. Each Initial Member that has the right to appoint a Committee Representative to the Management Committee shall have the right, directly or through its Committee Representative on the Management Committee, to partici- pate substantially in the management and conduct of the Company (both in the Company's own behalf and in the Company's capacity as the controlling member or partner in the Subsidiaries). The Manager shall from time to time meet with the members of the Management Committee to discuss the business and affairs of the Company or to discuss any particular matter requested by a member of the Management Committee. ARTICLE IV. RIGHTS AND DUTIES OF MEMBERS 4.1. Use of Company Property. No Member shall make use of the funds or property of the Company or any Subsidiary, or assign its rights to specific Company property except as otherwise specifically permitted by this Agreement. The Manager and the Management Committee can make use of the funds or property of the Company or any Subsidiary but only for the business or benefit of the Company. 4.2. Exclusivity; Other Activities of the Members. (a) (i) Notwithstanding anything else to the contrary herein, until such time as Whitehall no longer owns Membership Units and/or Shares having an aggregate original cost or fair market value, whichever is greater, of at least $10 million neither WCPT nor any of its Affiliates (including WRP) may make any investment in or otherwise acquire or own, directly or indirectly, any Office Property located in North America, except through its Interest in the Company, as specifically set forth in Section 4.2(b), (c), (d) and (k) or pursuant to an acquisition in accordance with Section 8.2 herein. Once the book value (before depreciation) of the Company's assets reaches $750,000,000, neither WCPT nor any of its Affiliates shall be entitled to make any investment pursuant to Section 4.2(b). For purposes of the first sentence of this Section 4.2(a)(i), the direct or indirect ownership by WCPT or any of its Affiliates (including WRP) of any indebtedness or debt security which (1) is secured by one or more Office Properties, and (2) when added to any senior and pari passu debt secured by such Office Property, had a loan- to-value ratio in excess of ninety percent (90%) at the time of origination shall constitute ownership of an Office Property by WCPT and a breach of this Section 4.2(a)(i). WCPT acknowledges that this covenant is a material inducement to Whitehall entering into this Agreement and that a breach of this covenant shall constitute a material breach of this Agreement entitling Whitehall to exercise the remedies provided elsewhere in this Agreement and at law. (ii) Notwithstanding anything else to the contrary herein, at any time after Whitehall no longer owns Membership Units and/or Shares having an aggregate original cost or fair market value, whichever is greater, of at least $10 million, and until such time as (A) Saracen no longer owns Membership Units, Series A Preferred Membership Units and/or Shares having an aggregate original cost or fair market value, whichever is greater, of at least $5 million, or (B) a Capital Event shall occur, neither WCPT nor any of its Affiliates (including WRP, but in any event excluding Whitehall and its Affiliates) may make any investment in or otherwise acquire or own, directly or indirectly, any Office Property located in the Target Territory, except through its Interest in the Company or pursuant to an acquisition in accordance with Section 8.2 herein. For purposes of the first sentence of this Section 4.2(a)(ii), the direct or indirect ownership by WCPT or any of its Affiliates (including WRP) of any indebtedness or debt security which (1) is secured by one or more Office Properties, and (2) when added to any senior and pari passu debt secured by such Office Property, had a loan-to-value ratio in excess of ninety percent (90%) at the time of origination shall constitute ownership of an Office Property by WCPT and a breach of this Section 4.2(a)(ii). (b) At any time after the first anniversary of the Initial Closing Date, an Affiliate of WCPT (including WRP) may acquire and own an Office Property if, and only if each of the following conditions are satisfied: (i) such Office Property is not located within the Target Territory, (ii) a property manager is hired by WRP or its Affiliate (other than WCPT) to manage the day-to-day operations at such Office Property, (iii) the net equity value of such Office Property plus the aggregate net equity value of all other Office Properties acquired by all such Affiliates pursuant to this Section 4.2(b) (determined at the time of acquisition) does not exceed the lesser of 25% of the net equity value of WCPT and 25% of the net equity value of WRP, (iv) WCPT or its Affiliate, as the case may be, shall have first offered the opportunity to acquire such Office Property to the Company in accordance with subparagraph (e) below and the Company shall have declined such opportunity in accordance therewith, (v) an Affiliate of WRP other than WCPT with its own corporate staff and acquisition personnel (distinct from the Company's) is established to acquire and own such Office Property, and (vi) the Company has not previously achieved a book value (before depreciation) of $750,000,000 or more. (c) If the Company has first been offered the opportunity, pursuant to subparagraph (e) below, to purchase an interest in the Office Property known as "First Canadian Place" located in Toronto and has declined such opportunity, an Affiliate of WCPT may purchase such Office Property as long as the conditions set forth in clauses (ii) and (v) of subparagraph (b) above are satisfied. (d) If WCPT or its Affiliate shall have offered the opportunity to acquire Office Properties in accordance with subparagraph (e) below and the Committee Representatives appointed by Whitehall shall have declined not less than five of such opportunities each having a purchase price of at least $15 million individually at any time since the later of (x) the first anniversary of the Initial Closing Date and (y) the date twelve months prior to the date of determination, then at any time thereafter (i) an Affiliate of WCPT (but not WCPT itself) may acquire Office Properties that have been offered to the Company pursuant to subparagraph (e) and declined by the Committee Representatives appointed by Whitehall and (ii) either party may trigger the provisions of Section 8.2(l). (e) If an Affiliate of WCPT (including WRP) wishes to make any investment in or otherwise acquire or own, directly or indirectly, any Office Property prior to the end of the term of this Agreement, then in such instance, WCPT shall provide written notice of such investment opportunity (an "Investment Notice") to each Committee Representative appointed by Whitehall. WCPT shall promptly provide to the Committee Representatives appointed by Whitehall all such information and copies of documents in WCPT's (or its Affiliate's) possession or reasonably available to WCPT (or its Affiliate) concerning any such Office Property. At the request of any Committee Representative appointed by Whitehall, WCPT shall deliver to Whitehall copies of all additional information and documents concerning such Office Property which are reasonably available to WCPT and are reasonably necessary for Whitehall to evaluate whether such Office Property is a suitable and desirable investment for the Company or one of its Subsidiaries, including all third-party reports and internal analyses or investment memoranda. The additional information and documents required to be provided to Whitehall or its Committee Representatives pursuant to this Section 4.2(e) shall be provided at the Company's expense. An Affiliate of WCPT (including WRP) may proceed with the investment in or acquisition of such Office Property if, and only if, (i) such investment or acquisition is not prohibited by Section 4.2(a) and (ii) within 15 Business Days after WCPT's delivery of an Investment Notice, or within 10 Business Days after the delivery of an Additional Information Request (as defined below), WCPT shall not have received notice from any Committee Representative appointed by Whitehall that either (x) the investment in or other acquisition of the specified Office Property would be a desirable investment for the Company or one of its Subsidiaries or (y) it reasonably requires additional information to make the determination whether the investment in or other acquisition of the specified Office Property would be a desirable investment for the Company or one of its Subsidiaries (an "Additional Information Request"). No more than two (2) Additional Information Requests may be made with respect to any investment opportunity. The fact that any information or document contained in an Additional Information Request shall be subject to a confidentiality agreement pursuant to which such information or document may not be disclosed to Whitehall shall not render an Additional Information Request unreasonable for purposes of clause (y) of the immediately preceding sentence. If, within 30 days after delivery of an Additional Information Request which contains a request for one or more documents subject to a confidentiality agreement to which WCPT or one of its Affiliates is bound, either (i) an appropriate modification or waiver of the relevant confidentiality agreement is not obtained or (ii) the relevant part of the Additional Information Request is not rescinded by Whitehall in writing, neither WCPT nor any of its Affiliates may make any investment in or otherwise acquire any interest in the relevant Office Property. (f) If the Company or one of its Subsidiaries does not elect to invest in or otherwise acquire an interest in any Office Property in accordance with Section 4.2 (e) and the financial terms of the transaction relating to such Office Property are later materially changed and, in the case of a change in financial terms, are expected to materially enhance the economic return of the Office Property, then the right of first refusal set forth in Section 4.2(e) shall again apply to such Office Property (it being understood that the economic return will be deemed to be "materially enhanced" in the event that either (i) the projected internal rate of return increases by at least one percent (1%) or (ii) the projected gross profits increase by at least $500,000.00 over the expected life of the investment). (g) Except as contemplated by this Agreement, WCPT shall not directly or indirectly enter into or conduct any business or own any assets other than through its Interest in the Company and shall not incur any Indebtedness or other liabilities or issue any debt or equity securities or Rights whatsoever without the prior written consent of Whitehall; provided that, WCPT may (i) issue additional Shares to WRP if (x) all proceeds received by WCPT are contributed to the Company to fund a Capital Call issued in accordance with Article V and (y) the price per Share paid in cash by WRP to WCPT is equal to the price per Membership Unit paid in cash by WCPT to the Company for such Capital Call, (ii) with the approval of Whitehall, issue Funding Debt if (x) the Company issues Back-to-Back Debt with identical terms to such Funding Debt and (y) all of the proceeds received by WCPT in connection with the issuance of such Funding Debt are used to purchase such Back-to-Back Debt and (iii) engage in activities contemplated by the Closing Steps Summary attached to the Contribution Agreement as Exhibit A. WCPT will not enter into a debt or equity financing unless, prior to entering into such financing, WCPT has first given the Company an opportunity to enter into such financing for the Company's account (rather than WCPT entering into such financing) substantially in the manner specified in Section 4.2(e). (h) Subject to this Section 4.2, and the limitations set forth in the Asset Management Agreement (only so long as such limitations are applicable under the Asset Management Agreement), each of WRP (but not WCPT), Whitehall, Saracen and their respective Affiliates may engage or invest in any other activity or venture or possess any interest therein independently or with others. None of the Company, the Members, the creditors of the Company or any other person having any interest in the Company shall have (i) any claim, right or cause of action against any of the Members or any other Person employed by, related to or in any way affiliated with, any of the Members by reason of any direct or indirect investment or other participation, whether active or passive in any such activity or venture or interest therein, or (ii) any right to any such activity or venture or interest therein or the income or profits derived therefrom. Notwithstanding anything to the contrary herein, (A) neither Whitehall nor any of its Affiliates nor any Person related to or in any way affiliated with Whitehall shall have any duty or obligation to disclose or offer to the Company or the Members, or obtain for the benefit of the Company or the Members, any activity or venture or interest therein, (B) except as otherwise specifically set forth herein (including, without limitation, in Section 4.2), neither WCPT nor any of its Affiliates nor any other Person related to or in any way affiliated with WCPT shall have any duty or obligation to disclose or offer to the Company or the Members, or obtain for the benefit of the Company or the Members, any activity or venture or interest therein, and (C) except as otherwise specifically set forth herein (including, without limitation, in Section 4.2) and in the Asset Management Agreement (only so long as such limitations are applicable under the Asset Management Agreement), neither Saracen nor any of its Affiliates nor any other Person related to or in any way affiliated with Saracen shall have any duty or obligation to disclose or offer to the Company or the Members, or obtain for the benefit of the Company or the Members, any activity or venture or interest therein. In addition, in the event that Whitehall introduces any investment opportunity to the Company and the Management Committee declines such opportunity, Whitehall shall not in any way be restricted with respect to such opportunity. (i) Whitehall hereby agrees that, with respect to any Office Property that has previously been offered to the Company by WCPT (or its Affiliate) and that the Committee Representatives appointed by Whitehall disapproved pursuant to subparagraph (e) above, (x) neither Whitehall nor any of its Affiliates shall be permitted to make any investment in or otherwise acquire or own, directly or indirectly, such Office Property and (y) it shall keep confidential all information concerning such Office Property that WCPT (or its Affiliate) provided to Whitehall (or any of its Affiliates) to the extent that such information constitutes Confidential Information (as defined below). The covenant set forth in clause (y) in the immediately preceding sentence shall cease to be applicable to any information either to the extent it no longer constitutes Confidential Information or more than two years has elapsed since the date of delivery thereof to Whitehall or its Affiliates. For purposes of this subparagraph (i), "Confidential Information" shall include all information furnished to Whitehall and its Affiliates by or on behalf of WCPT and/or its Affiliates concerning an Office Property. Notwithstanding the foregoing, any such information shall not constitute "Confidential Information" to the extent it (i) is or becomes generally available to the public other than as a result of a disclosure by Whitehall or its Affiliate in contravention of this Agreement, (ii) was already in the possession of Whitehall or its Affiliate prior to its disclosure to Whitehall or its Affiliate by or on behalf of WCPT or its Affiliate, (iii) is or becomes available to Whitehall or its Affiliate from a source (other than WCPT or its Affiliates) not bound, to the knowledge of Whitehall or its Affiliate, by any legal or other obligation prohibiting the disclosure of Confidential Information by such source to WCPT or its Affiliate or (iv) the Company or its Subsidiary acquires such Office Property. (j) Notwithstanding anything to the contrary set forth in this Agreement, WCPT or its Affiliates shall be entitled to acquire and own certain Office Properties (i) that may be acquired in connection with WRP's or its Affiliates' acquisition of Value Property Trust, a Maryland real estate investment trust and (ii) in accordance with the letter agreement dated the date hereof, among the Company, WCPT, Whitehall, Saracen and WRP pursuant to which Affiliates of WCPT may make certain entity-level investments. (k) Except for activities conducted through the Company or any of its Subsidiaries or as otherwise permitted pursuant to the other sections of this Agreement, WCPT (or any of its Affiliates) shall not form another entity with Whitehall and/or its Affiliates or jointly with Whitehall and/or its Affiliates, engage in, or make any investment in, or otherwise acquire or own, directly or indirectly, any Office Property located in the Target Territory, as partners or joint venturers (or in other similar relationships), without the prior written consent of Saracen. This Section 4.2(k) shall not independently prevent WCPT (or any of its Affiliates) or Whitehall (or any of its Affiliates) from individually, engaging in, or making an investment in, or otherwise acquiring or owning, directly or indirectly, Office Property located in the Target Territory, except as the same may be restricted pursuant to the other provisions of this Agreement. Nothing contained herein shall limit WCPT (or any of its Affiliates) from individually, or together with Whitehall (or any of its Affiliates) as partners or joint venturers (or in other similar relationships), from engaging in, or making an investment in, or otherwise acquiring or owning, directly or indirectly, any Office Property located outside the Target Territory, provided that, if otherwise restricted pursuant to the terms of this Agreement, WCPT obtains Whitehall's prior written consent. Nothing in this Agreement shall preclude or limit the ability of Whitehall and its Affiliates to purchase Office Properties either alone or in a partnership with another Person (except WCPT as described above). (l) Notwithstanding anything else to the contrary herein, at any time that the Committee Representatives on the Management Committee appointed by WCPT do not have the power to vote to prevent the Company from making an investment in or otherwise acquiring or owning, directly or indirectly, any Office Property (unless only in the event such voting rights have been terminated solely because WCPT has been terminated as Manager for Cause) and the Company desires to make an investment in or otherwise acquire or own, directly or indirectly, any Office Property located in the Hub Target Market, until such time as (A) Saracen no longer owns Membership Units, Series A Preferred Membership Units and/or Shares having an aggregate original cost or fair market value, whichever is greater, of at least $5 million, or (B) a Capital Event shall occur, the Company shall provide an Investment Notice to Saracen. The Company may proceed with the investment in or other acquisition of such Office Property in the Hub Target Market only if within one (1) Business Day after the Company's delivery of an Investment Notice to Saracen, the Company shall not have received written notice from Saracen objecting to the investment in or other acquisition of the specified Office Property located in the Hub Target Market. If, in accordance with the immediately preceding sentence, the Company may not make an investment in or otherwise acquire any Office Property in the Hub Target Market, Whitehall, either alone or in partnership or joint venture with any other Person, including, without limitation, WCPT and/or its Affiliates, may make such investment in or otherwise acquire such Office Property. 4.3. Indemnification with Respect to the Manager. (a) None of the Manager, its Affiliates or their respective officers, directors, trustees, employees, representatives or agents (collectively, the "Indemnified Parties") shall be liable, responsible or accountable in damages or otherwise to the Company, any third party or to any Member for (i) any act performed or omission within the scope of the authority conferred on the Indemnified Party by this Agreement except for the gross negligence, fraud, breach of fiduciary duty or willful misconduct of any Indemnified Party in carrying out its obligations hereunder, (ii) the Indemnified Party's performance of, or failure to perform, any act on the reasonable reliance on advice of legal counsel to the Company or (iii) the negligence, dishonesty or bad faith of any agent, consultant or broker of the Company selected, engaged or retained in good faith and with reasonable prudence. In any threatened, pending or completed action, suit or proceeding, each Indemnified Party shall be fully protected and indemnified and held harmless by the Company against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, proceedings, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, reasonable attorneys' fees, costs of investigation, fines, judgments and amounts paid in settlement, actually incurred by such Indemnified Party in connection with such action, suit or proceeding) by virtue of its status as an Indemnified Party or with respect to any action or omission taken or suffered in good faith, other than liabilities and losses resulting from the gross negligence, fraud, breach of fiduciary duty or willful misconduct of any Indemnified Party; provided, how- ever, that the Indemnified Parties shall not be so indemnified for any acts or omissions determined to be in contravention of this Agreement. The indem- nification provided by this Section 4.3(a) shall be recoverable only out of the assets of the Company, and no Member shall have any personal liability on account thereof. (b) The Manager shall indemnify and hold the Company and the Members harmless against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, proceedings, costs, expenses, and disbursements of any kind or nature whatsoever (including, without limitation, reasonable attorneys' fees, costs of investigation, fines, judgments and amounts paid in settlement, actually incurred by the Company in connection with any action, suit or proceeding) resulting from the gross negligence, fraud, breach of fiduciary duty or willful misconduct of the Manager. 4.4. Compensation of Members and Affiliates. Until the earlier of (i) such time as Whitehall no longer owns Membership Units and/or Shares in WCPT having an aggregate original cost or fair market value, whichever is greater, of at least $10 million and (ii) such time as WCPT makes an initial public offering (and in connection with an initial public offering by WCPT), the Company agrees that, to the extent the Company seeks to retain an investment bank for any financial or related services with respect to actions of the Company (including an initial public offering by WCPT), the Company will retain Goldman, Sachs & Co. or one or more of its Affiliates to provide such services; provided, that the foregoing requirement shall not apply to the sale or financing of a single Property or to the sale or financing of Properties having an aggregate book value of less than $50 million. If Goldman, Sachs & Co. or such Affiliate agrees to accept any such engagement, Goldman, Sachs & Co. and/or such Affiliate shall be entitled to receive its customary indemnification, and fees and commissions at rates that are consistent with the then prevailing rates for such services charged by similar quality providers of such services, for acting in such capacity. 4.5. Investment Representations. (a) The Members each represent that they are acquiring their interests as Members for their own account for investment purposes only and not with a view to the distribution or resale thereof, in whole or in part, and each agrees that it will not transfer, sell or dispose of all or any portion of, or offer to transfer, sell, or dispose of all or any portion of its interest as a Member, or solicit offers to buy from or otherwise approach or negotiate in respect thereof with any person or persons whomsoever, all or any portion of its Interest in any manner which would violate or cause the Company or any Member to violate applicable federal or state securities laws. (b) Each Saracen Member (either alone or with his, her or its advisors) have had a reasonable opportunity to ask questions of and receive information and answers from a person or persons acting on behalf of the Company and its Affiliates concerning the Company (and its Subsidiaries), the Company's (and any of its Subsidiary's) Properties, the Company's (and any of its Subsidiary's) financial and business condition and the acquisition of Membership Units and Series A Preferred Membership Units, and, as each Saracen Member may deem necessary, to verify any information provided to any Saracen Member by the Company and its Affiliates and all such questions have been answered and all such information has been provided to the full satisfaction of each Saracen Member. Nothing contained in this Section 4.5(b) shall limit in any way the representations and warranties of the Company set forth in the Contribution Agreement. (c) Each Saracen Member (either alone or with his, her or its advisors) has sufficient knowledge and experience in financial, tax and business matters to enable him, her or it to evaluate the merits and risks of an investment in the Membership Units and Series A Preferred Membership Units. Each Saracen Member has the ability to bear the economic risk of acquiring the Membership Units and the Series A Preferred Membership Units. Each Saracen Member acknowledges that (1) the transactions contemplated by this Agreement and the Contribution Agreement involve complex tax consequences for each Saracen Member and each Saracen Member is relying solely on the advice of his, her or its own tax advisors in evaluating such consequences, and (2) neither the Company (including any of its Affiliates), nor the Manager, nor the Management Committee has made (or shall be deemed to have been made) any representations or warranties as to the tax consequences of such transactions to any Saracen Member. Notwithstanding the foregoing, the Company acknowledges its obligations pursuant to Section 6.1(e) and Section 8.2A herein. (d) All information that each Member has provided to the Company concerning himself or herself or itself and his, her or its financial position, including any financial information requested by the Company, is correct and complete in all material respects as of the date hereof. (e) Each Saracen Member is not acquiring Membership Units or Series A Preferred Membership Units as a result of or subsequent to any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or presented at any meeting or seminar. (f) Each Saracen Member is over 21 years of age, has adequate means of providing for his or her current needs and personal contingencies and has no need for liquidity of any investment in the Membership Units and the Series A Preferred Membership Units. (g) Each Saracen Member has (i) a net worth, when combined with the net worth of that person's spouse, in excess of $1,000,000, or (ii) has had adjusted gross income for calendar years 1996 and 1997 and expects to have adjusted gross income for calendar 1998, of at least $200,000 for each such year. (h) No Saracen Member (or any ultimate beneficial interest holder in a Saracen Member that is a flow-through entity for tax purposes) is a "qualified organization" within the meaning of Section 514(c)(9)(C) of the Code. 4.6. Dealing with Members. The fact that a Member, an Affiliate of a Member or any officer, director, employee, partner, consultant or agent of a Member or an Affiliate of a Member, is directly or indirectly interested in or connected with any person, firm or corporation employed by the Company to render or perform a service, or from or to whom the Company may buy or sell any property or have other business dealings, shall not prohibit the Company from employing such person, firm or corporation or from dealing with him or it on customary terms and at competitive rates of compensation, and neither the Company nor any of the Members shall have any rights in or to any income or profits derived therefrom, provided, however that in the event any Member provides a loan to the Company, such loan shall (i) be on commercially reasonable terms, (ii) have a term of six (6) months or less and (iii) together with all other loans (other than loans made to assume or refinance the Lazard Mezzanine Loan (as defined in the Contribution Agreement) as described below) from Members to the Company then outstanding, be in an aggregate amount of less than 10% of the Book Value of all of the Company Assets, including any asset of any Subsidiary, provided further, however that Members and their Affiliates may assume or refinance the Lazard Mezzanine Loan (as defined in the Contribution Agreement) upon commercially reasonable terms, as determined by the Management Committee. 4.7. Designation of Tax Matters Member. The Manager, as long as it is a Member, shall act as the Tax Matters Member of the Company, as provided in the regulations pursuant to Section 6231 of the Code. Each Member hereby approves of such designation and agrees to execute, certify, acknowledge, deliver, swear to, file and record at the appropriate public offices such documents as may be deemed necessary or appropriate to evidence such approval. To the extent and in the manner provided by applicable Code sections and regulations thereunder, the Tax Matters Member (a) shall furnish the name, address, profits interest and taxpayer identification number of each Member to the IRS and (b) shall inform each Member of administrative or judicial proceedings for the adjustment of Company items required to be taken into account by a Member for income tax purposes. The Tax Matters Member shall not enter into an agreement with the IRS or any other taxing authority to extend the limitation period for assessment of any federal, state or local income, franchise or unincorporated business tax of any Member or owner thereof nor settle with the IRS or any other taxing authority to disallow deductions or increase income from this Company with respect to any Member, unless all of the Members shall have agreed thereto. ARTICLE V. CAPITAL CONTRIBUTIONS, LOANS AND LIABILITIES 5.1. Initial Capital Contributions and Capital Accounts of the Members. (a) On the Initial Closing Date, Whitehall contributed, or caused the contribution of, the following property to the Company (or one of its Subsidiaries) in exchange for the Membership Units specified in Section 5.1(h), all in accordance with Exhibit A: (i) the real property known as 1275 K Street which is more particularly described on Exhibit B-1, together with any and all improvements located thereon and the rights of the Whitehall Current Owners to any and all personal, tangible and intangible property located on or otherwise related to any Whitehall Property, including, without limitation, the property described on Exhibit B-2 but specifically excluding any such property described on Exhibit B-3; (ii) 100% of the legal and beneficial ownership of WHATR Real Estate Limited Partnership; and (iii) all right, title and interest of WHMAB Real Estate Limited Partnership in and under the 700 Atrium Purchase Contract (including, without limitation, the deposits made by purchaser thereunder prior to the Initial Closing). Effective as of the Initial Closing, all liabilities and duties under the 700 Atrium Purchase Contract (other than as explicitly provided in the assignment agreement in respect thereof), including, without limitation, payment of the purchase price thereunder, will be borne solely by the Company and neither Whitehall nor WHMAB Real Estate Limited Partnership shall have any further liability or obligation with respect thereto. All of the foregoing property described in subclauses (i), (ii), and (iii) above are herein referred to as the "Whitehall Contributed Assets". (b) The contribution by Whitehall to the Company (and/or one or more of its Subsidiaries) of the Whitehall Contributed Assets on the Initial Closing Date was made subject to the Assumed Financing and on the date of the Initial Closing, the Company and/or one or more of its Subsidiaries assumed the Assumed Financing. Unless Whitehall and its Affiliates are unconditionally released from any obligations under the Assumed Financing, the Company shall indemnify and hold Whitehall and its Affiliates (as transferors and not as Members) harmless from and against any liability related to the Assumed Financing. (c) The Whitehall Contributed Assets had an agreed upon value, net of any distributions made to Whitehall contemporaneously with the Initial Closing and net of the outstanding principal and accrued and unpaid interest of the Assumed Financing (calculated as of the Initial Closing Date) equal to Whitehall's Capital Account on the Initial Closing Date. To support this valuation, Whitehall made the representations and warranties set forth in Exhibit E-1 as of the Initial Closing Date. Each Member agrees, however, that the Whitehall Contributed Assets net of the amounts set forth in the first sentence of this subparagraph (c) may be worth more or less than an amount equal to Whitehall's Capital Account on the Initial Closing Date. The representations and warranties of Whitehall set forth in Exhibit E-1 were made as of and shall survive the Initial Closing for a period of two years from the Initial Closing Date and neither the Company, any Subsidiary nor any Member or other Person may make a claim for indemnity for a breach of a representation or warranty made by Whitehall hereunder or under the WWP Agreement either (i) at any time after the expiration of such two-year period or (ii) which breach is based upon or arises from information or facts contained in any Lease (as defined in Exhibit E-1), brokerage contract, environmental report, structural report, title commitment (including any copies of recorded documents), documents included in closing binders, legal memorandum concerning zoning or legal compliance of the Properties, rent rolls, title policies, surveys and service contracts, in each case which was delivered to WCPT or its Affiliate prior to the Initial Closing. Subject to the time limitations in the immediately preceding sentence, Whitehall agrees to indemnify, defend, and hold the Company, its Subsidiaries and their respective officers, directors, members, controlling persons, affiliates and agents harmless against all claims, demands, actions, causes of action and losses (collectively "Damages") suffered or incurred by, or asserted against, any of them relating to or arising from any inaccuracy in or breach of any representation or warranty of Whitehall made pursuant to this Agreement or the WWP Agreement. In the event that any representation or warranty made by Whitehall in Exhibit E-1 is inaccurate or breached, WCPT shall notify Whitehall in writing of such inaccuracy or breach and the amount of Damages suffered or incurred by the Company (or any of its Subsidiaries) as a result of such breach or inaccuracy. Within thirty (30) days after receipt of the foregoing notice, Whitehall shall either (i) make a capital contribution to the Company of cash in an amount equal to the Damages claimed in such notice to have been suffered or incurred by the Company as a result of the foregoing breach or inaccuracy or (ii) notify the Company in writing that it disputes the circumstances giving rise to or the amount of such claim for indemnification (such notice, a "Dispute Notice"). If (x) within the thirty (30) day period specified in the immediately preceding sentence Whitehall shall neither have made a capital contribution to the Company in the amount of the Damages claimed in the notice nor have delivered a Dispute Notice to the Company or (y) within thirty (30) days after Whitehall has received notice from the arbitrator selected in accordance with Section 5.10 Whitehall shall not have made a capital contribution to the Company in an amount equal to the amount of Damages which such arbitrator shall have determined to have been suffered or incurred by the Company as a result of the foregoing breach or inaccuracy, then WCPT may (i) elect on behalf of the Company to reduce Whitehall's Capital Account by the amount of the Damages suffered or incurred (or the amount determined by the arbitrator pursuant to Section 5.10 to have been suffered or incurred) by the Company in respect of such breach or inaccuracy and (ii) elect to reduce the number of Membership Units attributable to Whitehall (and the aggregate number of Membership Units of the Company outstanding) by an amount equal to the above-referenced amount of Damages divided by the Deemed Value Per Membership Unit (and thereby reduce Whitehall's Percentage Interest by a proportionate amount). If the Company fails to submit the subject matter of any Dispute Notice for binding arbitration as provided in Section 5.10 within thirty (30) days after receipt of such Dispute Notice, Whitehall shall be relieved of any responsibility or obligation in respect of the Damages which are the subject of such Dispute Notice. (d) On the Initial Closing Date, WCPT contributed the following property to the Company (and/or one or more of its Subsidiaries) in exchange for the Membership Units specified in Section 5.1(h), all in accordance with Exhibit A: (i) the real property known as 1700 Valley Road which is more particularly described on Exhibit C-1, together with any and all improvements located thereon and the rights of the WCPT Current Owners to any and all personal, tangible and intangible property located on or otherwise related to any WCPT Property, including, without limitation, the property described on Exhibit C-2 but specifically excluding any such Property described on Exhibit C-3; and (ii) 100% of the legal and beneficial ownership of the WCPT Current Owners other than North American Medical Research Corp., a New Jersey corporation. All of the foregoing property described in subclauses (i) and (ii) above are herein referred to as the "WCPT Contributed Assets". (e) The WCPT Contributed Assets had an agreed upon value net of any distributions made to WCPT contemporaneously with the Initial Closing equal to WCPT's Capital Account on the Initial Closing Date. To support this valuation, WCPT made the representations and warranties set forth in Exhibit E-2 as of the Initial Closing Date. Each Member agrees, however, that the WCPT Contributed Assets net of the amounts set forth in the first sentence of this subparagraph (e) may be worth more or less than an amount equal to WCPT's Capital Account on the Initial Closing Date. The representations and warranties of WCPT set forth in Exhibit E-2 were made as of and shall survive the Initial Closing for a period of two years from the Initial Closing Date and neither Whitehall, the Company nor any Subsidiary or other Person may make a claim for indemnity for a breach of a representation made by WCPT hereunder or under the WWP Agreement either (i) at any time after the expiration of such two-year period or (ii) which breach is based upon or arises from information or facts contained in any Lease (as defined in Exhibit E-2), brokerage contract, environmental report, structural report, title commitment (including any copies of recorded documents), documents included in closing binders, legal memorandum concerning zoning or legal compliance of the Properties, rent rolls, title policies, surveys and service contracts, in each case which was delivered to Whitehall or its Affiliate prior to the Initial Closing. Subject to the time limitations in the immediately preceding sentence, WCPT agrees to indemnify, defend and hold the Company, its Subsidiaries and their respective officers, directors, members, controlling persons, affiliates and agents harmless against all Damages suffered or incurred by, or asserted against, any of them relating to or arising from any inaccuracy or breach of any representation or warranty of WCPT made pursuant to this Agreement or the WWP Agreement. In the event that any representation or warranty made by WCPT in Exhibit E-2 is inaccurate or breached, Whitehall shall notify WCPT in writing of such inaccuracy or breach and the amount of Damages suffered or incurred by the Company (or any of its Subsidiaries) as a result of such breach or inaccuracy. Within thirty (30) days after receipt of the foregoing notice, WCPT shall either (i) make a capital contribution to the Company of cash in an amount equal to the Damages claimed in such notice to have been suffered or incurred by the Company as a result of the foregoing breach or inaccuracy or (ii) deliver a Dispute Notice to the Company. If (x) within the thirty (30) day period specified in the immediately preceding sentence WCPT shall neither have made a capital contribution to the Company in the amount of the Damages claimed in the notice nor have delivered a Dispute Notice to the Company or (y) within thirty (30) days after WCPT has received notice from the arbitrator selected in accordance with Section 5.10 WCPT shall not have made a capital contribution to the Company in an amount equal to the amount of Damages which such arbitrator shall have determined to have been suffered or incurred by the Company as a result of the foregoing breach or inaccuracy, then Whitehall may elect on behalf of the Company (i) to reduce WCPT's Capital Account by the amount of the Damages suffered or incurred (or the amount determined by the arbitrator pursuant to Section 5.10 to have been suffered or incurred) by the Company in respect of such breach or inaccuracy and (ii) to reduce the number of Membership Units attributable to WCPT (and the aggregate number of Membership Units of the Company outstanding) by an amount equal to the above- referenced amount of Damages divided by the Deemed Value Per Membership Unit (and thereby reduce WCPT's Percentage Interest by a proportionate amount). If the Company fails to submit the subject matter of any Dispute Notice for binding arbitration as provided in Section 5.10 within thirty (30) days after receipt of such Dispute Notice, WCPT shall be relieved of any responsibility or obligation in respect of the Damages which are the subject of such Dispute Notice. (f) The Company shall not consummate the transactions contemplated by the 700 Atrium Purchase Contract if the Management Committee determines in good faith that it would not be in the best interests of the Company. Any and all costs associated with the termination of the 700 Atrium Purchase Contract pursuant to this Section 5.1(f) shall be for the account of the Company. (g) Contemporaneously with the contribution to the Company and its Subsidiaries of the Whitehall Contributed Assets and the WCPT Contributed Assets in the manner set forth in 5.1(a) and (d) above, the Company entered into the WRP Loans. The proceeds of the Term Loan A (as defined in the loan documentation evidencing the WRP Loans) (apart from $1,500,000 which was retained by the Company as working capital) was used as follows: (i) $7,551,124 was distributed to Whitehall (for further distribution to its partners), (ii) $22,972,172 was used to repay the existing financing secured by 1275 K Street and (iii) $29,676,144 was distributed to WCPT. The effect of such distribution was to reduce the Capital Account of Whitehall to $24,950,000 and the Capital Account of WCPT to $25,050,000, each as of the Initial Closing Date. In the event that the closing under the 700 Atrium Purchase Contract is not consummated, Whitehall agrees to remit $1 million in cash to the Company as liquidated damages to be used for working capital of the Company; provided that, no increase or decrease in any Member's Capital Account, Percentage Interest or Membership Units shall be made on account of such remittance. (h) As of the date hereof, the Percentage Interest, the Series A Preferred Percentage Interest and the Capital Accounts of each of the Members and the number of Membership Units and Series A Preferred Membership Units outstanding immediately after the Saracen Closing shall be as set forth on Schedule 5.1(h) annexed hereto. Such Capital Accounts have been adjusted to reflect a revaluation of the Company's assets pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(f). (i) Subject to subparagraph (j) below and to Whitehall and/or its Affiliates obtaining the Necessary Whitehall Consents (as defined below), Whitehall shall, within ten (10) Business Days of obtaining such Necessary Whitehall Consents, contribute, or cause the contribution of, the following property to the Company (or one of its Subsidiaries) in accordance with Exhibit A: (1) the real property known as 600 Atrium located in Somerset County, New Jersey, together with any and all improvements located thereon and the rights of the Whitehall Additional Owners to any and all personal, tangible and intangible property located on or otherwise related to any Whitehall Additional Property, specifically excluding any such property identified to WCPT in writing prior to determining the value of such property as provided in subparagraph (j) below; and (2) the real property known as 15 Broad Street located in Boston, Massachusetts, together with any and all improvements located thereon and the rights of the Whitehall Additional Owners to any and all personal, tangible and intangible property located on, or otherwise related to, any Whitehall Additional Property, specifically excluding any such property identified to WCPT in writing prior to determining the value of such property as provided in subparagraph (j) below. All of the foregoing property described in subclauses (i) and (ii) above are herein referred to as the "Whitehall Additional Contributed Assets." As used in this subparagraph (i), the term "Necessary Whitehall Consents" means each and every consent of (i) the limited partners of Whitehall Street Real Estate Limited Partnership VII and Whitehall Street Real Estate Limited Partnership V, each a Delaware limited partnership, and (ii) the lenders under the financings secured by the Whitehall Additional Contributed Assets that are necessary in order to consummate the Additional Closing. Whitehall hereby agrees to use good faith efforts to obtain all Necessary Whitehall Consents as soon as practicable, provided that if Whitehall is not able to obtain one or more Necessary Whitehall Consents on or prior to December 15, 1997, Whitehall's obligations under this paragraph (i) shall terminate and be of no further force and effect. If the Whitehall Additional Contributed Assets are contributed to the Company, then Whitehall will receive cash in an amount equal to the agreed upon value of the Whitehall Additional Contributed Assets. (j) At the time of their contribution to the Company, the Whitehall Additional Contributed Assets had a value as agreed upon by the Initial Members on or prior to the Additional Closing Date. To support such valuation, Whitehall made the representations and warranties set forth in Exhibit E-3 as of the Additional Closing Date. Not later than five (5) Business Days prior to the Additional Closing Date, Whitehall furnished to WCPT copies of all disclosure schedules described in Exhibit E-3. The representations and warranties of Whitehall set forth in Exhibit E-3 were made as of and shall survive the Additional Closing for a period of two years from the Additional Closing Date and neither the Company, any Subsidiary, any Member nor any other Person may make a claim for indemnity for a breach of a representation or warranty made by Whitehall hereunder or under the WWP Agreement as of the Additional Closing Date either (i) at any time after the expiration of such two-year period or (ii) which breach is based upon or arises from information or facts contained in any Lease (as defined in Exhibit E-3), brokerage contract, environmental report, structural report, title commitment (including copies of recorded documents), documents included in closing binders, legal memorandum concerning zoning or legal compliance of the Properties, rent rolls, title policies, surveys and service contracts, in each case which was delivered to WCPT prior to the Additional Closing. Subject to the time limitations in the immediately preceding sentence, Whitehall agrees to indemnify, defend, and hold the Company, its Subsidiaries and their respective officers, directors, members, controlling persons, affiliates and agents harmless against all Damages, suffered or incurred by, or asserted against, any of them relating to or arising from any inaccuracy in or breach of any representation or warranty of Whitehall in Exhibit E-3. In the event that any representation or warranty made by Whitehall in Exhibit E-3 is inaccurate or breached, WCPT shall notify Whitehall in writing of such inaccuracy or breach and the amount of Damages suffered or incurred by the Company (or any of its Subsidiaries) as a result of such breach or inaccuracy. Within thirty (30) days after receipt of the foregoing notice, Whitehall shall either (i) make a capital contribution to the Company of cash in an amount equal to the Damages claimed in such notice to have been suffered or incurred by the Company as a result of the foregoing breach or inaccuracy or (ii) deliver a Dispute Notice to the Company. If (x) within the thirty (30) day period specified in the immediately preceding sentence Whitehall shall neither have made a capital contribution to the Company in the amount of the Damages claimed in the notice nor have delivered a Dispute Notice to the Company or (y) within thirty (30) days after Whitehall has received notice from the arbitrator selected in accordance with Section 5.10 Whitehall shall not have made a capital contribution to the Company in an amount equal to the amount of Damages which such arbitrator shall have determined to have been suffered or incurred by the Company as a result of the foregoing breach or inaccuracy, then WCPT may (i) elect on behalf of the Company to reduce Whitehall's Capital Account by the amount of the Damages suffered or incurred (or the amount determined by the arbitrator pursuant to Section 5.10 to have been suffered or incurred) by the Company in respect of such breach or inaccuracy and (ii) elect to reduce the number of Membership Units attributable to Whitehall (and the aggregate number of Membership Units of the Company outstanding) by an amount equal to the above-referenced amount of Damages divided by the Deemed Value Per Membership Unit (and thereby reduce Whitehall's Percentage Interest by a proportionate amount). If the Company fails to submit the subject matter of any Dispute Notice for binding arbitration as provided in Section 5.10 within thirty (30) days after receipt of such Dispute Notice, Whitehall shall be relieved of any responsibility or obligation in respect of the Damages which are the subject of such Dispute Notice. (k) On the Saracen Closing Date, Saracen contributed, or caused the contribution of, directly or indirectly, the following properties to the Company (and/or one or more of its Subsidiaries) in exchange for cash, the assumption of certain liabilities, Membership Units, Series A Preferred Membership Units and other good and valuable consideration, all in accordance with the Contribution Agreement: (i) the Nomura Properties, the 72 River Park Property and the Non-Nomura Properties, together with any and all improvements located thereon and the rights of the Saracen Current Owners to any and all personal, tangible and intangible property located on or otherwise related to any Saracen Property, including, without limitation, the properties described in Section 2.1 of the Contribution Agreement, all as more particularly described in the Contribution Agreement; and (ii) all of the legal and beneficial ownership interests of Saraceno Holding Trust General Partnership, a Massachusetts general partnership, in and to Wells Avenue Holdings LLC, a Massachusetts limited liability company. All of the foregoing property described in subclauses (i) and (ii) above are herein referred to as the "Saracen Contributed Assets". (l) The Saracen Contributed Assets had an agreed upon value net of any distributions made to Saracen contemporaneously with the Saracen Closing equal to the aggregate amount of the Saracen Members' Capital Accounts on the Saracen Closing Date. To support this valuation, the Saracen Members (excluding Edward Werner and Stephen Davis) guaranteed the truth, accuracy and performance of the representations, warranties and covenants of the Contributor set forth in the Contribution Agreement as and to the extent set forth therein, and subject also to the terms and conditions, including without limitation, the limitations on survival and liability, set forth therein. The representations, warranties and covenants of the Contributor were made as of and shall survive the Saracen Closing Date only if and for the periods set forth in the Contribution Agreement, and neither the Company nor any Subsidiary may make a claim for indemnity for a breach of a representation, warranty or covenant made by the Contributor under the Contribution Agreement, or the guaranty of the same made herein, at any time after the expiration of such periods, as set forth in the Contribution Agreement, or make a claim for damages based upon an inaccurate representation, warranty or covenant of the Contributor where the inaccuracy could have been readily discovered by the Company prior to the Saracen Closing Date from information or facts contained in any lease, brokerage agreement, management agreement, environmental report, structural report, title commitment (including copies of recorded title documents), documents included in closing binders, rent rolls, title policies or surveys, in each case which was delivered or made readily available by the Contributor to the Company or its attorneys and representatives prior to the Saracen Closing. Subject to the limitations in the immediately preceding sentence, the Saracen Members (excluding Edward Werner and Stephen Davis) agree to indemnify, defend and hold the Company, its Subsidiaries and their respective officers, directors, members, controlling persons, affiliates and agents harmless against all Damages in excess of $500,000.00 (but subject to the aggregate limitations on liability set forth in the Contribution Agreement) suffered or incurred by any of them relating to or arising from any inaccuracy or breach of any representation, warranty or covenant of the Contributor made pursuant to the Contribution Agreement. In the event that any representation, warranty or covenant made by the Contributor in the Contribution Agreement for which the Saracen Members (excluding Edward Werner and Stephen Davis) have liability hereunder or under the WWP Agreement is inaccurate or breached, the Company or the Manager shall notify Saracen in writing of such inaccuracy or breach (the "Breach Notice") and the amount of Damages in excess of $500,000.00 (but subject to the aggregate limitations on liability set forth in the Contribution Agreement) suffered or incurred as a result of such breach or inaccuracy. Within thirty (30) days after receipt of the Breach Notice, Saracen shall either (i) make a capital contribution to the Company of cash in an amount equal to the Damages in excess of $500,000.00 (but subject to the aggregate limitation on liability set forth in the Contribution Agreement) claimed in such Breach Notice to have been suffered or incurred as a result of the foregoing breach or inaccuracy or (ii) deliver a Dispute Notice to the Company. If (x) within the thirty (30) day period after receipt by Saracen of the Breach Notice, Saracen shall neither have made a capital contribution to the Company in the amount of the Damages in excess of $500,000.00 (but subject to the aggregate limitation on liability set forth in the Contribution Agreement) nor have delivered a Dispute Notice to the Company or (y) within thirty (30) days after Saracen has received notice from the arbitrator selected in accordance with Section 5.10 Saracen shall not have made a capital contribution to the Company in an amount equal to the amount of the Damages in excess of $500,000.00 (but subject to the aggregate limitation on liability set forth in the Contribution Agreement) which such arbitrator shall have determined to have been suffered or incurred by the Company as a result of the foregoing breach or inaccuracy, then the Management Committee may elect: (i) (A) to reduce Dominic J. Saraceno's Capital Account with respect to his Membership Units by the amount of the first $5,000,000.00 of Damages in excess of $500,000.00 (but subject to the applicable limitations on liability) suffered or incurred (or the first $5,000,000.00 of the amount of Damages determined by the arbitrator pursuant to Section 5.10 to have been suffered or incurred in excess of $500,000.00 (but subject to the applicable limitations on liability)) by the Company in respect of such breach or inaccuracy and (B) to the extent that such reduction in Dominic J. Saraceno's Capital Account with respect to his Membership Units is not sufficient to satisfy the first $5,000,000.00 of Damages in excess of $500,000.00 (but subject to the applicable limitations on liability), to reduce Dominic J. Saraceno's Capital Account with respect to his Series A Preferred Membership Units by the amount of the first $5,000,000.00 of Damages in excess of $500,000.00 (but subject to the applicable limitations on liability), less the amount already reduced pursuant to subparagraph (i)(A) above. Subject to the applicable limitations on liability set forth in the Contribution Agreement, only to the extent of such Damages which are in excess of the reduction in Dominic J. Saraceno's Capital Account with respect to his Membership Units and Series A Preferred Membership Units pursuant to the preceding sentence, unless Saracen shall have made a capital contribution in such amount, then the Management Committee may elect to reduce, pro rata with respect to their respective Percentage Interests, the Saracen Members' Capital Accounts (excluding Edward Werner and Stephen Davis) with respect to their respective Membership Units by the amount of the Damages in excess of $500,000.00 (but subject to the applicable limitations on liability), less the amount already reduced pursuant to the preceding sentence and (B) to the extent that such reduction in the Saracen Members' Capital Accounts (excluding Edward Werner and Stephen Davis) with respect to their Membership Units and such reduction in Dominic J. Saraceno's Capital Account with respect to his Membership Units and Series A Preferred Membership Units together with any capital contribution made pursuant to the preceding sentence is not sufficient to satisfy the Damages in excess of $500,000.00 (but subject to the applicable limitations on liability), to reduce, pro rata with respect to their respective Series A Preferred Percentage Interests, the Saracen Members' Capital Accounts (excluding Edward Werner and Stephen Davis) with respect to their respective Series A Preferred Membership Units by the amount of the Damages in excess of $500,000.00, less the amount already reduced pursuant to this subparagraph (i); and (ii) (A) to reduce the number of Membership Units attributable to Dominic J. Saraceno (and the aggregate number of Membership Units of the Company outstanding) by an amount equal to the amount of the first $5,000,000.00 of Damages in excess of $500,000.00 (but subject to the applicable limitations on liability) suffered or incurred (or the first $5,000,000.00 of the amount of Damages determined by the arbitrator pursuant to Section 5.10 to have been suffered or incurred in excess of $500,000.00 (but subject to the applicable limitations on liability)) divided by the Deemed Value Per Membership Unit (and thereby reduce Dominic J. Saraceno's Percentage Interest by a proportionate amount) and (B) to the extent that such reduction of the number of Membership Units (based upon the aggregate Deemed Value Per Membership Unit) attributable to Dominic J. Saraceno is not sufficient to satisfy the first $5,000,000.00 of Damages in excess of $500,000.00 (but subject to the applicable limitations on liability), to reduce the number of Series A Preferred Membership Units attributable to Dominic J. Saraceno (and the aggregate number of Series A Preferred Membership Units of the Company outstanding) by an amount equal to the amount of the first $5,000,000.00 of Damages in excess of $500,000.00 (but subject to the applicable limitations on liability), less the amount of Damages in excess of $500,000.00 satisfied pursuant to subparagraph (ii) (A) above, divided by $25.00 (and thereby reduce Dominic J. Saraceno's Series A Preferred Percentage Interest by a proportionate amount). In the event of Damages in excess of $500,000.00 (but subject to the applicable limitations on liability set forth in the Contribution Agreement, only to the extent of such Damages which are in excess of the amount of the reduction of the number of Membership Units and Series A Preferred Membership Units (based upon the aggregate Deemed Value Per Membership Unit and liquidation preference of the Series A Preferred Membership Units) attributable to Dominic J. Saraceno pursuant to the preceding sentence, unless Saracen shall have made a capital contribution in such amount, the Management Committee may elect to reduce, pro rata with respect to their respective Percentage Interests, the number of Membership Units attributable to the Saracen Members (excluding Edward Werner and Stephen Davis) (and the aggregate number of Membership Units of the Company outstanding) by an amount equal to the amount of Damages in excess of $500,000.00 (but subject to the applicable limitations on liability), less the amount satisfied pursuant to the preceding sentence, divided by the Deemed Value Per Membership Unit (and thereby reduce the Saracen Members' Percentage Interests (excluding Edward Werner and Stephen Davis) by a proportionate amount), and (B) to the extent that such reduction of the number of Membership Units and Series A Preferred Membership Units (based upon the aggregate Deemed Value Per Membership Unit and the liquidation preference of the Series A Preferred Membership Units) attributable to Dominic J. Saraceno and the reduction of the number of Membership Units (based upon the aggregate Deemed Value Per Membership Unit) attributable to the Saracen Members (excluding Edward Werner and Stephen Davis) together with any capital contribution made pursuant to the preceding sentence is not sufficient to satisfy the Damages in excess of $500,000.00 (but subject to the applicable limitations on liability), to reduce, pro rata with respect to their respective Series A Preferred Percentage Interests, the number of Series A Preferred Membership Units attributable to the Saracen Members (excluding Edward Werner and Stephen Davis) (and the aggregate number of Series A Preferred Membership Units of the Company outstanding) by an amount equal to the amount of Damages in excess of $500,000.00 (but subject to the applicable limitations on liability) suffered or incurred (or the amount determined by the arbitrator pursuant to Section 5.10 to have been suffered or incurred in excess of $500,000.00 (but subject to the applicable limitations on liability)), less the amount of Damages in excess of $500,000.00 satisfied pursuant to this subparagraph (ii) divided by $25.00 (and thereby reduce the Saracen Members' Series A Preferred Percentage Interests (excluding Edward Werner and Stephen Davis) by a proportionate amount). If the Company fails to submit the subject matter of any Dispute Notice for binding arbitration as provided in Section 5.10 within thirty (30) days after receipt of such Dispute Notice, the Saracen Members shall be relieved of any responsibility or obligation in respect of the Damages which are the subject of such Dispute Notice. (m) The representations, warranties and covenants of the Contributee are made as of and shall survive the Saracen Closing Date only if and for the periods set forth in the Contribution Agreement, and neither Saracen nor the Contributor may make a claim for indemnity for a breach of a representation, warranty or covenant made by the Contributee under the Contribution Agreement, at any time after the expiration of such periods, as set forth in the Contribution Agreement, or make a claim for damages based upon an inaccurate representation, warranty or covenant of the Contributee where the inaccuracy could have been readily discovered by Saracen or the Contributor prior to the Saracen Closing Date from information or facts contained in any lease, brokerage agreement, management agreement, environmental report, structural report, title commitment (including copies of recorded title documents), documents included in closing binders, rent rolls, title policies or surveys, in each case which was delivered or made readily available by the Contributee to Saracen or the Contributor or their attorneys and representatives prior to the Saracen Closing. Subject to the limitations in the immediately preceding sentence, the Company agrees to indemnify, defend and hold the Contributor and Saracen and their respective officers, directors, members, controlling persons, affiliates and agents harmless against all Damages in excess of $500,000.00 (but subject to the aggregate limitations on liability set forth in the Contribution Agreement) suffered or incurred by any of them relating to or arising from any inaccuracy or breach of any representation, warranty or covenant of the Contributee made pursuant to the Contribution Agreement. In the event that any representation, warranty or covenant made by the Contributee in the Contribution Agreement is inaccurate or breached, Saracen shall deliver a Breach Notice to the Company describing such inaccuracy or breach and the amount of Damages in excess of $500,000.00 (but subject to the aggregate limitations on liability set forth in the Contribution Agreement) suffered or incurred by any of them as a result of such breach or inaccuracy, which amount of Damages shall be reduced by any capital contributions made by the Initial Members pursuant to Sections 5.1(c), (e), and (j), but only to the extent such capital contributions were made with respect to the representations, warranties and covenants that were the basis of the Damage claim made pursuant to this Section 5.1(m). Within thirty (30) days after receipt of the Breach Notice, the Company shall either (i) make a payment in cash to the Saracen Members in accordance with their respective Percentage Interests in an amount equal to the Damages in excess of $500,000.00 (but subject to such limitations on liability) claimed in such Breach Notice to have been suffered or incurred as a result of the foregoing breach or inaccuracy or (ii) deliver a Dispute Notice to Saracen. If Saracen fails to submit the subject matter of any Dispute Notice for binding arbitration as provided in Section 5.10 within thirty (30) days after receipt of such Dispute Notice, the Company shall be relieved of any responsibility or obligation in respect of the Damages which are the subject of such Dispute Notice. 5.2. Additional Capital Contributions (a) If either the Manager or Whitehall shall reasonably determine that funds are required for a Necessary Expenditure, or in the event of a Preferential Distribution Non-Payment (as defined in the Series A Terms), either the Manager or Whitehall shall have the right to make a Mandatory Capital Call describing the amount and nature of the Necessary Expenditure or the aggregate amount of any payment default pursuant to the Series A Terms, in which event each of the Initial Members shall, within twenty (20) days after receipt of such Mandatory Capital Call, fund a portion of such amount equal to such Initial Member's Percentage Interest. Notwithstanding anything to the contrary herein, except for the payment of any Preferential Distribution Non-Payment (as defined in the Series A Terms), neither WCPT nor Whitehall shall be required to contribute or lend any funds to the Company (and no Mandatory Capital Call for a Necessary Expenditure may be issued to such Initial Member) pursuant to this Section 5.2 or otherwise (i) to the extent such Initial Member has previously made Capital Contributions (other than the Initial Capital Contributions) to the Company and its Subsidiaries in an amount equal to or in excess of $50,100,000 with respect to WCPT, or equal to or in excess of $49,900,000 with respect to Whitehall, (ii) in response to a Capital Call made at any time after the second anniversary of the Initial Closing (irrespective of the amounts previously contributed) or (iii) at any time after an initial public offering of Shares by WCPT. (b) If the Management Committee shall have authorized a Capital Call, the Manager shall make such Capital Call describing in brief detail the use of proceeds of such Capital Call, in which event each of the Initial Members shall, within (20) days after receipt of such Capital Call, fund a portion of such amount equal to such Initial Member's Percentage Interest. (c) Following receipt of a Capital Call in compliance with the requirements of this Section 5.2, each Initial Member shall contribute to the Company the amount applicable to such Member, in accordance with such Initial Member's Percentage Interest, set forth in the Capital Call delivered pursuant to this Section 5.2 on the due date specified in such notice. (d) Upon any conversion by a Saracen Member of any Series A Preferred Membership Units into Membership Units, such Saracen Member shall have the right to contribute up to $7,500.00 to the Company as an additional capital contribution, provided, however, that such capital contribution shall be in addition to and shall not reduce the conversion price payable in connection with such conversion. In exchange for such capital contribution, Membership Units shall be issued based upon the Deemed Value Per Membership Unit on the date of such capital contribution. Notwithstanding the foregoing, in no event shall (i) the aggregate amount of capital contributions made by all Saracen Members pursuant to this Section 5.2(d) exceed $50,000.00, and (ii) Membership Units be issued for more than $50,000.00 of capital contributions pursuant to this Section 5.2(d). 5.3. Failure to Fund Capital Contributions. If any Initial Member shall fail to make a capital contribution required to be made pursuant to Section 5.2 in the amount and within the time period specified in the Capital Call (such Initial Member is hereinafter referred to as a "Non-Contributing Member"), the Manager shall give notice of such failure to all other Initial Members and the amount of the capital contribution not funded by the Non- Contributing Member (such amount is hereinafter referred to as the "Failed Contribution"), and any Initial Member or Initial Members may fund all or part of such Failed Contribution (each such funding Initial Member is hereinafter referred to as a "Contributing Member"). If more than one Initial Member desires to be a Contributing Member, each such Initial Member shall have the right to fund the amount the Non-Contributing Member(s) failed to fund pro rata in proportion to the relative Percentage Interests of such Contributing Members; provided that, if any such Initial Member funds less than its pro rata share, the other Initial Members shall have the right to fund an amount equal to the difference between such first Initial Member's pro rata share and the amount such first Initial Member actually contributed pursuant to this sentence, on a pro rata basis in proportion to the relative Percentage Interests of such other Initial Members. Upon funding all or any part of a Failed Contribution, any Contributing Member may elect the following treatment for the portion (the "Funded Portion") of the Failed Contribution funded by such Contributing Member: (a) The Contributing Member may at any time (even after first electing to proceed under paragraph (b) below) elect to treat the Funded Portion as a capital contribution by such Contributing Member with the dilution provided for in Section 5.4 below. (b) The Contributing Member may elect to treat the Funded Portion as a loan (a "Member Loan") by the Contributing Member to the Non- Contributing Member, which Member Loan shall be treated as (i) a demand loan made by the Contributing Member to the Non-Contributing Member (bearing interest at the Default Rate), and (ii) as a Capital Contribution by the Non-Contributing Member. Any such Loan (to the extent of unpaid principal and interest) shall be recourse only to the Non-Contributing Member's Interest and shall also be payable by the Non- Contributing Member on demand of the Contributing Member and shall be repaid (i) directly by the Company on behalf of the Non-Contributing Member to the Contributing Member from funds otherwise distributable to the Non-Contributing Member pursuant to Section 7.4 or (ii) upon the closing of the transactions contemplated by Section 8.2 hereof. A Contributing Member may, by delivering a notice to the Non-Contributing Member at any time prior to full repayment of such Member Loan, elect to terminate such loan and have the Non-Contributing Member's Percentage Interest diluted as set forth in Section 5.4, with the entire outstand- ing principal and interest treated as the amount of the Failed Contribu- tion and the Capital Accounts of the Contributing and Non-Contributing Members adjusted accordingly to reflect the outstanding amount of a Member Loan as a Capital Contribution by the Contributing Member, not the Non-Contributing Member. Repayment of any Member Loan shall be secured by the Non-Contributing Member's Interest, and the Non- Contributing Member hereby grants a security interest in such Interest to the Contributing Member who has advanced such Member Loan and hereby irrevocably appoints such Contributing Member, and any of its agents, officers or employees, as its attorneys-in-fact with full power and authority to prepare and execute any documents, instruments and agree- ments, including, but not limited to, any note evidencing the Member Loan, and such Uniform Commercial Code financing statements, continuation statements, and other security instruments as may be appropriate to perfect and continue such security interest in favor of such Contributing Member. (c) [INTENTIONALLY OMITTED] 5.4. Dilution for Failure to Fund Capital Calls. (a) If one or more Contributing Members elect to treat the Funded Portion as a capital contribution (including after electing to terminate a Member Loan pursuant to Section 5.3(b)), the Percentage Interest of each such Contributing Member shall be increased by a percentage equal to the quotient (rounded up to the nearest one hundredth of one percent) obtained when (x) two times the remaining Funded Portion funded by such Contributing Member is divided by (y) the sum of all Members' Capital Contributions as of such date (including the remaining Funded Portions). (b) Notwithstanding the terms of paragraph (a) above, if (i) Saracen or any New Member has purchased Membership Units from the Company and continues to own any of such Membership Units, and (ii) one or more Contributing Members elect to treat the Funded Portion as a capital contribution (including after electing to terminate a Member Loan pursuant to Section 5.3(b)), the Percentage Interest of each such Contributing Member shall be increased by a percentage equal to the quotient (rounded up to the nearest one hundredth of one percent) obtained when (x) the remaining Funded Portion funded by such Contributing Member is divided by (y) the Deemed Value Per Membership Unit times the aggregate number of Membership Units then issued by the Company plus the amount of the remaining Funded Portion. (c) In the case of either (a) or (b) above, the Percentage Interest of the Non-Contributing Member shall be decreased by the aggregate amount of the increase in the Percentage Interests of all Contributing Members made pursuant to paragraph (a) or (b), as the case may be. On the date the adjusted Percentage Interests are determined as provided in this Section 5.4(c), each Member shall be considered as of such date, solely for purposes of further calculations and adjustments of each member's Percentage Interest to have made Capital contributions equal to such Member's Percentage Interest multiplied by the total Contributions made by all Members as of such date (such product being referred to as the "Notional Contribution" of such Member), for example, if (1) a Non-Contributing Member X has a Percentage Interest of 50% and has a Failed Contribution of $10 in respect of a $20 Capital Call, (2) Contributing Member A has a Percentage Interest of 40% and contributes $8 in respect of such Capital Call plus its pro rata share of the Non-Contributing Member's Failed Contribution (i.e., 40% divided by 50% multiplied by the $10 Failed Contribution or $8) and, prior to contributing any amount on account of the current Capital Call Member A has made Common Equity Capital Contributions of $392 ($40% of $980), (3) Contributing Member B has a Percentage Interest of 10% and contributes $2 in respect of such Capital Call plus its pro rata share of the Non-Contributing Member's Failed Contribution (i.e., 10% divided by 50% multiplied by the $10 Failed Contribution or $2), prior to contributing any amount on account of the current Capital Call has made Common Equity Capital Contributions of $98 (10% of $980), and (4) the sum of all Members' Common Equity Capital Contributions as of such date (including the current Capital Call of $20) is $1,000, then (i) the Percentage Interest of Contributing Member A will be increased to 41.6% (($392 + $8 + $16) divided by $1,000), FOR A NET INCREASE OF 1.6%, (ii) the Percentage Interest of Contributing Member B will be increased to 10.4% (($98 + $2 + $4) divided by $1,000), for a net increase of 0.4%, (iii) the Percentage Interest of Non-Contributing Member X will be decreased by 2.0% (the sum of the 1.6% increase in A's Percentage Interest and the 0.4% increase in B's Percentage interest), (iv) the Capital Account of each Member shall be adjusted to reflect the actual cash contributions made by such Member and (v) the Notional Contribution as of the date of adjustment of Member A, Member B and Member X, respectively, will be $416, $104 and $480. (d) In order to give effect to the dilution of the Non- Contributing Member's Percentage Interest as set forth above in this Section 5.4, a number of the Non-Contributing Member's Membership Units corresponding to the Percentage Interest forfeited under Section 5.4(a) or (b) shall be deemed to be assigned to the Contributing Members pro rata to the relative amounts of their remaining Funded Portions such that the percentage of all Membership Units then owned by each such Contributing Member shall equal each such Contributing Member's Percentage Interest (taking into account the additional Membership Units issued to the Contributing Members pursuant to Section 5.9), and the Manager is hereby authorized and directed to reflect such assignment on the books of the Company. 5.5. Capital of the Company. The capital of the Company shall be the sum of the Members' Capital Contributions. Except as otherwise provided herein, no Member shall be entitled to withdraw or receive any interest or other return on its Capital Contribution. 5.6. Liability of Members. The Members shall not be bound by, nor be personally liable for, the expenses, liabilities, indebtedness or obli- gations of the Company or of any other Member. The liability of each Member shall be limited solely to the amount of its Capital Contributions; provided, however, that after a Member has received a distribution from the Company, such Member may be liable to the Company for the amount of the distribution but only to the extent provided by the Act. The Members shall not be required to contribute any amounts in excess of the amounts set forth in Sections 5.1, and 5.2 hereof, provided, however, that any Member's failure to fund a Capital Call made pursuant to Section 5.2 shall be subject to the provisions of this Article V. 5.7. Return of Capital Contribution. Except as otherwise provided in this Agreement, no Member shall have the right to withdraw as a Member or demand the return of all or any part of its Capital Contribution until the Company has been dissolved and terminated, or to demand or receive property other than cash in return for its Capital Contribution. No Member shall be liable for the return of the Capital Contribution of any other Member. 5.8. Calculation of Members' Percentage Interest and Members' Series A Preferred Percentage Interest. (a) At any time, a Member's Percentage Interest shall be equal to the number of Membership Units owned by such Member at the date of determination divided by the aggregate number of Membership Units owned by all of the Members at such date. (b) At any time, a Member's Series A Preferred Percentage Interest shall be equal to the number of Series A Preferred Membership Units owned by such Member at the date of determination divided by the aggregate number of Series A Preferred Membership Units owned by all of the Members at such date. 5.9. Issuance of Additional Membership Units. (a) The Manager is hereby authorized and directed to cause the Company to issue to (i) the Initial Members the number of Membership Units set forth in Schedule 5.1(h) and (ii) the Saracen Members on the Saracen Closing Date the number of Membership Units and Series A Preferred Membership Units set forth in Schedule 5.1(h). (b) The Manager is hereby authorized and directed to cause the Company to issue to any Member (including a New Member) that makes a Capital Contribution to the Company (including a capital contribution made by a Contributing Member in accordance with Section 5.3), the number of Membership Units equal to the amount of such contributing Member's Capital Contribution divided by a price per Membership Unit determined by the Management Committee; provided that, if the Management Committee is unable to determine such price, the price per Membership Unit shall be equal to the Deemed Value Per Membership Unit, provided, further that, if (i) all or any portion of the Capital Contribution is made by WCPT or Whitehall, or both, and a third party is not making a Capital Contribution contemporaneously with WCPT and/or Whitehall at the same price per Membership Unit and (ii) the price per Membership Unit determined by the Management Committee in connection with such Capital Contribution is less than the most recent price per Membership Unit utilized to issue Membership Units to any Person (other than Whitehall or WCPT), Saracen shall have the right for its own account, and not for the account of any other party, to make a Capital Contribution in an amount equal to the product of (x) the aggregate amount of the Capital Contributions described in this Section 5.9(b) to be made by WCPT and/or Whitehall and (y) its Percentage Interest immediately prior to such Capital Contributions. In such instance, Saracen shall be given at least thirty (30) days' prior written notice to make such Capital Contribution and if no Capital Contribution is made by Saracen within such thirty (30) day period, the right to make such Capital Contribution shall be deemed waived. Unless specifically resolved otherwise by the Management Committee, any Membership Units issued after the Initial Closing Date shall have the same rights, powers and duties as the Membership Units issued on the Initial Closing Date and the Saracen Closing Date; provided that, in any event, the Management Committee may authorize the classification of multiple classes of membership interests and may establish the designations, preferences and relative, participating, optional or other special rights, powers or duties of each class of membership interests, subject to the restrictions set forth in the Series A Terms. (c) The Manager is hereby authorized and directed to cause the Company to issue Membership Units (i) to WRP as required in connection with the exercise of the WRP Warrants in exchange for Membership Units, (ii) to WCPT in connection with Whitehall's and Saracen's exercise of their rights set forth in Section 8.3, (iii) to WRP in connection with the exchange of Membership Units for WRP At-Market Shares and (iv) to Saracen in connection with the conversion of the Series A Preferred Membership Units. 5.10. Arbitration. Any matter arising pursuant to any provision hereunder which specifies that such matter shall be resolved by arbitration and any other dispute involving an alleged breach or violation of this Agreement (including, without limitation, an alleged breach or violation by WCPT that would entitle Whitehall to remove WCPT pursuant to Section 9.1) shall be submitted to arbitration ("Arbitration") in accordance with the provisions of this Section 5.10. The party having the right to submit a matter to Arbitration and exercising its rights to do so shall have the right to request an arbitration which shall be conducted in accordance with the Rules of Arbitration of the American Arbitration Association for a single arbitrator arbitration (the "Rules") in New York, New York, or at such other location as may be agreed between the parties. The Arbitration shall be conducted by a single arbitrator chosen in accordance with the Rules, provided that, such arbitrator shall be a person having at least ten (10) years experience in the matter in dispute including valuing real estate. The determination of the arbitrator shall be made within thirty (30) days following the appointment of such arbitrator and shall be conclusive and binding upon the parties and judgment upon the same may be entered in any court having jurisdiction thereof. Each party shall pay the fees and expenses of the arbitrator as determined by the arbitrator. The arbitrator shall not have the right to amend any provision of this Agreement. ARTICLE VI. CAPITAL ACCOUNTS, PROFITS AND LOSSES AND ALLOCATIONS 6.1. Capital Accounts. (a) The Company shall maintain a Capital Account for each Member in accordance with federal income tax accounting principles. (b) The Capital Account of each Member shall be increased by (i) the amount of any cash and the agreed net fair market value (as used herein, "agreed net fair market value" of property shall mean the gross fair market value of the property reduced by all liabilities encumbering the property) as of the date of contribution of any property subsequently contributed as a Capital Contribution to the capital of the Company by such Member and (ii) the amount of any Profits allocated to such Member. The Capital Account of each Member shall be decreased by (i) the amount of any Losses allocated to such Member and (ii) the amount of distributions to such Member. In all respects, the Member's Capital Accounts shall be determined in accordance with the detailed capital accounting rules set forth in Treasury Regulation Section 1.704-1(b)(2)(iv) and shall be adjusted upon the occurrence of certain events as provided in Treasury Regulation Section 1.704-1(b)(2)(iv)(f). The Members hereby agree that as of the date hereof, the Capital Account of each Member shall be as set forth on Schedule 5.1(h). (c) A transferee of all (or a portion) of an Interest shall succeed to the Capital Account (or portion of the Capital Account) attributable to the transferred Interest. (d) Notwithstanding anything to the contrary contained herein, no increase in any Member's Capital Account, Percentage Interest or number of Membership Units shall be made on account of a contribution made by an Initial Member pursuant to Section 5.1(c), (e), (i) or (j). (e) It is the intention of the parties that a conversion pursuant to its terms of a Series A Preferred Membership Unit into a Membership Unit be treated for federal income tax purposes as a contribution of the Series A Preferred Membership Unit to the Company in exchange for a Membership Unit and that any such conversion be treated as an event requiring an adjustment to the Members' Capital Accounts pursuant to Section 6.1(b) hereof and Treasury Regulation Section 1.704-1(b)(2)(iv)(f). (f) The Capital Account balances of the Members holding Series A Preferred Membership Units (the "Series A Capital Accounts") shall be maintained separately from the Capital Accounts of the Members holding Membership Units (the "Membership Capital Accounts"). For purposes of maintaining Capital Account balances as provided in subsection (b) above, the Series A Capital Accounts shall be adjusted for allocations of Profits and Losses pursuant to Sections 6.2(d)(i), 6.2(d)(ii) and 6.2(e)(iv) and for distributions made pursuant to Section 7.1(a-2)(i). (g) Notwithstanding anything in this Agreement to the contrary, including without limitation Articles VII and X hereof, no Member shall be required to pay to the Company or to any other Member any deficit or negative balance which may exist from time to time in such Member's Capital Account. 6.2. Profits and Losses. (a) The profits and losses of the Company ("Profits" and "Losses") shall be the net income or net loss (including capital gains and losses, income and gain exempt from tax, and items of loss, deduction of expense not deductible from Company income or capitalizable into the basis of Company property), respectively, of the Company determined for each Fiscal Year in accordance with the accounting method followed for federal income tax purposes except that (i) in computing Profits and Losses, all depreciation and cost recovery deductions shall be deemed equal to Depreciation and (ii) gain or loss on the sale or other disposition of a Company Asset shall be determined by reference to Book Value. (b) Whenever a proportionate part of the Profits or Losses is allocated to a Member, every item of income, gain, loss, deduction or credit entering into the computation of such Profits or Losses or arising from the transactions with respect to which such Profits or Losses were realized shall be credited or charged, as the case may be, to such Member in the same proportion; provided, however, that "recapture income", if any, shall be allocated to the Members who were allocated the corresponding depreciation deductions. (c) If any Member transfers all or any part of its Interest during any Fiscal Year or its Interest is increased or decreased, Profits and Losses attributable to such Interest for such Fiscal Year shall be apportioned between the transferor and transferee ratably on a daily basis, provided in all events that any apportionment described above shall be permissible under the Code and applicable regulations thereunder. (d) Profits shall be allocated each year among the Members as follows: (i) First, among all the Members holding Membership Units, in proportion to the amounts previously allocated pursuant to Section 6.2(e)(v) until the amounts allocated pursuant to this Section 6.2(d)(i) in the current and all prior years equals such amounts previously allocated pursuant to Section 6.2(e)(v) in the current and all prior years. (ii) Second, to the Saracen Members holding Series A Preferred Units, in proportion to the amounts previously allocated pursuant to Section 6.2(e)(iv) until the amount allocated pursuant to this Section 6.2(d)(ii) in the current and all prior years equals such amounts previously allocated pursuant to Section 6.2(e)(iv) in the current and all prior years; (iii) Third, to each Saracen Member holding Series A Preferred Units, an amount equal to the aggregate amounts distributed and distributable pursuant to Section 7.1(a-2)(i) (assuming that the Company had received all the cash attributable to the income being allocated) until the amounts allocated pursuant to this Section 6.2(d)(iii) in the current and all prior years equals such amounts previously distributed and distributable pursuant to Sections 7.1(a-2)(i) in the current and all prior years; provided, however, that in no event shall amounts be allocated under this Section 6.2(d)(iii) in excess of the Preferred Limitation; (iv) Fourth, among all the Members holding Membership Units, in proportion to the amounts previously allocated pursuant to Section 6.2(e)(iii) until the amount allocated pursuant to this Section 6.2(d)(iv) in the current and all prior years equals such amounts previously allocated pursuant to Section 6.2(e)(iii) in the current and all prior years. (v) Fifth, to the Saracen Members holding Membership Units, in proportion to their respective Percentage Interests, an amount equal to the product of (x) their aggregate Percentage Interests, and (y) the remaining Profits of the Company after taking into account Sections 6.1(d)(i) through (d)(iv) above; and (vi) The balance of the Company's Profits shall be allocated between the Initial Members as follows: A. First, to the Initial Members in proportion to the amounts previously allocated pursuant to Section 6(e)(ii)(D) until the amount allocated pursuant to this Section 6.2(d)(vi)(A) equals such amounts previously allocated pursuant to Section 6(e)(ii)(D). B. Next, to the Initial Members in proportion to the aggregate amounts distributed and distributable pursuant to Sections 7.1(b)(ii) (assuming that the Company had received all the cash attributable to the income being allocated) until the amount allocated pursuant to this Section 6.2(d)(vi)(B)(and not reversed by Section 6.2(e)(ii)(C) equals such amounts previously distributed and distributable pursuant to Sections 7.1(b)(ii); C. Next, to the Initial Members in proportion to the aggregate amounts distributed and distributable pursuant to Sections 7.1(b)(iii) (assuming that the Company had received all the cash attributable to the income being allocated) until the amount allocated pursuant to this Section 6.2(d)(vi)(C) (and not reversed by Section 6.2(e)(ii)(B)) equals such amounts previously distributed and distributable pursuant to Sections 7.1(b)(iii); and D. Thereafter, to the Initial Members in proportion to the aggregate amounts distributed and distributable pursuant to Sections 7.1(b)(iv) (assuming that the Company had received all the cash attributable to the income being allocated) until the amount allocated pursuant to this Section 6.2(d)(vi)(D) (and not reversed by Section 6.2(e)(ii)(A)) equals such amounts previously distributed and distributable pursuant to Sections 7.1(b)(iv). (e) Losses shall be allocated each year among the Members as follows: (i) First, among the Members holding Membership Units, in proportion to the amounts previously allocated pursuant to Sections 6.2(d)(iv) and (v) until the amount allocated pursuant to this Section 6.2(e)(i) equals such amounts previously allocated pursuant to Sections 6.2(d)(iv) and (v); such amount to be allocated to the Initial Members to be further allocated between them as set forth in Section 6.2(e)(ii) below. (ii) The allocation between the Initial Members described in Section 6.2(e)(i) shall be as follows: (A) First, to the Initial Members in proportion to the amounts previously allocated pursuant to Section 6.2(d)(vi)(D) until the amount allocated pursuant to this Section 6.2(e)(ii)(A) equals such amounts previously allocated pursuant to Section 6.2(d)(vi)(D); (B) Second, to the Initial Members in proportion to the amounts previously allocated pursuant to Section 6.2(d)(vi)(C) until the amount allocated pursuant to this Section 6.2(e)(ii)(B) equals such amounts previously allocated pursuant to Section 6.2(d)(vi)(C); (C) Third, to the Initial Members in proportion to the amounts previously allocated pursuant to Section 6.2(d)(vi)(B) until the amount allocated pursuant to this Section 6.2(e)(ii)(C) equals such amounts previously allocated pursuant to Section 6.2(d)(vi)(B); and (D) Thereafter, to the Initial Members pro rata in proportion to their relative Percentage Interests. (iii) Next, to the Members holding Membership Units, an amount required to reduce their positive Membership Capital Account balances to zero, in proportion to the respective required amounts. (iv) Next, to the Saracen Members holding Series A Preferred Membership Units, an amount required to reduce their positive Series A Capital Account balances to zero, in proportion to the respective required amounts. (v) Any remaining Losses shall be allocated among all Members holding Membership Units in proportion to their respective Percentage Interests. (f) Notwithstanding Sections 6.2(d) and (e) hereof, (i) For federal income tax purposes but not for purposes of crediting or charging Capital Accounts, depreciation or gain or loss realized by the Company with respect to any property that was contributed to the Company or that was held by the Company at a time when the Book Value of the Company assets was adjusted pursuant to the third sentence of Section 6.1(b) shall, in accordance with the "traditional method" under Section 704(c) of the Code and Treasury Regulation Section 1.704-1(b)(2)(iv)(d) and (f), be allocated among the Members in a manner which takes into account the differences between the adjusted basis for federal income tax purposes to the Company of its interest in such property and the fair market value of such interest at the time of its contribution or revaluation. (ii) If there is a net decrease in the Minimum Gain of the Company during a taxable year (including any Minimum Gain attributable to Member-Funded Debt), each Member at the end of such year shall be allocated, prior to any other allocations required under this Article VI, items of gross income for such year (and, if necessary, for subsequent years) in the amount and proportions described in Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(4). (iii) Notwithstanding the allocations provided for in Sections 6.2(d) and (e), no allocation of an item of loss or deduction shall be made to a Member to the extent such allocation would cause or increase a deficit balance in such Member's Capital Account as of the end of the taxable year to which such allocation relates. If any Member receives an adjustment, allocation or distribution that causes or increases such a deficit balance, taking into account the rules of Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6), such Member shall be allocated (after taking into account any allocations made pursuant to Section 6.2(f)(ii)) items of income and gain in an amount and manner to eliminate the Member's Capital Account deficit attributable to such adjustment, allocation or distribution as quickly as possible. For purposes of this Section 6.2(f)(iii), there shall be excluded from a Member's deficit Capital Account balance at the end of a taxable year of the Company (a) such Member's share, determined in accordance with Section 704(b) of the Code and Treasury Regulation Section 1.704-2(g) of Minimum Gain (provided that, in the case of Minimum Gain attributable to Member-Funded Debt, such Minimum Gain shall be allocated to the Member or Members to whom such debt is attributable pursuant to Treasury Regulation Section 1.704-2(i)), and (b) the amount that such Member is obligated to restore to the Company under Treasury Regulation Section 1.704-1(b)(2)(ii)(c). (iv) Notwithstanding the allocations provided for in subsection (ii) of this Section 6.2(f) and Sections 6.2(d) and (e), if there is a net increase in Minimum Gain of the Company during a taxable year of the Company that is attributable to Member-Funded Debt, then first Depreciation, to the extent the increase in such Minimum Gain is allocable to depreciable property, and then a proportionate part of other deductions and expenditures described in Section 705(a)(2)(B) of the Code, shall be allocated to the lending or guaranteeing Member (and to joint lenders or guarantors in proportion to their relative obli- gations), provided that the total amount of deductions so allocated for any year shall not exceed the increase in Minimum Gain attributable to such Member-Funded Debt in such year. (v) Any special allocation under Sections 6.2(f)(ii) through (iv) shall be taken into account in computing subsequent allocations of Profits and Losses of any item thereof pursuant to this Article VI so that the net amount of any items so allocated and the Profits, Losses and all items thereof allocated to each Member pursuant to this Article VI shall, to the extent permissible under Section 704(b) of the Code and the Treasury Regulations promulgated thereunder, be equal to the net amount that would have been allocated to each Member pursuant to this Article VI if such special allocation had not occurred. (vi) It is intended that prior to a distribution of the proceeds from a liquidation of the Company pursuant to Section 10.2(vi) hereof, the positive Capital Account balance of each Member shall be equal to the amount that such Member would receive if liquidation proceeds were distributed in accordance with Section 7.1. Accordingly, notwithstanding anything to the contrary in this Section 6.2, to the extent permissible under Sections 704(b) and 514(c)(9) of the Code and the Treasury Regulations promulgated thereunder, Profits and Losses and, if necessary, items of gross income and gross deductions, of the Company for the year of liquidation of the Company (or, if the liquidation spans more than one year, each such year) shall be allocated among the Members so as to bring the positive Capital Account balance of each Member as close as possible to the amount that such Member would receive if liquidation proceeds were distributed in accordance with Section 7.1. (vii) Appropriate adjustments shall be made to the provisions of this Section 6.2 if a New Member is admitted to the Company. (viii) The Members agree that in the absence of any special allocations or adjustments to the Capital Accounts made by the Internal Revenue Service, their respective Capital Account balances (other than with respect to the Series A Preferred Membership Units) should be in the ratio of their respective number of Membership Units, and, accordingly, notwithstanding anything to the contrary in Section 6.2(d), to the extent permissible under Sections 704(b) and 514(c)(9) of the Code and the Treasury Regulations promulgated thereunder, for purposes of maintaining Capital Account balances, book income, gain and loss from the sale of Company Assets shall be allocated, in a manner that brings the Member's Capital Account balances into the ratio of their respective number of Membership Units as quickly as possible. ARTICLE VII. APPLICATIONS AND DISTRIBUTIONS OF AVAILABLE CASH 7.1. Applications and Distributions. (a-1) Distributions shall be made by the Manager to the Members of all or a portion of Available Cash as determined by the Management Committee (such amount, the "Distribution Amount") in accordance with Section 7.1(a-2), (b) and (c) within thirty (30) days after the end of each quarter of each Fiscal Year. The Members acknowledge and agree, notwithstanding anything in this Agreement to the contrary, that the Company shall make distributions to the Members in an amount at least sufficient to pay the amounts to Saracen set forth in Section 7.1(a-2)(i) below and to provide WCPT the amount that WCPT would be required to distribute to its shareholders, on account of taxable income of the Company allocable to WCPT, so that WCPT is able to satisfy the distribution requirements of a real estate investment trust with respect to such taxable income. (a-2) The Distribution Amount and the Capital Proceeds Distribution Amount, if any, shall be distributed as follows: (i) First, in an aggregate amount equal to the sum of (A) the Unpaid Preferred Distribution, if any, plus (B) the Preferred Distribution Amount, pro rata to each Saracen Member, in proportion to its relative Series A Preferred Percentage Interests; (ii) Second, in an aggregate amount equal to the Common Distribution Amount, pro rata, (A) to each Saracen Member, an amount equal to each Saracen Member's Percentage Interest multiplied by the Common Distribution Amount and (B) to Whitehall and WCPT an amount equal to their combined Percentage Interests multiplied by the Common Distribution Amount, which amount shall be distributed to Whitehall and WCPT in accordance with Section 7.1(b). (b) The total amount distributed to Whitehall and WCPT pursuant to Section 7.1(a-2)(ii)(B) above shall be further distributed between them as follows: (i) First, to WCPT and Whitehall pro rata (in proportion to the unreturned Capital Contributions of such Members) until each of WCPT and Whitehall shall have received the full amount of all Capital Contributions made by such Member through the date of distribution; (ii) Second, to WCPT and Whitehall pro rata (in proportion to their relative Percentage Interests) until each of WCPT and Whitehall shall have received, taking into account the timing and amount of all prior contributions and distributions (other than any amounts paid pursuant to Sections 2.8 and 2.9 hereof and the Promote), an Internal Rate of Return equal to 17.5% per annum; (iii) Third, (x) 82.5% to WCPT and Whitehall pro rata (in proportion to their relative Percentage Interests) and (y) 17.5% to the Manager until WCPT and Whitehall shall have received, taking into account the timing and amount of all prior contributions and distribu- tions (other than any amounts paid pursuant to Sections 2.8 and 2.9 hereof and the Promote), an Internal Rate of Return equal to 22.5% per annum; and (iv) Thereafter, (x) 77.5% to WCPT and Whitehall pro rata (in proportion to their relative Percentage Interests) and (y) 22.5% to the Manager. (c) If and to the extent applicable, an amount equal to the Percentage Interest of each New Member multiplied by the Common Distribution Amount shall be distributed as follows: (i) First, to such New Member until such New Member shall have received the full amount of all Capital Contributions made by such New Member through the date of distribution; (ii) Second, to such New Member until such New Member shall have received, taking into account the timing and amount of all prior contributions and distributions, an Internal Rate of Return equal to a percentage to be approved by the Management Committee; (iii) Third, (x) a percentage to be approved by the Management Committee to such New Member and (y) a percentage to be approved by the Management Committee to the Manager, until such New Member shall have received, taking into account the timing and amount of all prior contributions and distributions, an Internal Rate of Return equal to a percentage to be approved by the Management Committee; and (iv) Thereafter, (x) a percentage to be approved by the Management Committee to such New Member and (y) a percentage to be approved by the Management Committee to the Manager. (d) If WCPT is entitled to receive payments pursuant to Section 7.1(c)(iii) or (iv) or pursuant to Section 7.6 (from any Member other than Whitehall, it being acknowledged that WCPT (or any other Manager) shall not be entitled to any such Promote from Saracen) on account of any Promote, then all such amounts entitled to be received by WCPT shall instead be distributed among WCPT and Whitehall in accordance with Section 7.1(b). Except as provided in the immediately preceding sentence, Whitehall, Saracen and any other New Member acknowledge and agree that, notwithstanding their existing or future direct or indirect ownership of Shares, (i) they shall not have any direct or indirect interest in the Promote payable to WCPT pursuant to this Agreement, (ii) WCPT shall structure the receipt of the Promote or enter into one or more transactions, so that neither Whitehall, Saracen nor any other New Member will have any direct or indirect interest therein, including, without limitation, by distributing or causing the distribution of the proceeds of or assigning its right to receive all or any portion of the Promote to an Affiliate of or Person(s) employed by WCPT and not to WCPT itself, (iii) Whitehall, Saracen, any other New Member and the Company will cooperate with WCPT, its Affiliates and their respective shareholders, in good faith, but without additional costs to Whitehall, Saracen, any other New Member or the Company, to accomplish the foregoing, and (iv) WCPT (or any other Manager) shall only be entitled to receive the Promote under and pursuant to Sections 7.1(b)(iii)(y), 7.1(b)(iv)(y), 7.1(c)(iii)(y) and 7.1(c)(iv)(y). (e) Notwithstanding the terms of Section 7.1(b) or 7.1(c), if WCPT shall cease to be the Manager, then, at the election of Whitehall, the amount of Available Cash that would otherwise be distributed pursuant to Sections 7.1(b)(iii)(y), 7.1(b)(iv)(y), 7.1(c)(iii)(y) or 7.1(c)(iv)(y) to the Manager shall not be distributed to WCPT, but shall be distributed to Whitehall and WCPT in proportion to their relative Percentage Interests, and appropriate adjustments shall be made in the allocations to be made pursuant to Article 6; provided, however, that if WCPT is removed as Manager pursuant to Section 9.1 Whitehall shall have the right, in its sole and absolute discretion, to provide for the payment to one or more successor managers (which may be Members or Affiliates of Members) of all or a portion of the amounts that would otherwise be distributed to the Manager pursuant to Sections 7.1(b)(iii)(y), 7.1(b)(iv)(y), 7.1(c)(iii)(y) or 7.1(c)(iv)(y) but are not to be so distributed by reason of this Section 7.1(e). (f) Distributions shall be made by the Manager to the Members of all or any portion of Capital Proceeds as determined by the Management Committee (such amount, the "Capital Proceeds Distribution Amount") in accordance with Section 7.1(a) in such amounts and at such time(s) as determined by the Management Committee in its sole discretion, provided, however, that such Capital Proceeds Distribution Amount shall not be made unless at least thirty (30) days' prior written notice of the approximate amount of such Capital Proceeds Distribution Amount has been delivered to the Preferred Holders. 7.2. Restoration of Excess Distributions. Subject to Section 7.3: (a) In the event that distributions have been made to WCPT and Whitehall under Section 7.1(b)(iii) of this Agreement or Section 7.1(b)(iii) of the WWP Agreement and subsequently, Whitehall or WCPT makes a Capital Contribution, then, to the extent required to cause Whitehall and WCPT to receive on a cumulative basis, taking into account the timing and amount of all prior contributions and distributions (other than the Promote), an Internal Rate of Return equal to 17.5% per annum, amounts previously distributed to a Manager under Section 7.1(b)(iii)(y) of this Agreement or Section 7.1(b)(iii)(y) of the WWP Agreement shall be returned by such Manager to the Company for immediate distribution to Whitehall and WCPT pro rata in accordance with their relative Percentage Interests, and, to the extent permissible under Sections 704(b) and 514(c)(9) of the Code and the Treasury Regulations promulgated thereunder, appropriate adjustments shall be made in the allocations pursuant to Article VI hereof. (b) In the event that distributions have been made to the WCPT and Whitehall under Section 7.1(b)(iv) of this Agreement or Section 7.1(b)(iv) of the WWP Agreement and subsequently, Whitehall or WCPT makes a Capital Contribution, then, to the extent required to cause Whitehall and WCPT to receive on a cumulative basis, taking into account the timing and amount of all prior contributions and distributions (other than the Promote), an Internal Rate of Return equal to 22.5% per annum, amounts previously distributed to the Manager under Section 7.1(b)(iv)(y) of this Agreement or Section 7.1(b)(iv)(y) of the WWP Agreement shall be returned by such Manager to the Company for immediate distribution to Whitehall and WCPT pro rata in accordance with their relative Percentage Interests, and, to the extent permissible under Sections 704(b) and 514(c)(9) of the Code and the Treasury Regulations promulgated thereunder, appropriate adjustments shall be made in the allocations pursuant to Article VI hereof. 7.3. Liquidation. In the event of the sale or other disposition of all Properties owned by the Company and its Subsidiaries, the Company shall be dissolved and the proceeds of such sale or other disposition shall be distributed to the Members in liquidation as provided in Article X. 7.4. Repayment of Member Loans. If any Member shall be a borrower under one or more Member Loans (a "Debtor Member"), then any distributions that would otherwise be payable to such Debtor Member pursuant to Section 7.1, 7.2 or 10.2 shall instead be paid to the Member or Members which made such Member Loans (each, a "Lender Member"), first to pay any accrued interest (at the Default Rate) and then to pay the principal amount thereof, until such Member Loans (including any accrued and unpaid interest) shall be repaid in full. In the event there are two or more Lender Members with respect to any Debtor Member, distributions under this Section 7.4 shall be made pro rata to each Lender Member in proportion to the relative principal amount of Member Loans (including accrued and unpaid interest) that such Lender Member has outstanding as a percentage of total outstanding Member Loans made to such Debtor Member by all Lender Members. Any amounts distributed pursuant to this Section 7.4 shall for all other purposes of this Agreement be treated as if distributed to the Debtor Member. 7.5. Revisions to Reflect Issuance of Additional Membership Interests. Subject to Section 12.1 herein, in the event that the Company issues additional membership interests pursuant to Section 5.9 hereof with rights, preferences or privileges different from those issued on the date hereof, the Manager shall make such revisions to this Article VII as it deems necessary to reflect the issuance of such additional membership interests and any special rights, duties or powers with respect thereto. 7.6. Initial Public Offering; Sale of Units. (a) In the event of a public offering of Shares by WCPT and provided that WCPT shall be acting as the Manager at the time of such offering, each Member and WRP agree to take all actions necessary or appropriate at no cost or expense to the Saracen Members, and without any impact on the rights or amounts to be received by the Saracen Members, including, without limitation, amending any Organizational Document of WCPT and the Company (including this Agreement) in order that the Manager receives additional compensation (either in cash, or if the Initial Members agree, in the form of Membership Units or otherwise) equal in value to the Promote that the Manager would have received if all of the Company Assets were sold for a price equal to the total valuation of the Company (implied by reference to the public offering price of the shares sold by WCPT) and the proceeds of such sale were distributed pursuant to Section 10.2. If, in connection with a public offering of WCPT, the Initial Members are restricted from selling their Membership Units or Shares until a specified lock-up period has lapsed after such offering, then the Promote payable to WCPT under this subparagraph (a) shall be calculated and paid to WCPT promptly after such lock-up period expires. The Initial Members (other than WCPT) agree to pay to the Manager or its designee contemporaneously with the closing of the public offering (or on the day after expiration of any lock-up as described in the immediately preceding sentence) such amount in cash or, if the Initial Members and WRP agree otherwise, in the form of Membership Units or otherwise (based upon the relative Percentage Interests of such Initial Members). Without in any way limiting the restrictions contained in Article 8, Whitehall agrees not to distribute its Membership Units or Shares to any of its constituent partners prior to payment of the Promote payable under this subparagraph (a). Any Membership Units to be received by the Manager pursuant to this subparagraph (a) shall not be newly issued Membership Units but shall be Membership Units beneficially owned by Whitehall. Each Member and WRP will work together in good faith to achieve the optimal tax consequences for WCPT; provided, that there is no adverse impact on the other Members. (b) Unless the full Promote has already been, or is due to be, paid to Manager under subparagraph (a), in the event that any Initial Member other than WCPT, to the extent permitted under this Agreement, either sells (or otherwise disposes of) all or any of its Membership Units to a third- party or converts all or any of its Membership Units into Shares or WRP Shares, such Initial Member shall pay to the Manager on the Determination Date (as defined below) an amount equal to the amount of the Promote that would have been payable to the Manager if the proceeds received by such Initial Member (or the cash value thereof as of the Determination Date if such proceeds are not cash) were first distributed to such Initial Member pursuant to Section 7.1 (ignoring for this purpose only any Interest of any other Initial Member) to the extent required for the Manager to receive the Promote. For purposes of this subparagraph (b), the "Determination Date" shall be the date of the relevant sale, disposition or conversion of the Membership Units; provided that, if the Shares or WRP Shares received by such Initial Member upon conversion of any Membership Units are subject to any "lock-up" agreement prohibiting the sale of such Shares or WRP Shares for a specified period, the "Determination Date" shall mean the date upon which such lock-up period expires. (c) Upon payment of any amounts (whether in cash, Shares, WRP Shares, Membership Units or other consideration) to the Manager pursuant to this Section 7.6 in respect of the sale, disposition or conversion of any Membership Units, no further amounts shall be payable to the Manager pursuant to this Section 7.6 or Sections 7.1(b)(iii)(y), 7.1(b)(iv)(y), 7.1(c)(iii)(y) or 7.1(c)(iv)(y) or any successor provision to any of the foregoing in respect of any such sold, disposed of or converted Membership Units or in respect of any subsequent sale, transfer or other disposition of the proceeds from or consideration received on account of any such sale, disposition or conversion of Membership Units. ARTICLE VIII. TRANSFER OF COMPANY INTERESTS 8.1. Limitations on Assignments of Interests by Members. (a) Except as provided in Section 8.1(b) and Section 8.2, no Member shall Transfer (as hereinafter defined) all or any portion of its Interest or permit such a Transfer or contract to do so, without the consent of each of the Initial Members (which consent may be withheld in such Initial Member's sole discretion for any reason or no reason) and in strict compli- ance with the provisions of this Article VIII. As used herein "Transfer" of an Interest means, with respect to any Member, any transfer, sale, pledge, hypothecation, encumbrance, assignment or other disposition of any portion of the Interest of such Member or the proceeds thereof (whether voluntarily, involuntarily, by operation of law or otherwise). Notwithstanding the foregoing, a transfer, sale, pledge, hypothecation, encumbrance, assignment or other disposition of ownership interests in WCPT (including by virtue of an Extraordinary Transaction but excluding any transfer of up to 6,000 shares of WCPT issued to holders other than WRP on or about the Initial Closing Date) shall constitute a "transfer" of WCPT's Interest and shall be subject to the provisions of this Article VIII. Any purported Transfer in violation of this Article VIII shall be void ab initio, and shall not bind the Company, and the Members making such purported transfer, sale or assignment shall indemnify and hold the Company and the other Members harmless from and against any federal, state or local income taxes, or transfer taxes, includ- ing without limitation, transfer gains taxes, arising as a result of, or caused directly or indirectly by, such purported Transfer. The giving of any consent to a Transfer in any one or more instances shall not limit or waive the need for such consent in any other or subsequent instances. (b) Subject to compliance with the remaining provisions of this Article VIII and with Section 4.2 and notwithstanding anything to the contrary set forth in Section 8.1(a) above, each of WCPT, Whitehall and Saracen may, from time to time and without any consent or approval, pledge or otherwise grant a security interest in all or part of such Member's Interest to an Institutional Lender to secure a loan made to such Member (a "Pledgor") by such Institutional Lender (a "Pledgee"); provided that, (i) such pledged Interest may not be transferred to the Pledgee by foreclosure, assignment in lieu thereof or other enforcement of such pledge, and (ii) WCPT, Whitehall and Saracen may pledge only their respective economic interests in the Company and no other rights hereunder. In addition, notwithstanding anything to the contrary set forth herein, (A) Whitehall shall have the right at any time to transfer all or any part of its Interest without the prior consent of any Member (including WCPT and the Manager) pursuant to Section 8.3 or in connection with (i) its exercise of the WRP Warrants in exchange for its Membership Units or (ii) the exchange of its Membership Units for the WRP At- Market Shares and (B) any Saracen Member shall have the right at any time to transfer all or any part of his or her Interest without the prior consent of any Member (i) pursuant to Section 8.3, (ii) to another Saracen Member, provided that such transfer shall not result in Dominic J. Saraceno having a Percentage Interest (assuming for purposes of determining Dominic J. Saraceno's Percentage Interest pursuant to this Section 8.1(b) only, all of his outstanding Series A Preferred Membership Units were converted into Membership Units at the conversion price set forth in the Series A Terms) equal to or greater than 10% or (iii) pursuant to a transfer for a tax or estate planning purpose only, by inter vivos gift or sale to an entity or trust or pursuant to any applicable laws of descent; provided that at all times the voting control of such entity or trust is held by and the decisions of such entity or trust are made solely by such Member (or, if applicable, by any executor). (c) At all times prior to an initial public offering by WCPT, any one or more of Whitehall Street Real Estate Limited Partnership V, Whitehall Street Real Estate Limited Partnership VII and/or Whitehall Street Real Estate Limited Partnership IX, each a Delaware limited partnership, shall control Whitehall. 8.2. Sale of Properties, the Company or its Subsidiaries. (a) Notwithstanding any other provisions herein, at any time prior to an initial public offering by WCPT and after the fourth anniversary of the Initial Closing, either Whitehall or WCPT may (as long as it is still an Appointing Member), by delivering written notice (a "Sales Notice") to the other (the person delivering such Sales Notice being referred to as the "Triggering Party" and the recipient of such Sales Notice being referred to as the "Non- Triggering Party"), require the Company to sell any and all of the Properties (or sell the Subsidiary(ies) owning any Property(ies)) in one or more bona fide transactions to a Person not Affiliated with the Triggering Party (a "Third Party"), subject to the terms and conditions of this Section 8.2. Each Property (or Subsidiary) which is the subject of a Sales Notice is referred to herein as a "Subject Property" (or "Subject Subsidiary"). The Sales Notice shall state the price (the "Total Price") at which the Triggering Party desires to sell the Subject Property(ies) and/or Subject Subsidiary(ies). (b) Concurrently with the delivery of the Sales Notice referred to in Section 8.2(a), the Triggering Party shall submit to the Non-Triggering Party an offer (the "Offer"), to sell (or cause the Company or the applicable Subsidiaries to sell) to the Non-Triggering Party (or its designees) for cash in exchange for the Non-Triggering Party (or its designees) paying to the Company or the Subsidiary(ies) owning the Subject Property(ies) the Total Price, failing which the Triggering Party shall be entitled to market the Subject Property(ies) and/or Subject Subsidiary(ies), as more particularly set forth below in this Section 8.2. The Offer shall also set forth any other material economic terms of the purchase; provided that, any Offer (x) shall be an all cash offer and shall contain an exculpation of the Members and their direct and indirect owners and Affiliates from any liabilities relating to the Subject Property(ies) and/or Subject Subsidiary(ies) and (y) notwithstanding such exculpation, may include a holdback for breaches of representations or warranties (which may survive for claims made within no more than one year from the transfer of the Subject Property(ies) and/or Subject Subsidiary(ies)) by the Company (which in each case shall be as outlined by the Triggering Party in the Offer) not to exceed 3% of the purchase price, which holdback amount may be available for no more than the survival period of the representations and warranties. (c) Within thirty (30) days after receiving the Offer, the Non- Triggering Party shall deliver a notice (a "Sales Response Notice") to the Triggering Party, stating the election by the Non-Triggering Party of one of the two following options: (1) to purchase (or have its designee purchase) for the Total Price the Subject Property(ies) and /or Subject Subsidiary(ies) on or before the date (the "Applicable Closing Date") specified in such Sales Response Notice (which date shall be no later than sixty (60) days after the Sales Response Notice is delivered) and in accordance with the terms set forth in the Offer; concurrently with the delivery of a Sales Response Notice, and as a condition to its effectiveness under this Section 8.2(c), the Non-Triggering Party shall also deliver to the Com- pany a down payment equal to 5% of the Total Price, which shall not be refundable except if the Company or its Subsidiary defaults as a seller of the Subject Property(ies) and/or Subject Subsidiary(ies); or (2) to agree to the sale of the Subject Property(ies) and/or Subject Subsidiary(ies) in accordance with the terms of the Offer, subject to such changes therein as are contemplated by the terms of this Section 8.2 provided below, in which event, the Non-Triggering Party shall have no further rights to purchase any Subject Property or Subject Subsidiary, except as may be expressly provided for below in this Section 8.2. If the Non-Triggering Party fails to elect, by written notice, one of the above two options within said thirty (30)-day period, or fails to deliver the down payment required as a condition of such election, then it shall be conclusively presumed that the Non-Triggering Party elected option (2) above (and the Non-Triggering Party hereby consents to such sale in such case). (d) Promptly after an election by the Non-Triggering Party pursuant to Section 8.2(c)(1), the Company (and/or the applicable Subsidiary or Subsidiaries) and the Non-Triggering Party (or its designee(s)) shall proceed with such purchase and sale, the closing for which shall be held on or before the Applicable Closing Date, during normal business hours at the offices of counsel to the Non-Triggering Party. The Non-Triggering Party shall have one five (5) Business Day adjournment, whereupon time shall be of the essence with respect to the Non-Triggering Party's obligation to close on the purchase of the Subject Property(ies) and/or Subject Subsidiary(ies) in accordance with the terms of this Section 8.2(d) on or before the Applicable Closing Date, and if the Non-Triggering Party does not close in accordance with this paragraph, the Triggering Party shall be entitled, as the sole and exclusive remedies of the Triggering Party, to market and sell the Subject Property(ies) and/or Subject Subsidiary(ies) on behalf of the Company (or the applicable Subsidiary(ies)) in accordance with this Section 8.2 as if the Non-Triggering Party made the election described in Section 8.2(c)(2) and to keep (for the Company's account) the downpayment described in Section 8.2(c)(1) above (unless the failure to close is due to the default of the Company or its Subsidiary, in which case the Triggering Party shall not be entitled to the foregoing remedies). (e) Upon an election (or deemed election) by the Non-Triggering Party pursuant to Section 8.2(c)(2), the Triggering Party shall have the right to cause the Company or the applicable Subsidiary(ies) to market the Subject Property(ies) and/or Subject Subsidiary(ies) for a period (the "Marketing Period") of one hundred and eighty (180) days commencing with the earlier to occur of (i) the thirtieth (30th) day after the delivery of the Offer to the Non-Triggering Party or (ii) the notice by the Non-Triggering Party to the Triggering Party of the Non-Triggering Party's election to proceed under Section 8.2(c)(2). The Members shall cooperate fully with the efforts of the Triggering Party to market the Subject Property(ies) and/or Subject Subsidiary(ies) and shall use their good faith efforts to cause the sale of the Subject Property(ies) and/or Subject Subsidiary(ies) on the terms set forth in the Offer. (f) If (i) during the Marketing Period, the Company receives a third-party offer to purchase the Subject Property(ies) and/or Subject Subsidiary(ies) for all cash (a "Third Party Offer") that the Triggering Party desires to accept, (ii) the sale price provided for therein (the "Third Party Offer Price") is equal to 100% or more of the Total Price and (iii) the terms are otherwise no less favorable to the Company than those set forth in the Offer and shall not provide for any additional or separate consideration to the Triggering Party (or its Affiliates), then the Company or the applicable Subsidiary(ies) shall sell the Subject Property(ies) and/or Subject Subsidiary(ies) in accordance with the terms of such Third Party Offer (the Triggering Party being fully authorized and empowered to execute and deliver all necessary documents, agreements and instruments on their behalf and to make the representations and warranties on their behalf that were outlined in the Offer) and no Non-Triggering Party shall have any right to purchase any Subject Property or Subject Subsidiary or to object to or otherwise interfere with such sale, provided that the closing of such sale shall occur not later than the ninetieth (90th) day after the expiration of the Marketing Period. In the event that the closing shall not occur within such ninety (90)-day period, or the Company does not receive a Third Party Offer that satisfies the conditions of this Section 8.2(f) during the Marketing Period, then the Triggering Party shall have the right at any time thereafter to further attempt to sell the Subject Property(ies) and/or Subject Subsidiary(ies), subject to the rights of the Non-Triggering Party under Section 8.2(a), which shall be reinstated with respect to any such further decision on the part of Triggering Party to sell the Subject Property(ies) and /or Subject Subsidiary(ies). (g) If during the Marketing Period, the Company receives a Third Party Offer that satisfies the conditions of Section 8.2(f), except that the Third Party Offer Price is less than 100% of the Total Price, then the Triggering Party, if it wishes to accept such Third Party Offer, shall so notify the Non-Triggering Party. Within thirty (30) days after receiving such notice, the Non-Triggering Party shall deliver to the Triggering Party a notice (a "Third Party Response Notice"), stating its election of one of the two following options: (1) to purchase (or have its designee purchase) for the Third Party Offer Price the Subject Property(ies) and/or Subject Subsidiary(ies) on or before the date which is no later than thirty (30) days after delivery of such Third Party Response Notice and otherwise in accordance with the terms set forth in the Third Party Offer; concurrently with the delivery of a Third Party Response Notice, and as a condition to its effectiveness under this Section 8.2(g), the Non- Triggering Party shall also deliver to the Company a down payment equal to 5% of the Third Party Offer Price, which shall not be refundable except if the Company or its Subsidiary defaults as a seller of the Subject Property(ies) and/or Subject Subsidiary(ies); or (2) to agree to the sale of the Subject Property(ies) and/or Subject Subsidiary(ies) in accordance with the terms of the Third Party Offer, in which event, the Non-Triggering Party shall have no further rights to purchase any Subject Property or Subject Subsidiary, except as may be expressly provided for below in this Section 8.2. If the Non-Triggering Party fails to elect, by written notice, one of the above two options within said thirty (30)-day period, or fails to deliver the down payment required as a condition of such election, then it shall be conclusively presumed that the Non-Triggering Party elected option (2) above (and the Non-Triggering Party hereby consents to such sale in such case). (h) Promptly after an election by the Non-Triggering Party pursuant to Section 8.2(g)(1), the Company and/or the applicable Subsidiary or Subsidiaries and the Non-Triggering Party (or its designee(s)) shall proceed with such purchase and sale, the closing for which shall be held on or before the closing date specified in the Third Party Response Notice pursuant to Section 8.2(g)(1) above, during normal business hours at the offices of counsel to the Non-Triggering Party. The Non-Triggering Party shall have one five (5) Business Day adjournment, whereupon time shall be of the essence with respect to the Non-Triggering Party's obligation to close on the purchase of the Subject Property(ies) and/or Subject Subsidiary(ies) in accordance with the terms of this Section 8.2(h) on or before the thirtieth (30th) day after such election is made, and if the Non-Triggering Party does not close in accordance with this paragraph, the Triggering Party shall be entitled, as the sole and exclusive remedies of the Triggering Party, to market and sell the Subject Property(ies) and/or the Subject Subsidiary(ies) on behalf of the Company (or the applicable Subsidiary) in accordance with this Section 8.2 as if the Non-Triggering Party made the election described in Section 8.2(g)(2) and to keep (for the Company's account) the down payment described in Section 8.2(g)(1) above (unless the failure to close is due to the default of the Company or its Subsidiary, in which case the Triggering Party shall not be entitled to the foregoing remedies). (i) If the Non-Triggering Party, having elected to proceed under either Section 8.2(c)(1) or Section 8.2(g)(1), defaults on its obligation to purchase the Subject Property(ies) and/or Subject Subsidiary(ies) as required thereunder, then the Triggering Party shall be entitled to retain (for the Company's account), as liquidated damages, the down payment received in contemplation of such sale, it being agreed that the amount represents a fair and equitable estimate of the damages to be suffered by the Triggering Party, the Company or its Subsidiaries if the Non-Triggering Party were to so default and that actual damages would be highly impracticable to determine. (j) Notwithstanding anything to the contrary, the Triggering Party shall, subject to and in accordance with this Section 8.1, have full right, power and authority (acting alone) to execute, deliver and perform, for and in the name of the Company, of the applicable Subsidiary(ies) and, in the case of a sale of the Company, of the Members, and each Member hereby agrees to execute, deliver and perform, any and all documents, agreements and instruments, and to take any other actions as may be required or desirable for the purpose of transferring the Subject Property(ies) and/or Subject Subsidiary(ies), to the maker of the Third Party Offer or the Non-Triggering Party, as the case may be. (k) No Property may be a Subject Property if the sale of such Property would cause WCPT to lose its REIT status or to incur a 100% tax on the profits allocable to WCPT. (l) Notwithstanding any other provisions herein, at any time after the occurrence of a Triggering Event (as defined below) and prior to an initial public offering by WCPT, the Marketing Member (as defined below) may require the Company or its Subsidiary(ies) to sell any or all of the Properties (or sell the Subsidiary(ies) owning such Property(ies)) , and may sell the Company as a whole, in one or more bona fide transactions to a Person not Affiliated with the Marketing Member, subject to the terms and conditions of this Section 8.2(l). Prior to commencing any sale of a Property or Subsidiary (or the Company) pursuant to this Section 8.2(l), the Marketing Member shall notify the other Members of its intention to sell the subject Property(ies) and/or Subsidiary(ies) (or the Company) in writing and shall keep the other Members reasonably informed of the status and terms of the marketing efforts with respect to such assets of the Company. The Marketing Member shall have full right, power and authority (acting alone) to execute, deliver and perform, for and in the name of the Company, of the applicable Subsidiary(ies) and, in the case of a sale of the Company, of the Members, and each Member hereby agrees to execute, deliver and perform, any and all documents, agreements and instruments, and to take any other actions as may be required or desirable for the purpose of transferring the subject Property(ies) and/or Subsidiary(ies) or the Company to the purchaser thereof. For purposes of this Section 8.2(l), the term "Triggering Event" shall mean (i) with respect to either Whitehall or WCPT, the fifth anniversary of the Initial Closing Date, (ii) with respect to Whitehall only, the occurrence of any event constituting Cause and (iii) with respect to either Whitehall or WCPT, at any time since the later of (x) the first anniversary of the Initial Closing Date and (y) the date twelve months prior to the date of determination, the Committee Representatives appointed by Whitehall declined not less than five opportunities to purchase one or more Office Properties each having a purchase price of at least $15 million individually after WCPT or one of its Affiliates shall have offered the Company the opportunity to purchase such Office Properties in accordance with Section 4.2(e). For purposes of this Section 8.2(l), the term "Marketing Member" shall mean, with respect to any Property or Subsidiary (or of the Company), the first of Whitehall or WCPT (provided such Person is still an Appointing Member) to receive a binding offer from a Person who is not Affiliated with such Member to purchase such Property or Subsidiary (or the Company) and if Whitehall and WCPT shall each contemporaneously receive such an offer, the Member receiving the offer with the higher purchase price for such Property or Subsidiary (or the Company); provided that, at any time after the occurrence of a Triggering Event specified in clause (ii) only Whitehall may be a Marketing Member. 8.2A Indemnification of Saracen. (a) The Company shall indemnify Saracen as and when required in this Section 8.2A. The Company acknowledges and agrees that this Section 8.2A is a material inducement to the Saracen Members entering into this Agreement, without which the Saracen Members would be unwilling to enter into this Agreement. (i) Except only as and to the extent set forth in this Section 8.2A(a) below, in the event the Company shall cause or permit to occur or exist (a) any Saracen Gain Recognition (as hereinafter defined) (x) on or before the expiration of a nine (9) year period following the Saracen Closing Date (the last day of such period, hereafter, the "End Date") with respect to all or any of the Nomura Properties or the 72 River Park Property and (y) on or before the expiration of a five (5) year period following the Saracen Closing Date with respect to all or any of the Non-Nomura Properties or (b) any Saracen Debt Reduction Event (as hereinafter defined) on or before the End Date, then the provisions in Sections 8.2A(v), (vi), (vii), (viii), (ix) and (x) shall apply. (ii) Notwithstanding anything in this Section 8.2A to the contrary, Section 8.2A(a)(i) above and Sections 8.2A(a)(v) through (x) below shall not apply to (x) any Saracen Gain Recognition caused by any affirmative action taken by any Saracen Member before, on or after the Saracen Closing Date with respect to any Interest of any Saracen Member (any such transfer, a "Non- Triggering Saracen Transfer") which triggers any Saracen Gain Recognition, but only if and to the extent of the Saracen Gain Recognition which is caused by such Non-Triggering Saracen Transfer, (y) any Saracen Gain Recognition or Saracen Debt Reduction Event which results (i) from the partial, periodic amortization of the Nomura Loan during the period from the Saracen Closing Date through the End Date, but only as and to the extent such amortization is required in connection with any applicable regularly scheduled payment of principal and interest pursuant to the documents evidencing the Nomura Loan as of the Saracen Closing Date ("Required Amortization"), such amortization not to include any voluntary or involuntary payments of principal (other than Required Amortization) on or before the End Date, whether in connection with any default, casualty, condemnation or otherwise, or (ii) from any payment of principal on or after the End Date, or (z) any recognition of income or gain by any Saracen Member as a result of or in connection with the Saracen Closing. (iii) For purposes of this Section 8.2A, the term "Saracen Gain" shall mean any "built-in gain" (within the meaning of Treasury Regulation Section 1.704-3(a)(3)(ii)) that exists immediately following the Saracen Closing with respect to any of the Nomura Properties, the 72 River Park Property or the Non-Nomura Properties (after taking into account any step-up in basis with respect to such properties arising in connection with the Saracen Closing), as such "built-in gain" may be reduced from time to time (a) under Treasury Regulations Section 1.704-3, and (b) to reflect any Damages (in excess of $500,000) determined pursuant to Section 5.1(l) hereof. For purposes of Section 8.2A, the term "Saracen Gain Recognition" means (x) any recognition of Saracen Gain by any Saracen Member, including a permitted transferee pursuant to Section 8.1(b)(B) (individually or collectively, as the case may be, hereafter a "Saracen Indemnitee Member"), with respect to the Nomura Properties or the 72 River Park Property at any time commencing on the Saracen Closing Date and ending on or before the End Date, and (y) any recognition of Saracen Gain by a Saracen Indemnitee Member with respect to the Non-Nomura Properties at any time during the five (5) year period commencing on the Saracen Closing Date. (iv) For purposes of this Section 8.2A, the term "Saracen Debt Reduction Event" shall mean the recognition of taxable income by any Saracen Indemnitee Member as a result of the failure, for any reason whatsoever, of the Company to have outstanding an amount of Non-Recourse Liabilities such that each Saracen Indemnitee Member is allocated (pursuant to Section 752 of the Code and the Treasury Regulations issued thereunder) an amount of such liabilities at least equal to the amount by which such Saracen Indemnitee Member's (outside) tax basis in his Interest would be negative but for allocations of Non-Recourse Liabilities to such Member (pursuant to Section 752 of the Code and the Treasury Regulations thereunder), in order to prevent such Member from recognizing taxable income as a result of a reduction in the amount of debt allocable to such Member; provided, however, that the amount of liabilities required to be allocated to all Saracen Indemnitee Members in the aggregate shall not exceed $50,000,000, reduced over time with respect to each applicable Saracen Indemnitee Member (w) by the aggregate amount of additions to such Saracen Indemnitee Member's (outside) tax basis in his Interests attributable to all prior Saracen Gain Recognition events and Saracen Debt Reduction Events, (x) by the aggregate amount of Required Amortization as allocated entirely among the Saracen Indemnitee Members, (y) by all payments of principal on the Nomura Loan made after the End Date as allocated entirely among the Saracen Indemnitee Members, (z) the aggregate amount of additions to such Saracen Indemnitee Member's (outside) tax basis in its Interests attributable to all taxable income recognized by reason of a Non-Triggering Saracen Transfer taken by such Saracen Indemnitee Member, (aa) by any reductions in the amount of Non-Recourse Liabilities allocable to such Saracen Indemnitee Member by reason of any adjustments to Capital Accounts or the number of Membership Units or Series A Preferred Membership Units pursuant to Section 5.1(l) hereof, and (bb) after the expiration of a five (5) year period after the Saracen Closing Date but only if there shall have been a Capital Event, by an amount equal to the amount by which such Saracen Indemnitee Member's (outside) tax basis in his Interest would be negative but for allocations of Non-Recourse Liabilities to such Member (pursuant to Section 752 of the Code and the Treasury Regulations thereunder), as of the day before the Saracen Closing Date determined solely with respect to the Non-Nomura Properties (without duplication for any amounts taken into account under clauses (w), (x), (y), (z) and (aa) above). (v) In the event of any Saracen Gain Recognition or Saracen Debt Reduction Event which is otherwise prohibited or restricted pursuant to this Section 8.2A(a), concurrently with the consummation of the transaction or other event or circumstance which results in such Saracen Gain Recognition or Saracen Debt Reduction Event, as the case may be, the Company shall pay to the applicable Saracen Indemnitee Members, in addition to any amounts otherwise distributable under Article VII (or, if applicable, Article X) hereof, an amount equal to the amounts described in Sections 8.2A(a)(vi) through (x) below. (vi) (A) In the case of any Saracen Gain Recognition at or before the expiration of a five (5) year period after the Saracen Closing Date, the aggregate federal, state and local income taxes (determined in accordance with Section 8.2A(x)) payable by each Saracen Indemnitee Member on the pro rata amount of Saracen Gain recognized by such Saracen Indemnitee Member as a result of the Saracen Gain Recognition, as such Saracen Gain is reduced, without duplication, by items (w), (x), (y) and (z) described in Section 8.2A(viii). (B) In the case of any Saracen Debt Reduction Event at or before the expiration of a five (5) year period after the Saracen Closing Date, the aggregate federal, state and local income taxes (determined in accordance with Section 8.2A(x)) payable by each Saracen Indemnitee Member on the pro rata amount of taxable income recognized by such Saracen Indemnitee Member as a result of the Saracen Debt Reduction Event, as such taxable income is reduced, without duplication, by items (w), (x), (y), (z), (aa) and (bb) described in Section 8.2A(iv). (vii) (A) In the case of any Saracen Gain Recognition after the expiration of a five (5) year period after the Saracen Closing Date, but prior to the End Date, and subject to Section 8.2A(a)(ix), an amount representing the present value of the aggregate federal, state and local income taxes (determined in accordance with Section 8.2A(x)) payable by each Saracen Indemnitee Member, on the pro rata amount of Saracen Gain recognized by such Saracen Indemnitee Member as a result of the Saracen Gain Recognition, as such Saracen Gain is reduced, without duplication, by items (w), (x), (y) and (z) described in Section 8.2A(viii), determined as if such taxes were payable on the End Date and calculated using a 10% discount rate. (B) In the case of any Saracen Debt Reduction Event after the expiration of a five (5) year period after the Saracen Closing Date, but prior to the End Date, and subject to Section 8.2A(a)(ix), an amount representing the present value of the aggregate federal, state and local income taxes (determined in accordance with Section 8.2A(x)) payable by each Saracen Indemnitee Member, on the pro rata amount of taxable income recognized by such Saracen Indemnitee Member as a result of the Saracen Debt Reduction Event, as such taxable income is reduced, without duplication, by items (w), (x), (y), (z), (aa) and (bb) described in Section 8.2A(iv), determined as if such taxes were payable on the End Date and calculated using a 10% discount rate. (viii) For purposes of Section 8.2A(a)(vi) and (vii) above and notwithstanding anything therein to the contrary, the amount required to be paid a result of any Saracen Gain Recognition with respect to any particular Property, other than amounts to be paid on account of the "gross-up" pursuant to Section 8.2A(x), shall equal the amount of aggregate federal, state and local income taxes (determined in accordance with Section 8.2A(x)) then payable with respect to the amount of Saracen Gain with respect to such Property at the time of the Saracen Gain Recognition, reduced over time with respect to each applicable Saracen Indemnitee Member, (w) by an amount equal to $4,000,000 times a fraction, the numerator of which is the Book Value of such Property and the denominator of which is the aggregate Book Values of all Saracen Contributed Properties, in each case as Book Value is determined immediately after the Saracen Closing, (x) by the pro rata amount of Saracen Gain previously taken into account by such Saracen Indemnitee Member (or any predecessor in interest) under Sections 8.2A(a)(vi) and (vii) as a result of any Saracen Gain Recognition, (y) by the amount of any Saracen Gain reportable as taxable income by such Saracen Indemnitee Member (or any predecessor in interest) as a result of any Non-Triggering Saracen Transfer, and (z) any increase in basis of such Property under Code Section 754, which is attributable to a sale, exchange or other disposition of an Interest by such Saracen Indemnitee Member (or any predecessor or successor hereof); the death of such Saracen Indemnitee Member (or any predecessor or successor thereof); or a distribution of property to such Saracen Indemnitee Member (or any predecessor or successor thereof). (ix) In addition, and notwithstanding the foregoing in the case of any Saracen Gain Recognition or Saracen Debt Reduction Event that occurs after the expiration of a five (5) year period after the Saracen Closing Date, but on or before the expiration of a seven (7) year period after the Saracen Closing Date, the Company shall, concurrently with the consummation of the transaction or other event or circumstance which results in such Saracen Gain Recognition or Saracen Debt Reduction Event, make a loan to each Saracen Indemnitee Member providing for (A) a principal amount equal to the amount by which the aggregate federal, state and local income taxes payable by such Member as a result of such Saracen Gain Recognition or Saracen Debt Reduction Event, as the case may be, exceeds the amount reimbursed by the Company pursuant to Section 8.2A(a)(vi) and (vii) above; (B) an interest rate equal to 10% per annum or, in the case of a Saracen Gain Recognition or Saracen Debt Reduction Event that arises in connection with an event which is not within the reasonable control of the Company, an interest rate equal to 12% per annum, which interest shall accrue until maturity, with all such amounts compounding annually; (C) maturity on the End Date; and (D) prepayment at any time without premium or penalty. (x) Any reimbursement by the Company under this Section 8.2A shall be increased by an amount (the "gross-up") to take into account any tax liability that would be incurred by the Saracen Indemnitee Member arising from the receipt or accrual of such reimbursement payment without regard to the gross-up. That is, the gross-up amount does not take into account any tax liability that would be incurred by the Saracen Indemnitee Member arising from the receipt or accrual of the gross-up payment itself. In computing the amount of any tax reimbursement payment or gross-up, such Member shall be deemed to be subject to federal, state and local income tax at the highest effective tax rate imposed on income of residents of Boston, Massachusetts then in effect but taking into account all applicable capital gains tax rates and giving effect to all federal income tax savings attributable to deductions for all state and local taxes payable hereunder in connection with a Saracen Gain Recognition and a Saracen Debt Reduction Event, and such payments shall be made without regard to or reduction for any items of loss, deduction or credit to which such Member may be entitled under applicable law, other than such deductions for all state and local taxes payable hereunder. (xi) The Saracen Members agree to furnish to the Company copies of all 1996, 1997 and 1998 federal and state income tax returns of the Saracen Current Owners relating to the Saracen Properties ("Tax Returns") as soon as practicable following the filing thereof with the tax authorities. However, any failure by any Saracen Member to comply with the requirements of this Section 8.2A(a)(xi) shall not constitute a default and will not affect or otherwise limit the Company's liability or obligations under this Section 8.2A(a). (xii) After the expiration of the End Date and only if no Capital Event shall have occurred before, on or after the End Date, the Company shall reasonably cooperate with the holders of the Saracen Membership Units and the Series A Preferred Membership Units to reduce or eliminate the amount of income that would otherwise be recognized by them by reason of a Saracen Debt Reduction Event, including by permitting such holders to guarantee certain obligations of the Company or to agree to a limited obligation to restore deficits in their capital accounts, provided and to the extent that doing so would not then impose (x) any adverse income tax consequences on any other Member or the Company, or (y) any economic cost on any other Member or the Company. Notwithstanding the foregoing, in no event shall the Company or the Management Committee have any duty to incur new or additional financing or to refrain from refinancing or satisfying any existing indebtedness of the Company as a result of this Section 8.2(A)(a)(xii), and neither the Company nor the Management Committee shall incur any liability in the event that the Company does not comply with the terms of this Section 8.2(A)(a)(xii) at any time. (xiii) Amounts required to be paid or loaned by the Company to one or more Saracen Indemnitee Members pursuant to this Section 8.2A (collectively, "Payments") shall be paid or loaned concurrently with the consummation of the transaction or other event or circumstance which causes such amounts to become payable. Within thirty (30) days following the receipt by a Saracen Indemnitee Member of a Payment, such Saracen Indemnitee Member can send a written notice to the Company containing a computation of what such Saracen Indemnitee Member considers to be correct amount of Payments and specifying the resulting deficiency (the "Asserted Deficiency"). Upon receipt by the Company of such a notice within said thirty (30) day period, there shall be no distributions of cash to any Member pursuant to Section 7.1(a-2) unless and until the Company shall, at its option, either (i) pay the Asserted Deficiency to such Saracen Indemnitee Member, (ii) establish a reserve account in an amount equal to the Asserted Deficiency, or (iii) resolve the dispute in a manner agreed to, in writing, by such Saracen Indemnitee Member. (xiv) If there is any change in the provisions of the Code or Treasury Regulations which would cause any Payments to become payable hereunder, each of the Saracen Indemnitee Members shall reasonably cooperate with the Company to reduce or eliminate any such Payments to the maximum extent possible, provided and to the extent that doing so would not then impose (x) any adverse income tax consequences to any Saracen Indemnitee Member, or (y) any economic cost on any Saracen Indemnitee Member and provided, further, that any failure of the Saracen Indemnitee Members to comply with the requirements of this Section 8.2A(xiv) shall not constitute a default and will not affect or otherwise limit the Company's liability or obligations under this Section 8.2A(a). (xv) This Section 8.2A(a) shall be binding upon all successors and assigns of the Company, including, without limitation, any successor as a result of a merger (including a triangular merger), consolidation or other combination with or into another Person (or such Person's Subsidiary), or otherwise. (b) Nothing contained in this Section 8.2A shall prohibit the Company from (A) paying down the principal of any Company indebtedness, (B) refinancing any such indebtedness with one or more mortgage loans, (C) selling or otherwise transferring all or any portion of or interest in all or any of its Properties, or (D) taking any other action with respect to the Company, its business or its Properties, provided, however, that the Company shall, in any such event, comply with the provisions set forth in Section 8.2A. (c) If the "total assets" of the Company as set forth on the Company's Consolidated Balance Sheets in accordance with generally accepted accounting principles, consistently applied, is less than $200 million, and the Company's net equity is less than 200% of the applicable Tax Liability for such year as set forth on Schedule 8.2A(c) annexed hereto, the Company shall establish a reserve account (the "Tax Liability Reserve Account") in an amount equal to the difference between (i) 200% of the applicable Tax Liability for such year as set forth on Schedule 8.2A(c) annexed hereto and (ii) the then current net equity of the Company. The determination of the "total assets" of the Company, (as set forth on the Company's Consolidated Balance Sheets in accordance with generally accepted accounting principles, consistently applied), and the Company's net equity and the applicable deposit, if any, in the Tax Liability Reserve Account, shall be made within forty-five (45) days after the end of each fiscal quarter of the Company, provided, however, if at any time the Company reasonably and in good faith determines that based upon the immediately preceding sentence an additional deposit or a decrease in the Tax Liability Reserve Account is required, such adjustment shall be made immediately. If any event occurs which decreases the Tax Liability for any specified year, as set forth on Schedule 8.2A(c) annexed hereto, the Management Committee shall amend such Schedule 8.2A(c) immediately to reflect the then current Tax Liability for such year. The Company's obligations under this Section 8.2A(c) shall cease if Shares or other capital stock of WCPT are issued or sold in a public offering or WCPT or the Company engages in (i) a merger (including a triangular merger), consolidation or other combination with or into another Person (or such Person's subsidiary) whose equity interests are publicly traded or (ii) the direct or indirect sale, lease, exchange or other transfer of all or substantially all of its assets in one transaction or a series of related transactions with another Person (or such Person's subsidiary) whose equity interests are publicly traded. Schedule 8.2(A)(c) is intended to be utilized solely for purposes of this Section 8.2(A)(c) and no inference is intended for, and Schedule 8.2(A)(c) shall have no affect on, the computations of any Payments pursuant to Section 8.2(A)(a) hereof. 8.3. Conversion Right. (a) At any time and from time to time after WCPT shall have Shares or other capital stock issued to the public in a public offering or shall engage in an Extraordinary Transaction, Whitehall and Saracen shall each have the right (the "Conversion Right") to require WCPT to convert part or all of its Membership Units into Shares, with such conversion to occur on the Specified Conversion Date and at a conversion price equal to and in the form of the Shares Amount. Any such Conversion Right shall be exercised pursuant to a Notice of Conversion delivered to WCPT. Each of Whitehall and Saracen may exercise the Conversion Right from time to time after WCPT shall have Shares or other capital stock issued to the public in a public offering or shall engage in an Extraordinary Transaction, without limitation as to frequency, with respect to part or all of the Membership Units that it owns, as selected by Whitehall and/or Saracen, as applicable. If the Shares Amount is not a whole number of Shares, Whitehall and/or Saracen, as applicable, shall be paid (i) that number of Shares which equals the nearest whole number less than such amount plus (ii) an amount of cash which WCPT determines, in its reasonable discretion, to represent the fair value of the remaining fractional Share which would otherwise be payable to Whitehall and/or Saracen, as applicable. Whitehall and/or Saracen, as applicable, shall have no right with respect to any Membership Units so converted to receive any distributions paid after the Specified Conversion Date with respect to such Membership Units. Any permitted successor or permitted assignee of Whitehall or Saracen may exercise Whitehall's rights or Saracen's rights, respectively, pursuant to this Section 8.3. In connection with any exercise of such rights by such permitted successor or permitted assignee of Whitehall or Saracen, the Shares Amount shall be paid by WCPT directly to such permitted successor or permitted assignee and not to Whitehall or Saracen. Whitehall and/or Saracen, as applicable, and WCPT acknowledge that Whitehall and Saracen are not "Excepted Holders" (as defined in Section 7.1 of the Declaration of Trust) and that, unless either becomes an "Excepted Holder", Whitehall's or Saracen's Conversion Right may be limited. Therefore, Whitehall and/or Saracen, as applicable, and WCPT agree to cooperate in good faith to cause Whitehall and Saracen to become "Excepted Holders" before the Conversion Right is exercised or to deliver to Whitehall and/or Saracen, as applicable, cash instead of Shares upon such exercise equal in amount to the fair market value of the Shares that would otherwise have been delivered, but for the fact that Whitehall and/or Saracen, as applicable, is not an "Excepted Holder". Subject to the foregoing, in the event that Whitehall and/or Saracen, as applicable, exercises its Conversion Rights before an initial public offering of WCPT, (i) any Shares received by Whitehall and/or Saracen, as applicable, pursuant to such exercise may not, prior to an initial public offering of WCPT, be transferred unless Whitehall and/or Saracen, as applicable, first offers WRP the opportunity to purchase such Shares in accordance with the following sentence and (ii) Whitehall and/or Saracen, as applicable, will remain obligated hereunder (including without limitation with respect to Whitehall only, its obligations in Section 5.2) until an initial public offering of WCPT occurs (upon which Whitehall and/or Saracen, as applicable, will have no further obligations hereunder except with respect to any Interest it then owns). If Whitehall and/or Saracen desire to sell any or all of their respective Shares to any Person that is not an Affiliate of Whitehall or Saracen, as applicable, Whitehall and/or Saracen, as applicable, shall, not less than ten (10) Business Days prior to any such sale, notify WRP in writing (the "Offer Notice") of such intended sale setting forth in such Offer Notice the number of Shares which Whitehall and/or Saracen, as applicable, intend to sell and the aggregate purchase price therefor and if WRP either has not notified Whitehall or Saracen, as applicable, in writing within ten (10) Business Days of receipt of the Offer Notice that it wishes to purchase such Shares on terms and conditions identical to those set forth in the Offer Notice, Whitehall or Saracen, as applicable, may sell to a non-Affiliate the number of Shares set forth in the Offer Notice for a price not less than the aggregate purchase price set forth therein. If WRP notifies Whitehall or Saracen, as applicable, in writing within ten (10) Business Days of receipt of the Offer Notice that it accepts the offer in the Offer Notice for all of the Shares described therein, WRP shall pay to Whitehall or Saracen, as applicable, the aggregate purchase price set forth in the Offer Notice not later than ten (10) Business Days after delivery to Whitehall or Saracen, as applicable, of its notice of acceptance of the offer set forth in the Offer Notice and Whitehall or Saracen, as applicable, shall deliver to WRP the requisite Shares free and clear of all Liens. (b) All Membership Units delivered for conversion shall be delivered to WCPT free and clear of all Liens, and, notwithstanding anything contained herein to the contrary, WCPT shall not be under any obligation to acquire Membership Units which are or may be subject to any Lien. (c) If Whitehall converts all of its Membership Units pursuant to the terms of this Section 8.3 at any time prior to an initial public offering by WCPT, until an initial public offering by WCPT, Whitehall (but not its successors or assigns unless such successor or assign is an Affiliate of Whitehall) shall be entitled to all of the same rights and powers with respect to the management and governance of WCPT that Whitehall has been granted under this Agreement and WCPT shall take such further actions as may be necessary (including by classifying its board of directors and amending its Declaration of Trust and other organizational documents) to give effect to this provision. Upon full implementation of such documentation as is necessary to grant Whitehall such rights and powers, the Committee Representatives appointed by Whitehall shall no longer serve on the Management Committee and all rights and obligations of Whitehall with respect to the Company shall terminate. (d) Upon conversion by Whitehall (or its permitted successor or permitted assign) of all or any of its Membership Units pursuant to the terms of this Section 8.3, Whitehall (or such permitted successor or assign) shall receive demand and piggyback registration rights with respect to the Shares received in such conversion, which registration rights shall be exercisable after any Shares of WCPT become publicly traded (subject to any lock-up agreement entered into by Whitehall) and shall be no less favorable to Whitehall than the registration rights granted with respect to WRP Shares pursuant to the Warrant Agreement. Promptly upon Whitehall's request, WCPT shall enter into a separate registration rights agreement with Whitehall in form and substance no less favorable to Whitehall than the Warrant Agreement (or, if more favorable, than those granted to WRP at the time of the initial public offering of WCPT). (e) Upon conversion by Saracen (or its permitted successors or permitted assigns) of all or any of its Membership Units pursuant to the terms of this Section 8.3, Saracen (or such permitted successors or assigns) shall receive registration rights with respect to the Shares or other capital stock of WCPT received in such conversion, as set forth in the form of Registration Rights Agreement annexed hereto as Exhibit G and which Registration Rights Agreement shall be executed by Saracen and WCPT on the Saracen Closing Date. In addition, and without in any way limiting the registration rights to be granted to Saracen under such Registration Rights Agreement, if WCPT offers Shares or other capital stock in an initial public offering (a "WCPT IPO") or within one year after the WCPT IPO, WCPT files a registration statement pursuant to which Whitehall may offer its Shares or other capital stock of WCPT to the public (the "Whitehall Registration Statement"), in either such instance, Saracen shall be given 30 days' advance notice of such event and shall have the right to participate in such offering on the same terms and conditions made available to Whitehall, provided, that, the number of Shares or other capital stock of WCPT to be registered on behalf of Saracen in the WCPT IPO or in the Whitehall Registration Statement, as the case may be, shall be less than or equal to (i) the aggregate number of Shares or other capital stock of WCPT owned by Saracen, multiplied by (ii) a fraction, the numerator of which is the number of Shares or other capital stock of WCPT owned by Whitehall which are to be registered in the WCPT IPO or the Whitehall Registration Statement, as the case may be, and the denominator of which is the aggregate number of Shares or other capital stock of WCPT owned by Whitehall. 8.4. Certain Transfer Provisions. The following provisions shall apply to a purchase by a Non-Triggering Party of any Subject Property or Subject Subsidiary: (a) The purchase price shall be paid in cash, by wire transfer of the funds to the accounts of the Company or the applicable Subsidiary. All transfer costs (including transfer taxes and attorneys' fees) shall be borne by the Company (unless the Offer provided otherwise) and there shall be an adjustment of the purchase price at closing to reflect a proration of any accrued income and expenses, excluding non-cash items. Within forty-five (45) days after the closing, the Non-Triggering Party shall direct the independent accountants for the Company to complete an audit of such Members' proration and such independent accountants shall deliver their audit report to the Members. If such audit report shall adjust such proration, the party in whose favor such adjustment is made shall promptly be paid by the other party the amount of such adjustment. (b) On payment of the purchase price, the Non-Triggering Party shall, with respect to each Company and/or Subsidiary debt, obligation and claim against the Company and/or a Subsidiary for which the Company, a Subsidiary or any Member (or any guarantor affiliated therewith or which delivered the guaranty on behalf of such Person) is or may be per- sonally liable with respect to the Subject Property or Subject Subsidiary, at the option of the Non-Triggering Party either (i) obtain a release of the Company, any applicable Subsidiary and each Member (and any guarantor affiliated therewith or which delivered the guaranty on behalf of such Person) from all liability, direct or contingent, from holders of such debt, obligation or claim or (ii) cause such indebtedness, obligation or claim to be paid in full at the closing, or (iii) deliver to the Company, any applicable Subsidiary and each Member, an agreement in form and substance reasonably satisfactory to the Company, such Subsidiary and each Member, which satisfaction may require a creditworthy guarantor, to defend, indemnify and hold the Company, such Subsidiary and each Member (and any guarantor affiliated therewith or which delivered the guaranty on behalf of such Person) harmless from any actions, including attorneys' fees and costs of litigation, claims or loss arising from such debt, obligation or claim. In no event shall such indemnity apply to liabilities resulting from the breach by any Member of its obligations under this Agreement. This subparagraph (b) shall not apply to any debt, obligation or claim which is fully insured by public liability insurer(s) reasonably acceptable to the Company, any applicable Subsidiary and each Member. 8.5 Assignment Binding on Company. No assignment or transfer of all or any part of the Interest of a Member permitted to be made under this Agreement shall be binding upon the Company unless and until a duplicate original of such assignment or instrument of transfer, duly executed and acknowledged by the assignor or transferor, has been delivered to the Company, and such instrument evidences (i) the written acceptance by the assignee of all of the terms and provisions of this Agreement, (ii) the assignees representation that such assignment was made in accordance with all applicable laws and regulations and (iii) the unanimous consent of all of the Initial Members to the transfer of the Interest unless such Transfer is pursuant to the last sentence of Section 8.1(b). 8.6. Bankruptcy of a Member. In the event a Member becomes subject to a Bankruptcy, the trustee or receiver of the estate shall have all the rights of a Member for the purpose of settling or managing the estate and such power as such Member possessed to assign all or any part of the Inter- ests and to join with the assignee thereof in satisfying conditions precedent to such assignee becoming a Substituted Member; provided, however, in such event, such Member shall cease to be an Appointing Member for purposes of Article III. The Company shall not be dissolved or terminated by reason of the Bankruptcy, removal, dissolution or admission of any Member. 8.7. Substituted Members. (a) Members who assign all their Interests pursuant to an assignment or assignments permitted under this Agreement shall cease to be Members of the Company except that unless and until a Substituted Member is admitted in his stead, the assigning Member shall not cease to be a Member of the Company under the Act and shall retain the rights and powers of a member under the Act and hereunder, provided that such assigning Member may, prior to the admission of a Substituted Member, assign its economic interest in the Interest, to the extent otherwise permitted under this Article VIII, including, without limitation, Section 8.5. Any Person who is an assignee of any of the Interests of a Member and who has satisfied the requirements of Sections 8.1 and 8.5 shall become a Substituted Member only when (i) the Manager has entered such assignee as a Member on the books and records of the Company, which the Manager is hereby directed to do upon satisfaction of such requirements, and (ii) such assignee shall have paid all reasonable legal fees and filing costs in connection with the substitution as Member. (b) Any Person who is an assignee of all or any portion of the Interest of a Member but who does not become a Substituted Member and desires to make a further assignment of any such Interest, shall be subject to all the provisions of this Article VIII to the same extent and in the same manner as any Member desiring to make an assignment of the Interest. 8.8. Acceptance of Prior Acts. Any person who becomes a Member, by becoming a Member, accepts, ratifies and agrees to be bound by all actions duly taken pursuant to the terms and provisions of this Agreement by the Company prior to the date it became a Member and, without limiting the gener- ality of the foregoing, specifically ratifies and approves all agreements and other instruments as may have been executed and delivered on behalf of the Company prior to said date and which are in force and effect on said date, provided, however, that nothing contained in this Section 8.8 shall limit or effect any of the representations, warranties, covenants and other agreements and obligations of the Company under the Contribution Agreement. 8.9. Additional Limitations. Notwithstanding anything contained in this Agreement, no Transfer shall be made and any Member shall have the right to prohibit and may refuse to accept any Transfer unless (i) registration is not required under the Securities Act of 1933, as amended, in respect of such transaction; and (ii) such assignment or transfer does not violate any applicable federal or state securities, real estate syndication, or comparable laws. Any Member may elect prior to any Transfer to require an opinion of counsel with respect to any of the foregoing matters. 8.10. Tag Along Rights. If WCPT and Whitehall together shall desire to sell or transfer, in one transaction or one or more series of related transactions, to a bona fide prospective third-party purchaser, unaffiliated with WCPT and/or Whitehall, any part or all of their Membership Units owned by them, then WCPT and Whitehall shall provide Saracen with 30 days' advance written notice of the pending sale (a "Tag Along Notice"), which Tag Along Notice shall contain the terms and conditions of the proposed sale or transfer. Saracen may elect to participate in such transaction (a "Tag Along Transaction") as an additional selling or transferring party by delivering a written notice thereof (a "Tag Along Election Notice") to WCPT and Whitehall within five (5) Business Days after delivery of such Tag Along Notice. A Tag Along Election Notice shall specify the number of Membership Units which Saracen wishes to sell or transfer in such transaction, which number may include a number of Membership Units previously received as a result of a conversion of Series A Preferred Membership Units into Membership Units pursuant to the Series A Terms, and shall in the aggregate, be less than or equal to (i) the aggregate number of Membership Units of which WCPT and Whitehall proposed to sell or transfer in such transaction, multiplied by (ii) a fraction, the numerator of which is the number of Membership Units owned by Saracen, and the denominator of which is the aggregate number of Membership Units owned by WCPT, Whitehall and Saracen. If Saracen shall elect to sell or transfer Membership Units in such transaction, the aggregate number of Membership Units to be sold or transferred in such transaction shall be increased by the number of Membership Units Saracen elects to sell or transfer or, in the sole discretion of WCPT and Whitehall, the aggregate number of Membership Units to be sold or transferred by WCPT and Whitehall shall be reduced pro rata, so that the aggregate number of Membership Units to be sold or transferred to such third-party by Saracen, WCPT and Whitehall shall remain equal to the aggregate number of Membership Units which WCPT and Whitehall originally proposed to sell or transfer in such transaction. Participation by Saracen in the offering of Membership Units pursuant to this Section 8.10 shall be at a price per Membership Unit equal to the price being offered to WCPT and Whitehall and on terms identical to those terms being offered to WCPT and Whitehall. In connection with such sale or transfer, WCPT, Whitehall and Saracen shall execute and deliver, in a timely manner, any and all documents, agreements and instruments reasonably necessary to sell or transfer their respective Membership Units. ARTICLE IX. MANAGER 9.1. Removal of Manager. (a) Whitehall may in its sole discretion elect, by ten (10) days' prior written notice, to remove WCPT as the Manager for Cause. Thereupon, WCPT shall cease to be an Appointing Member and Whitehall may appoint a new Manager. Nothing herein shall be deemed to limit the indemnification obligations under Section 4.3 if WCPT is removed as Manager of the Company, and this Section 9.1 shall not constitute a waiver of exculpation from claims by, or indemnification from, the Company with respect to any matter arising prior to the removal of WCPT. (b) Notwithstanding anything to the contrary herein, Whitehall may deliver a Sales Notice to WCPT at any time upon the removal of WCPT as Manager pursuant to Section 9.1(a) and require the Company to sell any and all of the Properties (or sell the Subsidiary(ies) owning such Property(ies)), and may sell the Company as a whole, in one or more transactions to a Third Party in the manner provided in Sections 8.2 and 8.4, without having to first offer the Property(ies), the Subsidiary(ies) or the Company to WCPT. If WCPT shall notify the Company in writing that it disputes any of the grounds for its removal as Manager (setting forth in such notice WCPT's grounds for such dispute) no later than fifteen (15) days after receipt of any Sales Notice delivered to WCPT in accordance with the immediately preceding sentence, the Initial Members shall submit the subject matter of WCPT's notice for binding arbitration as provided in Section 5.10 no later than fifteen (15) days after receipt of the foregoing notice from WCPT. If the arbitrator shall rule that WCPT may be removed as Manager pursuant to this Agreement, the Company shall sell any and all of the Properties (or the Company's Subsidiary(ies)) as selected by Whitehall in one or more transactions to Third Parties and Whitehall shall also have the full and exclusive right, power and authority on behalf of all Members to sell the Company itself to such a Third Party. 9.2. Fees. Except as provided in this Section 9.2 and elsewhere in this Agreement (including the provisions of Articles VI and VII regarding distribution, payments and allocations to which it may be entitled), the Manager shall not be compensated for its services as manager of the Company. Notwithstanding the foregoing, the Manager (for so long as the Manager is WCPT) shall be paid the Administration Fee on a quarterly basis in arrears and shall be reimbursed, on a monthly basis, for all expenses that it incurs relating to the ownership and operation of or for the benefit of, the Company (including without limitation, (i) expenses relating to the ownership of interests in and the management and operation of the Company and its Subsidiaries and (ii) compensation of WCPT officers and employees to the extent they devoted substantially all of their working time to the business of the Company and its Subsidiary(ies). The Members acknowledge that all such expenses of the Manager are deemed to be for the benefit of the Company. Such reimbursement shall be in addition to any reimbursement made as a result of indemnification pursuant to Section 4.3(a) hereof. ARTICLE X. TERMINATION OF COMPANY; LIQUIDATION AND DISTRIBUTION OF ASSETS 10.1. Dissolution and Termination. (a) The Company shall be dissolved and liquidated only upon the occurrence of any of the following: (i) December 31, 2045; (ii) the sale or other disposition of all of the Company Assets and receipt of the final payment of any installment obligation received as a result of any such sale or disposition; (iii) the written consent of all Initial Members; (iv) any event which makes it unlawful for the Company's business to be continued; or (v) the issuance of a decree by any court of competent jurisdiction that the Company be dissolved and liquidated. Upon dissolution, the Company shall promptly wind up its affairs and shall promptly be liquidated and a certificate of cancellation of the Company's Certificate of Formation, as required by law, shall be filed. (b) In the event of the dissolution and liquidation of the Company, its business activities shall promptly be wound up, any amounts due from the Members shall be collected, its debts and liabilities shall be paid and its remaining assets, if any, shall be distributed as set forth in Section 10.2 below. Dissolution shall be effective on the date of the occurrence of an event set forth in Section 10.1(a) but the Company shall not terminate until all of the Company assets have been liquidated and the proceeds distributed in accordance with the provisions of this Article X. Notwithstanding the dissolution of the Company, prior to the termination of the Company as aforesaid, the business of the Company and the affairs of the Members as such, shall continue to be governed by this Agreement. 10.2. Distribution Upon Liquidation. Upon dissolution of the Company, the Manager or other Members, as provided in this Agreement, or if there shall be none, a duly appointed trustee or liquidator as provided in this Agreement, shall promptly proceed with the liquidation of the Company, its Subsidiaries and the Company Assets and the proceeds of such liquidation shall be applied and distributed in the following order of priority: (i) to the payment of expenses of the liquidation; (ii) to the payment of debts and liabilities of the Company, in order of priority as provided by law, other than debts or liabilities owed to Members; (iii) to the setting up of any reserves that the Manager or such trustee or liquidator, as the case may be, shall determine are reasonably necessary for any contingent or unforeseen liabilities or obligations of the Company or the Members (in their respective capacity as Members); (iv) to the payment of other debts and liabilities of the Company owed to Members (including amounts payable to Saracen under Section 8.2A); and (v) except to the extent otherwise provided in Section 7.4, to the Members in accordance with their respective Capital Account balances after allocation of Profits and Losses for the period ending immediately prior to such distribution. 10.3. Sale of Company Assets. (a) As expeditiously as possible, the Manager, or any such trustee or liquidator, shall pay all Company liabilities, establish the reserves and make the distributions provided for in Section 10.2. Except as agreed by the Management Committee, no Member shall have the right to demand or receive property other than cash upon liquidation, and the Management Committee, or any such trustee or liquidator, shall, in any event, have the power to sell Company assets for cash as necessary to provide for the payment of all Company liabilities and the establishment of reserves. (b) In connection with the sale by the Company and reduction to cash of its assets, although the Company has no obligation to offer to sell any property to the Members, any Member or any Affiliate of any Member may bid on and purchase any Company Assets. If the Manager, or any such trustee or liquidator, determines that an immediate sale of part or all of the Company assets would cause undue loss to the Members, the Manager, or any such trustee or liquidator, may, with the written consent of the Management Committee, defer liquidation of and withhold from distribution for a reasonable time any assets of the Company (except those necessary to satisfy the Company's current obligations). ARTICLE XI. BOOKS, RECORDS, BUDGETS AND REPORTS 11.1. Books of Account. At all times during the continuance of the Company, the Manager shall keep or cause to be kept true and complete books of account in which shall be entered fully and accurately each trans- action of the Company. Such books shall be kept on the basis of the Fiscal Year in accordance with the accrual method of accounting, and shall reflect all Company transactions in accordance with generally accepted accounting principles. In addition, the Manager shall cause each Subsidiary to keep all books of account and other records of such Subsidiary separate and distinct from the books and records of the Company and with the standards set forth in this Section 11.1. 11.2. Availability of Books of Account. All of the books of account referred to in Section 11.1, together with an executed copy of this Agreement and the Certificate of Formation, and any amendments thereto and any other books and financial records of the Company, shall at all times be maintained at the principal office of the Company or such other place in the State of New York as the Manager may designate in writing to the Members, and upon reasonable notice to the Manager, shall be open to the inspection and examination of the Members or their representatives during reasonable business hours. 11.3. Financial Reports and Statements; Annual Budgets. (a) The Manager shall prepare or cause the Company's independent accountants to prepare (under the oversight of the Manager), on an accrual basis, all federal, state and local tax returns required to be filed. The Manager (or, if pursuant to the preceding sentence the tax returns are prepared by the independent accountants, such preparer) shall submit the returns and completed IRS Schedules K-1 to each member of the Management Committee for review and approval and the Manager shall deliver such approved K-1 to each Member no later than ten (10) days prior to the due date of the returns, but in no event later than March 1st of each year. Each Member shall notify the other Members upon receipt of any notice of tax examination of the Company by federal, state or local authorities. (b) For each Fiscal Year, the Manager shall send to each Person who was a Member at any time during such Fiscal Year, within sixty (60) days after the end of such Fiscal Year, an annual report of the Company including an annual balance sheet, profit and loss statement, a statement of cash flow and a statement of changes in Member's capital, all as prepared in accordance with generally accepted accounting principles consistently applied and audited by the Company's independent public accountants, which shall be Ernst & Young, unless another "Big Six" independent public accountants of recognized standing is selected by the Management Committee, and a statement showing allocations to the Members of taxable income, gains, losses, deductions and credits, as prepared by such accountants. For each quarter, the Manager shall send to each Person who was an Initial Member at any time during such quarter, within forty-five (45) days after the end of such quarter, quarterly financial statements of the Company including a quarterly balance sheet, profit and loss statement, a statement of cash flow and a statement of changes in Member's capital, all as prepared in accordance with generally accepted accounting principles consistently applied. In addition, the Manager shall send (i) to each Initial Member within fifteen (15) days after the end of each month of each Fiscal Year a monthly report setting forth such financial and operating information as such Initial Member shall reasonably request, and (ii) to each Member, such other information concerning the Company and reasonably requested by such Member as is necessary for the preparation of such Member's federal, state and local income or other tax returns. (c) (i) On or before the November 1st immediately preceding the commencement of each Budget Year of the Company, the Manager shall submit to the Management Committee for its approval (1) an annual capital budget for each Property (an "Annual Capital Budget"), in such form as the Management Committee shall have approved, for such Budget Year setting forth the Manager's estimates reasonably itemized of all receipts and expenditures in respect of capital transactions relating to such Property for such year (including expenditures for alterations incident to space leases to be recovered as rent from tenants) and (2) an annual operating budget for such Property (an "Annual Operating Budget"), in such form as the Management Committee shall have approved, for such year setting forth the Manager's estimates reasonably itemized of all income and expenses relating to such Property for such year and establishing reserves and working capital for such Property. The Annual Operating Budget shall also contain (x) a schedule of space that is vacant and space leases expiring during such year (including the square footage thereof) and (y) the Leasing Plan for such year, maximum tenant improvement allowances, maximum obligations on lease takeovers and any other criteria for leases that may be executed without the specific approval of the Management Committee. Not later than twenty (20) days after receipt of a proposed Annual Capital Budget or Annual Operating Budget, the Management Committee shall either approve the Annual Capital Budget and Annual Operating Budget or shall deliver a notice (an "Objection Notice") to the Manager stating that the Management Committee objects to any information contained in or omitted from such proposed Annual Capital Budget or Annual Operating Budget and setting forth the objections with reasonable specificity. With respect to such proposed Annual Capital Budget or Annual Operating Budget as to which no Objection Notice is delivered prior to such twentieth (20th) day, the proposed Annual Capital Budget or Annual Operating Budget will be deemed to have been accepted and consented to by the Management Committee and shall be deemed an "Approved Budget." If the Objection Notice is timely delivered, the Manager and the Management Committee shall endeavor in good faith to reach an agreement as to the Annual Capital Budget or Annual Operating Budget. Notwithstanding the foregoing, as of the Initial Closing, the Annual Capital Budget and Annual Operating Budget for each Property shall be the capital budget and operating budget for such Property as prepared by the WCPT Current Owner or Whitehall Current Owner, as the case may be, copies of which shall have been delivered to Whitehall or WCPT, as appropriate, prior to the Initial Closing. (ii) If the Management Committee shall consider for adoption a proposed Annual Capital Budget for any Budget Year and shall fail to adopt it in its entirety because of disagreement as to one or more line items although the Management Committee shall agree on other line items, then such proposed Annual Capital Budget, exclusive of the items as to which there is disagreement, shall be deemed adopted as the Annual Capital Budget for such Budget Year (and to such extent shall be deemed to be the Approved Budget for such Budget Year); provided that, if any item or project is approved as part of the Approved Capital Budget for one Budget Year but is not completed within such Budget Year, the unexpended portion of such Approved Capital Budget relating to such item or project shall be carried over to the following Budget Year and deemed approved. If the Management Committee shall consider for adoption a proposed Annual Operating Budget for any Budget Year and shall fail to adopt it in its entirety, then the Annual Operating Budget for the immediately preceding year shall be deemed adopted as the Annual Operating Budget for such year except that any specific line items agreed to in the proposed Annual Operating Budget shall control (and to such extent shall be deemed to be the Approved Budget for such Budget Year). 11.4. Accounting Expenses. All out-of-pocket expenses payable to Persons who are not Affiliated with any Member in connection with the keeping of the books and records of the Company and the preparation of audited or unaudited financial statements and federal and local tax and information returns required to implement the provisions of this Agreement or required by any governmental authority with jurisdiction over the Company shall be borne by the Company as an ordinary expense of its business. 11.5. Bank Account. The Company shall within 10 days after the date hereof arrange to maintain (and shall cause each Subsidiary which owns a Property to maintain) its bank deposits in segregated accounts held for the Company's (or such Subsidiary's) business, which accounts shall, to the extent reasonably practicable, be interest-bearing. All funds of the Company and each applicable Subsidiary shall be promptly deposited in the appropriate segregated account. The Manager from time to time shall authorize signatories for such accounts and withdrawals or checks in excess of $100,000 shall require the signature of Jeffrey H. Lynford, Edward Lowenthal or Gregory Hughes. 11.6. Fidelity Bonds and Insurance. The Company will obtain fidelity bonds with reputable surety companies, covering all persons having access to the Company's (or any Subsidiary's) funds, indemnifying the Company (or such Subsidiary) against loss resulting from fraud, theft and dishonest and other wrongful acts of such persons. The Company shall carry or cause to be carried on its behalf and on its Subsidiaries' behalf all property, liability and workers' compensation insurance as shall be required under applicable mortgages, leases, agreements, and other instruments and statutes, but in any event in the amounts and with the insurers required by the Insurance Program. ARTICLE XII. AMENDMENTS 12.1. Amendments (a) Amendments may be made to this Agreement from time to time by the Manager with only the written consent of each of the Initial Members, provided, however that Saracen shall have the right to consent to any amendment that shall (i) reduce Saracen's Capital Accounts with respect to its Membership Units or its Series A Preferred Membership Units, Saracen's Percentage Interest or Saracen's Series A Preferred Percentage Interest (except (A) in the case of the inclusion of additional Members in accordance with this Agreement, (B) due to a Capital Contribution(s) made by Members or New Members in accordance with this Agreement, (C) pursuant to the Contribution Agreement, (D) pursuant to Section 5.1(l) hereof or (E) pursuant to a conversion or redemption of Series A Preferred Membership Units in accordance with the Series A Terms, (ii) require Saracen to make any additional Capital Contribution, (iii) create any liability for Saracen other than the liability they have under this Agreement as of the Saracen Closing Date, (iv) modify the rights, priority, preferences and privileges of the Series A Preferred Membership Units except as permitted pursuant to the Series A Terms, (v) adversely affect or limit in any way Saracen's rights pursuant to Section 3.5, provided, however, that (A) the appointment or election of additional Committee Representatives having the right to attend and observe meetings of the Management Committee, (B) the appointment or election of additional Committee Representatives having voting, consent, approval or determination rights on the Management Committee or (C) amendments to the definition of Required Committee Approval (other than Required Committee Approval during a Preferential Distribution Non- Payment) shall not be deemed to adversely affect or limit in any way Saracen's rights pursuant to Section 3.5 provided, that such additional Committee Representatives are not appointed by, or representatives of, either Initial Member or their respective Affiliates, (vi) modify Saracen's rights and/or obligations as set forth in Sections 4.2, 5.1(l), 5.1(m), 5.2(d), 8.2A, 13.17 and this Section 12.1, (vii) modify the definitions of Target Territory and/or Hub Target Market only by reducing the size of the Target Territory and/or Hub Target Market, as applicable, (viii) adversely affect Saracen's rights under Articles VI and VII with respect to any Saracen Member, except as a result of other amendments or modifications permitted pursuant to this Section 12.1(a) or the Series A Terms, (ix) modify Saracen's transfer or pledge rights pursuant to Section 8.1(b), (x) modify the terms and conditions of Saracen's conversion right pursuant to Section 8.3 and (xi) modify the terms and conditions of Section 13.9 or 13.18 as they relate to Saracen. In making any amendments, there shall be prepared and filed for recordation by the Manager such documents and certificates as shall be required to be prepared and filed. Promptly after the execution of any amendments or restatements, the Manager shall provide copies thereof to all Members. (b) Each Saracen Member by execution and delivery of this Agreement, irrevocably constitutes and appoints the Manager and the Chairman, President, Secretary, Treasurer, Chief Financial Officer and Chief Operating Officer of the Manager as his or her true and lawful attorney-in-fact with full power and authority, in such Saracen Member's name, place, and stead only to execute, acknowledge and deliver such certificates, instruments, documents and agreements as are necessary to make any and all amendments of this Agreement which amendments do not require the consent of Saracen as set forth in Section 12.1(a), provided, however, that such power shall only be exercised by the Manager and/or the Chairman, President, Secretary, Treasurer and Chief Operating Officer of the Manager, if and only if, the Manager delivers written notice of the documents which are to be executed under this power of attorney to Saracen five (5) Business Days in advance of the date such documents are to be executed. The appointment by each Saracen Member of the Manager and the aforesaid officers of the Manager as attorney-in-fact shall be deemed to be a power coupled with an interest, and shall survive, and not be affected by the subsequent bankruptcy, death, incapacity, disability, adjudication of incompetence or insanity, or dissolution of any Saracen Member hereby giving such power. As a condition to the transfer by a Saracen Member of any or all of such Saracen Member's Interest, the foregoing power of attorney shall be granted by the transferee of such Saracen Member's Interest. ARTICLE XIII. MISCELLANEOUS 13.1. Further Assurances. Each party to this Agreement agrees to execute, acknowledge, deliver, file and record such further certificates, amendments, instruments and documents, and to do all such other acts and things, as may be required by law or as, in the reasonable judgment of the Management Committee, may be necessary or advisable to carry out the intent and purpose of this Agreement. 13.2. Notices. Unless otherwise specified in this Agreement, all notices, demands, elections, requests or other communications that any party to this Agreement may desire or be required to give hereunder shall be in writing and shall be given by hand, by depositing the same in the United States mail, first class postage prepaid, certified mail, return receipt requested, by facsimile transmission with delivery of an original thereafter by any other method provided by this Section 13.2, or by a recognized overnight courier service providing confirmation of delivery, addressed as follows: (a) To the Company, c/o Wellsford Commercial Properties Trust, 610 Fifth Avenue, New York, New York 10020, or at such other address as may be designated by the Manager upon written notice to all of the Members; and (b) To the Members at their respective addresses set forth in Section 2.6 herein. Each Member shall have the right to designate another address or change in address by written notice to the Company in the manner prescribed herein. All notices given pursuant to this Section 13.2 shall be deemed to have been given (i) if delivered by hand on the date of delivery or on the date delivery was refused by the addressee, (ii) if delivered by United States mail or by overnight courier, on the date of delivery as established by the return receipt or courier service confirmation (or the date on which the return receipt or courier service confirms that acceptance of delivery was refused by the addressee) or (iii) if delivered by facsimile, on the date of delivery thereof. 13.3. Headings and Captions. All headings and captions contained in this Agreement and the table of contents hereto are inserted for convenience only and shall not be deemed a part of this Agreement. 13.4. Variance of Pronouns. All pronouns and all variations thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or entity may require. 13.5. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original and all of which, when taken together, shall constitute one Agreement. 13.6. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF. 13.7. Partition. The Members hereby agree that no Member nor any successor-in- interest to any Member shall have the right, while this Agreement remains in effect, to have the property of the Company partitioned, or to file a complaint or institute any proceeding at law or in equity to have the property of the Company partitioned, and each Member, on behalf of himself, his successors, representatives, heirs and assigns, hereby waives any such right. 13.8. Invalidity. Every provision of this Agreement is intended to be severable. The invalidity and unenforceability of any particular provision of this Agreement in any jurisdiction shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted. 13.9. Successors and Assigns. This Agreement shall be binding upon the parties hereto and their respective successors, executors, administrators, legal representatives, heirs and permitted legal assigns and shall inure to the benefit of the parties hereto and, except as otherwise provided herein, their respective successors, executors, administrators, legal representatives, heirs and permitted legal assigns. No Person other than the parties hereto and their respective successors, executors, administrators, legal representatives, heirs and permitted legal assigns, shall have any rights or claims under this Agreement. 13.10. Entire Agreement. This Agreement, together with all Exhibits, Schedules, and Annexes hereto and all letter agreements executed by the Company, the Initial Members and/or their respective Affiliates on the Initial Closing Date and the date hereof (which are incorporated herein by this reference), supersedes all prior agreements among the parties with respect to the subject matter hereof and contains the entire agreement among the parties with respect to such subject matter. This instrument may not be amended, supplemented or discharged, and no provisions hereof may be modified or waived, except expressly by an instrument in writing signed by the Manager and each Member and, in the case of an amendment, modification or supplement, in compliance with Section 12.1. No waiver of any provision hereof by any party hereto shall be deemed a waiver by any other party nor shall any such waiver by any party be deemed a continuing waiver of any matter by such party. No amendment, modification, supplement, discharge or waiver hereof or hereunder shall require the consent of any person not a party to this Agreement. 13.11. No Brokers. Each of the parties hereto warrants to each other that there are no brokerage commissions or finders' fees (or any basis therefor) resulting from any action taken by such party or any Person acting or purporting to act on its behalf in connection with entering into this Agreement. Each Member agrees to indemnify and hold harmless each other Member for all costs, damages or other expenses arising out of any misrepresentation made in this Section 13.11. 13.12. Maintenance as a Separate Entity. The Company shall maintain books and records and bank accounts separate from those of its Affiliates; shall at all times hold itself out to the public as a legal entity separate and distinct from any of its Affiliates (including in its leasing activities, in entering into any contract, in preparing its financial statements, and in its stationery and on any signs it posts), and shall cause its Affiliates to do the same and to conduct business with it on an arm's- length basis; shall not commingle its assets with assets of any of its Affiliates; shall not guarantee any obligation of any of its Affiliates; shall cause its business to be carried on by the Manager and shall keep minutes of all meetings of the Members and the Management Committee. 13.13. Confidentiality. Each Member agrees not to disclose or permit the disclosure of any of the terms of this Agreement or of any information relating to the Company's assets or business, provided that such disclosure may be made (a) to any person who is a Member, officer, director or employee of such Member or counsel to, accountants of, investment bankers for or consultants to, such Member or the Company solely for their use and on a need-to-know basis, (b) with the prior consent of the other Members, (c) pursuant to a subpoena or order issued by a court, arbitrator or govern- mental body, agency or official or in order to comply with any law, rule or regulation (including the rules and regulations of the Securities and Exchange Commission, the American Stock Exchange and any other applicable national securities exchange), (d) in connection with and to the extent necessary to sell or market any Property in accordance with this Agreement, or (e) to any lender or investor providing financing to the Company. In the event that a Member shall receive a request to disclose any of the terms of this Agreement under a subpoena or order, such Member shall (i) promptly notify the other Members thereof, (ii) consult with the other Members on the advisability of taking steps to resist or narrow such request and (iii) if disclosure is required or deemed advisable, cooperate with any of the other Members in any attempt it may make to obtain an order or other assurance that confidential treatment will be accorded those terms of this Agreement that are disclosed. 13.14. Power of Attorney. (a) Each Member does irrevocably constitute and appoint the Manager, with full power of substitution, as its true and lawful attorney, in its name, place and stead, to execute, acknowledge, swear to, deliver, record and file, as appropriate and in accordance with this Agreement (i) the original Certificate of Formation and all amendments thereto required or permitted by law or the provisions of this Agreement, (ii) all certificates and other instruments requiring execution by the Members or any of them and deemed necessary or advisable by the Manager to qualify or continue the Company as a limited liability company in the jurisdictions where the Company may be conducting its operations, (iii) all instruments, agreements or documents that the Management Committee so directs pursuant to Section 3.5(e) and (iv) all conveyances and other instruments deemed necessary or advisable by the Manager to effect the dissolution and termination of the Company in accordance with this Agreement. Nothing contained in this Section 13.14 shall empower the Manager to take any action requiring the consent of the Management Committee or any Member(s) hereunder unless such consent is first obtained. (b) The powers of attorney granted pursuant to this Section 13.14 are coupled with an interest and shall be irrevocable and survive and not be affected by the subsequent death, incapacity, disability, Bankruptcy or dissolution of the grantor; may be exercised by the Manager either by signing separately as attorney-in-fact for each Member or by the Manager acting as attorneys-in-fact for all of them; and shall survive the delivery of an assignment by a Member of the whole or any fraction of its Interest, except that, where the whole of such Member's Interest has been assigned or diluted in accordance with this Agreement, the power of attorney of the assignor shall survive the delivery of such assignment for the sole purpose of enabling the Manager to execute, acknowledge, swear to, deliver, record and file any instrument necessary or appropriate to effect such substitution. In the event of any conflict between this Agreement and any document, instrument, conveyance or certificate executed or filed by the Manager pursuant to such power of attorney, this Agreement shall control. (c) In addition to the foregoing, each of Whitehall and WCPT are hereby irrevocably constituted and appointed, with full power of substitution, as the true and lawful attorney of the Manager and each Member of the Company to execute, acknowledge, swear to, deliver, record and file any and all instruments, agreements and other documents (in the name, place and stead of the Manager and each such Member and the Company) and to take any and all such other actions as may be necessary or desirable to carry out the provisions of Sections 8.2 and 8.3. 13.15. Time of the Essence. Time is of the essence in the performance of each and every term of this Agreement. 13.16. No Third Party Beneficiaries. The right or obligation of the Manager or Management Committee to call for any capital contribution or of any Member to make a capital contribution or otherwise to do, perform, satisfy or discharge any liability or obligation of any Member hereunder, or to pursue any other right or remedy hereunder or at law or in equity provided, shall not confer any right or claim upon or otherwise inure to the benefit of any creditor or other third party having dealings with the Company, it being understood and agreed that the provisions of this Agreement shall be solely for the benefit of, and may be enforced solely by, the parties hereto and their respective successors and assigns except as may be otherwise agreed to by the Company in writing with the prior written approval of the Management Committee. 13.17. Exculpation. The parties agree that the individuals executing this Agreement on behalf of WCPT and Whitehall have done so in their respective capacities as officers or trustees of such Members (or, in the case of Whitehall, its general partner) and not individually, and none of the direct or indirect partners, trustees, officers or shareholders of either such Member shall be bound or have any personal liability hereunder. Each Member shall look solely to the Interest of the other Members for satisfaction of any liability of such other Member in respect of this Agreement and will not seek recourse or commence any action against any of the direct or indirect partners, trustees, officers or shareholders of such other Member or any of their personal assets for the performance or payment of any obligation hereunder. The foregoing shall also apply to any future documents, agreements, understandings, arrangements and transactions between the parties hereto. 13.18. Consent of Saracen. Whenever the consent, approval, determination or decision of Saracen is required pursuant to any of the terms of this Agreement, including to amend or waive any provisions of this Agreement, such consent, approval, determination or decision shall be deemed given by, and binding on, each of the respective Saracen Members if the Company obtains the written consent, approval or decision of William F. Rand, III or any other Person designated in writing by a majority of Saracen's Percentage Interest (assuming for purposes of determining Saracen's Percentage Interest pursuant to this Section 13.18, all of the outstanding Series A Convertible Preferred Membership Units were converted into Membership Units at the conversion price set forth in the Series A Terms), which Person must be approved by the Management Committee which approval shall not be unreasonably withheld or delayed, and each of the Saracen Members hereby irrevocably agrees that William F. Rand, III, or such other Person designated by the Saracen Members, shall have the power and authority to grant any such written consent or approval, or make any such determination or decision, on behalf of, and as the duly authorized agent and representative of, such respective Persons. Each Saracen Member by execution and delivery of this Agreement, irrevocably constitutes and appoints William F. Rand, III or any other Person designated in writing by a majority of Saracen's Percentage Interest (assuming for purposes of determining Saracen's Percentage Interest pursuant to this Section 13.18, all of the outstanding Series A Convertible Preferred Membership Units were converted into Membership Units at the conversion price set forth in the Series A Terms), which Person must be approved by the Management Committee which approval shall not be unreasonably withheld or delayed, as his or her true and lawful attorney-in-fact with full power and authority in such Saracen Member's name, place, and stead only to execute, acknowledge and deliver such certificates, instruments, documents and agreements as are necessary or appropriate to make any and all amendments or restatements of this Agreement which amendments or restatements do explicitly require the consent of Saracen as set forth in Section 12.1(a). The appointment by each Saracen Member of William F. Rand, III or such other Person as designated above as attorney-in-fact shall be deemed to be a power coupled with an interest, and shall survive, and not be affected by the subsequent bankruptcy, death, incapacity, disability, adjudication of incompetence or insanity, or dissolution of any Saracen Member hereby giving such power. As a condition to the transfer by a Saracen Member of any or all of such Saracen Member's Interest, the foregoing power of attorney shall be granted by the transferee of such Saracen Member's Interest. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] [SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. WHWEL REAL ESTATE LIMITED PARTNERSHIP By: WHATR Gen-Par, Inc., General Partner By: /s/ Alan S. Kava ------------------------------- Name: Alan S. Kava Title: Vice President WELLSFORD COMMERCIAL PROPERTIES TRUST By: /s/ Gregory F. Hughes -------------------------------- Name: Gregory F. Hughes Title: Vice President /s/ Dominic J. Saraceno -------------------------------- DOMINIC J. SARACENO /s/ Kurt W. Saraceno -------------------------------- KURT W. SARACENO /s/ William F. Rand, III -------------------------------- WILLIAM F. RAND, III /s/ Ingeborg E. Saraceno -------------------------------- INGEBORG E. SARACENO /s/ Heidi A. Saraceno-Lawlor ------------------------------- HEIDI A. SARACENO-LAWLOR /s/ Leas A. Saraceno -------------------------------- LEAS A. SARACENO /s/ Stephen Davis -------------------------------- STEPHEN DAVIS /s/ Edward Werner ------------------------------------ EDWARD WERNER /s/ Carleton G. Tarpinian ------------------------------------ CARLETON G. TARPINIAN /s/ George McLaughlin, III ------------------------------------- GEORGE MCLAUGHLIN, III The undersigned has executed this Agreement solely for purposes of Section 4.2. and 7.6. WELLSFORD REAL PROPERTIES, INC. By: /s/ Gregory F. Hughes - ---------------------------------- Name: Gregory F. Hughes Title: CFO THE COMMONWEALTH OF MASSACHUSETTS Middlesex County ss.: July 15, 1998 Then personally appeared the above-named Dominic J. Saraceno , and acknowledged the foregoing instrument to be his free act and deed, before me, /s/ Christine M. Collins ------------------------------- Notary Public Christine M. Collins My Commission Expires: October 19, 2001 THE COMMONWEALTH OF MASSACHUSETTS Middlesex County ss.: July 15, 1998 Then personally appeared the above-named Kurt W. Saraceno , and acknowledged the foregoing instrument to be his free act and deed, before me, /s/ Christine M. Collins ------------------------------- Notary Public Christine M. Collins My Commission Expires: October 19, 2001 THE COMMONWEALTH OF MASSACHUSETTS Middlesex County ss.: July 15, 1998 Then personally appeared the above-named William F. Rand, III, and acknowledged the foregoing instrument to be his free act and deed, before me, /s/ Christine M. Collins ------------------------------- Notary Public Christine M. Collins My Commission Expires: October 19, 2001 THE COMMONWEALTH OF MASSACHUSETTS Middlesex County ss.: July 20 ,1998 Then personally appeared the above-named Ingeborg E. Saraceno, and acknowledged the foregoing instrument to be her free act and deed, before me, /s/ Christine M. Collins ------------------------------- Notary Public Christine M. Collins My Commission Expires: October 19, 2001 THE COMMONWEALTH OF MASSACHUSETTS Middlesex County ss.: July 20 ,1998 Then personally appeared the above-named Heidi A. Saraceno-Lawlor, and acknowledged the foregoing instrument to be her free act and deed, before me, /s/ Christine M. Collins ------------------------------- Notary Public Christine M. Collins My Commission Expires: October 19, 2001 THE STATE OF FLORIDA Palm Beach County ss.: July 20,1998 Then personally appeared the above-named Leas A. Saraceno, and acknowledged the foregoing instrument to be her free act and deed, before me, /s/ Nicole R. Charbonneau ------------------------------- Notary Public Nicole R. Charbonneau My Commission Expires: April 9, 2002 THE COMMONWEALTH OF MASSACHUSETTS Suffolk County ss.: July __,1998 Then personally appeared the above-named Stephen Davis, and acknowledged the foregoing instrument to be his free act and deed, before me, /s/ Karen M. Manan ------------------------------- Notary Public Karen M. Manan My Commission Expires: Sept. 7, 2001 THE COMMONWEALTH OF MASSACHUSETTS Essex County ss.: July 25,1998 Then personally appeared the above-named Edward Werner, and acknowledged the foregoing instrument to be his free act and deed, before me, /s/ Grace A. Hall ------------------------------- Notary Public Grace A. Hall My Commission Expires: Sept. 3, 2004 THE COMMONWEALTH OF MASSACHUSETTS Middlesex County ss.: July 15 ,1998 Then personally appeared the above-named Carleton G. Tarpinian, and acknowledged the foregoing instrument to be his free act and deed, before me, /s/ Christine M. Collins ------------------------------- Notary Public Christine M. Collins My Commission Expires: October 19, 2001 THE COMMONWEALTH OF MASSACHUSETTS Suffolk County ss.: July 17, 1998 Then personally appeared the above-named George McLaughlin, III, and acknowledged the foregoing instrument to be his free act and deed, before me, /s/ Sheri F. Perkins ------------------------------- Notary Public Sheri F. Perkins My Commission Expires: July 23, 2004 EXHIBIT A Transaction Summary EXHIBIT B-1 Description of Real Property Contributed by Whitehall EXHIBIT B-2 Description of Personal, Tangible and Intangible Property Contributed by Whitehall NONE EXHIBIT B-3 Description of Excluded Assets 1. Any interest rate protection agreement to which WHPKS Real Estate Limited Partnership is a party or a beneficiary EXHIBIT B-4 Whitehall Properties 300, 400, 500 Atrium (Somerset County, New Jersey) 1275 K Street (Washington, D.C.) Description of Contributed Assets Percentage and Legal Nature of Ownership Interest Contributed 1275 K Street Fee simple interest 300, 400 and 500 Atrium 100% partnership interest in WHATR Real Estate Limited Partnership EXHIBIT B-5 Whitehall Additional Properties 600 Atrium (Somerset County, New Jersey) 15 Broad Street (Boston, Massachusetts) Description of Contributed Assets Percentage and Legal Nature of Ownership Interest Contributed 600 Atrium Fee simple interest 15 Broad Street Fee simple interest EXHIBIT C-1 Description of Real Property Contributed by WCPT EXHIBIT C-2 Description of Personal, Tangible and Intangible Property Contributed by WCPT EXHIBIT C-3 Description of Excluded Assets EXHIBIT C-4 WCPT Properties Point View and adjacent land (residential and commercial) (Wayne, New Jersey) Chatham Building (Chatham, New Jersey) Greenbrook Corporate Center (Fairfield, New Jersey) 1700 Valley Road (Wayne, New Jersey) 1800 Valley Road (Wayne, New Jersey) Description of Contributed Assets Percentage and Legal Nature of Ownership Interest Contributed Point View 100% stock of Wellsford Wayne Corp. Chatham Building 100% stock of Wellsford Chatham Corp. Greenbrook Corporate Center 100% stock of Wellsford Greenbrook Corp. 1700 Valley Road Fee simple interest 1800 Valley Road 100% stock of Wellsford Wayne Corp. EXHIBIT E-1 Representations and Warranties of Whitehall EXHIBIT E-2 Representations and Warranties of WCPT EXHIBIT E-3 Representations and Warranties of Whitehall Concerning the Whitehall Additional Properties EXHIBIT F Terms of the Series A Preferred Membership Units EXHIBIT G Form of Registration Rights Agreement SCHEDULE 1 ADDITIONAL MEMBERS 1. Dominic J. Saraceno 2. Kurt W. Saraceno 3. William F. Rand, III 4. Ingeborg B. Saraceno 5. Heidi A. Saraceno-Lawlor 6. Leas A. Saraceno 7. Stephen Davis 8. Edward Werner 9. Carleton G. Tarpinian 10. George McLaughlin, III SCHEDULE 2.6 WHWEL Real Estate Limited Partnership c/o Whitehall Street Real Estate Limited Partnership VII 85 Broad Street, 19th Floor New York, New York 10004 Attention: Chief Financial Officer Wellsford Commercial Properties Trust 610 Fifth Avenue New York, New York 10020 Attention: President Saracen c/o Saracen Companies, Inc. 57 Wells Avenue Newton Centre, MA. 02159 Attn: Mr. William F. Rand, III SCHEDULE 3.2(a)(vi) Approved Leases and Lease Documentation [Schedule 5.1(h) Continued] Series A Preferred Membership Units Member Series A Series A Series A Preferred Preferred Preferred Capital Membership Percentage Account Units Interest - --------- ----------- ---------- ----------- Dominic J. Saraceno $ 7,685,475 307,419 40.45% Kurt W. Saraceno 3,274,250 130,970 17.23% William F. Rand, III 927,450 37,098 4.88% Ingeborg E. Saraceno 3,545,250 141,810 18.66% Heidi A. Saraceno-Lawlor 1,736,525 69,461 9.14% Leas A. Saraceno 919,925 36,797 4.84% Stephen Davis 155,000 6,200 0.82% Edward Werner 606,125 24,245 3.19% Carleton G. Tarpinian 150,000 6,000 0.79% TOTAL $19,000,000 760,000 100.00% EX-10.51 20 WHWEL REAL ESTATE LIMITED PARTNERSHIP 85 Broad Street New York, New York 10004 July 16, 1998 Wellsford Real Properties, Inc. 610 Fifth Avenue New York, New York 10020 Ladies and Gentlemen: We refer to the Limited Liability Company Operating Agreement (the "LLC Agreement") of Wellsford/Whitehall Properties II, L.L.C. ("Wellsford/Whitehall II") dated as of the date hereof, among Wellsford Commercial Properties Trust ("WCPT"), WHWEL Real Estate Limited Partnership ("Whitehall") and the Saracen Members. Capitalized terms used and not defined herein shall have the meanings set forth in the LLC Agreement. This letter agreement will confirm the agreement of Wellsford Real Properties, Inc. ("WRP") and Whitehall regarding warrants issued to Whitehall by WRP. It is hereby agreed by WRP that, within twenty (20) Business Days after Whitehall has delivered a written request to WRP, WRP will exchange shares of WRP Common Stock for Excess Membership Units (as defined below) then held by Whitehall or, at WRP's election, all or part of such Excess Membership Units shall be exchanged for cash at the fair market value of the applicable number of shares of WRP Common Stock as determined below. "Excess Membership Units" shall mean the Membership Units received by Whitehall in exchange for Capital Contributions made to Wellsford/Whitehall II by Whitehall in excess of $50,000,000 up to $75,000,000. The number of shares of WRP Common Stock issued to Whitehall in exchange for each Excess Membership Unit shall be equal to the quotient of (i) the Membership Unit Purchase Price (as defined below) divided by (ii) the Closing Price (as defined in the Warrant Agreement) as of the Trading Day (as defined in the Warrant Agreement) immediately prior to the date the written request described above is delivered to WRP. For purposes of this letter agreement "WRP Common Stock" shall mean the common stock, par value $.01 per share, of WRP and any other stock of WRP into which such common stock may be converted or reclassified (other than stock of the Company into which unissued Common Stock has been reclassified) or that may be issued in resect of, in exchange for, or in substitution of, such common stock by reason of any stock splits, stock dividends, distributions, mergers, consolidations, recapitalizations or other like events. For purposes of this letter agreement, "Membership Unit Purchase Price" shall mean the aggregate purchase price paid for all Excess Membership Units held by Whitehall on the date of determination divided by the number of Excess Membership Units held by Whitehall on such date. This letter agreement and all rights arising hereunder shall be governed by the internal laws of the State of New York. This letter agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. If the foregoing correctly reflects our understanding, please confirm your acceptance by executing the enclosed counterpart of this letter agreement and return it to the undersigned, whereupon it will become a binding agreement between the parties hereto in accordance with its terms. Very truly yours. WHWEL REAL ESTATE LIMITED PARTNERSHIP By: WHATR Gen-Par, Inc. By:/s/ Alan S. Kava ---------------------------- Name: Alan S. Kava Title: Vice President Acknowledged and agreed as of the date first above written: WELLSFORD REAL PROPERTIES, INC. By: /s/ Gregory F. Hughes ----------------------- Name: Gregory F. Hughes Title: CFO EX-10.52 21 FIXED RATE LOAN AGREEMENT Dated as of August 11, 1998 BY and AMONG FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, as Borrower BANKERS TRUST COMPANY, as Agent AND THE LENDERS LISTED ON THE SIGNATURE PAGES HERETO, as Lenders $45,000,000 (Bank Group) TABLE OF CONTENTS Page I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION. . . . . . . . . . . . . . . 1 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Principles of Construction. . . . . . . . . . . . . . . . . . . 13 II. GENERAL TERMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2.1 Commitments; Advances; Notes; the Register. . . . . . . . . . . 14 2.1.1 Commitments.. . . . . . . . . . . . . . . . . . . . 14 2.1.2 Borrowing Mechanics. . . . . . . . . . . . . . . . 14 2.1.3 Disbursement of Funds . . . . . . . . . . . . . . . 15 2.1.4 Notes . . . . . . . . . . . . . . . . . . . . . . . 15 2.1.5 The Register. . . . . . . . . . . . . . . . . . . . 16 2.2 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 16 2.3 Loan Repayments and Prepayments . . . . . . . . . . . . . . . . 16 2.3.1 Repayments. . . . . . . . . . . . . . . . . . . . . 16 2.3.2 Mandatory Prepayments of the Loans. . . . . . . . . 16 2.3.3 Voluntary Prepayments of the Loans. . . . . . . . . 17 2.3.4 Not A Revolver. . . . . . . . . . . . . . . . . . . 17 2.4 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 2.4.1 Generally . . . . . . . . . . . . . . . . . . . . . 17 2.4.2 Interest Payments . . . . . . . . . . . . . . . . . 17 2.4.3 Default Rate; Post-Maturity Interest. . . . . . . . 18 2.5 Payments; Computations. . . . . . . . . . . . . . . . . . . . . 18 2.5.1 Making of Payments. . . . . . . . . . . . . . . . . 18 2.5.2 Computation of Interest . . . . . . . . . . . . . . 18 2.5.3 Capital Adequacy Adjustment. . . . . . . . . . . . 18 2.6 Extension of Loan Term. . . . . . . . . . . . . . . . . . . . . 19 2.6.1 Extension Option. . . . . . . . . . . . . . . . . . 19 2.6.2 Conditions to Extend. . . . . . . . . . . . . . . . 19 2.7 Commitment and Other Fees . . . . . . . . . . . . . . . . . . . 20 2.8 Agent Reliance; Defaulting Lenders. . . . . . . . . . . . . . . 20 2.8.1 Agent Reliance. . . . . . . . . . . . . . . . . . . 20 2.8.2 Defaulting Lenders. . . . . . . . . . . . . . . . . 20 2.8.3 Subordination of Defaulting Lenders.. . . . . . . . 21 2.9 Lending Installations . . . . . . . . . . . . . . . . . . . . . 21 2.10 Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . 21 2.11 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . 22 2.12 Pro Rata Treatment. . . . . . . . . . . . . . . . . . . . . . . 23 III. SPECIAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . 23 3.1 Loss Proceeds Account . . . . . . . . . . . . . . . . . . . . . 23 3.2 Casualty and Condemnation . . . . . . . . . . . . . . . . . . . 23 3.2.1 Casualty, Condemnation and Application of Proceeds. 23 3.2.2 Conflicts With Mortgage Financing . . . . . . . . . 27 IV. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . 27 4.1 Intentionally Omitted.. . . . . . . . . . . . . . . . . . . . . 27 4.2 Conditions Precedent to All Advances. . . . . . . . . . . . . . 27 4.2.1 Notice of Borrowing; Other Documentation. . . . . . . . . . . . . . . . . . . . . . . 27 4.2.2 Other Conditions. . . . . . . . . . . . . . . . . . 28 V. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . 28 5.1 Borrower Representations. . . . . . . . . . . . . . . . . . . . 28 5.1.1 Organization; Existence . . . . . . . . . . . . . . 28 5.1.2 Proceedings . . . . . . . . . . . . . . . . . . . . 29 5.1.3 No Conflicts. . . . . . . . . . . . . . . . . . . . 29 5.1.4 Litigation. . . . . . . . . . . . . . . . . . . . . 29 5.1.5 Agreements. . . . . . . . . . . . . . . . . . . . . 30 5.1.6 No Bankruptcy Filing. . . . . . . . . . . . . . . . 30 5.1.7 Full and Accurate Disclosure. . . . . . . . . . . . 30 5.1.8 Tax and REIT Status . . . . . . . . . . . . . . . . 30 5.1.9 Use of Proceeds . . . . . . . . . . . . . . . . . . 30 5.1.10 Financial Information . . . . . . . . . . . . . . . 30 5.1.11 No Default. . . . . . . . . . . . . . . . . . . . . 31 5.1.12 Federal Reserve Regulations . . . . . . . . . . . . 31 5.1.13 Enforceability. . . . . . . . . . . . . . . . . . . 31 5.1.14 Incorporation of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . 32 VI. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . 32 6.1 Borrower Covenants. . . . . . . . . . . . . . . . . . . . . . . 32 6.1.1 SEC Filings and Press Releases. . . . . . . . . . . 32 6.1.2 Business and Operations . . . . . . . . . . . . . . 32 6.1.3 Costs of Enforcement. . . . . . . . . . . . . . . . 32 6.1.4 Estoppel Statement. . . . . . . . . . . . . . . . . 32 6.1.5 Loan Proceeds . . . . . . . . . . . . . . . . . . . 33 6.1.6 Name; Principal Place of Business . . . . . . . . . 33 6.1.7 Board of Trustees . . . . . . . . . . . . . . . . . 33 6.1.8 Offering. . . . . . . . . . . . . . . . . . . . . . 33 6.1.9 Incorporation of Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . 33 VII. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 33 7.1 Borrower Negative Covenants . . . . . . . . . . . . . . . . . . 33 7.1.1 Debt. . . . . . . . . . . . . . . . . . . . . . . . 34 7.1.2 Corporate Structure . . . . . . . . . . . . . . . . 34 7.1.3 Incorporation of Negative Covenants . . . . . . . . 34 VIII. DEFAULTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 8.1 Event of Default. . . . . . . . . . . . . . . . . . . . . . . . 34 8.2 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 8.3 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . 37 8.4 Gotham's Cure Rights. . . . . . . . . . . . . . . . . . . . . . 38 IX. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 9.1 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 9.2 Lenders' or Agent's Discretion. . . . . . . . . . . . . . . . . 39 9.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 39 9.4 Modification, Waiver in Writing . . . . . . . . . . . . . . . . 40 9.5 Delay Not a Waiver. . . . . . . . . . . . . . . . . . . . . . . 41 9.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 9.7 Trial By Jury . . . . . . . . . . . . . . . . . . . . . . . . . 42 9.8 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 9.9 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . 42 9.10 Preferences . . . . . . . . . . . . . . . . . . . . . . . . . . 42 9.11 Waiver of Notice. . . . . . . . . . . . . . . . . . . . . . . . 43 9.12 Remedies of Borrower. . . . . . . . . . . . . . . . . . . . . . 43 9.13 Non-Exculpation . . . . . . . . . . . . . . . . . . . . . . . . 43 9.14 Expenses; Indemnity . . . . . . . . . . . . . . . . . . . . . . 43 9.15 Exhibits, Schedules Incorporated. . . . . . . . . . . . . . . . 45 9.16 Offsets, Counterclaims and Defenses . . . . . . . . . . . . . . 45 9.17 No Joint Venture or Partnership . . . . . . . . . . . . . . . . 46 9.18 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 9.19 Waiver of Counterclaim. . . . . . . . . . . . . . . . . . . . . 46 9.20 Conflict; Construction of Documents . . . . . . . . . . . . . . 46 9.21 Brokers and Financial Advisors. . . . . . . . . . . . . . . . . 46 9.22 Prior Agreements. . . . . . . . . . . . . . . . . . . . . . . . 47 9.23 Maximum Rate of Interest. . . . . . . . . . . . . . . . . . . . 47 9.24 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . 47 9.25 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 47 9.26 Application of Payments . . . . . . . . . . . . . . . . . . . . 48 9.27 Assignments and Participations. . . . . . . . . . . . . . . . . 48 9.28 Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 9.29 Liability of Borrower's Trustees, etc.. . . . . . . . . . . . . 51 9.30 Employee Termination Expenses . . . . . . . . . . . . . . . . . 51 9.31 Conflicts with Intercreditor Agreement. . . . . . . . . . . . . 51 X. AGENT; SUCCESSOR AGENT . . . . . . . . . . . . . . . . . . . . . . . 52 10.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . 52 10.2 Powers and Duties; General Immunity . . . . . . . . . . . . . . 52 10.2.1 Powers; Duties. . . . . . . . . . . . . . . . . . . 52 10.2.2 Agent Entitled to Act as Lender . . . . . . . . . . 52 10.3 Representations and Warranties; No Responsibility for Appraisal of Creditworthiness. . . . . . . . . . . . . . . . . . . . . . . . . 53 10.4 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . 53 XI. OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 11.1 Rights Offering . . . . . . . . . . . . . . . . . . . . . . . . 54 11.2 Consummation. . . . . . . . . . . . . . . . . . . . . . . . . . 54 11.3 Proceeds of Offering. . . . . . . . . . . . . . . . . . . . . . 54 11.4 Pricing of Rights Offering. . . . . . . . . . . . . . . . . . . 54 11.5 Waiver of Ownership Limitations . . . . . . . . . . . . . . . . 54 11.6 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 55 EXHIBITS Exhibit A Form of Guaranty Exhibit B Form of Notes Exhibit C Form of Notice of Borrowing Exhibit D Form of Assignment and Acceptance SCHEDULES Schedule 1.1 List of Prior Debt Documents Schedule 2.1.1 Commitments; Lenders' Pro Rata Shares Schedule 5.1.4 Pending and Threatened Litigation Schedule 5.1.14 Annexes to Line of Credit Facility FIXED RATE LOAN AGREEMENT THIS FIXED RATE LOAN AGREEMENT, dated as of August 11, 1998 (as amended, restated, replaced, supplemented or otherwise modified from time to time, this "Agreement"), by and among BANKERS TRUST COMPANY, a New York banking corporation ("Bankers"), having an address at 130 Liberty Street, New York, New York 10006, BANKBOSTON N.A., a national banking association, having an address at 115 Perimeter Center Place, NE, Suite 500, Atlanta, Georgia 30346, and WELLSFORD CAPITAL, a Maryland real estate investment trust, having an address at 610 Fifth Avenue, New York, New York 10020 (together with their successors and assigns hereunder, each a "Lender" and collectively, the "Lenders"), BANKERS TRUST COMPANY, a New York banking corporation, as agent (in such capacity, together with its successors and assigns hereunder, "Agent"), having an address at 130 Liberty Street, New York, New York 10006, Attention: Jeffrey Baevsky, and FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, an Ohio real estate investment trust ("Borrower"), having an address at Suite 1900, 55 Public Square, Cleveland, Ohio 44113-1937. All capitalized terms used herein shall have the respective meanings set forth in Section 1.1 hereof. W I T N E S S E T H : - - - - - - - - - - WHEREAS, Borrower desires to obtain the Loans from Lenders; and WHEREAS, Lenders are willing to make the Loans to Borrower, sub- ject to and in accordance with the terms of this Agreement. NOW, THEREFORE, in consideration of the making of the Loans by Lenders and the covenants, agreements, representations and warranties set forth in this Agreement, the parties hereto hereby covenant, agree, represent and warrant as follows: I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION 1.1 Definitions. For all purposes of this Agreement, except as otherwise expressly provided herein or unless the context clearly indicates a contrary intent: "Advance" means an advance of a Loan made on or after the Closing Date pursuant to and in accordance with Section 2.1.1 to be used exclusively for the purposes described in Section 2.2. "Affiliate" means, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person or is a director, officer or trustee of such Person or of an Affiliate of such Person. For purposes of this definition, "control" of a person means the power, directly or indirectly, (i) to vote ten percent (10%) or more of the securities having ordinary voting power for the election of directors or trustees of such Person, or (ii) to direct or cause the direction of the management and policies of such Person, whether by contract or otherwise; provided that no Lender shall be deemed an Affiliate of Borrower for purposes of this Agreement or any other Loan Document; and that each of the entities included in the definition of Gotham are deemed to be Affiliates of each other. "Agent" has the meaning specified in the first Paragraph hereof. "Assignment and Acceptance" shall mean an Assignment and Acceptance in the form of Exhibit D and delivered pursuant to Section 9.27. "Bankruptcy" means, with respect to any Person: (i) the commencement by such Person of a proceeding seeking relief under any provision or chapter of the Bankruptcy Code or any other federal or state law relating to insolvency, bankruptcy or reorganization; (ii) an adjudication that such Person is insolvent or bankrupt; (iii) the entry of an order for relief under the Bankruptcy Code with respect to such Person; (iv) the filing of any such petition or the commencement of any such case or proceeding against such Person, unless such petition and the case or proceeding initiated thereby are dismissed within sixty (60) days from the date of such filing; (v) the filing of an answer by such Person admitting the material allegations of any such petition; (vi) the appointment of a trustee, receiver or custodian for all or substantially all of the assets of such Person unless such appointment is vacated or dismissed by the earlier of sixty (60) days from the date of such appointment and five (5) days before the proposed sale of any assets of such Person; (vii) the execution by such Person of a general assignment for the benefit of creditors; (viii) the convening by such Person of a meeting of its creditors, or any class thereof, for purposes of effecting a moratorium upon or composition of its debts or an extension of its debts; (ix) the levy, attachment, execution or other seizure of substantially all of the assets of such Person where such seizure is not discharged within ten (10) days thereafter; or (x) the admission by such Per- son in writing of its inability to pay its debts as they mature or that it is generally not paying its debts as they become due. "Bankruptcy Action" means, with respect to any Person: (i) commen- cing any case, proceeding or other action seeking protection for such Person as a debtor under any existing or future law of any jurisdiction relating to bankruptcy, insolvency, reorganization or relief of debtors; (ii) consenting to the entry of an order for relief in or institution of any case, proceeding or other action brought by any third party against such Person as a debtor under any existing or future law of any jurisdiction relating to bankruptcy, insolvency, reorganization or relief of debtors; (iii) filing an answer in any involuntary case or proceeding described in clause (ii) above admitting the material allegations of the petition therein or otherwise failing to contest any such involuntary case or proceeding; (iv) seeking or consenting to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar official for such Person or for a substantial portion of its properties; (v) making any assignment for the benefit of the creditors of such Person; or (vi) admitting in writing the inability of such Person to generally pay its debts as they mature or that such Person is generally not paying its debts as they become due. "Bankruptcy Code" means Title 11 of the United States Code entitled "Bankruptcy", as now and hereafter in effect, or any successor statute. "Borrower" has the meaning specified in the first Paragraph hereof. "Business Day" means any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York, or which is a day on which banking institutions located in any such jurisdiction are authorized or required by law or other governmental action to close. "Capital Event" means: (i) any sale, transfer, disposition, conveyance or refinancing of all or any portion of any Property; (ii) Casualty or Condemnation of all or any portion of any Property; (iii) the acquisition, by purchase or otherwise, of any Property or other assets; (iv) the issuance of any debt (other than the Indebtedness and other than under the Imperial Credit Facility and/or the Line of Credit Facility, as each is in effect on the date hereof) or equity securities by Borrower (including the Offering); (v) the incurrence of any indebtedness (other than the Indebted- ness and other than under the Imperial Credit Facility and/or the Line of Credit Facility, as each is in effect on the date hereof) for borrowed money by Borrower (other than purchase-money indebtedness); (vi) any transaction or arrangement with any Person whereby Borrower shall sell or transfer any Property and then or thereafter rent or lease back the same Property which it intends to use for substantially the same purposes as the Property sold or transferred; or (vii) any other event or occurrence which creates Capital Event Proceeds. "Capital Event Proceeds" means the net proceeds (i.e., the amounts received as a result of a Capital Event exceeds the costs and expenses incurred in such Capital Event) to Borrower from any Capital Event, including but not limited to: (i) net proceeds from the sale, transfer, disposition, conveyance or refinancing of all or any portion of any Property; (ii) Loss Proceeds in respect of a Casualty or Condemnation of all or any portion of the Properties, if such proceeds are not used to rebuild or restore such Properties, or are not governed by another document in accordance with Section 3.2.2; (iii) net proceeds from the issuance of any debt or equity securities by Borrower; (iv) net proceeds from the incurrence of any indebtedness for borrowed money by Borrower; or (v) any net proceeds from a transaction or arrangement with any Person whereby Borrower shall sell or transfer any Property and then or thereafter rent or lease back the same Pro- perty which it intends to use for substantially the same purposes as the Pro- perty sold or transferred; provided that all such proceeds shall be net of reasonable out-of-pocket transaction costs and income or other taxes payable by Borrower as a result of such Capital Event and, in the case of the sale or other disposition of any Property, net of payment of any debt secured by such Property or Properties. "Casualty" means any damage to, or loss or destruction of, all or any part of the Properties, whether or not such damage, loss or destruction is insured or insurable. "Casualty Insurance Proceeds" means insurance or other proceeds or amounts paid or payable to or on behalf of Borrower in respect of a Casualty. "Change in Control" means, with respect to Borrower, any of the following events: (i) the acquisition, directly or indirectly, by any one "person" (as such term is used in Section 13(d), and 14(d) of the Securities and Exchange Act of 1934, as amended) of more than 10% of the common stock of or other equity interests in Borrower; or (ii) during any period subsequent to the date hereof, individuals who at the beginning of such period constituted the Board of Trustees or Board of Directors of Borrower (together with any new directors or trustees whose election or nomination for election was approved by a vote of a majority of the directors or trustees then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of such Board of Directors or Board of Trustees then in office; provided that neither the execution of the Standby Purchase Agreements nor the purchase by the Standby Purchasers of any stock pursuant to the Offering or the Standby Purchase Agreements shall be deemed to cause a Change in Control and that any increase in the ownership by any Standby Purchaser of any common stock or other equity interests in Borrower shall not constitute a Change in Control. "Closing Date" means the date of this Agreement. "Commitments" means the commitments of Lenders to make Advances to Borrower pursuant to Section 2.1.1. "Commitment Fees" has the meaning specified in Section 2.7. "Condemnation" means any actual or threatened taking, condemna- tion, eminent domain or other similar proceeding relating to all or any portion of any Property. "Condemnation Proceeds" means any and all award proceeds and other compensation payable in respect of a Condemnation. "Control" of a Person means the power, whether or not exercised, to direct the management of such Person, whether by possession of the power to elect a majority of the Board of Directors or Board of Trustees or other- wise. "CPA" means a certified public accounting firm of recognized national standing. "Debt" means, with respect to any Person, without duplication, (i) all indebtedness of such Person for borrowed money, (ii) all indebtedness of such Person for the deferred purchase price of property or services (other than indebtedness for property and services purchased in the ordinary course of business that is payable and paid within sixty (60) days after delivery), (iii) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments (other than performance, surety and appeal bonds arising in the ordinary course of business), (iv) all indebtedness 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), (v) all obligations of such Person under leases which have been or should be, in accordance with GAAP, recorded as capital leases, (vi) all reimbursement, payment or similar obligations of such Person, contingent or otherwise, under acceptance, letter of credit or similar facilities (other than letters of credit in support of trade obligations or in connection with workers' com- pensation, unemployment insurance, old-age pensions and other social security benefits in the ordinary course of business), (vii) all Debt (as defined in clauses (i) through (vi) above) of another Person guaranteed directly or in- directly by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (A) to pay or purchase such Debt or to advance or supply funds for the payment or purchase of such Debt, (B) to pur- chase, 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 in respect of such Debt, (C) 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 (D) otherwise to assure a creditor against loss in respect of such Debt, and (viii) all Debt (as defined in clauses (i) through (vi) above) of another Person secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any lien, security interest or other charge or encumbrance upon or in property (including accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt; excluding, however, the endorsement of negotiable instruments or documents in the ordinary course of business. "Default" means the existence of a condition or the occurrence of an event which, but for the giving of notice or passage of time, or both, would be an Event of Default. "Default Rate" means a rate per annum equal to the greater of the Interest Rate plus four percent (4.0%) per annum and the Prime Lending Rate plus four percent (4.0%) per annum. "Defaulting Lender" shall have the meaning assigned to such term in Section 2.8.3. "Elliott" is a reference to Elliott Associates, L.P., a Delaware limited partnership. "Event of Default" has the meaning specified in Section 8.1. "Extension Fee" has the meaning specified in Section 2.6.2. "Final Commitment Date" means the date that is six (6) months from the date on which the Closing Date occurs; provided that if the Final Commitment Date occurs on a day which is not a Business Day, the Final Commitment Date will fall on the next succeeding Business Day. "Final Extension Maturity Date" has the meaning specified in Section 2.6.1(b). "Final Extension Notice" has the meaning specified in Section 2.6.1(b). "Final Extension Option" has the meaning specified in Section 2.6.1(b). "Fiscal Year" means each twelve month period commencing on Janu- ary 1 and ending on December 31. "FFO" means, for any Person, net income (computed in accordance with GAAP), excluding gains (or losses) from restructuring and sales of pro- perty, plus depreciation of real property, and after adjustments for unconsolidated entities in which such Person holds an interest. "Funding Date" means the date of the funding of an Advance. "GAAP" means generally accepted accounting principles in the United States of America as of the date of the applicable financial report. "Gotham" is a reference to Gotham Partners, L.P., a New York limited partnership, and Gotham Partners III, L.P., a New York limited partnership, and each reference herein to Gotham, including to Gotham as a Standby Purchaser, shall be deemed to be a reference to all of such entities or to both of such entities, as the context requires. "Governmental Authority" means any legislative body, court, board, agency, commission, office or authority of any nature whatsoever of or for any governmental unit (federal, state, county, district, municipal, city or otherwise) whether now or hereafter in existence. "Guarantors" means any Person which hereafter becomes a Guarantor pursuant to Section 7.20 of the Line of Credit Facility (as incorporated herein). "Guaranty" means each guaranty, substantially in the form attached hereto as Exhibit A, hereafter executed by a Guarantor in favor of Lenders, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Imperial Credit Facility" means the credit facility governed by (i) that certain Amended and Restated Credit Agreement dated as of April 17, 1997 among Imperial Parking Limited, 504463 N.B. Inc., the lenders named therein, and BT Bank of Canada, and (ii) that certain Ancillary Agreement dated April 17, 1997 among BT Bank of Canada, Hongkong Bank of Canada and Borrower; both as amended, restated, replaced, supplemented or otherwise modified, and as more specifically described on Schedule 1.1 hereto. "Indebtedness" means the indebtedness evidenced by the Notes, together with all other obligations and liabilities of Borrower due or to become due to Lenders pursuant hereto in respect of the Loans, under the Notes or in accordance with any of the other Loan Documents, all amounts, sums and expenses paid by or payable or reimbursable to Lenders hereunder in respect of the Loans or pursuant to the Notes or any of the other Loan Docu- ments, and all other covenants, obligations and liabilities of Borrower here- under in respect of the Loans or pursuant to the Notes or any of the other Loan Documents, together with all interest thereon (including, if and when applicable, interest at the Default Rate as provided in this Agreement and in the Notes). "Indemnified Liabilities" has the meaning specified in Section 9.14. "Indemnitees" means, collectively, Agent, Lenders and their successors and assigns, and its and their respective officers, directors, agents (including any servicer of the Loans), employees, parents, Affiliates and Subsidiaries. "Independent" means a Person who (i) is in fact independent, (ii) does not have any direct financial interest or any material indirect financial interest in Borrower or in any Affiliate of Borrower or any constituent partner of Borrower, and (iii) is not connected with Borrower or any Affiliate of Borrower or any constituent partner of Borrower as an officer, employee, promoter, underwriter, trustee, partner, director or per- son performing similar functions. Whenever it is herein provided that any Independent Person's opinion or certificate shall be provided, such opinion or certificate shall state that the Person executing the same has read this definition and is Independent within the meaning hereof. "Initial Extension Maturity Date" has the meaning specified in Section 2.6.1(a). "Initial Extension Notice" has the meaning specified in Section 2.6.1(a). "Initial Extension Option" has the meaning specified in Section 2.6.1(a). "Initial Maturity Date" means the day that is six (6) months from the date on which the Closing Date occurs; provided that if the Initial Maturity Date occurs on a day which is not a Business Day, the Initial Maturity Date will fall on the next succeeding Business Day. "Intercreditor Agreement" shall mean that certain Intercreditor Agreement of even date herewith by and among the parties to this Agreement and the parties to the Other Loan Agreement, as the same may be amended or otherwise modified from time to time. "Interest Payment Date" means, for any Interest Period, the date that is the last day of such Interest Period; provided, however, that if such day is not a Business Day, the Interest Payment Date for such Interest Period shall occur on the next succeeding Business Day. "Interest Period" means each calendar month during the term of the Loans; provided that: (a) the initial Interest Period shall commence on (and include) the Closing Date and shall end on (and include) the last day of the calendar month in which the Closing Date occurs; and (b) the final Interest Period shall end on (and include) the last day of the calendar month in which the Initial Maturity Date occurs (or, if applicable, the Initial Extension Maturity Date or Final Extension Maturity Date). "Interest Rate" means a rate of interest equal to nine and seven- eighths percent (9.875%) per annum. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, and as it may be further amended from time to time, any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form. "Legal Requirements" means all federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of any Governmental Authority (including Environmental Laws) affecting Borrower or any Property or any part thereof, whether now or hereafter enacted and in force. "Lenders" has the meaning specified in the first Paragraph hereof, and shall, as the context may require, include any servicer appointed by Lenders for the purpose of servicing the Loans. "Lender Approval" means the written approval of the Required Len- ders. Lender Approval or approval by the Required Lenders, except as other- wise herein provided, may be granted or withheld in the sole and absolute discretion of such required percentage of Lenders hereunder. "Lending Installation" means any office or branch of any Lender. "Lien" means any mortgage, deed of trust, lien, pledge, hypothe- cation, assignment, security interest, security title, or any other encum- brance, charge or collateral transfer of, on or affecting the Properties of Borrower or any portion thereof or any interest therein, including any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, the filing of any financing statement, and mechanic's, materialmen's and other similar liens and encumbrances. "Line of Credit Facility" means the $125,000,000.00 credit facility governed by that certain Amended and Restated Credit Agreement dated as of November 1, 1997 among Borrower, Manager, the lenders named therein, Keybank National Association, Bankers Trust Company, and National City Bank, as amended, restated, replaced, supplemented or otherwise modified, and as more specifically described on Schedule 1.1 hereto. "Loan Documents" means collectively, this Agreement, the Notes, the Guaranty, the Standby Purchase Agreements and any other document or instrument executed and delivered by Borrower or any other Person to Agent or any Lender evidencing, governing, securing or otherwise relating to the Loans, in each case, as amended, restated, replaced, supplemented or other- wise modified from time to time. "Loans" means the fixed rate unsecured loans evidenced by the Notes and governed by the Loan Documents, to be made in Advances by Lenders to Borrower pursuant hereto. "Loss Proceeds" means Casualty Insurance Proceeds and/or Condemna- tion Proceeds, as the context may require. "Loss Proceeds Account" has the meaning specified in Section 3.1. "Manager" means First Union Management, Inc., a Delaware corporation. "Material Adverse Effect" means any circumstance, act, condition or event of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, or circumstance or circumstances, whether or not related, that does, or could reasonably be expected to, (i) result in a materially adverse change in or have a materially adverse effect upon the business, operations or condition (financial or otherwise) of Borrower or any Standby Purchaser, as the case may be, or (ii) result in the material impairment of the ability of Borrower or any Standby Purchaser to perform, or of Lenders to enforce, the obligations of Borrower or such Standby Purchaser under the Loan Documents to which it is a party, or any of them. "Maximum Rate" has the meaning specified in Section 9.23. "Notes" means those certain Notes of even date herewith, in each case made by Borrower in favor of a Lender, substantially in the form of Exhibit B, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Notice of Borrowing" means a notice substantially in the form attached hereto as Exhibit C, delivered by Borrower to Agent pursuant to Section 2.1.2 with respect to a proposed borrowing hereunder. "Offering" has the meaning specified in Section 11.1. "Officer's Certificate" means a certificate delivered to Agent by Borrower which is signed by an authorized officer of Borrower. "Organizational Documents" means, with respect to any Person, (a) if such Person is a limited partnership, the limited partnership agreement of such Person and the certificate of limited partnership of such person, in each case, as amended, restated, supplemented or otherwise modified from time to time, (b) if such Person is a corporation, the certificate or articles of incorporation of such Person and the by-laws of such Person, in each case, as amended, restated, supplemented or otherwise modified from time to time, (c) if such Person is a limited liability company, the certificate of formation (or equivalent document) and the operating agreement of such Person, as amended, restated, supplemented or otherwise modified from time to time, (d) if such person is a trust, the trust agreement of such Person, as amended, restated, supplemented or otherwise modified from time to time, and (e) if such Person is a general partnership, the partnership agreement of such Per- son, as amended, restated, supplemented or otherwise modified from time to time. If a Person is an individual, there are no Organizational Documents for such Person. "Other Loan Agreement" shall mean that certain Fixed Rate Loan Agreement of even date herewith by and among Borrower, as borrower, Gotham, Blackacre Bridge Capital, L.L.C. and Elliott, as lenders, and Bankers Trust Company, as Agent. "Other Loans" means the "Loans," as defined in the Other Loan Agreement. "Paired Trust" means an Ohio trust created for the benefit of the shareholders of Borrower, which trust holds all of the shares of Manager. "Participant" means any participant in any obligations of Borrower hereunder. "Performing Lenders" shall have the meaning assigned to such term in Section 2.8.2. "Person" means any individual, corporation, general partnership, limited partnership, limited liability company, limited liability partner- ship, joint venture, estate, trust, unincorporated association, or other organization, whether or not a legal entity, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing. "Policies" has the meaning specified in Section 6.1.22(c). "Pre-Closing Documentation" has the meaning specified in Sec- tion 10.3. "Prime Lending Rate" shall mean the "Prime Rate" reported by The Wall Street Journal (Eastern Edition) from time to time; provided, however, if at any time more than one Prime Rate is reported by The Wall Street Journal, the Prime Lending Rate shall mean the rate which Agent announces from time to time as its prime lending rate, in effect from time to time. The Prime Lending Rate shall change as of the date of each change in the Prime Rate. If, during any period that any portion of the Loans are out- standing, The Wall Street Journal no longer publishes a "Prime Rate", the Prime Lending Rate shall mean the rate which Agent announces from time to time as its prime lending rate, in effect from time to time. The Prime Lending Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Lenders may make commercial or other loans at rates of interest at, above or below the Prime Lending Rate. "Prior Debt Documents" means the documents evidencing, governing, securing or otherwise relating to any outstanding Debt of Borrower as of the Closing Date other than the Indebtedness, including Debt pursuant to the Senior Notes, the Line of Credit Facility and the Imperial Credit Facility. The Prior Debt Documents shall include (but shall not be limited to) the instruments listed on Schedule 1.1 hereto. "Properties" means, collectively, the parcels of real property from time to time owned or leased by Borrower and all improvements thereon, together with all rights pertaining to such property and improvements. "Pro Rata Share" means with respect to each Lender, the percentage obtained by dividing (i) as of any date of determination prior to the termination of the Commitments (a) that Lender's Commitment by (b) the sum of the aggregate Commitments of all Lenders and (ii) as of any date of determination after the termination of the Commitments, (A) the aggregate principal amount of such Lender's outstanding Advances by (B) the sum of the aggregate principal amount of all outstanding Advances. "Register" has the meaning specified in Section 2.1.5(a). "REIT" means a real estate investment trust as defined in Section 856 of the Internal Revenue Code. "Required Lenders" shall mean Lenders holding a 66 2/3% or greater share of the outstanding Loans or, if no Loans are outstanding, Lenders holding a 66 2/3% or greater share of the Commitments. "Securities and Exchange Commission" means the United States Securities and Exchange Commission or any successor thereto. "Senior Notes" means those certain 8 and 7/8% Senior Notes due 2003 issued by Borrower pursuant to that certain Indenture dated as of October 1, 1993 from Borrower to Society National Bank , as amended, restated, replaced, supplemented or otherwise modified, and as more specifically described on Schedule 1.1 hereto. "Standby Purchase Agreements" shall mean each of the Standby Stock Purchase Agreements of even date herewith made by and between a Standby Pur- chaser and Borrower and acknowledged and agreed to by Agent, as the same may be amended or otherwise modified from time to time. "Standby Purchaser" means each of Elliott and Gotham. "Subsidiary" means, with respect to any Person, any corporation, partnership, limited liability company, trust or other entity of which at least a majority of the securities or other ownership interests having by their terms ordinary voting power to elect a majority of the Board of Directors or Board of Trustees or other individuals performing similar functions of such corporation, partnership, limited liability company, trust or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership, limited liability company, trust or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person and/or one or more Subsidiaries of such Person, and any partnership or limited liability company in which such Person or any such Subsidiary is a general partner or managing member. "Tax" means any present or future tax, levy, impost, duty, charge, fee, assessment, imposition, deduction or withholding of any nature and whatever called, by any Governmental Authority, on whomsoever and wherever imposed, levied, collected, withheld or assessed. "Work" has the meaning specified in Section 3.2.1(d)(i). 1.2 Principles of Construction. All references to sections, schedules and exhibits are to sec- tions, schedules and exhibits in or to this Agreement unless otherwise specified. Unless otherwise specified, the words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The words and phrases "including," "shall include," "inclusive of" and words and phrases of similar import shall be deemed to be followed by "without limitation" or "but not limited to". Unless otherwise specified, all meanings attributed to defined terms herein shall be equally applicable to both the singular and plural forms of the terms so defined. All accounting terms not specifically defined herein shall be construed in accordance with GAAP, as modified herein. II. GENERAL TERMS 2.1 Commitments; Advances; Notes; the Register. 2.1.1 Commitments. Subject to and upon the terms and conditions set forth herein, each Lender hereby severally agrees to lend to Borrower from time to time during the period from the Closing Date to and including the Final Commitment Date an aggregate amount not exceeding such Lender's Pro Rata Share of the aggregate amount of the Commitments; provided, however, that notwithstanding anything herein to the contrary, any amount borrowed and repaid hereunder cannot be reborrowed. Borrower agrees that for so long as Advances are available hereunder Borrower will not borrow under the Other Loan Agreement. The original amount of each Lender's Commitment and such Lender's original Pro Rata Share is set forth opposite its name on Schedule 2.1.1 annexed hereto and the aggregate original amount of the Commitments is Forty-five Million Dollars ($45,000,000.00). Borrower shall use the proceeds of all Loans for the purposes identified in Section 2.2. Each Lender's Commitment shall expire on the Final Commitment Date and all Advances and all other amounts owed hereunder with respect to the Loans and the Commitments shall be paid in full no later than the Initial Maturity Date (or, if the term of the Loans is extended pursuant to Section 2.6, the Initial Extension Maturity Date or the Final Extension Maturity Date, as the case may be). 2.1.2 Borrowing Mechanics. Advances made on any Funding Date shall be in an aggregate minimum amount of Five Million Dollars ($5,000,000.00). Whenever Borrower desires that Lenders make Advances, it shall deliver to Agent a Notice of Borrowing no later than 10:00 A.M. (New York time) at least three Business Days in advance of the proposed Funding Date. Each Notice of Borrowing shall specify (i) the proposed Funding Date (which shall be a Business Day), (ii) the amount of the Advances requested, (iii) the account to which the Advances shall be wired, and (iv) that no other Funding Date shall have occurred within the 30 days immediately preceding the proposed Funding Date. Borrower may give Agent telephonic notice by the required time of any proposed Advances under this Section 2.1.2; provided, however, that such notice shall be promptly confirmed in writing by delivery of a Notice of Borrowing to Agent on or before the applicable Funding Date. Neither Agent nor any Lender shall incur any liability to Borrower in acting upon any telephonic notice referred to above that Agent believes in good faith to have been given by a duly authorized officer or other Person authorized to borrow on behalf of Borrower or for otherwise acting in good faith under this Sec- tion 2.1.2, and upon funding of Advances by Lenders in accordance with this Agreement pursuant to any such telephonic notice Borrower shall have effected Advances hereunder. Borrower shall notify Agent (who shall notify Lenders) prior to the funding of any Advances in the event that any of the matters to which Borrower is required to certify in the applicable Notice of Borrowing is no longer true and correct as of the applicable Funding Date, and the acceptance by Borrower of the proceeds of any Advances shall constitute a re- certification by Borrower, as of the applicable Funding Date, as to the matters to which Borrower is required to certify in the applicable Notice of Borrowing. 2.1.3 Disbursement of Funds. All Advances under this Agree- ment shall be made by Lenders simultaneously and proportionately to their respective Pro Rata Shares, it being understood that no Lender shall be responsible for any default by any other Lender in that other Lender's obligation to make Advances requested hereunder nor shall the Commitment of any Lender be increased or decreased as a result of a default by any other Lender in that other Lender's obligation to make Advances requested hereun- der. Promptly after receipt by Agent of a Notice of Borrowing pursuant to Section 2.1.2 (or telephonic notice in lieu thereof), Agent shall notify each Lender of the proposed Advances. Provided that Lenders have received at least one (1) Business Day notice of the requested Advance, each Lender shall make its Pro Rata Share of the aggregate amount of the Advances requested in such Notice of Borrowing or telephonic notice, as the case may be, available to Agent, in same day funds, at the office of Agent located at 130 Liberty Street, New York, New York, not later than 12:00 Noon (New York time) on the applicable Funding Date. Upon satisfaction of the conditions precedent specified in Section 4.1 and 4.2 (in the case of Advances made on the Closing Date) and Section 4.2 (in the case of all Advances), Agent shall make the proceeds of such Advances available to Borrower on the applicable Funding Date by causing an amount of same day funds equal to the proceeds of all such Advances received by Agent from Lenders to be transferred to the account designated in the Notice of Borrowing or telephonic notice, as the case may be. 2.1.4 Notes. The Commitments and Loans shall be evidenced by the Notes of Borrower, each in the original principal amount of the respective Loan and having an initial maturity date of Initial Maturity Date. The Notes shall bear interest as provided in Section 2.4 and shall be subject to repayment and prepayment as provided in Section 2.3. The Notes shall be entitled to the benefits of this Agreement. 2.1.5 The Register. (a) Agent shall maintain, at its address referred to in this Agreement, a register for the recordation of the names and addresses of Lenders and the Commitment and Advances of each Lender from time to time (the "Register"). For all purposes of this Agreement, Borrower, Agent and Lenders may treat as a Lender hereunder each Person whose name is recorded in the Register as a Lender hereun- der. The Register shall be available for inspection by Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (b) Agent shall record in the Register the Commitment and the Advances from time to time of each Lender, and each repayment or prepayment in respect of the principal amount of the Advances of each Lender. Any such recordation shall be prima facie evidence of such matters as against Borrower and each Lender, absent manifest error; provided, however, that failure to make any such recordation, or any error in such recordation, shall not affect Borrower's obligations in respect of the applicable Loans. (c) Each Lender shall record on its internal records (including the Notes described in Section 2.1.4) the amount of each Advance made by it and each payment in respect thereof. Any such recordation shall be prima facie evidence of such matters as against Borrower absent manifest error; provided, however, that failure to make any such recordation, or any error in such recordation, shall not affect Borrower's obligations in respect of the applicable Loans. 2.2 Use of Proceeds. Borrower shall use the proceeds of the Loans only for the purposes of repurchasing outstanding Senior Notes and the payment of actual out-of- pocket costs incurred by Borrower in connection therewith, and for no other purpose. 2.3 Loan Repayments and Prepayments. 2.3.1 Repayments. Subject to Section 2.6 hereof, Borrower shall repay the then outstanding principal amount of the Loans in full on the Initial Maturity Date, together with interest thereon through (and including) the last day of the final Interest Period. 2.3.2 Mandatory Prepayments of the Loans. Subject to the terms and provisions of the Intercreditor Agreement, the Loans and the Other Loans are subject to mandatory partial or full prepayment (together with interest on the amount prepaid), on a pro-rata basis, with one hundred percent (100%) of all Capital Event Proceeds within two (2) Business Days after the date Borrower receives such Capital Event Proceeds; provided that Loss Proceeds shall be applied to such mandatory prepayment only to the extent such Loss Proceeds are not applied to rebuild or restore Properties that were the subject of the Casualty or Condemnation with respect to which such Loss Proceeds were received. However, to the extent such Loss Proceeds become available for prepayment during the Lock-Out Period (defined below), such prepayment shall be made immediately following the Lock-Out Period. 2.3.3 Voluntary Prepayments of the Loans. Subject to the terms and provisions of the Intercreditor Agreement, Borrower may, at any time, upon not less than two (2) days' prior written notice to Agent, prepay the Loans, in whole or in part, together with interest on the outstanding principal amount of the Loans being prepaid to (and including) the day in which the prepayment occurs, such amount of interest and principal to be applied to the Loans pro rata in accordance with the respective outstanding principal balances of the Loans; provided, however, that any Loan which is prepaid (including with the proceeds of the Offering) within ninety (90) days (the "Lock-Out Period") of being advanced shall be accompanied by a prepay- ment premium of (i) if the prepayment occurs on or before thirty (30) days after being advanced, three percent (3%) of the amount prepaid; (ii) if the prepayment occurs on or after thirty-one (31) days to and including sixty (60) days of being advanced, two percent (2%) of the amount prepaid; and (iii) if the prepayment occurs on or after sixty-one (61) days to and including ninety (90) days of being advanced, one percent (1%) of the amount prepaid. Each notice of prepayment of the Loans shall be irrevocable and shall specify (i) the prepayment date and (ii) the amount of prepayment. 2.3.4 Not A Revolver. This Agreement does not provide for revolving loans. Accordingly, amounts repaid or prepaid may not be reborrowed. 2.4 Interest. 2.4.1 Generally. The outstanding principal amount of the Loans shall bear interest at a rate per annum equal to the Interest Rate. 2.4.2 Interest Payments. Subject to the provisions of Sec- tion 2.4.3, interest on the outstanding principal balance of the Loans shall be payable (a) for any Interest Period other than the final Interest Period, on the Interest Payment Date for such Interest Period, (b) upon any prepay- ment of the Loans (to the extent accrued on the amount being prepaid), in accordance with Section 2.3, and (c) for the final Interest Period, on the Initial Maturity Date (or, if the term of the Loans is extended pursuant to Section 2.6, the Initial Extension Maturity Date or Final Extension Maturity Date, as applicable). 2.4.3 Default Rate; Post-Maturity Interest. If Borrower shall default in the payment of principal of or interest on the Loans, or any fees or other amounts owed by Borrower under this Agreement or any other Loan Documents shall not be paid when due, then the outstanding principal amount of the Loans and, to the extent permitted by applicable law, any interest payments thereon not paid when due and any fees and other amounts then due and payable under this Agreement or any other Loan Document shall thereafter bear interest (including post-petition interest in any proceeding under the Bankruptcy Code or any other now existing or future applicable bankruptcy, insolvency or other similar laws) payable upon demand at the Default Rate. Payment or acceptance of the increased rates provided for in this subsection is not a permitted alternative to timely payment and shall not constitute a waiver of any Default or Event of Default or an amendment to this Agreement or any other Loan Document and shall not otherwise prejudice or limit any rights or remedies of Lenders. 2.5 Payments; Computations. 2.5.1 Making of Payments. Each payment by Borrower hereunder or under the Notes shall be made to Agent by deposit to such account as Agent may have last designated by written notice to Borrower. Payments received after 2:00 p.m., New York City time, shall be deemed to have been received on the next Business Day. Whenever any payment hereunder or under the Notes shall be stated to be due on a day that is not a Business Day and an alternative payment date is not otherwise provided for, such payment shall be made on the next Business Day, with interest thereon to the date of payment. Immediately after receipt of payment, Agent will distribute to each Lender its Pro Rata Share of each such payment received by Agent for the account of Lenders. 2.5.2 Computation of Interest. Interest on the Loans shall be computed on the basis of a 360-day year, based on the actual number of days expired in any given Interest Period. In computing interest on the Loans, the first day of an Interest Period and the last day of such Interest Period shall be included. 2.5.3 Capital Adequacy Adjustment. If any Lender shall have determined that the adoption, effectiveness, phase-in or applicability of any law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change therein or in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance with any guideline, request or directive regarding capital adequacy (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency, in any case occurring or arising after the date hereof, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of, or with reference to, the Loans or other obligations hereunder to a level below that which such Lender or such controlling corporation could have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Lender or such controlling corporation with regard to capital adequacy), then from time to time, within five (5) Business Days after receipt by Borrower from Agent on behalf of such Lender of the statement referred to in the next sentence, Borrower shall pay to Agent on behalf of such Lender such addition- al amount or amounts as will compensate such Lender or such controlling cor- poration on an after-tax basis for such reduction. Agent on behalf of such Lender shall deliver to Borrower a written statement, setting forth in reasonable detail the basis of the calculation of such additional amounts, which statement shall be conclusive and binding upon all parties hereto absent manifest error. 2.6 Extension of Loan Term. 2.6.1 Extension Option. Subject to the satisfaction of each of the conditions set forth in Section 2.6.2: (a) Borrower shall have the option (the "Initial Extension Option"), exercisable by notice (the "Initial Extension Notice") to Agent given at least ten (10) Business Days prior to the Initial Maturity Date, time being of the essence, to extend the maturity of the Loans until the date three (3) months following the Initial Maturity Date (the "Initial Extension Maturity Date"). (b) If Borrower shall have exercised the Initial Extension Option, then Borrower shall have the option (the "Final Extension Option"), exercisable by notice (the "Final Extension Notice") to Agent given at least ten (10) Business Days prior to the Initial Extension Maturity Date, time being of the essence, to extend the maturity of the Loans until the date three (3) months following the Initial Extension Maturity Date (the "Final Extension Maturity Date"). 2.6.2 Conditions to Extend. Borrower's right to extend the term of the Loan shall be conditioned upon the satisfaction of the following conditions precedent as of the date on which the Initial Extension Notice or Final Extension Notice, as applicable, is provided to Agent, and as of the Initial Maturity Date or the Initial Extension Maturity Date, as applicable: (a) no monetary Default, material non-monetary Default or Event of Default shall have occurred and be continuing (and any extension shall not be deemed a waiver of a Default of any type); and (b) Borrower shall pay to Agent (to be distributed pro rata among Lenders in accordance with the outstanding principal balances of the Loans) on each of the dates on which the Initial Extension Notice and Final Extension Notice, as applicable, is provided to Agent a non- refundable extension fee of $225,000 (each, an "Extension Fee"). 2.7 Commitment and Other Fees. Borrower agrees to pay to each Lender on the Closing Date a non- refundable commitment fee (each a "Commitment Fee" and collectively the "Com- mitment Fees") in an amount equal to one and one-half percent (1.5%) of the principal amount of the Commitment made by such Lender to Borrower pursuant to this Agreement. Pursuant to a separate agreement with Borrower, upon the Closing Date Borrower is paying Agent a non-refundable Agent's fee. 2.8 Agent Reliance; Defaulting Lenders. 2.8.1 Agent Reliance. Unless Agent shall have been notified in writing by any Lender prior to the date of an Advance that such Lender does not intend to make available to Agent such Lender's pro rata share of the Advance to be made on such date, Agent may assume that such Lender has made such amount available to Agent on such date, and Agent may make available to Borrower a corresponding amount. If such corresponding amount is not in fact made available to Agent by such Lender on the date of such Advance, Agent shall have no obligation to make such corresponding amount available to the Borrower. If Agent has made such funds available to Borrower and such Lender does not pay such corresponding amount upon Agent's demand therefor, Agent may at any time thereafter so notify Borrower and Bor- rower shall immediately upon Agent's demand therefor pay to Agent such corresponding amount together with interest thereon, for each day from such Funding Date until the date such amount is paid to Agent, at the Interest Rate. 2.8.2 Defaulting Lenders. To the extent that a Lender fails to make any Advance when required hereunder and one or more of the other Lenders ("Performing Lenders") makes such Advance in such amounts as they may agree upon (although none of Lenders or Agent shall have any obligation to make any such Advance), then, without otherwise limiting any rights and remedies in such situation, Defaulting Lender shall pay to Lenders which per- formed Defaulting Lender's obligations (x) interest on such amount at a rate equal to such Performing Lender's cost of funds for the related Loan which Performing Lenders made to Borrower as a result of such Defaulting Lender's failure to effect the related Advance and (y) a pro-rata portion of the fees paid to Defaulting Lender by Borrower as set forth in Section 2.7, with such pro-rata portion to be calculated by amortizing such fees on a straight-line basis (over the then scheduled term of the Loan) and allocating to Performing Lenders, with respect to the period they performed on behalf of the Defaulting Lender, the fees allocable to the amount so advanced by Performing Lenders on behalf of Defaulting Lender. Such interest shall accrue and be payable from the date the Performing Lender(s) made a loan to Borrower on behalf of the Defaulting Lender(s) until such payment is made by the Defaulting Lender(s) to the Performing Lender(s). If Defaulting Lender makes the payment which it theretofore failed to make and pays Performing Lender the interest and fees described in this Section, then Defaulting Lender shall be deemed to have made the Advance when the same was originally due. 2.8.3 Subordination of Defaulting Lenders. If a Lender fails, when required hereunder, to make any Advance or fails to pay any sum payable to Agent hereunder and such default continues for five (5) days after written notice by Agent to such Lender, then such Lender's (the "Defaulting Lender") share in the Loans and the Loan Documents and proceeds thereof shall be immediately subordinated to the other Lenders' and Agent's share therein and proceeds thereof, and such Defaulting Lender's Commitment and Loans shall be voted by Agent, all without necessity for executing any further documents. Upon such failure, in addition to Agent's other legal and equitable rights and remedies, Agent shall withhold and apply any and all amounts payable to such Defaulting Lender under the Loan Documents in such order of priority as Agent shall determine in its sole discretion to: (i) purchase for the Defaulting Lender its share of any Loan or pay any sum payable hereunder that Defaulting Lender was obligated but failed to pay pursuant to this Agreement; and/or (ii) reimburse Performing Lenders and/or Agent for any other sums, costs, expenses or disbursements payable by Defaulting Lender hereunder. Upon actual payment by Defaulting Lender of its late Commitment percentage of the Loans and any other sums then payable by Defaulting Lender under the Loan Documents, its share in the Loans and in the Loan Documents and proceeds thereof and its Commitment and Loan thereupon shall immediately be restored to equal priority with that of the other Lenders, but these provisions shall not effect a rescission of any exercise by Agent of any vote of Defaulting Lender's Commitment and Loans. 2.9 Lending Installations. Each Lender may book Loans at one or more Lending Installations selected by it from time to time, and may change its Lending Installations from time to time, but no such selection or change shall affect the liability of the Lender making any such selection or change. All terms of this Agreement and of the other Loan Documents shall apply to any such Lending Installation as if it were a Lender hereunder, and, if a Lender so selects Lending Installation(s), this Agreement shall be deemed held by such Lender for the benefit of its selected Lending Installation(s). 2.10 Withholding. All payments by Borrower shall be paid in full without setoff or counterclaim and without reduction for and free from any and all Taxes; provided, however, that in the event Borrower shall be required by law to deduct or withhold Taxes from interest, fees or other amounts payable hereun- der or under any of the other Loan Documents, Borrower shall be entitled to do so without being in Default hereunder provided that Borrower, together with such payment, shall provide a statement to Agent and Lenders setting forth the amount of Taxes deducted or withheld, the applicable rate, an official receipt or other evidence of payment satisfactory to the applicable Lender and any other information or documentation which may reasonably be requested for the purpose of assisting the Person(s) from whom Taxes were deducted or withheld to obtain any allowable credits or deductions for the Taxes so deducted or withheld in each jurisdiction in which said Person(s) are subject to tax. Notwithstanding the foregoing, however, Borrower shall not deduct or withhold Taxes from amounts payable to or for the benefit of a Person entitled to payments hereunder whose percentage interest in the oblig- ations of Borrower has been disclosed to Borrower (either in writing or by a document to which such Person, any Lender or Borrower is a signatory) (or, in the event that any Taxes are required by law to be deducted or withheld from payments hereunder to any such Person, Borrower shall pay to such Person such additional amount as is necessary to ensure that the net amount actually received by such Person will equal the full amount such Person would have received had no such deduction or withholding been required), (i) if such Person is created or organized under the laws of the United States or any state thereof or (ii) to the extent that Borrower would be permitted to make such payments to such Person free of such deductions or withholdings as of the Closing Date or the date such Person otherwise acquires an interest in the obligations of Borrower hereunder; provided that if at the date a Person becomes a party hereto the applicable transferor or assignor was entitled to additional amounts under this Section 2.10, then to such extent the assignee or transferee shall also be entitled to additional amounts hereunder. A Lender organized in a jurisdiction other than the United States or a political subdivision thereof shall not be entitled to receive additional amounts under this Section 2.10 to the extent that a withholding tax is imposed due to a failure to comply with the provisions of Section 9.27(f) hereof. The percentage interest in the obligations of Borrower hereunder of each such Person shall equal the percentage participation in such obligations of such Person as so disclosed to Borrower from time to time. Borrower shall also pay any present or future stamp or documentary taxes or any other Taxes imposed on Agent or any Lender that arise from any payment hereunder or from the execution, delivery or registration of or otherwise with respect to this Agreement. 2.11 Sharing of Payments, Etc. If any Lender shall obtain any payment or reduction (including, without limitation, any amounts received as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code) of any obligation of Borrower hereunder in respect of the Loans or in respect of any other obliga- tions of Borrower under any of the Loan Documents (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its Pro Rata Share of payments or reductions on account of the Loans or such other obligations obtained by all Lenders, such Lender shall forthwith (i) notify each of the other Lenders and Agent of such receipt, and (ii) purchase from the other Lenders, without recourse, such participations in the affected obligations owned by the selling Lenders as shall be necessary to cause such purchasing Lenders to share the excess payment or reduction, net of costs incurred in connection therewith, ratably with each of them, provided that if all or any portion of such excess payment or reduction is thereafter recovered from such purchasing Lenders, or additional costs are incurred, the purchase shall be rescinded and the purchase price restored to the extent of such recovery or such additional costs, but without interest. Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.11 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of Borrower in the amount of such participation. 2.12 Pro Rata Treatment. Subject to the provisions of Sections 2.8.2 and 2.8.3, each borrowing by Borrower from Lenders and each payment (including each prepay- ment) by Borrower on account of principal and/or interest in respect of the Loans shall be made concurrently and pro rata as among all Lenders all in accordance with their Pro Rata Shares appropriately adjusted in the case of any Lender who shall have failed to fund its Pro Rata Share of the Loans. III. SPECIAL PROVISIONS 3.1 Loss Proceeds Account. Borrower shall cause all Casualty Insurance Proceeds or Condemnation Proceeds to be paid directly to an account designated by Agent for such purpose and under the sole dominion and control of Agent for the purposes of receiving and disbursing Loss Proceeds (the "Loss Proceeds Account"), on behalf of Lenders. If any Loss Proceeds are received by Borrower, the same shall be received in trust for Lenders, shall be segregated from other funds of Borrower, and shall be paid directly to the Loss Proceeds Account to be applied or disbursed in accordance with this Agreement. Borrower hereby authorizes and directs any affected insurance company to make payment of Loss Proceeds directly to the Loss Proceeds Account and Borrower agrees to execute such additional instruments as any such affected insurance company may request as a condition to making such payment of Loss Proceeds. 3.2 Casualty and Condemnation. 3.2.1 Casualty, Condemnation and Application of Proceeds. (a) Borrower shall give prompt written notice to Agent of any Casualty at or Condemnation of the Properties or any part thereof and shall deliver to Agent copies of any and all papers served in connection with such proceedings. All Casualty Insurance Proceeds and all Condemnation Proceeds shall be applied and disbursed in accordance with the provisions of this Section and Section 2.3.2, as the case may be. (b) Upon the occurrence of any Casualty at or Condemnation of the Properties or any part thereof, all Loss Proceeds shall only be applied to the Indebtedness or toward the restoration of such Property, as shall be determined by Borrower in its sole and absolute discretion; provided, however, that (i) if an Event of Default shall be continuing at the time of any Casualty or Condemnation, all Loss Proceeds shall only be applied to the Indebtedness, in accordance with Section 2.3.2; but (ii) if such Casualty or Condemnation occurs at a Property which is encumbered by a Lien, the Loss Proceeds shall be applied in accordance with such Lien documents. (c) Upon the occurrence of any Casualty at or Condemnation of the Properties or any part thereof during the existence of an Event of Default, Agent alone shall have the right, in its sole and absolute discretion, to settle, adjust or compromise any claim (i) under any policy of insurance or (ii) in connection with a Condemnation. In all other cases, Borrower may settle, adjust or compromise any such claim which is less than $500,000.00, and with respect to any such claim in excess of $500,000.00, Agent and the Borrower shall consult and cooperate with each other and each shall be entitled to participate in all meetings and negotiations with respect to the settlement of such claim. Any adjustment or settlement by the Borrower of any claim which is in excess of $500,000.00 shall be subject to prior Lender Approval, which approval shall not be unreasonably withheld or delayed; provided that if such Casualty/Condemnation occurs at a Property which is encumbered by a Lien, the any settlement, adjustment or compromise shall be decided in accordance with such Lien documents. (d) In the event that Loss Proceeds from any Casualty at or Condemnation of a Property or any part thereof are to be made available to Borrower for restoration and the reasonably anticipated cost of the restoration is $2,000,000 or more, the following provisions shall apply: (i) Borrower shall, no later than upon receipt of the Loss Proceeds, commence diligently to restore the applicable Property substantially to its value, character and utility immediately prior to such Casualty or Condemnation (it being understood that Borrower's commencement of such restoration prior to receipt of Insurance Proceeds shall not in any way affect Lender's right, if any, to apply Insurance Proceeds to the Loans pursuant to and in accordance with the terms of this Agreement), in which event Borrower shall comply with the following conditions in connection with the performance of all of such restoration (hereinafter "Work"): (A) no Work shall be undertaken until Borrower shall have provided Agent with evidence reasonably satisfac- tory to Agent that the amounts deposited in the Loss Proceeds Account will be sufficient to cover the entire cost of such Work; (B) no Work shall be undertaken until Borrower shall have procured and paid for, so far as the same may be required from time to time, all permits and consents of all Governmental Authorities having jurisdiction; (C) any Work that is structural in nature, that involves mechanical, electrical, fire safety, HVAC or other building systems or the performance of which in the reasonable judgment of Agent otherwise requires the services of a licensed architect, engineer and/or other professional in accordance with safe and sound construction practices, shall be performed in accordance with plans, specifications, reports and/or drawings prepared by Borrower's architect, engineer and/or other professional and approved by Agent (such approval not to be unreasonably withheld or delayed) and promptly following its receipt of same, Borrower shall deliver to Agent copies of all plans, specifications, reports and/or drawings relating to any such Work for its review and approval (such approval not to be unreasonably withheld or delayed); (D) all Work shall be performed in accordance with cost estimates approved by Agent as provided below and promptly following its receipt of same, Borrower shall deli- ver to Agent copies of all cost estimates relating to any such Work for Agent's review and approval (such approval not to be unreasonably withheld or delayed); (E) any Work that is structural in nature or that involves mechanical, electrical, fire safety, HVAC or other building systems or the performance of which in the reasonable judgment of Agent otherwise requires the services of a licensed architect, engineer and/or other professional in accordance with safe and sound construction practices, shall be performed under the supervision of a licensed architect, engineer and/or other professional reasonably approved by Agent; (F) all Work shall be prosecuted diligently to completion in a good and workmanlike manner and in compli- ance with all applicable permits and authorizations and with all other applicable Legal Requirements; (G) all Work shall be completed free and clear of all liens, encumbrances, chattel mortgages, conditional bills of sale and other charges, and substantially in accordance with the plans and specifications therefor; (H) during the performance of any Work, Borrower shall procure and maintain, or cause to be procured and maintained, (x) "All-Risk" builder's risk property insurance, with vandalism and malicious mischief endorse- ments, completed value form, covering all physical loss (including any loss of or damage to supplies, machinery and equipment) in connection with the performance of such Work and (y) statutory workers' compensation and employers' liability coverage, if applicable to Borrower; and (I) Borrower shall reimburse Agent and Lenders for all reasonable fees and expenses incurred by Agent or Lenders in connection with their review of any Work. (ii) All Loss Proceeds (in excess of $2,000,000 with respect to any Casualty or Condemnation) shall be deposited in the Loss Proceeds Account in accordance with the terms of this Agree- ment. Agent shall disburse such proceeds (together with any additional sums deposited) to or for the account of the Borrower from time to time to pay the costs and expenses associated with the restoration of the Properties, as set forth below: (A) Each request for payment shall be made on ten (10) Business Days' prior notice to Agent and, if an architect, engineer or other professional was retained to supervise the restoration, shall be accompanied by a certi- ficate to be made by such supervising architect, engineer and/or other professional stating that the sum requested is required to reimburse Borrower for payments by Borrower to, or is due to, the contractor, subcontractors, materialmen, laborers, engineers, architects or other persons rendering services or materials for the Work (giving a brief description of such services and materials); (B) Each request shall be accompanied by waivers of liens satisfactory to Agent covering that part of the Work for which reimbursement is being requested or for which payment was previously requested; and (C) Each request shall be accompanied by evi- dence reasonably satisfactory to Lender that the amounts deposited in the Loss Proceeds Account will be sufficient to cover the remaining cost of such Work. (e) Notwithstanding anything to the contrary contained in this Agreement, during the continuance of an Event of Default, Lenders shall have the absolute right to apply at any time all or any part of the Loss Proceeds then held by or on behalf of Lenders to the prepay- ment of the Indebtedness. 3.2.2 Conflicts With Mortgage Financing. If any term or provision of Section 3.2.1 shall conflict with the terms of any mortgage financing applicable to a Property as to which a Casualty or Condemnation has occurred, then the terms and provisions of such Prior Debt Documents shall take precedence over Sections 2.3.2 and 3.2.1 hereof. IV. CONDITIONS PRECEDENT 4.1 Intentionally Omitted. 4.2 Conditions Precedent to All Advances. The obligations of Lenders to make Advances on each Funding Date are subject to the satisfaction by Borrower of the following conditions precedent no later than such Funding Date: 4.2.1 Notice of Borrowing; Other Documentation. Agent shall have received before such Funding Date, in accordance with the provisions of Section 2.1.2, an (i) original executed Notice of Borrowing, in each case signed by an authorized officer of Borrower, and (ii) such other documents, agreements, certificates or instruments as Agent deems appropriate or necessary. 4.2.2 Other Conditions. As of such Funding Date: (a) the representations and warranties contained herein and in the other Loan Documents shall be true and correct in all material respects on and as of such Funding Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date (including references to "the Closing Date" or "the date hereof"), in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date; (b) Borrower and each Standby Purchaser shall have per- formed in all material respects all agreements and satisfied all condi- tions which this Agreement or any other Loan Document provides shall be performed or satisfied by it on or before such Funding Date; (c) no Material Adverse Effect (in the sole opinion of Agent) shall have occurred; (d) no order, judgment or decree of any arbitrator or Governmental Authority shall purport to enjoin or restrain any Lender from making the Advances to be made by it on that Funding Date; and (e) no event shall have occurred and be continuing or would result from the consummation of the borrowing contemplated by such Notice of Borrowing that would constitute a Default or Event of Default. V. REPRESENTATIONS AND WARRANTIES 5.1 Borrower Representations. Borrower represents and warrants (which representations and warranties shall survive Borrower's delivery of the Notes and the making and repayment of the Loans) that the following statements are true, correct and complete as of the Closing Date and on each Funding Date: 5.1.1 Organization; Existence. Borrower has been duly organized and is validly existing and in good standing as a business trust under the laws of the State of Ohio, with requisite trust power and authority to own or hold under lease its Properties and to transact the businesses in which it now engaged, and to execute and deliver the Loan Documents to which it is a party, and is qualified and self-administered as a REIT under Sec- tions 856 through 860 of the Internal Revenue Code. Borrower is duly quali- fied to do business in each jurisdiction where it is required to be so quali- fied in connection with its Properties, businesses and operations where the failure so to qualify would have a material adverse effect on Borrower. Bor- rower possesses all rights, licenses, permits and authorizations, governmen- tal or otherwise, necessary to entitle it to own its Properties and to transact the businesses in which it is now engaged. Borrower's Organizational Documents have been duly executed, delivered and, to the extent required by applicable law, filed, and are in full force and effect in accordance with their respective terms and have not been modified or amended. 5.1.2 Proceedings. Borrower has taken all necessary cor- porate, trust, partnership or limited liability company action to authorize the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party, and the performance of all transactions contemplated thereby, including the Offering. This Agreement and such other Loan Documents to which Borrower is a party have been duly executed and delivered by or on behalf of Borrower. 5.1.3 No Conflicts. The execution, delivery and performance by Borrower of the Loan Documents to which it is a party, and the performance of all transactions contemplated thereby, including the Offering, will not conflict with or violate any provisions of its Organizational Documents or conflict with or result in a breach of any of the terms or provisions of, or constitute a Default under, or result in the creation or imposition of any Lien, charge or encumbrance (other than pursuant to the Loan Documents) upon any of the Properties pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which the Properties are subject, nor will such action result in any material violation of the provisions of any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over Borrower (or any of its Affiliates), or over any of Borrower's Properties (including without limitation Regulations G, T, U or X of the Board of Governors of the Federal Reserve System), and any consent, approval, authorization, order, registration or qualification of or with any court or any such regulatory authority or other governmental agency or body or any other Person required for the execution, delivery and per- formance by Borrower of the Loan Documents to which it is a party has been obtained and is in full force and effect and no term of condition thereof has been amended or modified. 5.1.4 Litigation. Except as set forth on Schedule 5.1.4, there are no actions, suits or proceedings at law or in equity by or before any Governmental Authority or other agency now pending or, to Borrower's knowledge, threatened against or affecting Borrower where such actions, suits or proceedings, if determined against Borrower, could, individually or collectively, reasonably be expected to have a Material Adverse Effect. There are no proceedings pending or, to Borrower's knowledge, threatened against Borrower which call into question the validity or enforceability of any of the Loan Documents. 5.1.5 Agreements. Borrower is not a party to any agreement or instrument or subject to any restriction which does or could reasonably be expected to result in a Material Adverse Effect. 5.1.6 No Bankruptcy Filing. Borrower has not filed and Bor- rower is not contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or the liquidation of all or a major portion of its assets or property, and Borrower has no knowledge of any Person contemplating the filing of any such petition against it. 5.1.7 Full and Accurate Disclosure. No statement of fact made by Borrower in this Agreement or in any of the other Loan Documents contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained herein or therein not materially misleading. 5.1.8 Tax and REIT Status. Borrower has timely filed all tax returns that are required to be filed with any Government Entity and has timely paid all Taxes due pursuant to the tax returns or any assessment received by it or otherwise required to be paid, except Taxes being contested in good faith by appropriate proceedings and for which adequate reserves or other provisions are maintained in accordance with GAAP. Borrower has (i) elected to be taxed as a REIT effective for each of the taxable years ending on or after December 31, 1961, (ii) has not revoked such election, (iii) qualified for taxation as a REIT for each such taxable year and is in a position to so qualify for its current taxable year, (iv) operates in a manner so as to qualify as a REIT, and (v) has not sold or otherwise disposed of any assets which could give rise to a material amount of Tax pursuant to any election made by Borrower under Notice 88-19, 1988-1 CB 486 and does not expect to effect any such sale or other disposition. 5.1.9 Use of Proceeds. Borrower's use of the proceeds of the Loans is solely for the purposes described in Section 2.2. 5.1.10 Financial Information. Borrower has furnished Lenders with true, correct and complete copies of (a) the combined annual financial statements for Borrower and Manager for the most recent fiscal year of Borrower, including the combined balance sheet of Borrower and Manager and as of the end of such fiscal year and combined statements of income and changes in cash for Borrower and Manager and a statement of shareholder's equity, prepared on a consistent basis in accordance with GAAP (except as specifically disclosed therein) and in the form included with Borrower's Form 10-K as filed with the Securities and Exchange Commission for such fiscal year, certified without qualification by Borrower's CPAs; (b) the combined quarterly financial statements for Borrower and Manager for each fiscal quarter elapsed since the expiration of Borrower's most recent fiscal year, including a combined balance sheet and combined statements of income and change in cash of Borrower and the Manager prepared on a consistent basis with the prior fiscal year's financial statements in accordance with GAAP (except as specifically disclosed therein), and in the form included with Borrower's Form 10-Q, as filed with the Securities and Exchange Commission for any such fiscal quarter; and (c) a certificate of the chief financial officer, principal accounting officer or chief executive officer of Borrower, stating that to his best knowledge after due inquiry the foregoing statements present fairly in all material respects the combined financial position of Borrower and Manager and the results of their combined operations, subject, solely with respect to the materials described in clause (b), to routine year-end audit adjustments. No changes have occurred in the assets, liabilities or financial condition of Borrower or Manager from those reflected in the most recent balance sheets referred to above in this Section which, individually or in the aggregate, have been materially adverse. Since the date of such most recent balance sheet, there has been no material and adverse development in the business or in the operations or prospects of Borrower or Manager. 5.1.11 No Default. (a) No event has occurred and is continuing, and no condition exists, which constitutes a Default or Event of Default. (b) No Default by Borrower or any Standby Purchaser and no accrued right of rescission, cancellation or termination on the part of Borrower or any Standby Purchaser exists under this Agreement or any of the other Loan Documents. 5.1.12 Federal Reserve Regulations. No part of the proceeds of the Loans will be used for the purpose of purchasing or acquiring any "margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with such Regulation U or any other Regulations of such Board of Governors, or for any purposes prohibited by Legal Requirements or by the terms and conditions of this Agreement or the other Loan Documents. 5.1.13 Enforceability. The Loan Documents constitute legal, valid and binding obligations of Borrower and Standby Purchasers party thereto, enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency and similar laws affecting rights of creditors generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity) and are not subject to any right of rescission, set-off, counterclaim or defense by Borrower or any Standby Purchaser, including the defense of usury, and neither Borrower nor any Standby Purchaser has asserted any right of rescission, set-off, counterclaim or defense with respect thereto. 5.1.14 Incorporation of Representations and Warranties. In addition to the foregoing representations and warranties, each of the representations and warranties set forth in Section 6 of the Line of Credit Facility and any related definitions, as in effect on the date hereof, are hereby incorporated herein by reference and shall apply, mutatis mutandis, to this Agreement. VI. AFFIRMATIVE COVENANTS 6.1 Borrower Covenants. From the date hereof and until the indefeasible payment and perfo- rmance in full of all Indebtedness of Borrower, Borrower hereby covenants and agrees with Lenders that: 6.1.1 SEC Filings and Press Releases. Borrower shall provide to Agent copies promptly after their filing or, if not filed, after they become available, of (a) all financial statements, reports, notices and proxy statements sent or made available generally by Borrower to its security holders, (b) all regular and periodic reports and all registration statements and prospectuses, if any, filed by the Borrower with the New York Stock Exchange, Inc., any other securities exchange or with the Securities and Ex- change Commission or any Governmental Authority or private regulatory authority, and (c) all press releases and other statements made available generally by Borrower or any of its Affiliates to the public or to the securityholders of the Borrower; 6.1.2 Business and Operations. Borrower will continue to engage in the businesses presently conducted by it (i.e., acquisition, disposition and ownership of real property); provided that Borrower may cease conducting any business presently conducted by it, with prior written Lender Approval (such Lender Approval not to be unreasonably withheld). Borrower will qualify to do business and will remain in good standing under the laws of each jurisdiction necessary for the conduct of its business. 6.1.3 Costs of Enforcement. In the event of the Bankruptcy, insolvency, rehabilitation or other similar proceeding in respect of Borrower or an assignment by Borrower for the benefit of its creditors, Borrower, its successors or assigns, shall be chargeable with and agrees to pay all costs of collection and defense, including reasonable attorneys' fees in connection therewith and in connection with any appellate proceeding or post-judgment action involved therein, which shall be due and payable together with all required service or use Taxes. 6.1.4 Estoppel Statement. Borrower, within ten (10) days after request from Agent, shall furnish to Agent a statement, duly acknowl- edged and certified to Lenders and to any other Person designated by Agent, setting forth (a) the amount then owing by Borrower in respect of the Indebtedness, (b) the date through which interest on the Loans has been paid, (c) the nonexistence of any offsets, counterclaims, credits or defenses to the payment of Borrower's obligations under the Loan Documents, and (d) whether any written notice of default from Lenders or Agent to Borrower is then outstanding, and acknowledging that this Agreement and the other Loan Documents have not been modified or, if modified, giving the particulars of such modification. 6.1.5 Loan Proceeds. Borrower shall use the proceeds of the Loans only for the purposes set forth in Section 2.2. 6.1.6 Name; Principal Place of Business. Borrower shall provide to Agent (a) notification of any change in Borrower's name, identity or corporate, partnership, limited liability company or trust structure within 30 days of such change and (b) 30 days' prior written notice of any change in Borrower's executive office or principal place of business. 6.1.7 Board of Trustees. Borrower shall provide to Agent, with reasonable promptness, written notice of any change in the Board of Trustees of Borrower. 6.1.8 Offering. Borrower shall obtain Lender Approval of the registration statement for the Offering, file the approved registration statement for the Offering and use its best efforts to consummate the Offering, all in accordance with Article XI. 6.1.9 Incorporation of Affirmative Covenants. In addition to the foregoing affirmative covenants, each of the affirmative covenants set forth in Section 7 of the Line of Credit Facility and any related definitions, as in effect on the date hereof, are hereby incorporated herein by reference as if set forth herein in full and shall apply, mutatis mutandis, to this Agreement; provided, however, that the following affirmative covenants of the Line of Credit Facility are not so incorporated: 7.3, 7.4, 7.16(f) and 7.16(g), 7.17, 7.18 and 7.19. VII. NEGATIVE COVENANTS 7.1 Borrower Negative Covenants. From the date hereof until payment and performance in full of all Indebtedness of Borrower, Borrower covenants and agrees with Lenders that it will not do, directly or indirectly, any of the following: 7.1.1 Debt. Without prior Lender Approval and except for Debt existing on the date hereof and reflected in the financial information furnished to Lenders, Borrower shall not create, incur or assume any Debt exceeding in the aggregate Five Million Dollars ($5,000,000.00) other than (a) the Indebtedness; (b) draws under the existing Line of Credit Facility or the Imperial Credit Facility; and (c) non-recourse mortgage Debt for the pur- pose of financing an acquisition of a Property or refinancing any Property (provided that in the event of a refinancing such Debt may only encumber the Property being refinanced and in the event of an acquisition such Debt may only encumber the asset being acquired); provided that the net proceeds of any such financing or refinancing shall be used to prepay the Indebtedness pursuant to Section 2.3.2 above. 7.1.2 Corporate Structure. Without prior written Lender Approval (such Lender Approval not to be unreasonably withheld), Borrower shall not, and shall not permit any of its Subsidiaries or Affiliates to: (i) except as provided in Article XI, alter the corporate, capital or legal structure of Borrower or any of its Subsidiaries or Affiliates (including by the issuance or distribution of a new or special class of securities), (ii) incorporate or otherwise organize any Subsidiaries, (iii) make or permit any transfer, or acquire by purchase or otherwise, directly or indirectly, all or substantially all the business, property or fixed assets of, or stock or other evidence of beneficial ownership of, any Person, or (iv) engage in any transaction or take any action that would cause Borrower or Paired Trust to cease to qualify as a "stapled entity" entitled to an exemption from the requirements of Section 269B of the Internal Revenue Code. 7.1.3 Incorporation of Negative Covenants. In addition to the foregoing negative covenants, each of the negative covenants set forth in Section 8 of the Line of Credit Facility and any related definitions, as in effect on the date hereof, are hereby incorporated herein by reference as if set forth herein in full and shall apply, mutatis mutandis, to this Agree- ment. VIII. DEFAULTS 8.1 Event of Default. (a) In case of the occurrence of any of the following events (each of which is herein sometimes called an "Event of Default"): (i) if Borrower fails to make any payment of princi- pal of, or interest on, the Loans on the date on which such pay- ment was due hereunder; (ii) if Borrower fails to pay the Indebtedness in full on the Initial Maturity Date (or, if the term of the Loan is extended pursuant to Section 2.6, the Initial Extension Maturity Date or the Final Extension Maturity Date, as the case may be); (iii) if Borrower or Standby Purchaser fails to pay any other amount payable by Borrower or Standby Purchaser pur- suant to this Agreement or any other Loan Document when due and such failure continues for five (5) Business Days after Lender delivers written notice thereof to Borrower; (iv) if any representation or warranty made by Bor- rower or any Standby Purchaser herein or in any other Loan Docu- ment, or in any report, certificate, financial statement or other instrument, agreement or document furnished by Borrower or any Standby Purchaser in connection with this Agreement or any other Loan Document, shall be inaccurate or misleading in any material respect as of the date such representation or warranty was made or deemed made; (v) if Borrower or any Standby Purchaser shall make an assignment for the benefit of creditors; (vi) if a receiver, liquidator or trustee shall be appointed for Borrower or any Standby Purchaser or if Borrower or any Standby Purchaser shall be adjudicated a "Debtor" under the federal bankruptcy law or insolvent, or if any petition for Bank- ruptcy, reorganization or arrangement pursuant to federal Bank- ruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or acquiesced in by Borrower or any Standby Purchaser, or if any proceeding for the dissolution or liquidation of Borrower or any Standby Purchaser shall be instituted; provided, however, if such appointment, adjudication, petition or proceeding was involuntary and not consented to by Borrower or any Standby Purchaser, the same shall become an Event of Default upon the same not being discharged, stayed or dismissed within sixty (60) days, or if Borrower or any Standby Purchaser shall generally not be paying its debts as they become due; (vii) if Borrower assigns its rights under this Agreement or any of the other Loan Documents or any interest herein or therein; or if any Standby Purchaser assigns its rights under a Standby Purchase Agreement or any interest therein, other than in accordance with the terms of such Standby Purchase Agreement; (viii) if an Event of Default as defined or de- scribed in any other Loan Document occurs, or if any other event shall occur or condition shall exist, if the effect of such event or condition is to accelerate the maturity of all or any portion of the Indebtedness or to permit Lenders to accelerate the maturity of all or any portion of the Indebtedness; (ix) except as otherwise provided in this Section 8.1, if Borrower or Standby Purchaser shall continue to be in default under any of the other terms, covenants or conditions of this Agreement or any other Loan Document, for ten (10) days after notice to Borrower or Standby Purchaser from Agent, in the case of any default which can be cured by the payment of a sum of money, or for thirty (30) days after notice from Agent in the case of any other default; provided, however, that if such non-monetary default is susceptible of cure but cannot reasonably be cured within such 30-day period and provided further that Borrower or Standby Purchaser shall have commenced to cure such default within such 30-day period and thereafter diligently and expeditiously proceeds to cure the same, such 30-day period shall be extended for such time as is reasonably necessary for Borrower or Standby Purchaser in the exercise of due diligence to cure such default, such additional period not to exceed thirty (30) days; (x) if Borrower fails to make any payment due to any Indemnitee or such Indemnitee's respective officers, directors, agents, parents or affiliates pursuant to Section 9.14 hereof for a period of fifteen (15) days after receipt by Borrower of written demand therefor; provided that Borrower shall not be deemed to be in Default in respect of any such payment (or portion thereof) which Borrower is contesting in good faith pursuant to appropriate proceedings, provided, further, that (A) Borrower shall post cash or other security reasonably satisfactory to the relevant Indemnitee with an escrowee satisfactory to such Indemnitee in an amount equal to the disputed amount during the pendency of any appeal by Borrower of an adverse determination, and (B) if such contest is finally determined in favor of the Indemnitee (or if Borrower does not appeal an adverse determination), Borrower shall be required to make such payment (or portion thereof) to such Indemnitee within ten (10) days after such determination; (xi) if any money judgment, writ or warrant of attach- ment or similar process requiring the payment of in excess of $500,000 not adequately covered by insurance as to which a solvent and unaffiliated insurance company has acknowledged coverage shall be entered or filed against Borrower or any of its assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of sixty (60) days (or in any event later than five days prior to the date of any proposed sale thereunder); (xii) if there shall be a default by Borrower under any of the Prior Debt Documents (as in effect on the date hereof) or if there shall be a default by Borrower under any of the Prior Debt Documents (as from time to time in effect); (xiii) if Borrower shall cease for any reason to maintain its status as a REIT under the Internal Revenue Code; (xiv) a Change in Control shall occur; or (xv) an Event of Default (as defined in the Other Loan Agreement) shall occur under the Other Loan Agreement; then and in every such Event of Default and at any time thereafter during the continuance thereof, Agent may, in addition to any other rights or remedies available to Agent and/or Lender pursuant to this Agreement and the other Loan Documents or at law or in equity, take such action, without notice or demand, that Required Lenders deem advisable to protect and enforce their rights against Borrower and/or any Standby Purchaser, including declaring the Indebtedness or any portion thereof to be immediately due and payable, and may enforce or avail itself of any or all rights or remedies provided in the Loan Documents, including all rights or remedies available at law or in equity. 8.2 Remedies. Upon the occurrence and during the continuance of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Lenders under this Agreement or any of the other Loan Documents or at law or in equity may be exercised, at the direc- tion of the Required Lenders by Agent on behalf of Lenders at any time and from time to time, whether or not all or any of the Indebtedness shall be declared due and payable, and whether or not Agent on behalf of Lenders shall have commenced any action for the enforcement of Lender's rights and remedies under any of the Loan Documents. 8.3 Remedies Cumulative. The rights, powers and remedies of Agent and Lenders under this Agreement shall be cumulative and not exclusive of any other right, power or remedy which Agent and Lenders may have against Bor- rower pursuant to this Agreement or the other Loan Documents, or existing at law or in equity or otherwise. Agent's and Lenders' rights, powers and remedies shall be concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as Required Lenders may determine, to the fullest extent permitted by law, with- out impairing or otherwise affecting the other rights and remedies of Agent and Lenders permitted by law, equity or contract or as set forth herein or in the other Loan Documents. No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient. A waiver of one Default or Event of Default shall not be construed to be a waiver of any subsequent Default or Event of Default or to impair any remedy, right or power consequent thereon. 8.4 Gotham's Cure Rights. Notwithstanding anything contained herein or in any other Loan Document, if there shall be a Default or Event of Default by any Standby Purchaser (other than Gotham) under this Agreement or any other Loan Document, or a Default or Event of Default by Borrower which is due to any breach by any Standby Purchaser (other than Gotham) of any representations, warranties, covenants or any other provision contained in this Agreement or any other Loan Document (each such event, a "Standby Purchaser Default"), then such Default or Event of Default may be cured in accordance with the following procedures: (a) Agent, promptly following its receipt of notice of such Standby Purchaser Default, shall notify Gotham of the occurrence of such Standby Purchaser Default (the "Standby Purchaser Notice"); (b) Gotham shall, within fifteen (15) days of receipt of the Standby Purchaser Notice, elect, in a writing delivered to Agent, to either: (i) assume all rights and obligations of the defaulting Standby Purchaser under its respective Standby Purchase Agreement (the "Alternate Standby Rights"), or (ii) decline to so assume the Alternate Standby Rights. Failure by Gotham to respond within 15 days shall be deemed to be a decision to decline to assume the Alternate Standby Rights. (c) If Gotham chooses to assume the Alternate Standby Rights, each Gotham Standby Purchase Agreement shall be deemed to have been amended to reflect Gotham's assumption of the Alternate Standby Rights (with such assumption to be on a pro-rata basis among the entities comprising Gotham, unless Gotham's notice sets forth a different allocation for the assumption of the Alternate Standby Rights), the rights of the defaulting Standby Purchaser so to purchase shall be subject to Gotham's rights so to purchase and the Standby Purchaser Default shall be deemed cured. If Gotham chooses to decline to assume the Alternate Standby Rights, then such Standby Purchaser Default shall constitute a Default or Event of Default as described in Section 8.1 of this Agreement. IX. MISCELLANEOUS 9.1 Survival. This Agreement and all covenants, agreements, repre- sentations and warranties made herein and in the certificates delivered pur- suant hereto shall survive the Closing Date, the making by Lenders of any Loans hereunder and the execution and delivery to Agent of the Notes, and shall continue in full force and effect so long as all or any of the Indebt- edness is outstanding and unpaid. All covenants, promises and agreements in this Agreement contained shall inure to the benefit of and be binding upon the respective legal representatives, successors and assigns of the parties hereto, provided that Borrower may not assign or transfer any of its rights or obligations hereunder. 9.2 Lenders' or Agent's Discretion. Whenever pursuant to this Agree- ment or any other Loan Document, Lenders or Agent exercise any right given to any of them to approve, disapprove, make a determination, exercise discretion or consent, or any arrangement or term is to be satisfactory to Lenders or Agent, the decision of Lenders or Agent to approve, disapprove, make a determination, exercise discretion or consent, or to decide whether arrangements or terms are satisfactory or not satisfactory shall (except as otherwise specifically herein or in any other Loan Document provided) be in the sole discretion of Lenders or Agent and shall be final and conclusive. 9.3 Governing Law. (a) This Agreement was negotiated in the State of New York, and made by Lenders and Agent and accepted by the Borrower in the State of New York, and the proceeds of the Notes delivered pursuant hereto were disbursed from the State of New York, which State the parties agree has a substantial relationship to the parties and to the underlying transaction embodied hereby, and in all respects, including matters of construction, validity and performance, this Agreement and the obligations arising hereunder shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and performed in such State and any applicable law of the United States of America. To the fullest extent permitted by law, Borrower hereby unconditionally and irrevocably waives any claim to assert that the law of any other jurisdiction governs this Agreement and the Notes. Lenders, Agent and Borrower hereby agree, in accordance with Section 5-1401 of the New York General Obligations Law, that this Agreement and the Notes shall be governed by and construed in accordance with the laws of the State of New York. (b) To the fullest extent permitted by applicable law, any legal suit, action or proceeding against Lenders, Agent or Borrower arising out of or relating to this Agreement shall be instituted in any federal or state court in New York, New York (the "New York Courts"), pursuant to Section 5-1402 of the New York General Obligations Law, and Borrower waives any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding in the New York Courts, and Borrower hereby irrevocably submits to the jurisdiction of any such New York Court in any suit, action or proceeding. Borrower does hereby designate and appoint Gotham Partners Management Co., LLC, having an address at 110 East 42nd Street, New York, New York 10017, Attention: William A. Ackman or at such other office in New York, New York as it may direct, as its authorized agent to accept and acknowledge on its behalf service of any and all process which may be served in any such suit, action or proceeding in any federal or state court in New York, New York, and agrees that service of process upon said agent at said address and written notice of said service of Bor- rower mailed or delivered to Borrower in the manner provided herein shall be deemed in every respect effective service of process upon Bor- rower, in any such suit, action or proceeding in the State of New York. Borrower (i) shall give prompt notice to Agent of any changed address of its authorized agent hereunder, (ii) may, at any time and from time to time designate a substitute authorized agent with an office in New York, New York (which office shall be designated as the address for service of process), and (iii) shall promptly designate such a substi- tute if its authorized agent ceases to have an office in New York, New York or is dissolved without leaving a successor. 9.4 Modification, Waiver in Writing. Except as otherwise required by this Section or where Agent is, pursuant to any of the Loan Documents, authorized to act without the consent of the Lenders, no modification, termination or waiver of any provisions of this Agreement or of any of the other Loan Documents, nor consent to any departure therefrom, shall in any event be effective, irrespective of any course of dealing between the parties, unless the same shall be in a writing executed by Required Lenders; provided, however, that, notwithstanding anything to the contrary in any of the Loan Documents, Agent may amend any of the Loan Documents or waive any condition or provision thereof if such amendment or waiver is of a technical nature. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No notice to or demand on Borrower, any Guarantor or any Standby Purchaser in any case shall entitle Borrower, any Guarantor or any Standby Purchaser to any other or further notice or demand in the same, similar or other circumstances. In the case and to the extent of any waiver, the parties shall be restored to their former positions and rights hereunder and under the other Loan Documents; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. No disbursement of an Advance or of a portion thereof shall constitute a waiver of any Default, Event of Default or condition to disbursement, nor shall such disbursement preclude Agent on behalf of Required Lenders from declaring an Event of Default and pursuing its and their remedies hereunder in the event such Event of Default is not cured. Any Advance made by Lenders hereunder made prior to or without the fulfillment by Borrower of all of the conditions precedent thereto, whether or not known to Agent and/or Lenders, shall not constitute a waiver by Agent and/or Lenders of the requirement that all conditions, including the non-performed conditions, shall be satisfied with respect to all future advances. This Agreement, together with the other Loan Documents, sets forth the entire understanding of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings relating hereto, whether oral or written. Except as may be expressly required by the Loan Documents, Required Lenders shall not, without the prior written consent of all Lenders, (i) increase the principal amount of the Loans, (ii) postpone any date fixed for payment of principal or interest on the Loans, (iii) reduce the amount of any principal or interest payable with respect to the Loans, (iv) release Borrower, any Guarantor or Standby Pur- chaser or forgive or discharge all or any part of the Loans, in each event whether or not with consideration, (v) change the definition of Required Lenders, (vi) change the Commitment of any Lender, (vii) change this sentence or the first sentence of Section 9.4, (viii) reduce the fees payable by Borrower, (ix) permit Borrower to assign any of its rights or obligations under the Loan Documents, (x) consent to any amendment or modification to the Loan Documents which is material and is favorable to Borrower, (xi) waive any Event of Default, or (x) modify Section 11.1. 9.5 Delay Not a Waiver. Neither any failure nor any delay on the part of Agent or any Lender, in insisting upon strict performance of any term, condition, covenant or agreement, or exercising any right, power, remedy or privilege hereunder, or under the Notes or under any other Loan Document, or any other instrument given as security therefor, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege. In particular, and not by way of limitation, by accepting payment after the due date of any amount payable under this Agree- ment, the Notes or any other Loan Document, Lenders and Agent shall not be deemed to have waived any right either to require prompt payment when due of all other amounts due under this Agreement, the Note or the other Loan Docu- ments, or to declare a default for failure to effect prompt payment of any such other amount. 9.6 Notices. All notices, consents, approvals and requests required or permitted hereunder or under any other Loan Document shall be given in writing and shall be effective for all purposes if hand delivered or sent by (a) certified or registered United States mail, postage prepaid, (b) expedited prepaid delivery service, either commercial or United States Postal Service, with proof of attempted delivery, or (c) telecopier (with answer back acknowledged and hard copy sent by hand or one of the methods described in clause (a) or (b) above), addressed if to Lenders at their addresses set forth above, if to Agent at its address set forth on the first page hereof, and if to Borrower at the address of Borrower set forth above (with a copy to Gotham Partners Management Co., LLC, 110 East 42nd Street, New York, New York 10017, Attention: William Ackman), or at such other address as shall be designated from time to time by any party hereto, as the case may be, in a written notice to the other parties hereto in the manner provided for in this Section. A notice shall be deemed to have been given: in the case of hand delivery, at the time of delivery; in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day; in the case of expedited prepaid delivery and telecopy, upon the first attempted delivery on a Business Day; or if telecopied, upon receipt. 9.7 Trial By Jury. BORROWER, AGENT AND EACH LENDER EACH HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE LENDER/BORROWER RELATIONSHIP BETWEEN THEM. The scope of this waiver is intended to encompass any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including contract claims, tort claims, breach of duty claims, and all other common laws and statutory claims. Borrower, Agent and each Lender each acknowledges that this waiver is a material inducement to enter into this Agreement, and that each will continue to rely on the waiver in their related future dealing. Borrower warrants and represents that it has reviewed this waiver with its legal counsel, and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, ANY OTHER DOCUMENTS OR AGREE- MENTS RELATING TO THE LOANS. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. 9.8 Headings. The Article and/or Section headings and the Table of Contents in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. 9.9 Severability. If any provision of this Agreement or any of the other Loan Documents or the application thereof to any Person or circumstance shall, for any reason and to any extent, be invalid or unenforceable, then neither the remainder of this Agreement or the other Loan Documents nor the application of such provision to other Persons or circumstances nor the other instruments referred to hereinabove shall be affected thereby, but rather shall be enforced to the greatest extent permitted by applicable Legal Requirements. 9.10 Preferences. To the extent any Person makes a payment or payments to Agent for Borrower's benefit, which payment or proceeds or any part there- of are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds received, the obliga- tions hereunder or under any other Loan Document or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been received by Agent. 9.11 Waiver of Notice. Borrower shall not be entitled to any notices of any nature whatsoever from Agent or Lenders except with respect to matters for which this Agreement or the other Loan Documents specifically and expressly provide for the giving of notice by Agent or Lenders to Borrower and except with respect to matters for which Borrower is not, pursuant to applicable Legal Requirements, permitted to waive the giving of notice. Bor- rower hereby expressly waives the right to receive any notice from Agent or Lenders with respect to any matter for which this Agreement or the other Loan Documents do not specifically and expressly provide for the giving of notice by Agent or Lenders to Borrower. 9.12 Remedies of Borrower. In the event that a claim or adjudication is made that Agent or Lenders or their agents have acted unreasonably or unreasonably delayed acting in any case where by law or under this Agreement or the other Loan Documents, Agent, Lenders or such agent, as the case may be, have an obligation to act reasonably or promptly, Borrower agrees that neither Agent, Lenders nor their agents shall be liable for any monetary damages, and Borrower's sole remedies shall be limited to commencing an action seeking injunctive relief or declaratory judgment. The parties hereto agree that any action or proceeding to determine whether Agent or any Lender has acted reasonably shall be determined by an action seeking declaratory judgment. In any such action, the prevailing party shall be entitled to recover its reasonable attorneys' fees and disbursements incurred in connec- tion with such action from the other party. 9.13 Non-Exculpation. Notwithstanding anything to the contrary in this Agreement or the other Loan Documents, Borrower's obligations to pay the principal of and interest on the Loans, the Notes and any and all other amounts payable by Borrower hereunder and under the other Loan Documents, the performance by Borrower of its respective obligations hereunder and under the other Loan Documents, and Borrower's liability for its representations, warranties and covenants hereunder and under the other Loan Documents, shall be full recourse obligations of Borrower. 9.14 Expenses; Indemnity. (a) Borrower covenants and agrees to reimburse Indemnitees and each of them upon receipt of written notice from any Indemnitee for all loss, cost, damage, expense or liability of any kind or nature whatsoever (including reasonable attorneys' fees and disbursements) in- curred by such Indemnitee in connection with (i) the preparation, negotiation, execution, delivery and administration of this Agreement, the other Loan Documents and the consummation of the transactions contemplated hereby and thereby (ii) the negotiation, preparation, execution, delivery and administration of any consents, amendments, waivers or other modifications to this Agreement, the other Loan Docu- ments, and any other documents or matters if requested by Borrower or required by Agent or Lenders; (iii) reasonable fees and expenses of counsel for providing to Agent and Lenders all required legal opinions; (iv) enforcing or preserving any rights in response to third party claims or prosecuting or defending any action or proceeding or other litigation, in each case against, under, affecting or relating to Bor- rower, any Guarantor, this Agreement or the other Loan Documents; and (v) enforcing any obligations of, or paying or performing any defaulted obligations of, or collecting any payments due from, Borrower or any Guarantor or Standby Purchaser under this Agreement, the other Loan Documents or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement or any of the other Loan Documents in the nature of a "work-out" or of any insolvency or bankruptcy proceedings in respect of Borrower or any Guarantor or Standby Purchaser or any of its successors; provided, however, that Borrower shall not be liable for the payment of any costs and expenses described in clauses (i) through (v) above to the extent the same arise by reason of the gross negligence, illegal acts, fraud or willful misconduct of the Indemnitees, their agents, contractors or employees. (b) In addition to but without duplication of the payment of expenses pursuant to subsection (a) above, whether or not the trans- actions contemplated hereby shall be consummated, Borrower agrees to indemnify, pay and hold harmless the Indemnitees, and each of them, from and against any and all other losses, costs, damages, expenses or liabilities of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for such Indemnitee in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto), that may be imposed on, incurred by, or asserted against such Indemnitee in any manner relating to or arising out of (i) any breach by Borrower of its obligations under, or any material misrepresentation by Borrower contained in this Agreement or any Loan Document, or (ii) the use or intended use of the proceeds of the Loans (collectively, the "Indemnified Liabilities"); provided, however, that Borrower shall not have any obligation to an Indemnitee hereunder to the extent that such Indemnified Liabilities arise from gross negli- gence, illegal acts, fraud or willful misconduct of such Indemnitee, its agents, contractors or employees. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it violates any law or public policy, Borrower shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them. Borrower shall not, without the prior written consent of the applicable Indemnitee, settle or compromise any claim, or permit a default or consent to the entry of judgment in respect thereof, unless such settlement, compromise or consent includes, as an unconditional term thereof, the giving by the claimant to the Indemnitee of an unconditional release from all liability in respect of such Claim. (c) Nothing herein shall limit the indemnity made by Borrower to and in favor of Agent and Lenders in the Standby Purchase Agreements. (d) Borrower hereby acknowledges and agrees that each Indemnitee (other than each Lender) is an intended third-party bene- ficiary of this Section 9.14. Promptly after receipt by an Indemnitee of notice of any claim or the commencement of any action for which indemnity may be sought against Bor- rower under this Agreement or any other Loan Document, such Indemnitee shall notify Borrower in writing of the receipt of such claim. Borrower shall be entitled to assume the defense of any claim with counsel reasonably satisfactory to such Indemnitee, and after notice from Borrower to such Indemnitee of its election so to assume and actual assumption of the defense thereof with counsel reasonably satisfactory to such Indemnitee, Borrower shall not be liable to such Indemnitee under any indemnity agreement set forth herein or in any other Loan Document for any legal or other expense subsequently incurred by such Indemnitee in connection with the defense thereof other than reasonable fees and expenses of separate counsel retained by such Indemnitee unless (a) Borrower and such Indemnitee shall have agreed to the retention of such subsequent counsel or (b) such Indemnitee shall have reasonably concluded that representation of Borrower and such Indemnitee by the same counsel would be inappropriate due to actual or potential conflicting interests between them. Borrower shall have no liability for any settlement of any action or claim effected without its consent, but if settled with such consent or if there be a final judgment for the plaintiff not stayed by appeal, Borrower agrees to indemnify the Indemnitee from and against any loss or liability required to be paid by the Indemnitee by reason of such settlement or judgment if and to the extent required by, and subject to the limitations of, the terms of this Agreement. Borrower agrees to consult in advance with Agent with respect to the terms of any proposed waiver, release or settlement of any claim, liability, proceeding or other action against Borrower to which any Indemnitee may also be subject, and to use reasonable efforts to afford Agent and any such Indemnitee the opportu- nity to join in such waiver, release or settlement. 9.15 Exhibits, Schedules Incorporated. The Exhibits and Schedules annexed hereto are hereby incorporated herein as a part of this Agreement with the same effect as if set forth in the body hereof. 9.16 Offsets, Counterclaims and Defenses. Any assignee of any Lender's interest in and to this Agreement, the Notes or the other Loan Documents shall take the same free and clear of all offsets, counterclaims or defenses which are unrelated to such documents which Borrower may otherwise have against any assignor of such documents, and no such unrelated counterclaim or defense shall be interposed or asserted by Borrower in any action or pro- ceeding brought by any such assignee upon such documents and any such right to interpose or assert any such unrelated offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by Borrower. 9.17 No Joint Venture or Partnership. Borrower and Lenders intend that the relationships created hereunder and under the other Loan Documents and be solely that of borrower and lender. Nothing contained herein or therein (i) shall constitute any Lender or any of their Affiliates as members of any partnership, joint venture, association or other separate entity with Bor- rower, its Affiliates or any other entities, (ii) shall be construed to impose any liability as such on any Lender or any of their Affiliates, or (iii) shall constitute a general or limited agency or be deemed to confer on either party hereto any express, implied or apparent authority to incur any obligation or liability on behalf of the other. 9.18 Publicity. On and after the Closing Date, Lenders and their Affiliates shall be entitled, but not required, to advertise the transactions contemplated hereby from time to time in media selected by Lenders or their Affiliates at their expense. On and after the Closing Date, Borrower shall be entitled, but not required, to advertise the same from time to time in media selected by Borrower at its expense, provided that Borrower's adver- tisements shall include a disclosure, in each case approved in writing by Agent (not to be unreasonably withheld or delayed), that Lenders originated the Loans. 9.19 Waiver of Counterclaim. Borrower hereby waives the right to assert a counterclaim, other than a compulsory counterclaim, in any action or proceeding brought against it by Agent, any Lender or their agents, but Bor- rower does not waive its right to assert any such claim in a separate action. 9.20 Conflict; Construction of Documents. In the event of any conflict between the provisions of this Agreement and any of the other Loan Documents, the provisions of this Agreement shall control. The parties hereto acknowledge that they were represented by counsel in connection with the negotiation and drafting of the Loan Documents and other documents and instruments executed and delivered in connection therewith and that such Loan Documents and other documents and instruments shall not be subject to the principle of construing their meaning against the party which drafted the same. 9.21 Brokers and Financial Advisors. Borrower hereby represents that it has dealt with no financial advisors, brokers, underwriters, placement agents, agents or finders in connection with the transactions contemplated by this Agreement. Borrower hereby agrees to indemnify and hold harmless Lenders and their Affiliates and their respective agents, representatives and employees from and against any and all claims, liabilities, costs and expenses of any kind in any way relating to or arising from a claim by any Person that such Person acted on behalf of Borrower or its Affiliates in connection with the transactions contemplated herein. The provisions of this Section 9.21 shall survive the expiration and termination of this Agreement and the repayment of the Indebtedness. 9.22 Prior Agreements. This Agreement and the other Loan Documents contain the entire agreement of the parties hereto and thereto in respect of the transactions contemplated hereby and thereby, and all prior agreements among or between such parties, whether oral or written, are superseded by the terms of this Agreement and the other Loan Documents. 9.23 Maximum Rate of Interest. This Agreement, the Notes and the other Loan Documents are subject to the express condition that at no time shall Borrower be obligated or required to pay interest on the Loans at a rate that could subject Lenders to either civil or criminal liability as a result of such rate being in excess of the highest lawful rate permitted under applicable usury law to be charged to Borrower (the "Maximum Rate"). If, by the terms of this Agreement, the Notes or any of the other Loan Documents, Borrower is at any time required or obligated to pay interest on the Loans at a rate in excess of such Maximum Rate, the rate of interest applicable to the Loans shall be deemed to be immediately reduced to such Maximum Rate and the interest payable shall be computed at such Maximum Rate and all prior interest payments in excess of such Maximum Rate shall be deemed to have been the result of a mistake on the part of both Borrower and Lenders, and Lenders shall promptly credit such excess (to the extent only of such interest pay- ments in excess of the Maximum Rate) against the unpaid principal amount of the Loans to which such excess may lawfully be credited, and any portion of such excess payments not capable of being so credited shall be refunded to Borrower or otherwise disposed of as directed by the order of a court of competent jurisdiction. 9.24 Attorneys' Fees. In the event of any litigation, arbitration or other dispute resolution proceedings between the parties hereto arising out of or relating to this Agreement or the transactions contemplated hereby, the party prevailing in such litigation, arbitration or proceeding shall be entitled to recover from the other party the reasonable attorney's fees and disbursements incurred by such prevailing party in connection with such litigation, arbitration or proceeding. 9.25 Counterparts. This Agreement and any amendments, waivers, consents or supplements hereto or in connection herewith may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. 9.26 Application of Payments. Except as otherwise provided in this Agreement and the other Loan Documents, each and every payment made by Bor- rower to Agent in accordance with the terms of this Agreement and the other Loan Documents and all other proceeds received by Agent with respect to the Indebtedness shall be applied in the following order of priority: (i) to pay the costs and expenses of Agent and Lenders for which Agent and Lenders are entitled to reimbursement from Borrower under this Agreement or the other Loan Documents, and that have not previously been reimbursed by Borrower, together with accrued interest thereon (if any); then (ii) to ratably pay accrued interest on the Loans, including interest accrued at the Default Rate (if any); and then (iii) to ratably reduce the outstanding principal amount of the Loans. 9.27 Assignments and Participations. (a) Each Lender may assign, to one or more banks or other financial institutions regularly engaged in making or acquiring loans, all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided, however, that (i) Agent (in its sole discretion) must give its prior written consent to such assignment, (ii) if no Event of Default and/or monetary Default shall then exist and be continuing, Borrower must give its prior written consent to such assignment, which consent shall not be unreasonably withheld or delayed and if an Event of Default or a monetary Default shall be so continuing, then Borrower's consent shall not be required, (iii) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Lender's rights and obligations under this Agreement as a Lender and the other Loan Documents, (iv) the aggregate amount of the Loans and Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to Agent) shall not be less than $10,000,000 unless such Lender's then outstanding Loans and Commitment is less than $10,000,000 in which event such Lender may assign the aggregate amount of the Loans made by such Lender and its entire Commitment to make Loans, (v) the parties to each such assignment shall execute and deliver to Agent an Assignment and Acceptance, and a processing fee of $5,000 and (vi) if no Default and/or Event of Default shall then be continuing, Bankers agrees to retain at least a 22.2222% interest in the Loans. Upon the later of acceptance pursuant to this Section, and the effective date specified in each Assignment and Acceptance, which effective date shall be at least five (5) Business Days after the execution thereof, (A) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations under this Agreement and the other Loan Documents, and (B) the assign- ing Lender thereunder shall, to the extent provided in such assignment, be released from its obligations under this Agreement and the other Loan Documents (and, in the case of an Assignment and Acceptance cover- ing all or the remaining portion of an assigning Lender's rights and obligations under this Agreement and the other Loan Documents, such assigning Lender shall cease to be a party hereto, but it shall continue to receive the benefit of the indemnifications referred to or provided for in, Section 9.14). Borrower shall execute replacement Notes (in the form of Exhibit B) in connection with any such assignment. (b) By executing and delivering an Assignment and Accep- tance, the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or represen- tations made in or in connection with this Agreement or any of the other Loan Documents, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any of the other Loan Documents, or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower or any other Person or the per- formance or observance by Borrower any other Person of any of its obli- gations under this Agreement or any of the other Loan Documents, or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement and the other Loan Documents and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will independently and without reliance upon Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee appoints and authorizes Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto; and (vi) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement and the other Loan Documents are required to be per- formed by it as a Lender. (c) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and assignee together with the processing fee referred to in Section 9.27(a) above and the written consent of Agent (and of Borrower, if required) to such assignment Agent shall (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register, and (iii) give prompt notice thereof to Borrower and Lenders. (d) Each Lender may without the consent of Borrower, but upon the prior written consent of Agent, sell participations to one or more banks or other financial institutions regularly engaged in making or acquiring loans in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided, however, that (i) such Lender's obli- gations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participating banks or other entities shall be entitled to the benefit of the provisions contained in Sections 2.5, 2.9, 2.10 and 9.14 as if such Participant were a Lender, and (iv) Borrower, Agent and other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, and such Lender shall retain the sole right to enforce the obligations of Borrower, Guarantors and Standby Purchasers relating to the Loans and to approve any amendment, modification or waiver of any provision of this Agreement or any of the other Loan Documents (but with respect to the matters referred to in the last sentence of Section 9.4 a Lender may allow its participant to have approval rights with respect thereto). (e) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section, disclose to the assignee or participant or proposed assignee or participant any information relating to Borrower any Guarantor or any Standby Purchaser, their respective Affiliates furnished to each such Lender by or on behalf of Borrower, Guarantors and/or Standby Pur- chasers. (f) Any Lender which is organized under the laws of any jurisdiction other than the United States or any state or other political subdivision thereof shall, and if pursuant to Section 9.27(a), any interest in this Agreement is assigned to any other bank or financial institution, the assigning Lender shall cause the assignee, concurrently with the effectiveness of such assignment to (i) furnish to Borrower either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Form 1001 (or such other forms or certificates wherein such assignee claims entitlement to complete exemption from or reduction of U.S. federal withholding tax on all interest payments hereunder) and (ii) agree (for the benefit of Borrower) to provide Bor- rower a new form upon the expiration or obsolescence of any previously delivered form and comparable statements in accordance with applicable U.S. laws and regulations and amendments duly executed and completed by such assignee, and to comply from time to time with all applicable U.S. laws and regulations with regard to such withholding tax exemption. Notwithstanding anything to the contrary herein, nothing in this Section 9.27(f) shall require a Lender to provide a form which it is not legally permitted to provide. 9.28 Setoff. Upon the occurrence of an Event of Default, Agent and each Lender is hereby authorized, at any time or from time to time, without prior notice to Borrower or any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other indebtedness or property at any time held or owing by Agent or any Lender to or for the credit or the account of Borrower, whether or not related to this Agreement or any transaction or occurrence hereunder, against and on account of the indebtedness and other liabilities of Borrower to Agent or any Lender hereunder, under the Notes and/or under any of the other Loan Documents, whether or not Agent or any Lender shall have made any demand hereunder and although such liabilities, or any of them, shall be contingent or unmatured. The rights and remedies granted to Agent and each Lender under this Section shall be in addition to, and not in substitution for, any rights or remedies, including, without limitation, any right of set-off or banker's lien, to which Agent or any Lender may otherwise be entitled. 9.29 Liability of Borrower's Trustees, etc. Notwithstanding any provision of this Agreement to the contrary, this Agreement has been executed and delivered by a duly authorized officer of Borrower, for and on behalf of Borrower's trustees. The Agent and each Lender each acknowledges that neither the trustees of Borrower, nor any additional or successor trustees of Borrower, nor any beneficiary, officer, employee or agent of Borrower, shall have any personal, individual liability hereunder or under any of the Loan Documents. 9.30 Employee Termination Expenses. Notwithstanding anything herein to the contrary, for the purposes of this Agreement and of the Line of Credit Facility (as incorporated herein), including, without limitation, for the purposes of Section 7.20 of the Line of Credit Facility, employee termination expenses of up to $8,500,000 incurred from and after the date hereof shall be disregarded. 9.31 Conflicts with Intercreditor Agreement. If any term or provision of this Agreement relating to the application of monies conflicts with the provisions of the Intercreditor Agreement, the terms and provisions of the Intercreditor Agreement shall take precedence over such conflicting provisions of this Agreement. X. AGENT; SUCCESSOR AGENT 10.1 Appointment. Bankers Trust Company is hereby appointed Agent hereunder and under the other Loan Documents and each Lender hereby authorizes Agent to act as its agent in accordance with the terms of this Agreement and the other Loan Documents. Agent agrees to act upon the express conditions contained in this Agreement and the other Loan Documents, as applicable. The provisions of this Article X are solely for the benefit of Agent and Lenders and Borrower shall not have any right as third-party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement, Agent shall act solely as an agent of Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for Borrower or any Affiliate of Borrower. 10.2 Powers and Duties; General Immunity. 10.2.1 Powers; Duties. Each Lender irrevocably authorizes Agent to deal and communicate with Borrower on such Lender's behalf in all respects under and in connection with the Loan Documents. Borrower shall have no obligation to recognize or deal directly with Lenders nor to comply with any demand or requirement made by any Lender (other than through Agent), and no Lender shall deal directly with Borrower with respect to the rights, benefits and obligations of Borrower under the Loan Documents or any one or more documents or instruments in respect thereof. Borrower shall be entitled to rely conclusively on the actions of Agent as agent to bind Lenders, notwithstanding that the particular action in question may, pursuant to the terms of such agreements as may exist from time to time among the Agent and Lenders, be subject, as among the Agent and Lenders, to the approval or direction of Lenders or any specified percentage of Lenders. Agent may exer- cise its powers, rights and remedies and perform its duties hereunder by or through its agents or employees. Agent shall not have, by reason of this Agreement or any of the other Loan Documents, a fiduciary relationship in respect of any Lender; and nothing in this Agreement or any of the other Loan Documents, expressed or implied, is intended to or shall be so construed as to impose upon Agent any obligations in respect of this Agreement or any of the other Loan Documents except as expressly set forth herein or therein. 10.2.2 Agent Entitled to Act as Lender. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, Agent in its individual capacity as a Lender hereunder. With respect to its participation in the Loans, Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not performing the duties and functions delegated to it hereunder, and the term "Lender" or "Lenders" or any similar term shall, unless the context clearly otherwise indicates, include Agent in its individual capacity. Agent and its Affiliates may accept deposits from, lend money to and generally engage in any kind of banking, trust, financial advisory or other business with Borrower or any Standby Purchaser or any of their respective Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from Borrower or any Standby Purchaser for services in connection with this Agreement and other- wise without having to account for the same to Lenders. 10.3 Representations and Warranties; No Responsibility for Appraisal of Creditworthiness. Each Lender hereby acknowledges that such Lender has been furnished with copies of such Loan Documents, financial statements, certifi- cates, instruments, documents, affidavits, resolutions, reports, and agree- ments (collectively, the "Pre-Closing Documentation") as such Lender has deemed necessary to make its own credit analysis and decision with respect to the Loans. Each Lender acknowledges that it has, independently and without reliance upon Agent and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and to extend credit to the Borrower on the terms set forth in this Agreement and the other Loan Documents. Each Lender also acknowledges to Agent that such Lender will, independently and without reliance upon Agent and based on the Pre-Closing Documentation and such other documents and information as it shall deem appropriate at the time, make and continue to make its own decision in taking or not taking action with respect to the Loans. Lenders hereby acknowledge that Agent (i) shall not be responsible to Lenders for any statements, warranties, or representations (written or other- wise) by any party other than Agent made in or in connection with the Pre- Closing Documentation, the Loans, or the Loan Documents, or the financial condition of Borrower or the Standby Purchasers, any indemnitor or any other person; and (ii) shall not be responsible to Lenders for the due execution, legality, validity, enforceability, genuineness, sufficiency or collectability of any of the Loan Documents or any other instrument or docu- ment furnished pursuant thereto or in connection with the Loans. 10.4 Successor Agent. Agent may resign at any time by giving thirty (30) days' prior written notice thereof to Lenders and Borrower, and Agent may be removed for cause by Lenders by written Lender Approval, if such written instrument is delivered to Borrower. Upon any such notice of resignation or any such removal, Lenders shall have the right, by Lender Approval, upon five (5) Business Days' notice to Borrower, to appoint a suc- cessor Agent. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, that successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Agent and the retiring or removed Agent shall be discharged from its duties and obligations under this Agreement. After any retiring or removed Agent's resignation or removal hereunder as Agent, the provisions of this Article X shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. XI. OFFERING 11.1 Rights Offering. Borrower shall use its best efforts to file with the Securities and Exchange Commission within forty-five (45) days from the Closing Date either (i) a registration statement or (ii) to the extent that Borrower in good faith concludes that the Offering (as defined below) may be conducted pursuant to a prospectus supplement to Borrower's existing shelf registration statement (file no. 333-31695), a prospectus supplement (in which case the number of days referred to above shall be sixty (60) days) or (iii) a post-effective amendment to such shelf registration statement, in each case in such form such that when the same is declared effective by the Securities and Exchange Commission or, in the case of clause (ii) above, filed with the Securities and Exchange Commission, Borrower will be able to consummate an offering entitling holders of equity securities of Borrower to purchase additional equity interests in Borrower on a pro rata basis (the "Offering") which, if fully subscribed, would result in aggregate proceeds to Borrower of an amount at least sufficient to enable Borrower to prepay, upon the consummation of the Offering, the Loans and the Other Loans (and all interest and other fees or other amounts due in connection with the Loans and the Other Loans), and Borrower shall use its best efforts to cause any such registration statement or post-effective amendment referred to in clause (i) or (iii) above to be declared effective within ninety (90) days from the Closing Date. Borrower shall use its best efforts to take, or cause to be taken, any and all further action or actions necessary or advisable to be taken in order to enable the Offering to be consummated as contemplated by this Section 11.1, including but not limited to the distribution of a prospectus or prospectus supplement pursuant to any of the applicable registration statements referred to above. It shall be an Event of Default if the registration statement or post-effective amendment is not declared effective or if the prospectus supplement is not filed with the Securities and Exchange Commission, as the case may be, on or prior to the Initial Maturity Date. 11.2 Consummation. After the filing of the registration statement, post-effective amendment or prospectus supplement referred to in Section 11.1 above, for the Offering pursuant to Section 11.1, Borrower shall thereafter diligently and continuously use its best efforts to consummate the Offering. 11.3 Proceeds of Offering. Upon Borrower's receipt of any proceeds of the Offering, Borrower shall cease to have any right to borrow under this Agreement. 11.4 Pricing of Rights Offering. The pricing of the securities to be offered pursuant to the Offering shall be consistent with the pricing parameters set forth in Section 7(d) of the Standby Purchase Agreements. 11.5 Waiver of Ownership Limitations. Borrower hereby covenants and agrees to use its best efforts to cause to be issued to Gotham a waiver of the ownership limitations set forth in Article VI, Section 6 of the By-Laws of Borrower, in form and substance reasonably satisfactory to Gotham, to the extent necessary (in light of all other securities of Borrower directly, indirectly, beneficially or constructively owned or controlled by or subject to the power to vote of (in each case, within the meaning of Borrower's Organizational Documents, the Securities Exchange Act of 1934, as amended and the rules and regulations thereunder, and the Internal Revenue Code and the rules and regulations thereunder) Gotham to permit Gotham to acquire the securities it may become obligated to purchase pursuant to the Standby Purchase Agreement to which Gotham is a party; provided, however, that notwithstanding the foregoing or any other provision of this Agreement, (i) Borrower shall not be obligated to take any action hereunder which would prevent Borrower from qualifying or continuing to qualify for taxation under the Internal Revenue Code as a REIT, and (ii) Borrower shall not be prevented or restricted hereunder with respect to taking any action which the Board of Trustees of Borrower shall deem advisable to prevent disqualification of Borrower for taxation under the Internal Revenue Code as a REIT. 11.6 Indemnification. (a) Borrower agrees to indemnify and hold harmless Agent and each Lender against any and all losses, claims, damages, obligations, penalties, judgments, awards, liabilities, costs, expenses and disbursements (and any and all actions, suits, proceedings and investigations in respect thereof and any and all legal and other costs, expenses and disbursements in giving testimony or furnishing documents in response to a subpoena or otherwise), including, without limitation, the costs, expenses and disbursements, as and when incurred, of investigating, preparing or defending any such action, suit, proceeding or investigation (whether or not in connection with litigation in which any Agent or any Lender is a party), directly or indirectly, caused by, relating to, based upon, arising out of, or in connection with, including, without limitation, any act or omission by Agent or such Lender in connection with the Offering or any registration statement or any prospectus relating to the Offering. (b) These indemnification provisions shall be in addition to any liability which Borrower may otherwise have to Agent or Lenders or the persons indemnified below in this sentence and shall extend to the following: Agent, Lenders, their respective affiliated entities, partners, employees, legal counsel, agents and controlling persons (within the meaning of the federal securities laws), and the officers, directors, employees, legal counsel, partners, agents and controlling persons of any of them. All references to Agent and/or Lender in these indemnification provisions shall be understood to include any and all of the foregoing indemnitees. (c) If any action, suit, proceeding or investigation is commenced, as to which Agent or any Lender proposes to demand indemnification, it shall notify Borrower with reasonable promptness; provided, however, that any failure by Agent or any Lender to notify Borrower shall not relieve Borrower from its obligations hereunder. Agent or any such Lender, as the case may be, shall have the right to retain counsel of its own choice to represent it, and Borrower shall pay the reasonable fees, expenses and disbursements of such counsel; and such counsel shall, to the extent consistent with its professional responsibilities, cooperate with Borrower and any counsel designated by Borrower. Borrower shall not be liable for any settlement of any claim against Agent or any Lender made without Borrower's prior written consent, which consent shall not be unreasonably withheld. Borrower shall not, without the prior written consent of Agent or any such Lender, as the case may be, settle or compromise any claim, or permit a default or consent to the entry of any judgment in respect thereof, unless such settlement, compromise or consent includes, as an unconditional term thereof, the giving by the claimant to Agent or any such Lender, as the case may be, of an unconditional release from all liability in respect of such claim. (d) In order to provide for just and equitable contribution, if a claim for indemnification pursuant to these indemnification provisions is made but it is found in a final judgment by a court of competent jurisdiction (not subject to further appeal) that such indemnification may not be enforced in such case, even though the express provisions hereof provide for indemnification in such case, then Borrower, on the one hand, and Agent or any such Lender, as the case may be, on the other hand, shall contribute to the losses, claims, damages, obligations, penalties, judgments, awards, liabilities, costs, expenses, and disbursements to which the indemnified persons may be subject in accordance with the relative benefits received by Borrower, on the one hand, and Agent or any such Lender, as the case may be, on the other hand, and also the relative fault of Borrower, on the one hand, and Agent or any such Lender, as the case may be, on the other hand, in connection with the statements, acts or omissions which resulted in such losses, claims, damages, obligations, penalties, judgments, awards, liabilities, costs, expenses or disbursements and the relevant equitable considerations shall also be considered. No person found liable for a fraudulent misrepresentation shall be entitled to contribution from any person who is not also found liable for such fraudulent misrepresentation. Notwithstanding the foregoing, neither Agent nor any Lender shall be obligated to contribute any amount hereunder that exceeds the amount of fees previously received by Agent or such Lender, as the case may be, pursuant to this Agreement. (e) These indemnification provisions and the provisions of Section 9.14 shall survive any termination of this Agreement and thereafter shall remain operative and in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized representatives, all as of the day and year first above written. LENDER and AGENT: BANKERS TRUST COMPANY By: /s/ Alexander Johnson ------------------------------ Name: Alexander Johnson Title: Managing Director LENDERS: BANKBOSTON, N.A. By:/s/ Paul F. DiVito --------------------------------- Name: Paul F. DiVito Title: Managing Director WELLSFORD CAPITAL By:/s/ Gregory F. Hughes ------------------------------- Name: Gregory F. Hughes Title:Chief Financial Officer BORROWER: FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS By: /s/ Thomas Kmiecik ------------------------------ Name: Thomas Kmiecik Title: Senior Vice President Treasurer EX-10.53 22 PROMISSORY NOTE $15,000,000 Dated as of August 11, 1998 THIS PROMISSORY NOTE (as amended, restated, supplemented or otherwise modified from time to time, this "Note") is made by FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, an Ohio business trust ("Borrower"), having an address at Suite 1900, 55 Public Square, Cleveland, Ohio 44113-1937, Attention: William Ackman, in favor of WELLSFORD CAPITAL, a Maryland real estate investment trust (together with its successors and assigns hereunder, "Lender"), whose address is 610 Fifth Avenue, New York, New York 10020. Section 1. Promise to Pay. FOR VALUE RECEIVED, Borrower hereby promises to pay to the order of Lender, on or before the Initial Maturity Date (as defined in the Loan Agreement, defined below), or if the Loan is extended pursuant to Section 2.6 of the Loan Agreement, on or before the Initial Extension Maturity Date or the Final Extension Maturity Date (both as defined in the Loan Agreement), as applicable (such final maturity date, the "Maturity Date"), the principal sum of Fifteen Million Dollars in U.S. dollars (U.S.$15,000,000), or, if less, the then unpaid principal amount of the Loan made to Borrower by Lender pursuant to that certain Fixed Rate Loan Agreement dated as of even date herewith, by and among Borrower, Lender, Bankers Trust Company, as agent, and the other lenders named therein (as amended, restated, replaced, supplemented or otherwise modified from time to time, the "Loan Agreement"; capitalized terms used herein without definition shall have the meanings ascribed to those terms in the Loan Agreement). Borrower also promises to pay interest on the unpaid principal amount hereof as provided herein. Section 2. Interest. a. Accrual. Subject to the other provisions of this Note and Loan Documents, interest shall accrue on the unpaid principal amount hereof from the Closing Date through the Maturity Date at the Interest Rate. b. Interest Payments. On each Interest Payment Date, Borrower shall pay to Lender all accrued and unpaid interest at the Interest Rate for the Interest Period then ended. c. Default Rate. Upon the occurrence and during the continuation of any default in the payment of principal or interest in respect of the Loan, or any fees or other amounts owed by Borrower under this Note, the Loan Agreement or any of the other Loan Documents, the principal amount hereof and, to the extent permitted by applicable law, any interest payments thereon not paid when due and any fees and other amounts then due and payable under this Note, the Loan Agreement or any of the other Loan Documents, shall thereafter bear interest (including post-petition interest in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws) payable upon demand at a rate (the "Default Rate") equal to the greater of four percent (4%) per annum in excess of the Interest Rate and four percent (4%) per annum in excess of the Prime Rate. Payment or acceptance of interest at the Default Rate is not a permitted alternative to timely payment and shall not constitute a waiver of any Default or Event of Default or an amendment to this Note or any other Loan Document and shall not otherwise prejudice or limit any rights or remedies of Lender. d. Manner of Payment. Each payment hereunder shall be made in the manner specified in Section 2.5 of the Loan Agreement. e. Computation of Interest. Interest payable hereunder shall be computed on the basis of a 360-day year and the actual number of days expired in the related Interest Period. In computing interest on the Loan, the first day of an Interest Period and the last day of such Interest Period shall be included (it being understood that no day shall be included in more than one Interest Period). f. Usury Laws. It is the intention of Borrower and Lender that no provision of this Note or any other Loan Document shall require the payment of interest on the Loan at a rate that exceeds the highest rate permitted under any applicable usury law (the "Maximum Rate"). Notwithstanding anything to the contrary contained herein or in any other Loan Document, Borrower shall not be obligated to make any payment hereunder or under any other Loan Document to the extent (but only to the extent) that such payment would result in the payment of interest at a rate in excess of the Maximum Rate. If, by the terms of this Note or any other Loan Document, Borrower is at any time required or obligated to pay interest on the Loan at a rate in excess of such Maximum Rate, the rate of interest applicable to the Loan shall be deemed to be immediately reduced to such Maximum Rate, and the interest payable shall be computed at such Maximum Rate, and all prior interest payments in excess of such Maximum Rate shall be deemed to have been the result of a mistake on the part of both Borrower and Lender. Any monies collected by Lender that constitute interest in excess of the Maximum Rate shall be applied to the unpaid principal amount of the Loan to which such excess may lawfully be credited, and any portion of such excess payment not capable of being so credited shall be refunded to Borrower or otherwise disposed of as directed by the order of a court of competent jurisdiction. Section 3. Unscheduled Prepayments. This Note is subject to voluntary and mandatory prepayment in whole or in part prior to the Maturity Date only as provided in Section 2.3 of the Loan Agreement. Borrower shall pay a prepayment premium in connection with any prepayment, if applicable, as and to the extent provided in the Loan Agreement. Section 4. Loan Agreement. This Note is one of the "Notes" referred to in, is issued pursuant to, and is entitled to the benefits of, the Loan Agreement, to which reference is made for a more complete statement of the terms and conditions under which the Loan evidenced hereby was made and is to be repaid. This Note is entitled to the benefits of the Guaranties, if any, and the other Loan Documents. Section 5. Event of Default. Upon the occurrence of an Event of Default, the principal of and accrued interest on this Note may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Loan Agreement. Section 6. Miscellaneous. Borrower hereby waives presentment, demand, protest or notice of any kind in connection with this Note. The proceeds of this Note were or are to be disbursed from the State of New York, which State the parties agree has a substantial relationship to the parties and to the underlying transaction embodied hereby, and in all respects, including matters of construction, validity and performance, THIS NOTE AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO CONFLICT OF LAW PRINCIPLES. To the fullest extent permitted by law, Borrower hereby unconditionally and irrevocably waives any claim to assert that the law of any other jurisdiction governs this Note, and Lender and Borrower hereby agree, in accordance with Section 5-1401 of the New York General Obligations Law, that this Note shall be governed by and construed in accordance with the laws of the State of New York. The terms of this Note are subject to amendment only in the manner provided in the Loan Agreement. No reference herein to the Loan Agreement, and no provision of this Note or the Loan Agreement, shall alter or impair the obligations of Borrower, which are absolute and unconditional, to pay the principal of, interest on, and any applicable prepayment premium with respect to, this Note at the place, at the respective times and in the manner prescribed herein and in the Loan Agreement. The provisions of this Note are subject to Section 9.13 of the Loan Agreement, which is incorporated herein by this reference as if set forth in full. IN WITNESS WHEREOF, Borrower has caused this Note to be executed by its duly authorized representative as of the day and year first written above. FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS, an Ohio business trust By: /s/ Thomas T. Kmiecik ------------------------------ Name: Thomas T. Kmiecik Title: Senior Vice President - Treasurer EX-10.54 23 FIRST AMENDMENT OF FIXED RATE LOAN AGREEMENT FIRST AMENDMENT OF FIXED RATE LOAN AGREEMENT (as the same may be amended or otherwise modified from time to time, the "Amendment"), dated as of the 8th day of January, 1999, among First Union Real Estate Equity and Mortgage Investments, as Borrower; BankBoston, N.A., Wellsford Capital and Bankers Trust Company, as Lenders; and Bankers Trust Company, as Agent. W I T N E S S E T H: WHEREAS, pursuant to that certain Fixed Rate Loan Agreement as of August 11, 1998 among the parties hereto (as the same may be amended or otherwise modified from time to time, the "Loan Agreement"), Lenders made loans to Borrower in the original aggregate principal amount of Forty-Five Million and 00/100 ($45,000,000.00) Dollars; and WHEREAS, Borrower and Lenders desire to modify and amend the terms and provisions of the Loan Agreement as hereinafter provided. NOW, THEREFORE, in consideration of the covenants set forth herein and for other good and valuable consideration, the receipt and legal sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. Definitions. All capitalized terms used herein without definition and which are defined in the Loan Agreement are used herein with the meanings assigned to such terms in the Loan Agreement. 2. Amendments to Loan Agreement. The Loan Agreement is hereby modified as follows: a. The definition of the Imperial Credit Facility is hereby amended to include, as part of the Amended and Restated Credit Agreement referred to in such definition, that certain Second Amendment to the Amended and Restated Credit Agreement dated as of December 30, 1998, a copy of which is annexed to this Amendment as EXHIBIT A. Accordingly, the reference in SECTION 8.1(a)(xii) of the Loan Agreement to the Prior Debt Documents "as in effect on the date hereof" (to the extent such reference to the Prior Debt Documents is a reference to the Imperial Credit Facility) shall mean the Imperial Credit Facility as in effect after giving effect to such Second Amendment to the Amended and Restated Credit Agreement. b. The definition of Line of Credit Facility is hereby amended to include, as part of the Amended and Restated Credit Agreement referred to in such definition, that certain Amendment No. 2 dated as of November 24, 1998 to the Amended and Restated Credit Agreement dated as of November 1, 1997, a copy of which Amendment No. 2 is annexed to this Amendment as EXHIBIT B. Accordingly, the references in SECTIONS 6.1.9 and 7.1.3 of the Loan Agreement to the Line of Credit Facility "as in effect on the date hereof" and in SECTION 8.1(a)(xii) of the Loan Agreement to the Prior Debt Documents "as in effect on the date hereof" (to the extent such reference to the Prior Debt Documents is a reference to the Line of Credit Facility) shall mean the Line of Credit Facility as in effect after giving effect to Amendment No. 2. c. Clause (b) of the definition of "Interest Period" is hereby amended to read, in its entirety, as follows: "(b) the final Interest Period shall end on (and include) August 11, 1999." d. The definition of Interest Rate is hereby amended to read, in its entirety, as follows: "Interest Rate" means (i) from the date hereof to and including November 11, 1998, a rate of interest equal to nine and seven- eighths percent (9.875%) per annum and (ii) on and after November 12, 1998, a rate of interest equal to twelve percent (12%) per annum. e. The first sentence of SECTION 2.1.4 of the Loan Agreement is hereby amended to read, in its entirety, as follows: "The Commitments and the Loans shall be evidenced by the Notes of Borrower, each in the original principal amount of the respective Loans and having a scheduled maturity date of August 11, 1999." f. SECTION 2.3.1 of the Loan Agreement is hereby amended to read, in its entirety, as follows: "Borrower shall repay the then outstanding principal amount of the Loans in full on August 11, 1999, together with interest thereon through (and including) the last day of the final Interest Period." g. SECTION 2.6 of the Loan Agreement and all related definitions are hereby deleted. h. All references in the Loan Agreement to the Initial Maturity Date, the Initial Extension Maturity Date and the Final Extension Maturity Date shall mean August 11, 1999. ul SECTION 2.7 of the Loan Agreement is hereby amended to designate the existing provisions thereof as paragraph (a) and to add the following as a new SECTION 2.7(b): "On January 15, 1999, Borrower shall pay to Agent (for the ratable benefit of Lenders) a non-refundable facility fee of $450,000. If, on March 31, 1999, the outstanding principal balance of the Loans is $30,000,000 or more, then on March 31, 1999 Borrower shall pay to Agent (for the ratable benefit of Lenders) a non- refundable facility fee of one-half of one percent (.50%) of the then outstanding principal balance of the Loans. If, on May 31, 1999, the outstanding principal balance of the Loans exceeds $15,000,000, then on May 31, 1999 Borrower shall pay to Agent (for the ratable benefit of Lenders) a non-refundable facility fee of one percent (1.0%) of the then outstanding principal balance of the Loans. However, if on May 31, 1999 the outstanding principal balance of the Loans is less than or equal to $15,000,000, then on May 31, 1999 Borrower shall pay to Agent (for the ratable benefit of Lenders) a non-refundable facility fee of one-half of one percent (.50%) of the then outstanding principal balance of the Loans. Each of the fees payable pursuant to this SECTION 2.7(b) shall be payable only if on the date such fee is due Loans are outstanding. Any repayment of the Loans shall not entitle Borrower to any refund of any fees or other amounts paid to Lenders. Borrower's failure to pay, when due, any fee payable pursuant to this SECTION 2.7(b) shall be an Event of Default." j. SECTION 8.1(a)(ii) of the Loan Agreement is hereby amended to read, in its entirety, as follows: "(ii) if Borrower fails to pay the Indebtedness in full on August 11, 1999;" k. SECTION 8.1(a) (xiv) of the Loan Agreement is hereby amended to delete the "or" at the end thereof; SECTION 8.1(a)(xv) of the Loan Agreement is hereby amended to add "or" at the end thereof; and the following are hereby added to the Loan Agreement as new SECTIONS 8.1(a)(xvi) and (xvii): "(xvi) if on March 31, 1999 the outstanding principal amount of the Loans is $35,000,000 or more; or (xvii) if on May 31, 1999 the outstanding principal balance of the Loans is $25,000,000 or more." 1. SECTIONS 11.2 and 11.3 of the Loan Agreement are hereby deleted and SECTION 11.1 is hereby amended to read, in its entirety, as follows: "Borrower shall use its best efforts to consummate, on or before each of March 31, 1999 and May 31, 1999 (each, a "Required Payment Date"), an offering, or offerings, as the case may be (collectively, the "Offering"), pursuant to the Registration Statement filed by Borrower on September 17, 1998 (Registration No. 333-63541), as amended from time to time, and such other registration statements as Borrower shall deem necessary or appropriate, which entitle(s) holders of equity securities of Borrower to purchase additional equity securities of Borrower, on a pro rata basis and which Offering, if fully subscribed, would provide Borrower with net proceeds, together with any other Capital Event Proceeds received by Borrower prior to each Required Payment Date, sufficient to enable Borrower to make principal payments on account of the Loans and Other Loans such that no Event of Default will occur under SECTIONS 8.1(a)(xvi) or (xvii) of the Loan Agreement or SECTIONS 8.1(a)(xvi) or (xvii) of the Other Loan Agreement. Borrower shall use its best efforts to take, or cause to be taken, any and all further action or actions necessary or advisable to be taken in order to consummate the Offering when and as required by this SECTION 11.1, including but not limited to the distribution of a prospectus or preparation, filing and distribution of any necessary prospectus supplement with respect to any of the applicable registration statements referred to above. Without limiting the foregoing, Borrower shall use its best efforts to commence, on a timely basis, but in any event no later than sixteen (16) days prior to each applicable Required Payment Date, an Offering which, if fully subscribed, would provide the Borrower with net proceeds, together with any other Capital Event Proceeds received by Borrower prior to the applicable Required Payment Date, sufficient to enable Borrower to satisfy such principal amortization requirements (as previously reduced by other prepayments) under the Loans and Other Loans due on the applicable Required Payment Date, and, following the commencement of such Offering, diligently proceed to consummate such Offering. It shall be an Event of Default if the Registration Statement filed by Borrower on September 17, 1998 (Registration No. 333-6351) is not declared effective on or prior to February 11, 1999." 3. Amendments to Notes. The first eight (8) lines of SECTION 1 of each Note are hereby deleted and are replaced with the following: "FOR VALUE RECEIVED, Borrower hereby promises to pay to the order of Lender, on or before August 11, 1999 (the "Maturity Date"), the principal sum of " 4. Outstanding Loans. Borrower represents and warrants to Lenders that the outstanding principal amount of the Loans is $45,000,000, that there are no offsets, defenses or counterclaims to its obligations under the Loan Documents and, that to the extent that any such offsets, defenses or counterclaims exist without its knowledge, the same are hereby waived to the fullest extent permitted by law. Except as modified by this Amendment, the terms and provisions of the Loan Documents are hereby ratified and confirmed in all respects and continue in full force and effect. 5. Consent of Lenders. Concurrently herewith the parties to the Other Loan Agreement are entering into a First Amendment to Fixed Rate Loan Agreement (the "Other Amendment"), which Other Amendment is, except for the parties thereto, substantially identical to this Amendment. The Lenders hereby consent to the execution and delivery of the Other Amendment. 6. Modifications. No provision of this Amendment may be waived, amended or supplemented except by a written instrument executed in accordance with SECTION 9.4 of the Loan Agreement. 7. Successors and Assigns. This Amendment, which sets forth the entire understanding of the parties hereto with respect to the subject matter hereof, inures to the benefit of, and shall be binding upon, the parties hereto and their respective successors and permitted assigns. 8. Severability. In the event that any one or more of the provisions contained in this Amendment shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Amendment, but this Amendment shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. 9. Captions; Counterparts; Governing Law. Captions used in this Amendment are for convenience of reference only and shall not be deemed a part of this Amendment nor used in the construction of its meaning. This Amendment may be signed in any number of counterparts, each of which, when taken together, shall constitute one and the same Amendment. This Amendment shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to contracts made and to wholly be performed within such state. IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment, as of the date and year first written above. LENDER AND AGENT: BANKERS TRUST COMPANY By: /s/ Steven P. Lapham ------------------------------ - -- Name: Steven P. Lapham Title: Vice President LENDERS: BANKBOSTON, N.A. By: /s/ Paul F. DiVito ------------------------------ - -- Name: Paul F. DiVito Title: Managing Director WELLSFORD CAPITAL By: /s/ Gregory F. Hughes ------------------------------ - - Name: Gregory F. Hughes Title: Chief Financial Officer BORROWER: FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS By: /s/ Steven M. Edelman ------------------------------ - ---- Name: Steven M. Edelman Title: Executive Vice President CONSENT OF STANDBY PURCHASERS (BANK GROUP) Each of the Standby Purchasers hereby consents to the execution and delivery by Borrower of the foregoing Amendment and represents and warrants to Lenders that there are no offsets, defenses or counterclaims to its obligations under the Standby Purchase Agreement to which it is a party and, that to the extent that any such offsets, defenses or counterclaims exist without its knowledge, the same are hereby waived to the fullest extent permitted by law. Each Standby Purchaser confirms that its obligations under the Standby Purchase Agreement to which it is a party shall be applicable to each Offering contemplated by SECTION 11.1 of the Loan Agreement and that this confirmation shall not in any manner limit any obligations of any Standby Purchaser under the Standby Purchase Agreement to which it is a party. The terms and provisions of the Standby Purchase Agreements are hereby ratified and confirmed in all respects and continue in full force and effect. GOTHAM PARTNERS, L.P. By: Section H Partners, L.P. By: Karenina Corp. By: /s/ William A. Ackman ----------------------------- Name: William A. Ackman Title: President ELLIOTT ASSOCIATES, L.P. By:/s/ Paul Singer ----------------------------- Name: Paul Singer Title:General Partner GOTHAM PARTNERS III, L.P. By:Section H Partners, L.P. By: Karenina Corp. By: /s/ William A. Ackman --------------------------- Name: William A. Ackman Title: President EX-10.55 24 FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS 55 Public Square Suite 1900 Cleveland, Ohio 44113-1937 January 8, 1999 Bankers Trust Company BankBoston, N.A Wellsford Capital c/o Bankers Trust Company 130 Liberty Street New York, New York 10006 Gentlemen: Reference is hereby made to that certain Fixed Rate Loan Agreement dated as of August 11, 1998 (as amended by that certain First Amendment of Fixed Rate Loan Agreement dated as of January 8, 1999 and as the same may further be amended or otherwise modified from time to time, the "Loan Agreement"). All capitalized terms used herein without definition and which are defined in the Loan Agreement are used herein with the meanings assigned to such terms in the Loan Agreement. 1. Borrower and Lenders hereby agree that the Loan Agreement shall be and hereby is modified as follows: (a) The first sentence of Section 2.7(b) is hereby deleted and the following is substituted in lieu thereof: "On January 8, 1999, Borrower shall pay to Agent (for the ratable benefit of Lenders) a non-refundable facility fee of $150,000 and, on February 11, 1999, Borrower shall pay to Agent (for the ratable benefit of Lenders) a non-refundable facility fee of 1% of the then outstanding principal balance of the Loans." (b) Section 11.1 of the Loan Agreement is hereby amended to read, in its entirety, as follows: "Borrower shall use its best efforts to consummate, on or before each of March 31, 1999, May 31, 1999 and August 11, 1999 (each, a "Required Payment Date"), an offering, or offerings, as the case may be (collectively, the "Offering"), pursuant to the Registration Statement filed by Borrower on September 17, 1998 (Registration No. 333-63541), as amended from time to time, and such other registration statements as Borrower shall deem necessary or appropriate, which entitle(s) holders of equity securities of Borrower to purchase additional equity securities of Borrower, on a pro rata basis and which Offering, if fully subscribed, would provide Borrower with net proceeds, together with any other Capital Event Proceeds received by Borrower prior to each Required Payment Date, sufficient to enable Borrower to make principal payments on account of the Loans and Other Loans such that no Event of Default will occur under SECTIONS 8.1(a) (i),(xvi) or (xvii) of the Loan Agreement or SECTIONS 8.1(a)(i), (xvi) or (xvii) of the Other Loan Agreement. Borrower shall use its best efforts to take, or cause to be taken, any and all further action or actions necessary or advisable to be taken in order to consummate the Offering when and as required by this SECTION 11.1, including but not limited to the distribution of a prospectus or preparation, filing and distribution of any necessary prospectus supplement with respect to any of the applicable registration statements referred to above. It shall be an Event of Default if Borrower shall not commence, by that date which is sixteen (16) days prior to each applicable Required Payment Date, an Offering which, if fully subscribed, would provide the Borrower with net proceeds, together with any other Capital Event Proceeds received by Borrower prior to the applicable Required Payment Date, sufficient to enable Borrower to satisfy such principal payment or amortization requirements (as previously reduced by other prepayments) under the Loans and Other Loans due on the applicable Required Payment Date. Following the commencement of such Offering, Borrower shall diligently proceed to consummate such Offering. Borrower shall use its best efforts to cause the Registration Statement filed by Borrower on September 17, 1998 (Registration No. 333-6351) to be declared effective on or prior to February 11, 1999." 2. As modified hereby, the Loan Agreement is hereby ratified and confirmed. 3. Concurrently herewith, the parties to the Other Loan Agreement are entering into a letter agreement (the "Other Letter Agreement"), which is, except for the parties thereto, identical to this letter agreement. The Lenders hereby consent to the execution and delivery of the Other Letter Agreement. 4. This letter agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all of such counterparts together shall constitute one and the same instrument. If the foregoing is acceptable to you, please so indicate by signing below. Very truly yours, FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS By: /s/ Steven M. Edelman -------------------------------- Name: Steven M. Edelman Title: Executive Vice President LENDER AND AGENT: BANKERS TRUST COMPANY By: /s/ Steven P. Lapham ----------------------------- - -- Name: Steven P. Lapham Title: Vice President LENDERS: BANKBOSTON, N.A. By: /s/ Paul F. DiVito ---------------------------- - -- Name: Paul F. DiVito Title: Managing Director WELLSFORD CAPITAL By: /s/ Gregory F. Hughes ------------------------------ Name: Gregory F. Hughes Title: Chief Financial Officer CONSENTED TO: GOTHAM PARTNERS, L.P. By: Section H Partners, L.P. By: Karenina Corp. By: /s/ William A. Ackman ------------------------------- Name: William A. Ackman Title: President ELLIOTT ASSOCIATES, L.P. By: /s/ Paul Singer ---------------------------- Name: Paul Singer Title: General Partner GOTHAM PARTNERS III, L.P. By:Section H Partners, L.P. By: Karenina Corp. By: /s/ William A. Ackman ---------------------------- Name: William A. Ackman Title: President EX-10.57 25 AMENDMENT TO REVOLVING CREDIT AGREEMENT THIS AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Amendment") is made and executed as of the 6th day of April, 1998 by each of the entities identified on Schedule A annexed hereto (collectively, the "Borrower"), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a New York banking corporation (the "Lender"). RECITALS R-1. AP-Anaheim LLC, a California limited liability company, AP- Arlington LLC, a California limited liability company, AP-Atlantic LLC, a California limited liability company, AP-Cityview LLC, a California limited liability company, AP-Redlands LLC, a California limited liability company, AP-Palmdale LLC, a California limited liability company, AP-Farrell Ramon LLC, a California limited liability company, AP-Sierra LLC formerly known as Abbey Sierra LLC, a California limited liability company, AP-Victoria LLC, a California limited liability company, and AP-Victorville LLC, a Delaware limited liability company (collectively, the "Original Borrowers") executed and delivered a certain Revolving Credit Agreement dated August 28, 1997 (the "Original Agreement"), whereby the Original Borrowers borrowed from Lender, on a secured revolving credit basis, up to the maximum principal amount of SEVENTY MILLION AND NO/100 DOLLARS ($70,000,000.00). R-2. AP-Edinger LLC, a California limited liability company, AP- Glendora LLC, a California limited liability company and AP - Diamond Bar LLC, a California limited liability company (collectively, the "Additional Borrowers"), have, pursuant to certain Revolving Credit Assumption Agreements dated December 10, 1997, December 24, 1997 and January 16, 1998, respectively, assumed all obligations under the Original Agreement on a joint and several basis with the Original Borrowers and each other Additional Borrower (the Original Agreement, as assumed and/or modified, as the case may be, by said three Revolving Credit Assumption Agreements, collectively, the "Loan Agreement"). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Loan Agreement. R-3. The Borrower requests, and the Lender has agreed, to increase the maximum outstanding principal amount available pursuant to the Loan Agreement from SEVENTY MILLION AND NO/100 DOLLARS ($70,000,000.00) to ONE HUNDRED TWENTY MILLION AND NO/100 DOLLARS ($120,000,000.00) subject to and in accordance with the terms and conditions set forth below. AGREEMENT NOW THEREFORE, as an inducement for Lender to increase the aggregate principal amount available to Borrower pursuant to the Loan Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties do hereby agree as follows: 1. The Recitals set forth hereinabove are hereby incorporated by this reference with the same force and effect as if fully set forth herein. 2. Lender's obligation to increase the maximum principal amount of the Loan as contemplated hereunder is subject to the satisfaction of each of the following conditions as determined by Lender. All documents, instruments, certificates and opinions referred to below shall be satisfactory in form and substance to Lender in its sole discretion: (a) Guaranty Amendment. Guarantor shall have executed and delivered to Lender an Amendment to and Reaffirmation of Guaranty with respect to the guaranty previously executed and delivered by Guarantor in connection with the Loan. (b) Promissory Note Amendment. Borrower shall have executed and delivered to Lender an Amendment to Promissory Note (the "Note Amendment") pursuant to which, among other things, the principal amount of the Note shall be increased to $120,000,000. (c) First Amendment to Deed of Trust. Each Borrower shall have executed and delivered to Lender a First Amendment to Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing and First Amendment to Assignment of Leases and Rents and Security Deposits (the "Security Amendment") in recordable form with respect to the Mortgage and the Assignment of Leases and Rents and Security Deposits encumbering the Subject Property owned or leased by such Borrower pursuant to which, among other things, the amounts secured by such documents shall be increased to $120,000,000. (d) Certificate as to Organizational Documents of Each Borrower. Lender shall have received copies of amendments to the operating agreements of each of the Borrowers reflecting the increase in the Loan contemplated hereby as well as a certificate from the Managing Member of each Borrower certifying that there have been no other changes to the organizational documents of such Managing Member or the Borrower as previously delivered to Lender as well as updated good standing certificates for each Borrower and the Managing Member thereof. (e) Resolutions of Each Borrower Approving the Transaction. Lender shall have received resolutions duly adopted by the Members of each Borrower approving the transactions contemplated hereby. (f) Consents. Lender shall have received copies of any required consents which are necessary in connection with the consummation of the transactions contemplated hereby including, without limitation, the consent and estoppel of any ground lessor in substantially the same form as delivered at the original closing of the Loan. (g) Fees and Expenses. Borrower shall have paid the legal fees and expenses of Lender's Counsel and any local counsel retained by Lender in connection with the negotiation, preparation, execution and delivery of this Amendment and the other documents contemplated hereby as well as all other costs and expenses in connection with the transactions contemplated hereunder. (h) Title Policies. Lender shall have received an endorsement to each of the policies of title insurance previously delivered to Lender, which endorsements shall without further exception unless approved by Lender (i) update the date of each such policy to the date hereof and (ii) increase the insured amount to $120,000,000. (i) Opinion of Counsel. Lender shall have received an opinion of counsel with respect to the transactions contemplated hereby and which shall also serve to update the opinion delivered to Lender at the time of the execution and delivery of the Original Agreement. (j) No Default. No Event of Default or Default shall have occurred and be continuing and no Default or Event of Default will occur as a result of the consummation of any of the transactions contemplated hereby. (k) Representations and Warranties. All representations and warranties made by the Borrower and the Guarantor in any Loan Document shall remain true, correct and complete in all material respects as of the date hereof as if made on the date hereof. (l) Participation. Lender shall have entered into an amendment of the Loan Participation Agreement with Wellsford Real Properties, Inc. (the "Participant") dated August 28, 1997 pursuant to which the Participant shall have consented to the increase in the Loan contemplated hereunder and agreed to participate in the Loan, as increased, on the same terms and conditions as currently in effect. (m) Other Documents. Lender shall have received such other documents, instruments, certificates and assurances relating to the transactions contemplated hereby as Lender may reasonably request. 3. References in the Loan Agreement to "$70,000,000" , "$70,000,000.00" or to "SEVENTY MILLION AND NO/100 DOLLARS ($70,000,000.00)" set forth on the cover page thereof, in the first recital thereof, in the definition of "Commitment" set forth in Section 1.01 thereof, in Section 5.02 thereof and in Section 8.25 thereof are hereby deleted and are hereby replaced by, respectively, "$120,000,000", $120,000,000.00" or "ONE HUNDRED TWENTY MILLION AND NO/100 DOLLARS ($120,000,000.00)". 4. The definition of the term "Note" set forth in Section 1.01 is hereby deleted in its entirety and the following definition is hereby substituted therefor: "Note" means that certain Promissory Note dated August 28, 1997 executed by the Original Borrowers in the original maximum principal amount of $70,000,000 as assumed and/or modified by Promissory Note Assumption Agreements dated December 10, 1997, December 24, 1997 and January 16, 1998, executed by AP-Edinger LLC, a California limited liability company, AP-Glendora LLC, a California limited liability company and AP - Diamond Bar LLC, a California limited liability company, respectively, as further modified and increased to $120,000,000 pursuant to an Amendment to Promissory Note between Borrower and Lender dated as of April _, 1998, as the same may be further modified, assumed or supplemented from time to time. 5. Section 2.01(a) of the Loan Agreement is hereby modified by deleting the figure "$80,000,000" as it appears therein and replacing it with the figure "$130,000,000". 6. The last line of Section 3.01(b) of the Loan Agreement is hereby modified by deleting the phrase "Three Hundred Fifty Thousand Dollars ($350,000.00)" and replacing it with the phrase "Six Hundred Thousand Dollars ($600,000.00)". 7. Each Borrower hereby reaffirms all of its covenants and obligations under the Loan Agreement as modified hereby. Each of the Borrowers represents and warrants to Lender that all of the representations and warranties contained in the Loan Agreement made by such Borrower remain true and correct in all material respects as of the date hereof as if made on the date hereof and are true and correct with respect to this Amendment, the Note Amendment and the Security Amendment. Each Borrower acknowledges and agrees that it has no offsets, counterclaims or defenses to any of its obligations under the Loan Agreement as modified hereby. 8. Except as modified hereby, the Loan Agreement remains unmodified and in full force and effect. 9. This Amendment may be executed in any number of counterparts, all of which, when taken together, shall constitute but one and the same instrument. [Signatures Appear on Following Page] IN WITNESS WHEREOF, the undersigned have executed and delivered this Amendment as of the day and year first hereinabove written. BORROWER: AP - DIAMOND BAR LLC, a California limited liability company By: Abbey Investments, Inc., a California corporation, its Manager By:/s/ Donald G. Abbey ______________________________ Name:Donald G. Abbey Title:President AP - EDINGER LLC, a California limited liability company By: Abbey Investments, Inc., a California corporation, its Manager By:/s/ Donald G. Abbey _____________________________ Name:Donald G. Abbey Title:President AP - GLENDORA LLC, a California limited liability company By: Abbey Investments, Inc., a California corporation, its Manager By:/s/ Donald G. Abbey _____________________________ Name:Donald G. Abbey Title:President [Signatures Continue on Following Page] AP - ANAHEIM LLC, a California limited liability company By: Abbey Investments, Inc., a California corporation, its Manager By:/s/ Donald G. Abbey _____________________________ Name:Donald G. Abbey Title:President AP - ARLINGTON LLC, a California limited liability company By: Abbey Investments, Inc., a California corporation, its Manager By:/s/ Donald G. Abbey _____________________________ Name:Donald G. Abbey Title:President AP - ATLANTIC LLC, a California limited liability company By: Abbey Investments, Inc., a California corporation, its Manager By:/s/ Donald G. Abbey _____________________________ Name:Donald G. Abbey Title:President AP - CITYVIEW LLC, a California limited liability company By: Abbey Investments, Inc., a California corporation, its Manager By:/s/ Donald G. Abbey _____________________________ Name:Donald G. Abbey Title:President [Signatures Continue on Following Page] AP - REDLANDS LLC, a California limited liability company By: Abbey Investments, Inc., a California corporation, its Manager By:/s/ Donald G. Abbey _____________________________ Name:Donald G. Abbey Title:President AP - PALMDALE LLC, a California limited liability company By: Abbey Investments, Inc., a California corporation, its Manager By:/s/ Donald G. Abbey _____________________________ Name:Donald G. Abbey Title:President AP - FARRELL RAMON LLC, a California limited liability company By: Abbey Investments, Inc., a California corporation, its Manager By:/s/ Donald G. Abbey _____________________________ Name:Donald G. Abbey Title:President AP - SIERRA LLC (formerly known as Abbey Sierra LLC), a California limited liability company By: Abbey Investments, Inc., a California corporation, its Manager By:/s/ Donald G. Abbey _____________________________ Name:Donald G. Abbey Title:President [Signatures Continue on Following Page] AP - VICTORIA LLC, a California limited liability company By: Abbey Investments, Inc., a California corporation, its Manager By:/s/ Donald G. Abbey _____________________________ Name:Donald G. Abbey Title:President AP - VICTORVILLE LLC, a Delaware limited liability company By: DA Investments Properties, Inc., a Delaware corporation, its Manager By:/s/ Donald G. Abbey _____________________________ Name:Donald G. Abbey Title:President LENDER: MORGAN GUARANTY TRUST COMPANY OF NEW YORK By:/s/ Bernard J. Costello ___________________________________ Name: Bernard J. Costello Title: Vice President By:/s/ E. Thornton ___________________________________ Name: E. Thornton Title: Vice President SCHEDULE A Borrower Entities 1. AP - DIAMOND BAR LLC, a California limited liability company 2. AP - EDINGER LLC, a California limited liability company 3. AP - GLENDORA LLC, a California limited liability company 4. AP - ANAHEIM LLC, a California limited liability company 5. AP - ARLINGTON LLC, a California limited liability company 6. AP - ATLANTIC LLC, a California limited liability company 7. AP - CITYVIEW LLC, a California limited liability company 8. AP - REDLANDS LLC, a California limited liability company 9. AP - PALMDALE LLC, a California limited liability company 10. AP - FARRELL RAMON LLC, a California limited liability company 11. AP - SIERRA LLC (formerly known as Abbey Sierra LLC), a California limited liability company 12. AP - VICTORIA LLC, a California limited liability company 13. AP - VICTORVILLE LLC, a Delaware limited liability company EX-10.59 26 FIRST AMENDMENT TO PARTICIPATION AGREEMENT This FIRST AMENDMENT TO PARTICIPATION AGREEMENT (this "Amendment") is made and entered into as of this 7th day of April, 1998 between MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a New York banking corporation having an address at 60 Wall Street, New York, New York 10260 (the "Bank") and WELLSFORD CAPITAL, a Maryland real estate investment trust having an address at 610 Fifth Avenue, New York, New York 10020 (the "Participant"). RECITALS WHEREAS, the Bank and Wellsford Real Properties, Inc. (the "Original Participant") entered into that certain Loan Participation Agreement dated as of August 28, 1997 (the "Agreement"; capitalized terms used herein without definition shall have the respective meanings ascribed thereto in the Agreement) pursuant to which the Bank and the Original Participant agreed, among other things, to participate in the funding of the Loan in the maximum outstanding amount of $70,000,000; and WHEREAS, pursuant to that certain Assignment and Acceptance Agreement dated March_, 1998, the Original Participant assigned all of its rights under the Agreement to the Participant and the Participant assumed all of the Original Participant's obligations thereunder; and WHEREAS, the Participant is now the holder of the Junior Participation; and WHEREAS, the Borrower has requested that the maximum principal amount of the Loan be increased from $70,000,000 to $120,000,000; and WHEREAS, the Bank and the Participant desire to amend the Agreement as hereinafter set forth to reflect the increase in the Loan and the agreement between the Bank and the Participant to fund the Loan as increased on the same basis as the Loan is currently being funded. AGREEMENT NOW, THEREFORE, in consideration of the premises set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Bank and the Participant hereby agree as follows: 1. The Recitals set forth above are deemed a part of this Amendment as if they were fully set forth herein. 2. The Bank and the Participant agree that each shall fund all future Advances and receive payments thereon under the Agreement as modified hereby in the same manner and in the same proportion as currently set forth in the Agreement, all as if the original amount of the Loan had been $120,000,000. 3. The first sentence of the first paragraph of the Agreement on page 1 is hereby deleted in its entirety and the following sentence is hereby substituted therefor: Reference is made to the Revolving Credit Agreement dated as of August 28, 1997 as modified by (a) three Revolving Credit Assumption Agreements dated December 10, 1997, December 24, 1997 and January 16, 1998, respectively and (b) an Amendment to Revolving Credit Agreement dated as of April 6, 1998, between the Bank and the entities named therein as "Borrowers" (said entities, together with any other entity who becomes liable under the terms of the Credit Agreement (as hereinafter defined), are hereinafter collectively referred to as the "Borrower"), copies of which have been furnished to the Participant (said Revolving Credit Agreement, as heretofore assumed and modified as set forth above, together with any further modification made in accordance with Section 4(f) below, is hereinafter referred to collectively as the "Credit Agreement"). 4. The last sentence of the first paragraph of the Agreement on page 1 is hereby modified by deleting the figures "$70,000,000" and "$80,000,000" where they appear therein and substituting the figures "$120,000,000" and "$130,000,000" therefor, respectively. 5. The second sentence of the second paragraph of the Agreement on page 1 is hereby modified by deleting the figure "$35,000,000" where it appears therein and substituting the figure "$60,000,000" therefor. 6. The last sentence of the second paragraph of the Agreement on page 1 is hereby deleted in its entirety and the following sentence is hereby substituted therefor: For purposes of this Agreement, the term "Note" shall mean the promissory note in the original principal amount of $70,000,000 dated August 28, 1997 as modified by (a) three Promissory Note Assumption Agreements dated December 10, 1997, December 24, 1997 and January 16, 1998, respectively and (b) increased to $120,000,000 pursuant to an Amendment to Promissory Note dated as of April 6, 1998, executed by Borrower in favor of the Bank together with any modification thereof made in accordance with Section 4(f) below. 7. The fourth sentence of Section 1(d) of the Agreement on page 3 is hereby modified by deleting the phrase "In the event that the Participant fails to reimburse the Bank as provided in this paragraph within three (3) Business Days" at the beginning of said sentence and substituting the phrase "For so long as the Participant fails to reimburse the Bank as provided in this paragraph" therefor. 8. The third sentence of Section 4(e) of the Agreement on page 7 is hereby modified by inserting the word "sole" following the phrase "the Participant shall have the" and immediately prior to the phrase "right to accelerate the Loan". 9. The second sentence of Section 8 of the Agreement on page 10 is hereby deleted in its entirety and the following sentence is hereby substituted therefor: 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. 10. The Participant, by its execution of this Amendment, hereby consents in accordance with Section 4(f) of the Agreement to the increase in the Commitment from $70,000,000 to $120,000,000 including, without limitation, all documents executed between the Borrower and the Bank to effectuate the increase in the Commitment as well as the increase in the Junior Participation from $35,000,000 to $60,000,000 as contemplated hereby. 11. The Participant, by its execution of this Amendment, hereby acknowledges that the Bank may be entering into a participation agreement (as opposed to an assignment of the Bank's rights under the Agreement) pursuant to which the Bank may sell a participation interest in the Senior Participation. In connection therewith the Participant hereby acknowledges and agrees that, in certain circumstances, the Bank's new participant may, as between the Bank and such new participant, control certain decisions and determinations to be made by the holder of the Senior Participation under the Agreement, provided, however, that as between the Bank and the Participant, the Participant will continue to deal directly with the Bank as currently set forth in the Agreement. 12. Except as modified hereby, the Agreement remains unmodified and in full force and effect. 13. This Amendment shall be governed by and construed in accordance with the laws of the State of New York. [Signatures contained on following page] IN WITNESS WHEREOF, the parties hereto have executed this Amendment 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: Vice President -------------------------------- - -- EX-10.61 27 AMENDMENT TO PROMISSORY NOTE THIS AMENDMENT TO PROMISSORY NOTE (this "Amendment") is made and executed as of the 6th day of April, 1998 by each of the entities identified on Schedule A annexed hereto (collectively, the "Makers"), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a New York banking corporation (the "Payee"). RECITALS R-1. AP-Anaheim LLC, a California limited liability company, AP- Arlington LLC, a California limited liability company, AP-Atlantic LLC, a California limited liability company, AP-Cityview LLC, a California limited liability company, AP-Redlands LLC, a California limited liability company, AP-Palmdale LLC, a California limited liability company, AP-Farrell Ramon LLC, a California limited liability company, AP-Sierra LLC formerly known as Abbey Sierra LLC, a California limited liability company, AP-Victoria LLC, a California limited liability company, and AP-Victorville LLC, a Delaware limited liability company (collectively, the "Original Borrowers") executed and delivered on a joint and several basis a certain Promissory Note to Payee dated August 28, 1997 (the "Original Note"), in the original maximum principal amount of SEVENTY MILLION AND NO/100 DOLLARS ($70,000,000.00). R-2. AP-Edinger LLC, a California limited liability company, AP- Glendora LLC, a California limited liability company and AP - Diamond Bar LLC, a California limited liability company (collectively, the "Additional Borrowers"), have, pursuant to certain Promissory Note Assumption Agreements dated December 10, 1997, December 24, 1997 and January 16, 1998, respectively, assumed all obligations under the Original Note on a joint and several basis with the Original Borrowers and each other Additional Borrower (the Original Note, as heretofore modified by said Promissory Note Assumption Agreements, is hereinafter collectively referred to as the "Note"). Capitalized terms used herein without definition shall have the respective meanings ascribed thereto in the Note. R-3. The Makers have requested and the Payee has agreed to increase the maximum outstanding principal amount available pursuant to the Loan Agreement from SEVENTY MILLION AND NO/100 DOLLARS ($70,000,000.00) to ONE HUNDRED TWENTY MILLION AND NO/100 DOLLARS ($120,000,000.00) subject to and in accordance with that certain Amendment to Revolving Credit Agreement of even date herewith between the Makers and Payee. R-4. The parties hereto desire to amend the Note to increase the principal amount thereof from SEVENTY MILLION AND NO/100 DOLLARS ($70,000,000.00) to ONE HUNDRED TWENTY MILLION AND NO/100 DOLLARS ($120,000,000.00) in accordance with the terms set forth herein. AGREEMENT NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Makers hereby jointly and severally agree as follows with Payee. 1. The Recitals set forth hereinabove are hereby incorporated by this reference with the same force and effect as if fully set forth herein. 2. The definition of the term "Mortgages" set forth in the Note is hereby deleted in its entirety and the following is hereby substituted therefor: "Mortgages" shall mean collectively (i) those thirteen (13) Deeds of Trust, Security Agreements, Assignments of Rents and Fixture Filings previously executed by each Maker for the benefit of Payee, each in the original principal amount of $70,000,000, as each of such deeds of trust was increased to $120,000,000 and modified pursuant to certain First Amendments to Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing and First Amendment to Assignment of Leases and Rents and Security Deposits executed by each of the Makers and dated as of April _, 1998 and (ii) any other deeds of trust hereafter delivered to Payee pursuant to the terms of the Loan Agreement. 3. The definition of "Note Amount" is hereby modified by deleting the amount "$70,000,000" and substituting the amount "$120,000,000" therefor. The first paragraph of the Note is hereby modified by deleting the phrase "SEVENTY MILLION AND NO/100 DOLLARS ($70,000,000.00)" where it appears therein and substituting the phrase "ONE HUNDRED TWENTY MILLION AND NO/100 DOLLARS ($120,000,000.00)" therefor. 4. The outstanding principal balance due under the Note as modified hereby is $59,420,800 as of the date hereof. Each of the Makers hereby reaffirms all of its covenants and obligations under the Note as modified hereby, including, without limitation, the obligation to pay the principal amount of the Note as modified hereby together with interest thereon as provided in the Note. Each of the Makers acknowledges and agrees that it has no offsets, counterclaims or defenses to any of its obligations under the Note as modified hereby. 5. Except as modified hereby, the Note remains unmodified and in full force and effect. 6. This Amendment shall be governed by and construed in accordance with the laws of the State of New York in the same manner and to the same extent as the Original Note. 7. This Amendment may be executed in any number of counterparts, all of which, when taken together, shall constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment as of the day and year first hereinabove written. AP - DIAMOND BAR LLC, a California limited liability company By: Abbey Investments, Inc., a California corporation, its Manager By:/s/ Donald G. Abbey ------------------------------- Name:Donald G. Abbey Title:President AP - EDINGER LLC, a California limited liability company By: Abbey Investments, Inc., a California corporation, its Manager By:/s/ Donald G. Abbey ------------------------------- Name:Donald G. Abbey Title:President AP - GLENDORA LLC, a California limited liability company By: Abbey Investments, Inc., a California corporation, its Manager By:/s/ Donald G. Abbey ------------------------------- Name:Donald G. Abbey Title:President [Signatures Continue on Following Page] AP - ANAHEIM LLC, a California limited liability company By: Abbey Investments, Inc., a California corporation, its Manager By:/s/ Donald G. Abbey ------------------------------- Name:Donald G. Abbey Title:President AP - ARLINGTON LLC, a California limited liability company By: Abbey Investments, Inc., a California corporation, its Manager By:/s/ Donald G. Abbey ------------------------------- Name:Donald G. Abbey Title:President AP - ATLANTIC LLC, a California limited liability company By: Abbey Investments, Inc., a California corporation, its Manager By:/s/ Donald G. Abbey ------------------------------- Name:Donald G. Abbey Title:President AP - CITYVIEW LLC, a California limited liability company By: Abbey Investments, Inc., a California corporation, its Manager By:/s/ Donald G. Abbey ------------------------------- Name:Donald G. Abbey Title:President [Signatures Continue on Following Page] AP - REDLANDS LLC, a California limited liability company By: Abbey Investments, Inc., a California corporation, its Manager By:/s/ Donald G. Abbey ------------------------------- Name:Donald G. Abbey Title:President AP - PALMDALE LLC, a California limited liability company By: Abbey Investments, Inc., a California corporation, its Manager By:/s/ Donald G. Abbey ------------------------------- Name:Donald G. Abbey Title:President AP - FARRELL RAMON LLC, a California limited liability company By: Abbey Investments, Inc., a California corporation, its Manager By:/s/ Donald G. Abbey ------------------------------- Name:Donald G. Abbey Title:President AP - SIERRA LLC (formerly known as Abbey Sierra LLC), a California limited liability company By: Abbey Investments, Inc., a California corporation, its Manager By:/s/ Donald G. Abbey ------------------------------- Name:Donald G. Abbey Title:President [Signatures Continue on Following Page] AP - VICTORIA LLC, a California limited liability company By: Abbey Investments, Inc., a California corporation, its Manager By:/s/ Donald G. Abbey ------------------------------- Name:Donald G. Abbey Title:President AP - VICTORVILLE LLC, a Delaware limited liability company By: DA Investments Properties, Inc., a Delaware corporation, its Manager By:/s/ Donald G. Abbey ------------------------------- Name:Donald G. Abbey Title:President MORGAN GUARANTY TRUST COMPANY OF NEW YORK By:/s/ Bernard J. Costello -------------------------------------- Name: Bernard J. Costello Title: Vice President By:/s/ E. Thornton -------------------------------------- Name: E. Thornton Title: Vice President SCHEDULE A Borrower Entities 1. AP - DIAMOND BAR LLC, a California limited liability company 2. AP - EDINGER LLC, a California limited liability company 3. AP - GLENDORA LLC, a California limited liability company 4. AP - ANAHEIM LLC, a California limited liability company 5. AP - ARLINGTON LLC, a California limited liability company 6. AP - ATLANTIC LLC, a California limited liability company 7. AP - CITYVIEW LLC, a California limited liability company 8. AP - REDLANDS LLC, a California limited liability company 9. AP - PALMDALE LLC, a California limited liability company 10. AP - FARRELL RAMON LLC, a California limited liability company 11. AP - SIERRA LLC (formerly known as Abbey Sierra LLC), a California limited liability company 12. AP - VICTORIA LLC, a California limited liability company 13. AP - VICTORVILLE LLC, a Delaware limited liability company EX-10.67 28 ====================================================================== SAFEGUARD CAPITAL FUND, L.P., a Delaware limited partnership as Borrower and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Lender ---------------- $90,000,000 REVOLVING CREDIT AGREEMENT Dated as of March 28, 1998 ====================================================================== TABLE OF CONTENTS Page ARTICLE I. DEFINITIONS; CONSTRUCTION. . . . . . . . . . . . . . . . . . . .1 Section 1.01 Definitions.. . . . . . . . . . . . . . . . . . . . . .1 ARTICLE II. AMOUNT AND TERMS OF THE LOAN. . . . . . . . . . . . . . . . . .3 Section 2.01 The Loan. . . . . . . . . . . . . . . . . . . . . . . .3 Section 3.01 Fees. . . . . . . . . . . . . . . . . . . . . . . . . .4 ARTICLE IV. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . .5 Section 4.01 Conditions Precedent to Closing. . . . . . . . . . . .5 Section 4.02 Conditions Precedent to Advances. . . . . . . . . . . .7 ARTICLE V COLLATERAL VALUE AND RELEASES OF COLLATERAL. . . . . . . . . . . 11 Section 5.01 Determinations of Collateral Value by Lender. . . . . 11 Section 5.02 Recalculations of Collateral Value at Borrower's Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 5.03 Release of Collateral . . . . . . . . . . . . . . . . 12 Section 5.04 Calculations of Collateral Value and LTV Ratio. . . . 13 ARTICLE VI. REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . 13 Section 6.01 Representations and Warranties. . . . . . . . . . . . 13 Section 6.02 Financial Reports . . . . . . . . . . . . . . . . . . 18 Section 6.03 Litigation. . . . . . . . . . . . . . . . . . . . . . 19 ARTICLE VII. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . 20 Section 7.01 Events of Default . . . . . . . . . . . . . . . . . . 20 ARTICLE VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 20 Section 8.01 Notices . . . . . . . . . . . . . . . . . . . . . . . 20 Section 8.02 Performance by Lender . . . . . . . . . . . . . . . . 20 Section 8.03 No Oral Change. . . . . . . . . . . . . . . . . . . . 20 Section 8.04 No Waiver: Remedies Cumulative. . . . . . . . . . . . 21 Section 8.05 Fees and Expenses . . . . . . . . . . . . . . . . . . 21 Section 8.06 Indemnification . . . . . . . . . . . . . . . . . . . 22 Section 8.07 Benefits of Agreement . . . . . . . . . . . . . . . . 22 Section 8.08 Participations. . . . . . . . . . . . . . . . . . . . 22 Section 8.09 Assignments . . . . . . . . . . . . . . . . . . . . . 23 Section 8.10 Governing Law . . . . . . . . . . . . . . . . . . . . 23 Section 8.11 Counterparts. . . . . . . . . . . . . . . . . . . . . 24 Section 8.12 Waiver of Counterclaim, Etc . . . . . . . . . . . . . 24 Section 8.13 Severable Provisions. . . . . . . . . . . . . . . . . 24 Section 8.14 Right of Setoff . . . . . . . . . . . . . . . . . . . 24 TABLE OF CONTENTS (continued) Page Section 8.18 Waiver of Notice. . . . . . . . . . . . . . . . . . . 25 Section 8.19 Remedies of Borrower. . . . . . . . . . . . . . . . . 25 Section 8.20 Reserved. . . . . . . . . . . . . . . . . . . . . . . 25 Section 8.21 Application of Default Rate Not a Waiver. . . . . . . 25 Section 8.22 No Joint Venture or Partnership . . . . . . . . . . . 25 Section 8.23 Time of the Essence . . . . . . . . . . . . . . . . . 25 Section 8.24 Publicity . . . . . . . . . . . . . . . . . . . . . . 25 Section 8.25 Securitization. . . . . . . . . . . . . . . . . . . . 26 Section 8.26 Offsets, Counterclaims and Defenses . . . . . . . . . 26 Section 8.27 Headings; Construction of Documents: etc. . . . . . . 26 Section 8.28 Joint and Several . . . . . . . . . . . . . . . . . . 26 REVOLVING CREDIT AGREEMENT (this "Agreement"), dated as of March __, 1998 between SAFEGUARD CAPITAL FUND, L.P., a Delaware limited partnership, having an address at 111 Veterans Boulevard, Suite 1020, Metairie, Louisiana 70005 (the "Borrower") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a New York banking corporation, having an address at 60 Wall Street, New York, New York 10260 ("Lender"). W I T N E S S E T H: WHEREAS, in order to refinance certain self-storage facilities currently owned by Borrower and to finance future acquisitions by Borrower of additional self-storage facilities, Borrower desires to borrow from Lender, on a secured revolving credit basis, loans in an aggregate principal sum outstanding from time to time not exceeding Ninety Million Dollars ($90,000.000.00); and WHEREAS, Lender is willing to make advances (individually, an "Advance", and collectively, the "Loan") to Borrower on such basis for such purposes, subject to the terms and conditions hereof. NOW THEREFORE, in consideration of the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I. DEFINITIONS; CONSTRUCTION Section 1.01 Definitions. (a) Defined terms used herein and not otherwise defined herein shall have the meanings ascribed thereto in the Mortgages. (b) As used herein and in the Note, the following terms shall have the meanings herein specified (to be equally applicable to both the singular and plural forms of the terms defined). "Agreement" means this Revolving Credit Agreement, as amended, supplemented or modified from time to time in accordance with its terms. "Borrowing" means a borrowing under this Agreement consisting of an Advance made to Borrower by Lender pursuant to Section 2.01 of this Agreement. "Borrowing Date" with respect to a particular Borrowing shall mean the Business Day, identified by the Borrower in the related Borrowing Request, as the date on which the Borrower requests that Lender make an Advance. "Borrowing Request" means a Borrowing Request in the form of Exhibit A-1. "Closing Date" means the date hereof. "Collateral" shall mean collectively, the real property and improvements thereon secured by the Mortgages together with any additional collateral pledged to Lender in accordance with Section 5.01 hereof. "Collateral Value" means the aggregate value assigned by Lender to the Collateral as of any date of determination, which value shall be calculated in accordance with Lender's standard underwriting practices consistently applied. "Commitment" means the obligation of Lender to make Advances to Borrower pursuant to Section 2.01 in an aggregate amount not to exceed $90,000,000 at any one time outstanding. "Commitment Period" means the period commencing with the Closing Date and ending on the Expiration Date, unless otherwise extended by Lender in writing or unless otherwise terminated pursuant to the terms hereof. "Expiration Date" means April 1, 2001. "First Facility Fee" shall have the meaning set forth in Section 3.01(c) hereof. "Guarantor" means collectively Jack Chaney and Bruce C. Roch, Jr. "Initial Advance" shall mean the Advance to be made on the Closing Date in the aggregate original principal amount of $2,075,000. "Lender" shall have the meaning set forth in the preamble hereof, which term shall include, as applicable, any other office of Lender designated by it from time to time for the purpose of making or maintaining any Advances hereunder. "Lien" means any interest in property, real or personal, tangible or intangible, securing an obligation owed to, or a claim by, a Person other than the owner of such property, whether such interest is based on the common law, statute or contract, and including, but not limited to, the security interest, security title or lien arising from a security agreement, mortgage, deed of trust, deed to secure debt, encumbrance, pledge, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. The term "Lien" shall also include reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting such property. "Loan" is defined in the preamble to this Agreement. "Loan Fee" shall have the meaning set forth in Section 3.01(b) hereof. "LTV Ratio" shall have the meaning set forth in Section 5.01 hereof. "Maturity Date" means, with respect to each Advance, the Expiration Date. "Mortgage(s)" shall mean each mortgage, deed of trust or deed to secure debt encumbering a Subject Property, each substantially in the form of Exhibit B and incorporating such modifications as may be necessary, appropriate or customary in Lender's determination under the law of the State where the Subject Property is located, and as otherwise originally executed or as the same may hereafter from time to time be supplemented, amended, modified or extended by one or more indentures supplemental thereto granted by Borrower to Lender as security for the Note. "Note" means the Secured Promissory Note of even date herewith executed by Borrower and payable to Lender in the maximum principal amount of $90,000,000, together with any amendments thereto or supplements thereof. "Participant" shall have the meaning set forth in Section 8.08. "Preliminary Borrowing Request" means a request by Borrower in the form of Exhibit A-2. "Second Facility Fee" shall have the meaning set forth in Section 3.01(d) hereof. "Subject Property" means the property, real or personal, tangible or intangible, which is, or which is proposed to be, financed pursuant to the terms of this Agreement and subject to the Lien of a Mortgage. In all cases the Subject Property shall be improved with a self storage facility. ARTICLE II. AMOUNT AND TERMS OF THE LOAN Section 2.01 The Loan. (a) Lender agrees, upon the terms and subject to the conditions and in reliance upon the representations, warranties and covenants hereinafter set forth, to make the Loan in one or more Advances on a revolving credit basis, to Borrower, up to the amount of the Commitment, provided, however, that notwithstanding anything to the contrary contained herein or in any other Loan Document, in no event will Lender be obligated to re-advance more than $10,000,000 of Loan proceeds such that the aggregate principal amount of all Advances made hereunder (including such re-advances) shall in no event exceed $100,000,000 over the term of this Agreement. Borrower and Lender acknowledge and agree that on the Closing Date the Initial Advance in the aggregate principal amount of $2,075,000 will be made to Borrower subject to the satisfaction of all applicable terms and conditions hereinafter set forth. (b) Each Advance shall be in an aggregate amount of not less than One Million Dollars ($1,000,000.00), and in integral multiples of Fifty Thousand Dollars ($50,000.00); provided, however, that the aggregate amount of Advances at any time outstanding (after giving effect to such Advance) shall not exceed the lesser of (x) the amount of the Commitment or (y) 75% of the Collateral Value. (c) In connection with each Advance to be made hereunder: (i) Borrower shall deliver a Preliminary Borrowing Request to Lender, accompanied by each of the instruments, documents and agreements set forth on Schedule I, together with such other information as Lender may reasonably request, and with respect to items 9 through 13 of said Schedule I, performed by Persons previously approved by Lender, as set forth on Schedule II hereof, and engaged by Lender at the sole cost and expense of Borrower, except to the extent that any such instrument, document or agreement has been previously delivered to Lender; (ii) Lender shall approve, which approval may be granted or denied in Lender's sole and absolute discretion, or disapprove any such Preliminary Borrowing Request received by Lender from Borrower within ten (10) Business Days of the receipt thereof; and (iii) in the event that Lender approves the Advance for which the Preliminary Borrowing Request relates, such Advance shall be made subject to the terms and conditions hereof, including, without limitation, Borrower delivering a Borrowing Request not less than three (3) Business Days prior to the proposed Borrowing Date, which Borrowing Request shall be irrevocable and must be received by Lender not later than 1:00 p.m. (New York City time), unless otherwise agreed to in writing by Lender. Subject to the terms and conditions hereof, Lender shall make the amount of funds evidencing the approved Advance available by wire transfer in accordance with the instructions set forth in the applicable Borrowing Request. (d) The Loan and each of the Advances shall be evidenced by the Note, duly executed by Borrower, dated the Closing Date and payable to the order of Lender. All Advances to Borrower pursuant to this Agreement and all payments of the principal of such Advances to Lender shall be recorded by Lender on the schedule attached to the Note and by specific reference made a part thereof. The amounts of principal indicated by said schedule as outstanding or accrued and unpaid, as the case may be, shall constitute rebuttable presumptive evidence of the principal outstanding and the accrued and unpaid interest on the Loan; provided, that any failure or error on the part of Lender in recording any Advance on such schedule shall not limit the obligation of Borrower to pay all principal of and interest accruing on the Loan. Section 3.01 Fees. (a) Borrower has previously paid to Lender a non-refundable arrangement fee in the amount of $50,000.00, which fee shall be credited towards the initial payment due under Section 3.01(b). below. (b) On each Borrowing Date, Borrower shall pay to Lender a loan fee (the "Loan Fee") equal to (i) the aggregate principal amount of such Advance to be made on such Borrowing Date, multiplied by (ii) 0.75%. (c) In the event that on the first anniversary of the date of this Agreement the aggregate principal amount of Advances hereunder shall be less than $30,000,000, then, in such event, Borrower shall have the option to either (i) terminate the Commitment whereupon (x) Lender shall have no further obligation to make any Advances hereunder and (y) all outstanding amounts under the Loan shall be due and payable within thirty (30 ) days following such election or (ii) throughout the balance of the Commitment Period, pay to Lender an additional fee (the "First Facility Fee") on a monthly basis, in the same manner and times as interest is payable under the Note, commencing with the first interest payment following the first anniversary of this Agreement, in an amount equal to the product of (x) .25% per annum multiplied by (y) the excess of $90,000,000 over the aggregate outstanding principal balance of the Loan as of the date of determination, provided, however, that in the event that the aggregate principal amount of Advances hereunder exceeds $45,000,000 as of the eighteen month anniversary of the date of this Agreement, Borrower shall no longer be obligated to pay the First Facility Fee commencing with the next monthly payment. (d) In the event that on the first anniversary of the date of this Agreement the aggregate principal amount of Advances hereunder was equal to or in excess of $30,000,000 but on the eighteen month anniversary of the date of this Agreement the aggregate principal amount of Advances hereunder shall be less than $45,000,000, then, in such event, Borrower shall have the option to either (i) terminate the Commitment whereupon (x) Lender shall have no further obligation to make any Advances hereunder and (y) all outstanding amounts under the Loan shall be due and payable within thirty (30) days of such election or (ii) throughout the balance of the Commitment Period, pay to Lender an additional fee (the "Second Facility Fee") on a monthly basis, in the same manner and times as interest is payable under the Note, commencing with the first interest payment following the eighteen month anniversary of this Agreement, in an amount equal to the product of (x) .25% per annum multiplied by (y) the excess of $90,000,000 over the aggregate outstanding principal balance of the Loan as of the date of determination. (e) In the event that Borrower is obligated to elect an option under either paragraph (c) or (d) above, Borrower shall notify Lender of its election within ten (10) Business Days following receipt of notice from Lender that an election is required. In the event that Lender does not receive Borrower's election in a timely manner, Borrower shall be deemed to have elected to pay the First Facility Fee or the Second Facility Fee, as the case may be. (f) All fees paid under this Section 3.01 shall be non-refundable. Each payment thereof and any other charges or amounts payable under this Agreement shall be paid by Borrower in accordance with Section 2.2 of the Note. ARTICLE IV. CONDITIONS PRECEDENT Section 4.01 Conditions Precedent to Closing. On the Closing Date, in addition to the other documents and instruments required by this Agreement, Borrower shall deliver the following documents to Lender, all of which shall be satisfactory in form and substance to Lender in its sole and absolute discretion: (a) Corporate Action. Certified copies of (i) the certificate and agreement of partnership of Borrower and the certificate of formation and operating agreement of General Partner, and (ii) all partnership, corporate and company action, as applicable, taken by Borrower and General Partner approving the Loan and the Loan Documents (including, without limitation, a certificate setting forth the resolutions of the members of General Partner, both in its individual capacity and as general partner of Borrower, adopted in respect of the transactions contemplated thereby). (b) Incumbency. A certificate of General Partner's officers or members stating (i) the Persons authorized to sign the Loan Documents on behalf of Borrower and General Partner, and (ii) who will, until replaced by another officer or officers or manager duly authorized for that purpose, act on behalf of Borrower and General Partner for the purposes of signing documents and giving notices and other communications in connection with the Loan Documents and the transactions contemplated thereby (and Lender may conclusively rely on such certificate until it receives notice in writing from Borrower and General Partner, signed by any of such officers or members, to the contrary). (c) Officer's Certificate. The conditions set forth in paragraphs (a), (d) and (e) of Section 4.02 hereof shall be satisfied on and as of the Closing Date and Lender shall have received a certificate of Borrower certifying that such conditions have been satisfied. (d) Opinion of Counsel. An opinion of counsel to Borrower and General Partner in form and substance satisfactory to Lender, including, without limitation a substantive non-consolidation opinion in a form approved by Lender to be delivered in connection with the initial Borrowing. (e) Loan Documents. This Agreement, the Note and each of the other Loan Documents shall have been duly executed and delivered by the parties thereto. (f) Perfection of Security Interests. Evidence that all actions necessary or, in the opinion of Lender, desirable to perfect and protect the Liens and security interests created by the Loan Documents have been taken. (g) Fees and Expenses. Evidence (including, without limitation, payment instructions given by Borrower) that all fees and expenses payable to Lender, including without limitation, the fees and expenses referred to in each of Section 3.01 and Section 8.05, to the extent then due and payable, have been paid in full. (h) Other Documents. Such other documents relating to the transactions contemplated hereby as Lender may reasonably request. Section 4.02 Conditions Precedent to Advances. The obligation of Lender to make any Advance to Borrower upon the occasion of any proposed Borrowing hereunder is subject, in addition to the continued satisfaction of the conditions in Section 4.01 hereof, to the fulfillment of the following conditions, which, unless otherwise expressly stated below, shall be satisfied both immediately prior and after giving effect to such Borrowing and the application of the proceeds therefrom: (a) Borrowing Request. A Borrowing Request and Preliminary Borrowing Request, each executed and delivered on behalf of Borrower by a duly authorized officer thereof, shall have each been delivered to Lender and Lender shall have, in its sole and absolute discretion, approved the Advance requested in the Preliminary Borrowing Request and Borrowing Request. (b) Due Diligence and Loan Documents. Lender shall have completed its due diligence and underwriting of the proposed Advance and Subject Property, all of which shall be satisfactory in form and substance to Lender in its sole and absolute discretion. Lender shall have received, not less than fifteen (15) Business Days prior to the date of the proposed Borrowing (or, if a later delivery date is expressly set forth below, on or prior to such later date), each of the following documents, instruments and agreements, each of which shall be satisfactory in form and substance to Lender in its reasonable discretion: (i) Title Insurance. On the date of the applicable Borrowing, policies of title insurance on forms of, and issued by, one or more title insurance companies satisfactory to Lender in its sole and absolute discretion (the "Title Companies"), showing fee simple title vested in the Borrower with respect to, or, if applicable, showing the Borrower's interest as a tenant under a ground lease of, the applicable Subject Property and insuring the first priority of the Liens created under the Mortgage thereon in an amount satisfactory to Lender in its sole and absolute discretion, subject only to such Liens as are acceptable to Lender, together with, as may be required by Lender, such reinsurance schedules, endorsements and agreements in respect of all then existing title insurance policies for such properties and the other Subject Properties in amounts and otherwise in form and substance satisfactory to Lender and executed by the Title Companies. Such policies shall also contain such endorsements and affirmative insurance provisions as Lender may reasonably require, subject to availability in the particular jurisdiction. In addition, Borrower shall have paid to the Title Companies (and shall have delivered to Lender evidence of such payment) all expenses of the Title Companies in connection with the issuance of such policies, reinsurance schedules, endorsements and agreements and an amount equal to the recording and stamp taxes (including, without limitation, mortgage recording taxes) payable in connection with recording the Mortgages in the appropriate county land offices. (ii) Searches. Not less than three (3) Business Days prior to the proposed Borrowing, copies of the UCC filing searches, tax lien searches, judgment searches and real estate tax searches and, where available, municipal department searches setting forth any and all building violations (if available) in each county where the applicable Subject Property is located (and in the case of UCC filing searches, in the office of the Secretary of State or other applicable State office of the State where such Subject Property is located), demonstrating as of a recent date the existence of no other financing statements (other than those to be released concurrently with the subject Advance), tax liens, judgments, building violations or delinquent real estate taxes, together with evidence that all fees payable in connection with any such searches have been paid. (iii) Survey. A survey of the applicable Subject Property, prepared by a land surveyor licensed or registered in the State in which such Subject Property is located and otherwise satisfactory to Lender, in compliance with the minimum standard detail requirements for land title surveys adopted by the American Land Title Association and American Congress on Surveying and Mapping, and certified to Lender, Borrower, the Title Companies and any other parties requested by Lender, as of a date not more than two months prior to the date of the Borrowing. (iv) Ground Leases. Certified copies of all ground leases affecting the applicable Subject Property, including all amendments and modifications thereto, and a ground lessor estoppel and consent satisfactory, in form and substance, to Lender. (v) Material Contractual Obligations. Not less than five (5) Business Days prior to the proposed Borrowing, certified copies of all documents, instruments or agreements constituting material Contractual Obligations relating to the applicable Subject Property, together with a certificate signed by Borrower stating that such documents, instruments and agreements reflect, to the best of its knowledge, the only material Contractual Obligations relating to such property. (vi) Counsel Opinions. Such legal opinions (including an opinion of local counsel in the State in which such Subject Property is located) with respect to such matters as Lender shall request and otherwise in form and substance satisfactory to the Lender. (vii) Rent Roll. Not less than five (5) Business Days prior to the proposed Borrowing, a rent roll for the applicable Subject Property, together with a certificate signed by Borrower stating that to the best of its knowledge such rent roll is true, complete and correct and contains the aforesaid information required by such Mortgage. (viii) Leases. At Lender's option, copies of all leases for the applicable Subject Property, together with a certificate signed by Borrower to the effect that to the best of its knowledge each such copy is true, complete and correct. (ix) Management Agreement. A management agreement for the applicable Subject Property in form and substance acceptable to Lender in its sole and absolute discretion. (x) Zoning Compliance, Etc. Not less than five (5) Business Days prior to the proposed Borrowing, evidence satisfactory to Lender of the type customarily delivered in the jurisdiction in which the Subject Property is located for commercial loan facilities that all improvements have been constructed and are being used and operated in compliance with (A) all applicable zoning, subdivision, environmental and other laws, orders, rules, regulations and requirements relating to the use and occupancy of the Subject Properties and (B) all building permits issued in respect of the Subject Properties and (if available) a copy of all certificates of occupancy for each such property to the extent available to the Borrower. (xi) Contract of Sale. Copies of the contracts of sale executed in connection with the purchase of the applicable Subject Property. (xii) Title Updates. Borrower shall have provided Lender with a Revolving Credit Endorsement, if available, with respect to each Title Policy. In any jurisdiction in which a Revolving Credit Endorsement is unavailable or the Revolving Credit Endorsement takes exception to mechanics' liens or other liens or encumbrances not approved by Lender, Borrower will provide a title update or title report for the applicable Subject Properties before the date of each Borrowing reflecting that there are no mechanics' liens or other liens or encumbrances upon the applicable Subject Properties which have not been approved by Lender. In the event such title update or title report discloses mechanics' liens or other liens or encumbrances not approved by Lender, and, without waiving any of Lender's rights hereunder or under any other Loan Documents on account of the existence of such liens or other encumbrances, the obligation of Lender to make any Advance to Borrower is subject to the condition that such mechanics' liens or other liens or encumbrances be cured, deleted of record or remedied to Lender's reasonable satisfaction. (xiii) Perfection of Security Interests. Evidence that all actions necessary or, in the opinion of Lender, desirable to perfect and protect the Liens created by the Loan Documents have been taken, including, without limitation, evidence that the Mortgage on the applicable Subject Property has been duly filed and recorded in the appropriate governmental offices and that the related UCC financing statements have been duly filed in the appropriate governmental offices. (xiv) Fees and Expenses. Evidence (including, without limitation, payment instructions given by Borrower) that all fees and expenses payable to Lender, including, without limitation, the fees and expenses referred to in Section 3.01 and Section 8.05 hereof, to the extent then due and payable, have been paid in full. (xv) Other Documents. Such other documents relating to the transactions contemplated hereby as Lender may reasonably request, including, without limitation, an assignment of leases and rents in substantially the form of Exhibit C attached hereto and a reaffirmation of guaranty executed by the Guarantor in substantially the form of Exhibit D attached hereto. (c) Loan Documents. On or before the date of each Borrowing, the Mortgages shall constitute valid first mortgage liens on the fee simple title to, or, if applicable, on the relevant Borrower's interest as a tenant under a ground lease of, the Subject Properties and which shall secure all of the Debt, subject only to such defects, Liens, encumbrances, assessments, security interests, restrictions, easements and other title exceptions as shall be acceptable to Lender or permitted by the express terms of the relevant Mortgage; and UCC-1 financing statements covering fixtures owned by the relevant Borrower and affixed to, or used in connection with each such property, in each case appropriately completed and duly executed and delivered to Lender for filing in the appropriate county and State offices shall have been filed to perfect Lender's Lien in the collateral described therein. Each of the Mortgages shall be cross-collateralized and cross- defaulted with the other Mortgages. In the event that the State in which the Subject Property is located does not impose a mortgage recording tax, then the Mortgage encumbering such Subject Property will be in the face amount of $90,000,000. In the event, however, that any such State imposes a mortgage recording tax, the face amount of the applicable Mortgage shall be limited to 100% of the appraised value of the Subject Property as determined by Lender. (d) Default. No Event of Default or Default shall have occurred and be continuing and no Default will occur as the result of the consummation of any of the transactions contemplated by the Loan Documents. (e) Representations. The representations and warranties of Borrower and Guarantor included and incorporated by reference in this Agreement and each of the other Loan Documents shall be true, correct and complete on and as of the date of such Borrowing (or, for purposes of Section 4.01(c), on and as of the Closing Date) with the same force and effect as if made on and as of such date. On the date of funding of each subsequent Advance, the Borrower shall execute a certification to Lender stating that all representations and warranties made by the Borrower in this Agreement remain true and correct as they relate to the Borrower and the Subject Properties which were the subject of prior Advances and are true and correct with respect to the applicable new Subject Property. (f) Material Adverse Effect. Since the date of the most recent financial statements of Borrower or Guarantor delivered to Lender, nothing shall have occurred which would or could have a Material Adverse Effect on Borrower or Guarantor. (g) Recording Taxes. Borrower shall have paid all mortgage recording taxes payable (if any) in each jurisdiction in which the applicable Subject Property is located and shall have delivered to Lender any and all supplemental or additional mortgages, in form and substance satisfactory to Lender, as may be required by Lender. Without limiting the generality of the foregoing, and notwithstanding anything to the contrary contained in any Loan Document, Borrower acknowledges and agree that to the extent there is a payment of principal of the Loan which results in the aggregate outstanding principal amount of the Loan being less than the aggregate maximum principal amount of the Loan secured by any Jurisdictional Capped Mortgage(s) (whether or not such aggregate outstanding principal amount of the Loan was originally less than the aggregate maximum principal amount of the Loan secured by such Jurisdictional Capped Mortgage(s) prior to such payment), then (A) Borrower may thereafter be required to pay additional mortgage recording taxes in connection with any future Borrowing pursuant to this Agreement so that the Jurisdictional Capped Mortgages in existence at or prior to such Borrowing will secure, in accordance with applicable law, the amount of such Borrowing up to the aggregate maximum original principal amount secured by such Jurisdictional Capped Mortgage(s), and (B) if and to the extent that Lender determines in good faith that any such additional mortgage recording taxes are so due and payable in connection with any such future Borrowing and unless Borrower shall have presented to Lender evidence, satisfactory to Lender, that any such additional mortgage recording taxes are not so due and payable, Borrower shall pay such additional mortgage recording taxes to the appropriate governmental taxing authorities, and shall duly execute and deliver to Lender any and all supplemental or additional mortgages and consolidation agreements, as may be required by Lender in connection therewith. As used herein, "Jurisdictional Capped Mortgages" shall collectively mean, for each State, all of the Mortgage(s) now or hereafter covering Subject Properties located in such State which secure a maximum original principal amount of indebtedness which is less than the Commitment, whether for the purpose of limiting the debt secured by such Mortgages and any mortgage recording taxes payable in connection therewith or otherwise with approval of Lender; and the "aggregate maximum principal amount of the Loan secured by any such Jurisdictional Capped Mortgage(s)" shall mean, at any time, the aggregate maximum original principal amount of indebtedness secured by all of the Mortgages covering Subject Properties in such State at such time, as specified in such Mortgages. (h) Loan Amount. The aggregate amount of all Advances then outstanding, prior to and after giving effect to the making of the Advance on the Borrowing Date, does not exceed the lesser of (i) the amount of the Commitment or (ii) 75% of the Collateral Value. Each Borrowing Request hereunder shall be deemed to constitute a certification by Borrower to the effect set forth in the above clauses of this Section 4.02 (as of the date of such notice and, unless Borrower otherwise notifies Lender prior to the date of such Borrowing, as of the date of such Borrowing, both immediately prior to and after giving effect to such Borrowing and the application of proceeds therefrom). ARTICLE V COLLATERAL VALUE AND RELEASES OF COLLATERAL Section 5.01 Determinations of Collateral Value by Lender. Lender shall have the right at any time to recalculate the Collateral Value. In the event that Lender determines at any time, whether pursuant to this Section 5.01 or 5.02 below, that the ratio of the aggregate outstanding principal balances of the Loan to the then current Collateral Value (the "LTV Ratio") exceeds seventy-five percent (75%), Borrower shall, within thirty (30) days following Lender's demand therefor, either (a) pay down the principal balance of the Loan in an amount necessary to reduce the LTV Ratio to seventy-five percent (75%) or (b) deliver to Lender such additional collateral in form, type and amount satisfactory to Lender in its sole and absolute discretion, which additional collateral shall be subject to a first lien security interest in favor of Lender, such that the LTV Ratio, after giving effect to Lender's determination of the value of such collateral, is reduced to seventy-five percent (75%). In the event that Borrower elects to deliver additional collateral, Borrower shall also deliver such additional materials and assurances with respect thereto as Lender may request based upon the nature of the collateral. Upon Lender's receipt of a first lien security interest in such additional approved collateral, such additional collateral shall, so long as Lender continues to hold a first lien security interest therein, be included in all future calculations of Collateral Value. Section 5.02 Recalculations of Collateral Value at Borrower's Request. (a) Borrower shall have the right to request that Lender recalculate the Collateral Value once in each calendar quarter during the term of this Agreement. In the event the recalculated Collateral Value results in an LTV Ratio in excess of seventy-five percent (75%), Borrower shall prepay the Loan or deliver additional collateral to Lender in accordance with the requirements set forth in Section 5.01 above. In the event that the recalculated Collateral Value results in an LTV Ratio of less than seventy-five percent (75%), Borrower shall have the right, subject to the satisfaction of all applicable conditions set forth herein, to receive additional Advances hereunder until the LTV Ratio reaches seventy-five percent (75%), but in no event shall the aggregate outstanding balance at any time exceed $90,000,000. (b) Notwithstanding anything to the contrary contained in this Article or Article IV above, subject to the satisfaction of all applicable conditions thereto set forth in Article IV above as modified below, in the event Borrower elects and is entitled to receive an Advance following the recalculation of the Collateral Value without delivering additional Collateral to Lender: (i) In lieu of new Loan Documents as contemplated by Section 4.02(c) above, Lender shall have received, with respect to those Subject Properties for which the Mortgage amount is limited to 100% of the appraised value thereof, amendments to or supplements of such Mortgages (and the related Assignments), satisfactory in form and substance to Lender, which the Lender reasonably determines to be necessary to maintain the same level of security on a cross- collateralized basis with respect to the applicable Subject Properties as existed immediately prior to such Advance; and (ii) In lieu of a new Title Policy, Lender shall have received such endorsements to the Title Policies for all Subject Properties, satisfactory in form and substance to Lender, increasing the amount of insurance for each Subject Property by (x) the applicable amount of the increase to or supplement of the applicable original Mortgage as contemplated in clause (i) above with respect to Subject Properties with respect to which the amount of the Mortgage was originally 100% of the appraised value and (y) with respect to all other Subject Properties, an amount reasonably allocated thereto by Lender, and showing said Advance as having the same priority as the original Advance made with respect to the applicable Subject Properties without further exception. Section 5.03 Release of Collateral. Provided there exists no Default or Event of Default hereunder (other than a Default or Event of Default which is non-monetary in nature and relates only to the property encumbered by the Mortgage to be released), Lender shall fully release any Mortgage upon the request of the Borrower (but Lender shall not partially release any Mortgage) provided that after giving effect to such reconveyance, (a) the LTV Ratio does not exceed seventy-five percent (75%) and (b) there shall exist no Default or Event of Default. As a condition to any such release, Borrower shall remit to Lender the release price calculated by Lender as necessary to achieve a seventy-five percent (75%) LTV Ratio after giving effect to the release of the Mortgage. As additional conditions to any such release, Borrower shall pay all fees, costs and expenses, including reasonable attorneys' fees and expenses, incurred by Lender in connection with such release. In connection with a release of a particular Mortgage, Lender shall also, at Borrower's expense, release the related Assignment of Rents and UCC financing statements relating to that particular Mortgage. Section 5.04 Calculations of Collateral Value and LTV Ratio. All calculations of Collateral Value and LTV Ratio shall be made by Lender in accordance with its customary underwriting standards consistently applied and shall be deemed binding and conclusive upon Borrower. ARTICLE VI. REPRESENTATIONS, WARRANTIES AND COVENANTS Section 6.01 Representations and Warranties. In order to induce Lender to enter into this Agreement and to make the Advances of the Loan hereunder, Borrower hereby represents and warrants to Lender as of the date hereof or such other date as is set forth below: (a) Organization and Authority. Borrower (i) is a limited liability company, general partnership, limited partnership or corporation, as the case may be, duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation, (ii) has all requisite power and authority and all necessary licenses and permits to carry on its business as now conducted and as presently proposed to be conducted and (iii) is duly qualified, authorized to do business and in good standing in each other jurisdiction where the conduct of its business or the nature of its activities makes such qualification necessary. If Borrower is a limited liability company, limited partnership or general partnership, each general partner or managing member, as applicable, of Borrower which is a corporation is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. (b) Power. Borrower and, if applicable, each General Partner has full power and authority to execute, deliver and perform, as applicable, the Loan Documents to which it is a party. (c) Authorization of Borrowing. The execution, delivery and performance of the Loan Documents to which Borrower is a party, are within the powers of Borrower and have been duly authorized by Borrower and, if applicable, the General Partners, by all requisite action (and Borrower hereby represents that no approval or action of any limited partner or shareholder, as applicable, of Borrower is required to authorize any of the Loan Documents to which Borrower is a party) and will constitute the legal, valid and binding obligations of Borrower, enforceable against Borrower in accordance with their terms, except as enforcement may be stayed or limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity (whether considered in proceedings at law or in equity) and will not (i) violate any provision of its partnership agreement or partnership certificate or certificate of incorporation or bylaws, or operating agreement, or articles of organization, as applicable, or, to its knowledge, any law, judgment, order, rule or regulation of any court, arbitration panel or other Governmental Authority, domestic or foreign, or other Person affecting or binding upon Borrower or the Subject Property, or (ii) violate any provision of any indenture, agreement. mortgage, contract or other instrument to which Borrower or, if applicable, any General Partner is a party or by which any of their respective properties, assets or revenues are bound, or be in conflict with, result in an acceleration of any obligation or a breach of or constitute (with notice or lapse of time or both) a default or require any payment or prepayment under, any such indenture, agreement, mortgage, contract or other instrument, or (iii) result in the creation or imposition of any lien, except those in favor of Lender as provided in the Loan Documents to which it is a party. (d) Consent Neither Borrower nor, if applicable, any General Partner, is required to obtain any consent, approval or authorization from, or to file any declaration or statement with, any Governmental Authority or other agency in connection with or as a condition to the execution, delivery or performance of this Agreement, the Note or the other Loan Documents which has not been so obtained or filed. (e) Reserved (f) Other Agreements. Borrower is not a party to nor is otherwise bound by any agreements or instruments which, individually or in the aggregate, are reasonably likely to have a Material Adverse Effect. Neither Borrower nor, if applicable, any General Partner, is in violation of its organizational documents or other restriction or any agreement or instrument by which it is bound, or any judgment, decree, writ, injunction, order or award of any arbitrator, court or Governmental Authority, or any Legal Requirement, in each case, applicable to Borrower or the Subject Property, except for such violations that would not, individually or in the aggregate, have a Material Adverse Effect. (g) Maintenance of Existence. Borrower and, if applicable, each General Partner at all times since their formation have been duly formed and existing and shall preserve and keep in full force and effect their existence as a Single Purpose Entity in accordance with the requirements of the Mortgages. (h) No Defaults. No Default or Event of Default has occurred and is continuing or would occur as a result of the consummation of the transactions contemplated by the Loan Documents. Borrower is not in default in the payment or performance of any of its Contractual Obligations in any respect. (i) Governmental Consents and Approvals. Borrower and, if applicable, each General Partner, have obtained or made all necessary (i) consents, approvals and authorizations, and registrations and filings of or with all Governmental Authorities and (ii) consents, approvals, waivers and notifications of partners, stockholders, creditors, lessors and other nongovernmental Persons, in each case, which are required to be obtained or made by Borrower or, if applicable, the General Partner, in connection with the execution and delivery of, and the performance by Borrower of its obligations under, the Loan Documents. (j) Investment Company Act Status. Borrower is not an "investment company," or a company "controlled" by an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended. (k) Compliance with Law. Borrower is and shall remain in compliance in all material respects with all Legal Requirements to which it is subject, including, without limitation, all Environmental Statutes, the Occupational Safety and Health Act of 1970, the Americans with Disabilities Act and ERISA. (l) Financial Information. The financial statements of Borrower and the General Partner that have been delivered by or on behalf of Borrower or the General Partner to Lender (i) are true, complete and correct in all material respects, (ii) fairly present the financial condition of the Borrower or the General Partner, as the case may be, as of the end of the period indicated and the results of operations for the periods indicated and (iii) have been prepared on a cash basis in accordance with sound accounting principles consistently applied (or such other accounting basis as is acceptable to Lender) throughout the periods covered. As of the date hereof, neither Borrower nor, if applicable, any General Partner, has any contingent liability, liability for taxes or other unusual or forward commitment not reflected in such financial statements delivered to Lender; since the date of the last financial statements delivered by Borrower to Lender except as otherwise disclosed in such financial statements or notes thereto, there has been no change in the assets, liabilities or financial position of Borrower nor, if applicable, any General Partner, or in the results of operations of Borrower which would have a Material Adverse Effect. Neither Borrower nor, if applicable, any General Partner, has incurred any obligation or liability, contingent or otherwise not reflected in such financial statements which would have a Material Adverse Effect. (m) Transaction Brokerage Fees. Borrower has not dealt with any financial advisors, brokers, underwriters, placement agents, agents or finders in connection with the transactions contemplated by this Agreement except for Lender and its Affiliates. All brokerage fees, commissions and other expenses payable in connection with the transactions contemplated by the Loan Documents have been paid in full contemporaneously with the execution of the Loan Documents and the funding of the Initial Advance. Borrower hereby agrees to indemnify and hold Lender harmless from and against any and all claims, liabilities, costs and expenses of any kind in any way relating to or arising from (i) a claim by any Person that such Person acted on behalf of Borrower in connection with the transactions contemplated herein or (ii) any breach of the foregoing representation. The provisions of this subsection shall survive the repayment of the Debt. (n) Federal Reserve Regulations. No part of the proceeds of any Advance will be used for the purpose of purchasing or acquiring any "margin stock" within the meaning of Regulations G, T, U or X of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with such Regulations G, T, U or X or any other Regulations of such Board of Governors, or for any purposes prohibited by Legal Requirements or by the terms and conditions of the Loan Documents. (o) Pending Litigation. There are no actions, suits or proceedings pending or, to the best knowledge of Borrower, threatened against or affecting Borrower in any court or before any Governmental Authority which if adversely determined either individually or collectively has or is reasonably likely to have a Material Adverse Effect. (p) Solvency; No Bankruptcy. Each of Borrower and, if applicable, the General Partner, (i) is and has at all times been Solvent and will remain Solvent immediately upon the consummation of the transactions contemplated by the Loan Documents and (ii) is free from bankruptcy, reorganization or arrangement proceedings or a general assignment for the benefit of creditors and is not contemplating the filing of a petition under any state or federal bankruptcy or insolvency laws or the liquidation of all or a major portion of such Person's assets or property and Borrower has no knowledge of any Person contemplating the filing of any such petition against it or, if applicable, the General Partner. None of the transactions contemplated hereby will be or have been made with an intent to hinder, delay or defraud any present or future creditors of Borrower and Borrower has received reasonably equivalent value in exchange for its obligations under the Loan Documents. Borrower's assets do not, and immediately upon consummation of the transaction contemplated in the Loan Documents will not, constitute unreasonably small capital to carry out its business as presently conducted or as proposed to be conducted. Borrower does not intend to, nor believe that it will, incur debts and liabilities beyond its ability to pay such debts as they may mature. (q) Use of Proceeds. The proceeds of the Loan shall be applied by Borrower to (i) satisfy certain mortgage loans presently encumbering all or a part of the applicable Subject Property or to be purchased with such proceeds, (ii) fund any reserve required by Lender in connection with a particular Advance, (iii) purchase the Subject Property, (iv) pay certain transaction costs incurred by Borrower in connection with the Loan and (v) for any other business purposes approved by Lender. No portion of the proceeds of the Loan will be used for family, personal, agricultural or household use. (r) Tax Filings. Borrower and, if applicable, each General Partner, have filed all federal, state and local tax returns required to be filed and have paid or made adequate provision for the payment of all federal, state and local taxes, charges and assessments payable by Borrower and, if applicable, the General Partners. Borrower and, if applicable, the General Partners, believe that their respective tax returns properly reflect the income and taxes of Borrower and said General Partner, if any, for the periods covered thereby, subject only to reasonable adjustments required by the Internal Revenue Service or other applicable tax authority upon audit. (s) Not Foreign Person. Borrower is not a "foreign person" within the meaning of Section 1445(f)(3) of the Code. (t) ERISA. (i) The assets of Borrower and Guarantor are not and will not become treated as "plan assets", whether by operation of law or under regulations promulgated under ERISA. Each Plan and Welfare Plan, and, to the knowledge of Borrower, each Multiemployer Plan, is in compliance in all material respects with, and has been administered in all material respects in compliance with, its terms and the applicable provisions of ERISA, the Code and any other applicable Legal Requirement, and no event or condition has occurred and is continuing as to which Borrower would be under an obligation to furnish a report to Lender under clause (ii)(A) of this subsection. Other than an application for a favorable determination letter with respect to a Plan, there are no pending issues or claims before the Internal Revenue Service, the United States Department of Labor or any court of competent jurisdiction related to any Plan or Welfare Plan under which Borrower, Guarantor or any ERISA Affiliate, directly or indirectly (through an indemnification agreement or otherwise), could be subject to any material risk of liability under Section 409 or 502(i) of ERISA or Section 4975 of the Code. No Welfare Plan provides or will provide benefits, including, without limitation, death or medical benefits (whether or not insured) with respect to any current or former employee of Borrower, Guarantor or any ERISA Affiliate beyond his or her retirement or other termination of service other than (A) coverage mandated by applicable law, (B) death or disability benefits that have been fully provided for by fully paid up insurance or (C) severance benefits. (ii) Borrower will furnish to Lender as soon as possible, and in any event within ten (10) days after Borrower knows or has reason to believe that any of the events or conditions specified below with respect to any Plan, Welfare Plan or Multiemployer Plan has occurred or exists, an Officer's Certificate setting forth details respecting such event or condition and the action, if any, that Borrower or its ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to PBGC (or any other relevant Governmental Authority) by Borrower or an ERISA Affiliate with respect to such event or condition, if such report or notice is required to be filed with the PBGC or any other relevant Governmental Authority: (A) any reportable event, as defined in Section 4043(b) of ERISA and the regulations issued thereunder, with respect to a Plan, as to which PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within thirty (30) days of the occurrence of such event (provided that a failure to meet the minimum funding standard of Section 412 of the Code of Section 302 of ERISA, including, without limitation, the failure to make on or before its due date a required installment under Section 412(m) of the Code of Section 302(e) of ERISA, shall be a reportable event regardless of the issuance of any waivers in accordance with Section 412(d) of the Code), and any request for a waiver under Section 412(d) of the Code for any Plan; (B) the distribution under Section 4041 of ERISA of a notice of intent to terminate any Plan or any action taken by Borrower or an ERISA Affiliate to terminate any Plan; (C) the institution by PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by Borrower or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by PBGC with respect to such Multiemployer Plan; (D) the complete or partial withdrawal from a Multiemployer Plan by Borrower or any ERISA Affiliate that results in liability under Section 4201 or 4204 of ERISA (including the obligation to satisfy secondary liability as a result of a purchaser default) or the receipt by Borrower or any ERISA Affiliate of notice from a Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated under Section 4041A of ERISA; (E) the institution of a proceeding by a fiduciary of any Multiemployer Plan against Borrower or any ERISA Affiliate to enforce Section 515 of ERISA, which proceeding is not dismissed within thirty (30) days; (F) the adoption of an amendment to any Plan that, pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the loss of tax-exempt status of the trust of which such Plan is a part if Borrower or an ERISA Affiliate fails to timely provide security to the Plan in accordance with the provisions of said Sections; or (G) the imposition of a lien or a security interest in connection with a Plan. (iii) Borrower shall not knowingly engage in or permit any transaction in connection with which Borrower, Guarantor or any ERISA Affiliate could be subject to either a civil penalty or tax assessed pursuant to Section 502(i) or 502(1) of ERISA or Section 4975 of the Code, permit any Welfare Plan to provide benefits, including without limitation, medical benefits (whether or not insured), with respect to any current or former employee of Borrower, Guarantor or any ERISA Affiliate beyond his or her retirement or other termination of service other than (A) coverage mandated by applicable law, (B) death or disability benefits that have been fully provided for by paid up insurance or otherwise or (C) severance benefits, permit the assets of Borrower or Guarantor to become "plan assets", whether by operation of law or under regulations promulgated under ERISA or adopt, amend (except as may be required by applicable law) or increase the amount of any benefit or amount payable under, or permit any ERISA Affiliate to adopt, amend (except as may be required by applicable law) or increase the amount of any benefit or amount payable under, any employee benefit plan (including, without limitation, any employee welfare benefit plan) or other plan, policy or arrangement, except for normal increases in the ordinary course of business consistent with past practice that, in the aggregate, do not result in a material increase in benefits expense to Borrower, Guarantor or any ERISA Affiliate. (u) Labor Matters. Borrower is not a party to any collective bargaining agreements. Section 6.02 Financial Reports. (a) Borrower will keep and maintain or will cause to be kept and maintained on a Fiscal Year basis, on a cash basis in accordance with sound accounting principles consistently applied (or such other accounting basis acceptable to Lender), proper and accurate books, records and accounts reflecting all of the financial affairs of Borrower. Lender shall have the right from time to time at all times during normal business hours upon reasonable notice to examine such books, records and accounts at the office of Borrower or other Person maintaining such books, records and accounts and to make such copies or extracts thereof as Lender shall desire. After the occurrence of an Event of Default, Borrower shall pay any costs and expenses incurred by Lender to examine Borrower's accounting books and records, as Lender shall determine to be necessary or appropriate in the protection of Lender's interest. (b) Borrower will furnish Lender annually, within one hundred twenty (120) days following the end of each Fiscal Year of Borrower, with a complete copy of Borrower's financial statement audited by a certified public accountant acceptable to Lender and prepared on a cash basis in accordance with sound accounting principles consistently applied (or such other accounting basis acceptable to Lender) covering all of the financial affairs of Borrower and containing a statement of revenues and expenses, a statement of assets and liabilities and a statement of Borrower's equity. Together with Borrower's annual financial statements, Borrower shall supplement the combined financial statement with information on a property by-property basis that was used in the preparation of the combined statement and shall furnish to Lender an Officer's Certificate certifying as of the date thereof (i) that the annual financial statements accurately represent the results of operation and financial condition of Borrower (or, in the case of a combined financial statement, the results of operation and financial condition of Borrower) all in accordance with sound accounting principles consistently applied, and (ii) whether to the best knowledge of the officer executing such certificate, there exists an event or circumstance which constitutes, or which upon notice or lapse of time or both would constitute, a Default under the Note or any other Loan Document executed and delivered by Borrower, and if such event or circumstance exists, the nature thereof, the period of time it has existed and the action then being taken to remedy such event or circumstance. (c) Borrower shall furnish to Lender, within twenty-five (25) days following the end of each calendar quarter, income and expense statements and an updated rent roll with respect to each of the Subject Properties, in each case certified by Borrower to be true and correct. (d) Borrower shall furnish Lender, within thirty (30) days after Lender's request therefor, with such further detailed information with respect to the financial affairs of Borrower as may be reasonably requested by Lender. Section 6.03 Litigation. Borrower will give prompt written notice to Lender of any litigation or governmental proceedings pending or threatened (in writing) against Borrower which might have a Material Adverse Effect. ARTICLE VII. EVENTS OF DEFAULT Section 7.01 Events of Default. If any Event of Default shall occur and be continuing then, and in any such event, and in addition to any other rights or remedies Lender may have hereunder, under any other Loan Documents, including, without limitation, pursuant to Section 13.02 of the Mortgages, or at law or equity, (A) if such event is an Event of Default specified in Section 13.01(i) of any of the Mortgages, the Commitment hereunder shall immediately terminate and the outstanding principal amount of the Note together with accrued and unpaid interest thereon and all other amounts owing under this Agreement and the Note shall immediately become due and payable, and (B) if such event is any other Event of Default, Lender may, by written notice of default to Borrower, terminate the Commitment hereunder and/or declare the outstanding principal amount of the Note, together with accrued and unpaid interest thereon and all other amounts owing under this Agreement and the Note to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above herein or in any of the other Loan Documents, presentment, demand, protest and all other notices of any kind are hereby expressly waived by Borrower. ARTICLE VIII. MISCELLANEOUS Section 8.01 Notices. All notices, requests and other communications to any party hereunder or under the Note shall be given in the manner and to the address of each party as set forth in Article XI of the Mortgages. Section 8.02 Performance by Lender. Should Borrower fail to perform any covenant, duty or agreement in accordance with the terms and conditions of any of the Loan Documents to which it is party and, except in the case of an emergency or any other event which could or would materially adversely affect the collateral for the Loan (in which cases no notice shall be required), such failure continues uncured for a period ten (10) days following written notice to Borrower specifying such default, Lender may (but shall be under no obligation to), at its option, perform, or attempt to perform, such covenant, duty or agreement on behalf of Borrower. In such event, the appropriate entity shall, at the request of Lender, promptly pay any amount expended by Lender in such performance or attempted performance to Lender at the office of Lender designated for receipt of payments of principal and interest on the Loan, together with interest thereon at the Default Rate from the date of such expenditure by Lender until paid. Notwithstanding the foregoing, it is expressly understood that Lender does not assume and shall never have, except by express written consent, any liability or responsibility for the performance of any duties of Borrower hereunder, or under or in connection with any of the other Loan Documents. Section 8.03 No Oral Change. The terms of this Agreement, together with the terms of the Note and the other Loan Documents constitute the entire understanding and agreement of the parties hereto and supersede all prior agreements, understandings and negotiations between Borrower and Lender with respect to the Loan. This Agreement, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act on the part of Borrower or Lender, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. Section 8.04 No Waiver: Remedies Cumulative. No failure or delay on the part of Lender in exercising any right, remedy, power or privilege hereunder or under the other Loan Documents and no course of dealing between Borrower and Lender shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege hereunder or under the other Loan Documents preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege hereunder or thereunder. The rights and remedies provided herein and in the other Loan Documents are cumulative and not exclusive of any rights or remedies provided by law. The giving of notice to or demand on Borrower, which notice or demand is not required hereunder or under the other Loan Documents, shall not entitle Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights, remedies, powers or privileges of Lender in any circumstances not requiring notice or demand. Section 8.05 Fees and Expenses. In addition to any other amounts payable by the Borrower under the terms of any of the Loan Documents, Borrower agrees to promptly pay or reimburse Lender for: (a) all reasonable expenses (including, without limitation, the fees, which shall not exceed $50,000, and the reasonable disbursements of Swidler & Berlin, Chartered and any local counsel retained by Lender) incurred in connection with the negotiation, preparation, execution and delivery of this Agreement: (b) all reasonable expenses (including, without limitation, the fees, which shall not exceed $10,000 per Advance per property, and the reasonable disbursements of Swidler & Berlin, Chartered and any local counsel retained by Lender) incurred in connection with the closing of each subsequent Advance; (c) all costs and expenses (including, without limitation, reasonable fees and disbursements of counsel) incurred in connection with any Default or Event of Default and any enforcement or collection proceedings resulting therefrom including, without limitation, in connection with any bankruptcy, insolvency, liquidation, reorganization, moratorium or other similar proceedings involving Borrower or a "workout" of the Loan, as applicable, or in connection with any seizure or sale of any Subject Property or any related or similar proceedings; (d) all Taxes, and all transfer, stamp, documentary or other similar taxes, assessments or charges levied by any governmental or revenue authority in respect of this Agreement, any other Loan Documents or any other document referred to herein or therein, and all costs, expenses, Taxes and other charges incurred in connection with any filing, registration, recording or perfection of any security interest or Lien contemplated by this Agreement, any other Loan Documents or any document referred to therein; and (e) all recording fees, registration taxes, title insurance premiums, appraisal fees, costs of surveys, fees of third-party consultants and all other fees and expenses reasonably incurred by Lender in connection with any Subject Property, all of which sums shall be paid on demand, with interest thereon at the Default Rate if not paid within five (5) days following demand therefor. Section 8.06 Indemnification. Borrower agrees to indemnify Lender (and any Participant of Lender) and their respective directors, officers, attorneys, employees and agents from, and to hold each of them harmless against, any and all losses, liabilities, claims, damages or expenses (in contract, tort or otherwise) incurred by any of them, as incurred, arising out of or by reason of any claim of any Person relating to or arising out of this Agreement or any other Loan Document or any transaction contemplated hereby or thereby or resulting from the ownership or financing of any Subject Property or any investigation or litigation or other proceedings (including any threatened investigation or litigation or other proceedings) relating to this Agreement or any other Loan Document or any actual or proposed use by Borrower of any of the proceeds of any of the Advances (including, without limitation, the reasonable fees and disbursements of counsel), but excluding any such losses, liabilities, claims, damages or expenses incurred by reason of the gross negligence or willful misconduct of any Person to be indemnified hereunder. Notwithstanding any other provision of this Agreement, the obligation of Borrower under this Section 8.06 shall survive the repayment of the Loan. Section 8.07 Benefits of Agreement. This Agreement shall be binding upon and inure to the benefit of Borrower, Lender and their respective successors and assigns, except that Borrower may not assign or transfer any of its rights or obligations under this Agreement or the Note without the prior written consent of Lender. Section 8.08 Participations. Lender may at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any portion or all of the Loan. In the event of any such grant by Lender of a participating interest to a Participant, whether or not upon notice to Borrower, Lender shall remain responsible for the performance of its obligations hereunder, and Borrower shall continue to deal solely and directly with Lender in connection with Lender's rights and obligations under this Agreement. Any agreement pursuant to which Lender may grant such a participating interest shall provide that Lender shall retain the sole right and responsibility to enforce the obligations of Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that (i) Lender will not agree to any modification, amendment or waiver of this Agreement (a) which increases or decreases the Commitment, (b) reduces the principal of or rate of interest on the Loan or fees hereunder, (c) postpones the date fixed for any payment of principal of or interest on the Loan or any fees hereunder, (d) modifies the 75% LTV Ratio requirement or (e) otherwise materially affects the rights of the Participant without the consent of the Participant and (ii) the Participant may commence servicing the Loan upon the occurrence of an Event of Default. Lender shall have the right to deliver from time to time to any Participant or prospective Participant copies of all financial and other information in the possession of Lender with respect to any Loan, the Borrower, any guarantor or any other related person or entity, all of which information may be retained by such Participant and/or prospective Participant. Section 8.09 Assignments. Lender may at any time assign to one or more banks or other institutions (each an "Assignee") all, or a proportionate part of all, of its rights and obligations under this Agreement and the Note, and such Assignee shall assume such rights and obligations, pursuant to an assignment and assumption agreement executed by such Assignee and Lender, with (and subject to) the subscribed consent of Borrower, which shall not be unreasonably withheld; provided that if an Assignee is an Affiliate of Lender, no such consent shall be required. Upon execution and delivery of such instrument and payment by such Assignee to Lender of an amount equal to the purchase price agreed between Lender and such Assignee, such Assignee shall be a party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and Lender shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this Section 8.09, Lender and Borrower shall make appropriate arrangements so that, if required, a new Note is issued to the Assignee. In addition to the foregoing, Lender may assign or transfer any of its rights or obligations hereunder and under the Note to an Affiliate or other branch of Lender. Section 8.10 Governing Law. (a) This Agreement was negotiated and executed in New York, and the proceeds of the Note delivered pursuant hereto will be disbursed from New York, which State the parties agree has a substantial relationship to the parties and to the underlying transaction embodied hereby, and in all respects, including, without limiting the generality of the foregoing, matters of construction, validity and performance. This Agreement and the obligations arising hereunder shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and performed in such State and any applicable law of the United States of America, except that at all times the provisions for the creation, perfection, and enforcement of the liens and security interests created pursuant to the Mortgages and pursuant to the other Loan Documents shall be governed by and construed according to the law of the State in which the Subject Property is located, it being understood that, to the fullest extent permitted by law of such State, the law of the State of New York shall govern the validity and the enforceability of all Loan Documents, and the Debt or obligations arising hereunder or thereunder. To the fullest extent permitted by law, Borrower hereby unconditionally and irrevocably waives any claim to assert that the law of any other jurisdiction governs this Agreement and this Agreement shall be governed by and construed in accordance with the laws of the State of New York pursuant to Section 5-1401 of the New York General Obligations Law. (b) Any legal suit, action or proceeding against Borrower or Lender arising out of or relating to this Agreement shall be instituted in any federal or state court in New York, New York, pursuant to Section 5-1402 of the New York General Obligations Law, and Borrower waives any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding, and Borrower hereby irrevocably submits to the juris- diction of any such court in any suit, action or proceeding. Borrower does hereby designate and appoint CT Corporation System, 1633 Broadway, New York, New York 10019 as its authorized agent to accept and acknowledge on its behalf service of any and all process which may be served in any such suit, action or proceeding in any federal or state court in New York, New York, and agrees that service of process upon said agent at said address and written notice of said service of Borrower mailed or delivered to Borrower in the manner provided in Section 8.01 hereof, shall be deemed in every respect effective service of process upon Borrower, in any such suit, action or proceeding in the State of New York. Borrower (i) shall give prompt notice to the Lender of any changed address of its authorized agent hereunder, (ii) may at any time and from time to time designate a substitute authorized agent with an office in New York, New York (which office shall be designated as the address for service of process), and (iii) shall promptly designate such a substitute if its authorized agent ceases to have an office in New York, New York or is dissolved without leaving a successor. Section 8. 11 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. Section 8.12 Waiver of Counterclaim, Etc. BORROWER HEREBY WAIVES THE RIGHT TO ASSERT A COUNTERCLAIM, OTHER THAN A COMPULSORY COUNTERCLAIM, IN ANY ACTION OR PROCEEDING BROUGHT AGAINST IT BY LENDER OR ITS AGENTS, AND WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER OR IN ANY COUNTERCLAIM BORROWER MAY BE PERMITTED TO ASSERT HEREUNDER OR WHICH MAY BE ASSERTED BY LENDER OR ITS AGENTS, AGAINST BORROWER, OR IN ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT OR THE DEBT. Section 8.13 Severable Provisions. If any term, covenant or condition of the Loan Documents including, without limitation, the Note or this Agreement, is held to be invalid, illegal or unenforceable in any respect, such Loan Document shall be construed without such provision. Section 8.14 Right of Setoff. In addition to any other rights now or hereafter granted under applicable law or otherwise and not by way of limitation of any such rights, upon the occurrence of an Event of Default, Borrower hereby authorizes Lender and each Affiliate of Lender at any time or from time to time, without presentment, demand, protest or other notice of other kind to Borrower or any other Person, each of which is hereby expressly waived by Borrower, to the extent permitted by applicable law, to set-off and appropriate and apply any and all deposits (general or special) in any currency and any amount owing from Lender to Borrower, to any amount owing by Borrower hereunder and under the other Loan Documents to which it is a party to Lender. Section 8.15 Confidentiality. Except as provided herein to the contrary, all correspondence from Lender to Borrower and all of the Loan Documents are confidential and may not be shown by Borrower to or discussed by Borrower with any third party (other than on a confidential basis with Borrower's legal counsel and independent public accountants and Borrower's investors) without Lender's prior written consent. Section 8.16 Exhibits Incorporated. The information set forth on the cover hereof, and the Exhibits annexed hereto, are hereby incorporated herein as a part of this Agreement with the same effect as if set forth in the body hereof. Section 8.17 Sole Discretion of Lender. Whenever Lender exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Lender, the decision of Lender to approve or disapprove or to decide that arrangements or terms are satisfactory or not satisfactory shall be in the sole discretion of Lender and shall be final and conclusive, except as may be otherwise specifically provided herein. Section 8.18 Waiver of Notice. Borrower shall not be entitled to any notices of any nature whatsoever from Lender except with respect to matters for which this Agreement specifically and expressly provides for the giving of notice by Lender to Borrower and except with respect to matters for which Borrower is not, pursuant to applicable Legal Requirements, permitted to waive the giving of notice. Section 8.19 Remedies of Borrower. In the event that a claim or adjudication is made that Lender has acted unreasonably or unreasonably delayed acting in any case where by law or under the Note, this Agreement or the other Loan Documents, it has an obligation to act reasonably or promptly, Lender shall not be liable for any monetary damages, and Borrower's remedies shall be limited to injunctive relief or declaratory judgment. Section 8.20 Reserved. Section 8.21 Application of Default Rate Not a Waiver. Application of the Default Rate shall not be deemed to constitute a waiver of any Default or Event of Default or any rights or remedies of Lender under this Agreement, any other Loan Document or applicable Legal Requirements, or a consent to any extension of time for the payment or performance of any obligation with respect to which the Default Rate may be invoked. Section 8.22 No Joint Venture or Partnership. Borrower and Lender intend that the relationship created hereunder be solely that of a borrower and a lender. Nothing herein is intended to create a joint venture, partnership, tenancy-in-common, or joint tenancy relationship between Borrower and Lender. Section 8.23 Time of the Essence. Time shall be of the essence in the performance of all obligations of Borrower hereunder. Section 8.24 Publicity. All promotional news releases, publicity or advertising by Borrower or its Affiliates through any media intended to reach the general public shall not refer to the Loan Documents or the financing evidenced by the Loan Documents, or to Lender or any of its Affiliates without the prior written approval of Lender or its Affiliates, as applicable, in each instance, such approval not to be unreasonably withheld or delayed. Lender shall be authorized to provide information relating to the Loan and matters relating thereto to rating agencies, underwriters, potential securities investors, auditors, regulatory authorities and to any Persons which may be entitled to such information by operation of law. Section 8.25 Securitization. In the event the Loan or any portion thereof are to be included as an asset of a Securitization, Borrower, without cost to Borrower (except any costs incurred by Borrower in connection with its representation by legal counsel), shall, at the request of Lender, promptly, but in any event within ten (10) Business Days of Lender's request (a) amend the Loan Documents with respect to the Loan (or the portions thereof) which are to be included in the Securitization to extend the maturity date thereof for a period to be determined by Lender in its sole discretion which shall in no event be more than two (2) additional years, (b) split the Note into two or more notes with principal balances aggregating not more than $90,000,000, (c) amend any cross-default provisions and/or cross- collateralization provisions in the Loan Documents so that the portions of the Loan which are not to be included as an asset in the Securitization shall not be cross-defaulted or cross-collateralized with the portions thereof which are to be included within such Securitization and (d) amend the Loan Documents and enter into additional Loan Documents as may be reasonably requested by Lender, provided, that no such amendments or additional documentation shall materially and adversely affect Borrower. Section 8.26 Offsets, Counterclaims and Defenses. Any assignee of this Agreement, any Mortgage, the Assignment or the Note shall take the same free and clear of all offsets, counterclaims or defenses which are unrelated to this Agreement, the Mortgages, the Assignment or the Note which Borrower may otherwise have against any assignor of this Agreement, the Mortgages, the Assignment and the Note and no such unrelated counterclaim or defense shall be interposed or asserted by Borrower in any action or proceeding brought by any such assignee upon this Agreement, the Mortgages, the Assignment or the Note and any such right to interpose or assert any such unrelated offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by Borrower. Section 8.27 Headings; Construction of Documents: etc. The table of contents, headings and captions of various paragraphs 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. Borrower acknowledges that it was represented by competent counsel in connection with the negotiation and drafting of this Agreement and the other Loan Documents and that neither this Agreement nor the other Loan Documents shall be subject to the principle of construing the meaning against the Person who drafted same. Section 8.28. Joint and Several. If Borrower consists of more than one Person or party, the obligations and liabilities of each such Person or party hereunder shall be joint and several. IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be duly executed by their respective officers thereunto duly authorized, as of the date first above written. SAFEGUARD CAPITAL FUND, L.P., a Delaware limited partnership By: Safeguard Equity Group, L.L.C., a limited liability company, Its General Partner By: Safeguard Holdings, L.L.C., a limited liability company, Its Manager By: /s/ Bruce C. Roch, Jr. -------------------------- Name: Bruce C. Roch, Jr. ------------------------ Title: Manager ------------------------ MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ Bernard J. Costello ------------------------------------ Name: Bernard J. Costello Title: Vice President By: /s/ R. Gray ------------------------------------ Name: R. Gray Title: Vice President EXHIBIT A BORROWING REQUEST From: _____________________________ To: Morgan Guaranty Trust Company of New York c/o J.P. Morgan Securities Inc., its agent 60 Wall Street, l8th Floor New York, New York 10260 1. ______________________ ("Borrower") requests a Borrowing from MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("Lender") pursuant to the Revolving Credit Agreement, dated March ___, 1998 between Borrower and Lender (as the same may be amended from time to time, the "Agreement"). Capitalized terms used herein and defined in the Agreement shall be used herein as so defined. 2. Borrowing requested: (a) Borrower hereby requests a Borrowing in the principal amount of $_________________________; and (b) Requested Borrowing Date:_________________ 199____. 3. The undersigned officer of Borrower represents and warrants to Lender: (a) no Default or Event of Default has occurred and is continuing; and (b) no change or event which has a Material Adverse Effect has occurred. 4. The representations and warranties of Borrower contained in the Agreement and those contained in each other Loan Document to which Borrower is a party remain true and correct in all material respects on and as of the date hereof with respect to the Borrower and all Subject Properties which were the subject of prior Advances and are true and correct in all material respects as of the date hereof with respect to the new Subject Property. IN WITNESS WHEREOF, Borrower has caused this request to be duly executed by its officer thereunto duly authorized, as of . ____________________________________ By: _________________________________ By: Name: Title: EXHIBIT A-2 PRELIMINARY BORROWING REQUEST From: ________________________ To: Morgan Guaranty Trust Company of New York c/o J.P. Morgan Securities Inc., its agent 60 Wall Street, l8th Floor New York, New York 10260 1. , a ("Borrower") hereby submits for your approval a preliminary request for a Borrowing from MORGAN GUARANTY TRUST COMPANY OF NEW YORK (the "Lender") pursuant to the Revolving Credit Agreement, dated as of March ___, 1998 between Borrower and Lender (as the same may be amended from time to time, the "Agreement"). Capitalized terms used herein and defined in the Agreement shall be used herein as so defined. 2. Borrowing requested: (a) Borrower hereby requests a Borrowing in the principal amount of $ ; and (b) Requested Borrowing Date: on or about , 199_. 3. The undersigned officer of Borrower represents and warrants to Lender: (a) each of the documents, instruments and agreements required to be delivered pursuant to Section 2.01(c) of the Agreement has been previously delivered to you or accompanies this request, and each such document, instrument and agreement is either the original or a true and accurate copy thereof and has not been amended, modified or terminated since the date submitted to you; (b) no Default or Event of Default has occurred and is continuing under the Agreement; and (c) no change or event which constitutes a Material Adverse Effect has occurred. 4. The representations and warranties of Borrower contained in the Agreement and those contained in each other Loan Document to which Borrower is a party remain true and correct in all material respects on and as of the date hereof with respect to the Borrower and all Subject Properties which were the subject of prior Advances and are true and correct in all material respects as of the date hereof with respect to the new Subject Property. IN WITNESS WHEREOF, Borrower has caused this request to be duly executed by its officer thereunto duly authorized, as of . BORROWER By:________________________________ Name: Title: Schedule I Document No. Item 1. Checklist of Credit File Contents 2. Loan Summary Memorandum 3. Exhibit 1 - Site Plan or Building Layout/Floor Plan 4. Exhibit 2 - Color Photographs 5. Exhibit 3 - Property Operating Statements (2 prior years), current year-to date and budget or trailing 12 - Months 6. Exhibit 4 - Rent Roll (or other evidence of leasing status) and Lender rent roll form, if applicable 7. Exhibit 5 - Capital Expenditures Schedule and Budget 8. Signed Tenant Estoppel Certificates for Major Space Leases only 9. Appraisals (2 originals and 1 copy) to be ordered by Lender 10. Environmental Site Assessment (2 originals and 1 copy) to be ordered by Lender 11. Physical Assessment Report (2 originals and 1 copy) to be ordered by Lender 12. Seismic (2 originals) to be ordered by Lender 13. Site inspection - to be ordered by Lender 14. Real Estate Tax Bills (2 years) 15. Monthly Occupancy History (2 years) 16. Tenant Delinquency Report (1 year) 17. Standard Lease Form - all properties except Hotel and Nursing Home 18. Executed Ground Lease - if applicable 19. Tenant Leases (if required by Lender) - Retail, Industrial, Office only 20. Updated Rent Roll - Multifamily and Self-Storage only 21. Termite Inspection Report - Multifamily only 22. Executed Property Management Agreement 23. All known current property code violations for the Mortgaged Property 24. All known current litigation for the Mortgaged Property 25. Property Insurance Policies and Paid Receipts 26. Certificates of Occupancy 27. Licenses and Permits 28. Evidence of Zoning 29. Major Vendor/Service Contracts and Equipment Leases - Hotel, Congregate Care and Nursing Home only 30. Letter of Rebuildability, if legal non-conforming use Schedule II APPROVED PROFESSIONAL CONSULTANTS FIRM NAME CONTACT NAME CONTACT NUMBER - --------- ------------ -------------- APPRAISERS CB Commercial Ron Neyhart (770) 851-7874 Cushman & Wakefield Bruce Kellogg (404) 853-5227 ENGINEERS AND ENVIRONMENTAL CONSULTANTS Aaron & Wright Richard Dagnall (312) 573-0327 Certified Environments Inc. Gregory F. Paulay (301) 622-7100 Eckland Consultants Bob Splain (214) 490-4010 EMG Fritzi Beale (410) 785-6200 Law Engineering Steve Taylor (214) 934-0800 Property Solutions, Inc. Tim Downes (609) 764-6000 SEISMIC CONSULTANTS Dames & Moore Craig Tillman (714) 433-2000 Eckland Consultants Sterling Ault (520) 577-0108 Project Resources Inc. Noreen L. Clindinning (619) 505-1000 EX-10.68 29 PROMISSORY NOTE Date of Note: March 28, 1998 Note Amount: $90,000,000.00 FOR VALUE RECEIVED, the undersigned, as maker (the "Maker"), hereby promises to pay to the order of MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("Payee"), on or before April 1, 2001, at its office located at 60 Wall Street, l8th Floor, New York, New York 10260 or to such other location or account as Payee shall specify to Maker from time to time, in federal or other immediately available funds in lawful money of the United States, the principal amount of NINETY MILLION AND NO/100 DOLLARS ($90,000,000.00) or, if less, the aggregate unpaid principal amount of all Advances made by Payee to the Maker pursuant to the Revolving Credit Agreement dated as of even date herewith (such agreement as it may from time to time be amended, modified or supplemented being the "Loan Agreement") between Maker and Payee, and as recorded by Payee on the schedule attached to this Note and by specific reference made a part thereof (the "Schedule"). The amounts of principal indicated by said Schedule as outstanding or accrued and unpaid, as the case may be, shall constitute rebuttable presumptive evidence of the principal outstanding and the accrued and unpaid interest on the Advances; provided, that any failure or error on the part of Payee in recording any Advance on such Schedule shall not limit the obligation of Maker to pay all principal of and interest and other amounts accruing on the Loan. Up to $10,000,000 of the principal amount evidenced hereby may be repaid and subsequently readvanced in accordance with the terms of the Loan Agreement. SECTION 1 DEFINITIONS As used herein, the following terms shall have the meanings herein specified unless the context otherwise requires. Defined terms in this Note shall include in the singular number the plural and in the plural number the singular. All capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Mortgages or the Loan Agreement. "Adjusted LIBOR" means, at any date of determination, the quotient of (i) the LIBO Rate then in effect divided by (ii) the difference between (A) 1.0, minus (B) the reserve percentage (expressed as a decimal) applicable during such Interest Accrual Period (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Accrual Period during which any such percentage shall be so applicable) under regulations issued from time to time by the Board for determining the maximum reserve requirement (including, any emergency, supplemental or other marginal reserve requirement) of Payee with respect to liabilities or assets consisting of or including "Eurocurrency liabilities" (as such term is defined in Regulation D of the Board) having a term equal to such Interest Accrual Period. "Base Rate" means, for any day the Federal Funds Rate for such day plus 2.50%. "Board" means the Board of Governors of the Federal Reserve System, and any successor thereof. "Business Day" means any a Business Day as defined in the Mortgages, and when used in the context of an Advance bearing interest at the LIBO Rate, is also a day of trading by and between banks in the London interbank market. "Capital Adequacy Rule" means any law, rule or regulation regarding capital adequacy, or any interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency. "Dollar" and the sign "$" means lawful money of the United States of America. "Federal Funds Rate" means, for any date, the rate set forth in the weekly statistical release designated as H.15(519) or any successor publication, published by the Board for such day opposite the caption "Federal Funds Effective". If on the relevant day such rate is not yet so published, the rate for such date will be the rate set forth in the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York for such date under the caption "Federal Funds Effective Rate". If on any relevant date the appropriate rate for such date is not yet published in either of the foregoing publications, the rate for such day will be the arithmetic mean (rounded upwards if necessary, to the nearest 1/l00th of one percent) of the rates for the last transaction in overnight Federal Funds arranged prior to 9:00 a.m. (New York City time) on that day by three leading brokers or dealers of Federal Funds transactions in New York City, selected by Payee. "Interest Accrual Period" means each one-month period commencing on the first day of each calendar month and ending on the last day of such calendar month; provided that, if any Borrowing is made on a day other than the first day of a calendar month, then the first Interest Accrual Period with respect to such Borrowing shall be deemed to have begun on the date of such Borrowing and shall end on the last day of the calendar month in which such Borrowing was made. Notwithstanding the foregoing, with respect to any Advance (a) if any Interest Accrual Period would otherwise commence before and end after the applicable Maturity Date, such Interest Accrual Period shall end on such Maturity Date; and (b) each Interest Accrual Period which would otherwise end on a day which is not a Business Day shall end on the next succeeding day which is a Business Day (or if such next succeeding Business Day falls in the next succeeding calendar month, such Interest Accrual Period shall end on the next preceding Business Day) and the first day of the next succeeding Interest Accrual Period shall be adjusted to fall on the last day of such preceding Interest Accrual Period. "LIBOR Lending Office" means the office of Payee located at Nassau, Bahamas or such other branch (or Affiliate) of Payee as Payee may designate as its LIBOR Lending Office. "LIBO Rate" means the rate per annum at which deposits in Dollars appear with respect to the applicable Interest Accrual Period on the Telerate Page 3750 (or any successor page), in each case as of 11:00 a.m. (London time) two Business Days prior to the beginning of such Interest Accrual Period, or if such rate is not available, then the average (rounded upwards, if necessary, to the nearest 1/16 of 1%) of the rates quoted to Payee in the London Interbank market at or about 11:00 a.m. (London time) two Business Days prior to the first day of the applicable Interest Accrual Period for the offering to Payee of Dollar deposits for such Interest Accrual Period in an amount approximately equal to the aggregate amount of all Advances to be outstanding on the first day of such Interest Accrual Period and with a maturity equal to such Interest Accrual Period. "Maturity Date" shall mean April 1, 2001. "Mortgages" shall mean collectively any mortgages, deeds to secure debt, deeds of trust or other similar security instruments now or hereafter delivered to Payee pursuant to the terms of the Loan Agreement as security for this Note and the Loan Agreement. "Parent" means, with respect to Payee, any Person controlling Payee. SECTION 2 INTEREST, PAYMENTS, ETC. Section 2.1 Interest. 2.1.1 Maker shall pay interest (computed on the basis of the actual number of days elapsed in a year of 360 days) on the outstanding principal amount of each Advance from the date of the making of such Advance until the principal amount thereof shall be paid in full, at a rate per annum equal to Adjusted LIBOR, plus two and 50/100 percent (2.50%). 2.1.2 Except as otherwise provided in Section 2.1.3., interest on all Advances shall be payable monthly in arrears on (i) the first day of the next succeeding Interest Accrual Period for such Loan, (ii) upon repayment of any Advance or any portion thereof (whether scheduled or otherwise), and (iii) on the Maturity Date. 2.1.3 If Maker shall default in the payment of the principal of or interest on the Loan or any fee, charge or other amount due and payable hereunder or under any of the other Loan Documents beyond any applicable notice or grace period, Maker shall on demand pay interest on such overdue principal amount and, to the extent permitted by applicable law, on such overdue interest and any other overdue amount, at the Default Rate, accruing from the date such payment was due until such amount is paid in full (after as well as before judgment). 2.1.4 Payee shall determine the LIBO Rate, Base Rate, and Federal Funds Rate as in effect from time to time, and each such determination of the LIBO Rate, Base Rate and Federal Funds Rate shall be conclusive and binding absent manifest error. Section 2.2 Payments. 2.2.1 Maker shall repay the unpaid principal amount of the Loan on the Maturity Date. 2.2.2 Any prepayment of any Advance shall be governed by Section 15.01 of the Mortgages and Article V of the Loan Agreement. In addition thereto, any such prepayment of any Advance permitted by Payee hereunder shall be accompanied by the payment of any costs, loss or expenses incurred by Payee in connection with such prepayment as provided in Section 2.4. Any amounts so prepaid may (a), to the extent of $10,000,000, be reborrowed by Maker on or prior to the Expiration Date in accordance with the terms and conditions of the Loan Agreement and (b) be applied in such order of priority as Payee shall determine in its sole discretion. Section 2.3 Funds; Manner of Payment; Taxes. 2.3.1 Each payment of principal of and interest on the Loan, and each payment on account of any other fees, charges or other amounts payable under this Note or under any of the other Loan Documents shall be paid by Maker, without set-off or counterclaim, by wire transfer to Payee at its office set forth in the preamble hereof or to such other location or account as Payee may specify to Maker from time to time, in Federal or other immediately available funds in lawful money of the United States of America, not later than 12:00 Noon, New York City time, on the date on which any such payment is payable. If any payment hereunder or under any of the other Loan Documents becomes due and payable on a day (the "Due Date") other than a Business Day, such payment shall not be payable until the next succeeding Business Day, provided, however, if such next succeeding Business Day falls within the next calendar month, such payment shall be due and payable on the immediately preceding Business Day. If the date for any payments of principal is extended on account of the foregoing or on account of operation of law or otherwise, interest thereon shall be payable at the then applicable rate during such extension. 2.3.2 All payments made by Maker under this Note and any of the Loan Documents shall be made free and clear of, and without reduction for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding income and franchise taxes of the United States of America or any political subdivision or taxing authority thereof or therein (such non-excluded taxes being called "Additional Taxes"). If any Additional Taxes are required to be withheld from any amounts payable to Payee hereunder or under any of the other Loan Documents, the amounts so payable to Payee shall be increased to the extent necessary to yield to Payee (after payment of all Additional Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Note. Section 2.4 Indemnity. Maker agrees to indemnify Payee and to hold it harmless from any cost, loss or expense which Payee may sustain or incur as a consequence of (a) Maker making a payment or prepayment of principal on any Loan on a day which is not the first day of an Interest Accrual Period with respect thereto, (b) any failure by Maker to borrow an Advance hereunder after a Borrowing Request has been given pursuant to this Note, (c) default by Maker in making any prepayment after Maker has given a notice of prepayment, and (d) any acceleration of the maturity of the Loan by Payee in accordance with the terms of this Note, including, but not limited to, any such reasonable cost, loss or expense arising in liquidating the Loan and from interest or fees payable by Payee to lenders of funds obtained by it in order to maintain the Loan hereunder. Section 2.5 Increased Cost and Reduced Return. 2.5.1 If, on or after the date hereof, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by Payee (or its LIBOR Lending Office) with any request or directive (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board (but excluding with respect to any such requirement reflected in the then effective LIBO Rate)), special deposit, insurance assessment or similar requirement against assets of, deposits with or for the account of, or credit extended by, Payee (or its LIBOR Lending Office) or shall impose on Payee (or its LIBOR Lending Office) or on the London interbank market any other condition affecting any Advance bearing interest at the LIBO Rate, and the result of any of the foregoing is to increase the cost to Payee (or its LIBOR Lending Office) of making or maintaining any Advance at the LIBO Rate, or to reduce the amount of any sum received or receivable by Payee (or its LIBOR Lending Office) under this Note, by an amount deemed by Payee to be material, then, within sixty (60) days after demand by Payee, Maker shall pay to Payee such additional amount or amounts as will compensate Payee for such increased cost or reduction. 2.5.2 If Payee shall have determined that, after the date hereof, the adoption of any Capital Adequacy Rule has or would have the effect of reducing the rate of return on capital of Payee (or its Parent) as a consequence of Payee's obligations hereunder to a level below that which Payee (or its Parent) could have achieved but for such adoption (taking into consideration its policies with respect to capital adequacy) by an amount deemed by Payee to be material, then from time to time, within fifteen (15) days after demand by Payee, Maker shall pay to Payee such additional amount or amounts as will compensate Payee (or its Parent) for such reduction. 2.5.3 Payee will promptly notify Maker of any event of which it has knowledge, occurring after the date hereof, which will entitle Payee to compensation pursuant to this Section 2.5 and will designate a different LIBOR Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the reasonable judgment of Payee, be otherwise disadvantageous to Payee. A certificate of Payee claiming compensation under either Section 2.5.1 or 2.5.2 and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error; provided that any certificate delivered by Payee pursuant to this Section 2.5.3 shall (i) in the case of a certificate in respect of amounts payable pursuant to Section 2.5.1, set forth in reasonable detail the basis for and the calculation of such amounts, and (ii) in the case of a certificate in respect of amounts payable pursuant to Section 2.5.2, (A) set forth at least the same amount of detail in respect of the calculation of such amount as Payee provides in similar circumstances to other similarly situated borrowers from Payee, and (B) include a statement by Payee that it has allocated to the Commitment or outstanding Loan a proportionately equal amount of any reduction of the rate of return on Payee's capital due to a Capital Adequacy Rule as it has allocated to each of its other commitments to lend or to each of its other outstanding loans that are affected similarly by such Capital Adequacy Rule. Section 2.6 Deposits Unavailable. In the event, and on each occasion, that (i) Payee shall have reasonably determined that dollar deposits in the principal amounts of the Loan are not generally available to Payee in the London interbank market, for such periods and amounts then outstanding hereunder or that reasonable means do not exist for ascertaining the LIBO Rate, or (ii) Payee reasonably determines that the rate at which such dollar deposits are being offered will not adequately and fairly reflect the cost to Payee of making or maintaining the Loan at the LIBO Rate during such month, Payee shall, as soon as practicable thereafter, give written notice of such determination to Maker. In the event of any such determination, until the circumstances giving rise to such notice no longer exist, the Loan shall bear interest at the Base Rate. After an Event of Default, interest shall accrue on the outstanding principal balance of this Note at a rate per annum equal to the Default Rate. Section 2.7 Illegality. If, on or after the date of this Note, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by Payee (or its LIBOR Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for Payee (or its LIBOR Lending Office) to make, maintain or fund the Loan or any portion thereof at the LIBO Rate, Payee shall forthwith give notice thereof to Maker, whereupon until Payee notifies Maker that the circumstances giving rise to such suspension no longer exist, the obligation of Payee to make Advances at the LIBO Rate shall be suspended. Before giving any notice to Maker pursuant to this Section 2.7, Payee shall designate a different LIBOR Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of Payee, be otherwise disadvantageous to Payee. If Payee shall reasonably determine that it may not lawfully continue to maintain and fund any outstanding Advance at the LIBO Rate to maturity and shall so specify in such notice, Maker shall immediately prepay in full the then outstanding principal amount of each such Advance, together with accrued interest thereon. Concurrently with prepaying each such Advance, Maker shall borrow an Advance which shall accrue interest at the Base Rate in an equal principal amount from Payee for an Interest Accrual Period coincident with the remaining term of the Interest Accrual Period applicable to such Advance repaid, and Payee shall make such an Advance accruing interest at the Base Rate. SECTION 3 DEFAULTS Section 3.1. Events of Default. This Note is secured by, among other things, the Mortgages which specify various Events of Default, upon the happening of which all or portions of the sums owing under this Note may be declared immediately due and payable as more specifically provided therein. Any Event of Default under any Mortgage or any one or more of the other Loan Documents shall be an Event of Default hereunder. To the extent that Maker makes a payment or Payee receives any payment or proceeds for Maker's benefit, which are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver, custodian or any other party under any bankruptcy law, common law or equitable cause, then, to such extent, the obligations of Maker hereunder intended to be satisfied shall be revived and continue as if such payment or proceeds had not been received by Payee. Section 3.2. Remedies. If an Event of Default shall occur hereunder or under any other Loan Document, in addition to all other remedies available to Payee under the Mortgages, the other Loan Documents at law or in equity, interest on the Principal Amount and, to the extent permitted by applicable law, all accrued but unpaid interest on the Principal Amount shall, commencing on the date of the occurrence of such Event of Default, at the option of Payee, immediately and without notice to Maker, accrue interest at the Default Rate until such Event of Default is cured. The foregoing provision shall not be construed as a waiver by Payee of its right to pursue any other remedies available to it under the Mortgages, or any other instrument evidencing or securing the Loan, nor shall it be construed to limit in any way the application of the Default Rate. If there is more than one Maker of this Note, the undersigned parties shall each be jointly and severally liable to pay the entire Loan Amount and all other sums becoming due hereunder or under the other Loan Documents. SECTION 4 MISCELLANEOUS Section 4.1. Further Assurances. Maker shall execute and acknowledge (or cause to be executed and acknowledged) and deliver to Payee all documents, and take all actions, reasonably required by Payee from time to time to confirm the rights created or now or hereafter intended to be created under this Note and the other Loan Documents, to protect and further the validity, priority and enforceability of this Note and the other Loan Documents, to subject to the Loan Documents any property of Maker intended by the terms of any one or more of the Loan Documents to be encumbered by the Loan Documents, or otherwise carry out the purposes of the Loan Documents and the transactions contemplated thereunder; provided, however, that no such further actions, assurances and confirmations shall increase Maker's obligations under this Note. Section 4.2. Modification, Waiver in Writing. No modification, amendment, extension, discharge, termination or waiver (a "Modification") of any provision of this Note, the Mortgages or any one or more of the other Loan Documents, nor consent to any departure by Maker therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to, or demand on, Maker shall entitle Maker to any other or future notice or demand in the same, similar or other circumstances. Payee does not hereby agree to, nor does Payee hereby commit itself to, enter into any Modification. However, in the event Payee does ever agree to a Modification, such Modification shall only be upon the terms and conditions set forth in the Mortgages. Section 4.3. Costs of Collection. Maker agrees to pay all costs and expenses of collection incurred by Payee, in addition to principal, interest and late or delinquency charges (including, without limitation, reasonable attorneys' fees and disbursements) and including all costs and expenses incurred in connection with the pursuit by Payee of any of its rights or remedies referred to in Section 3 hereof or its rights or remedies referred to in any of the Loan Documents or the protection of or realization of collateral or in connection with any of Payee's collection efforts, whether or not suit on this Note, on any of the other Loan Documents or any foreclosure proceeding is filed, and all such costs and expenses shall be payable on demand, together with interest at the Default Rate thereon, and also shall be secured by the Mortgages and all other collateral at any time held by Payee as security for Maker's obligations to Payee. Section 4.4. Maximum Amount. 4.4.1 It is the intention of Maker and Payee to conform strictly to the usury and similar laws relating to interest from time to time in force, and all agreements between Maker and Payee, whether now existing or hereafter arising and whether oral or written, are hereby expressly limited so that in no contingency or event whatsoever, whether by acceleration of maturity hereof or otherwise, shall the amount paid or agreed to be paid in the aggregate to Payee as interest hereunder or under the other Loan Documents or in any other security agreement given to secure the Debt, or in any other document evidencing, securing or pertaining to the Debt, exceed the maximum amount permissible under applicable usury or such other laws (the "Maximum Amount"). If under any circumstances whatsoever fulfillment of any provision hereof, or any of the other Loan Documents, at the time performance of such provision shall be due, shall involve transcending the Maximum Amount, then ipso facto, the obligation to be fulfilled shall be reduced to the Maximum Amount. For the purposes of calculating the actual amount of interest paid and/or payable hereunder, in respect of laws pertaining to usury or such other laws, all sums paid or agreed to be paid to the holder hereof for the use, forbearance or detention of the Debt, outstanding from time to time shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread from the date of disbursement of the proceeds of this Note until payment in full of all of the Debt, so that the actual rate of interest on account of the Debt is uniform through the term hereof. The terms and provisions of this Section 4.4 shall control and supersede every other provision of all agreements between Maker or any endorser and Payee. 4.4.2 If under any circumstances Payee shall ever receive an amount which would exceed the Maximum Amount, such amount shall be deemed a payment in reduction of the Loan Amount owing hereunder and any other obligation of Maker in favor of Payee, and shall be so applied in accordance with Section 2.2 hereof, or if such excessive interest exceeds the unpaid balance of the Loan Amount and any other obligation of Maker in favor of Payee, the excess shall be deemed to have been a payment made by mistake and shall be refunded to Maker. Section 4.5. Waivers. Maker hereby expressly and unconditionally waives presentment, demand, protest, notice of protest or notice of any kind, including, without limitation, any notice of intention to accelerate and notice of acceleration, except as expressly provided herein, and in connection with any suit, action or proceeding brought by Payee on this Note, any and every right it may have to (a) a trial by jury, (b) interpose any counterclaim therein (other than a counterclaim which can only be asserted in the suit, action or proceeding brought by Payee on this Note and cannot be maintained in a separate action) and (c) have the same consolidated with any other or separate suit, action or proceeding. Section 4.6. Governing Law. (a) This Note was negotiated in New York, and made by Maker and accepted by Payee in the State of New York, and the proceeds of the Note delivered pursuant hereto were disbursed from New York, which State the parties agree has a substantial relationship to the parties and to the underlying transaction embodied hereby, and in all respects, including, without limiting the generality of the foregoing, matters of construction, validity and performance. This Note and the obligations arising hereunder shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and performed in such State and any applicable law of the United States of America, except that at all times the provisions for the creation, perfection, and enforcement of the liens and security interests created pursuant to any Mortgage and pursuant to the other Loan Documents shall be governed by and construed according to the law of the State in which the applicable Mortgaged Property is located, it being understood that, to the fullest extent permitted by law of such State, the law of the State of New York shall govern the validity and the enforceability of all Loan Documents, and the Debt or obligations arising hereunder or thereunder. To the fullest extent permitted by law, Maker hereby unconditionally and irrevocably waives any claim to assert that the law of any other jurisdiction governs this Note and this Note shall be governed by and construed in accordance with the laws of the State of New York pursuant to Section 5-1401 of the New York General Obligations Law. (b) Any legal suit, action or proceeding against Maker or Payee arising out of or relating to this Note shall be instituted in any federal or state court in New York, New York, pursuant to Section 5-1402 of the New York General Obligations Law, and Maker waives any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding, and Maker hereby irrevocably submits to the jurisdiction of any such court in any suit, action or proceeding. Maker does hereby designate and appoint CT Corporation System, 1633 Broadway, New York, New York 10019 as its authorized agent to accept and acknowledge on its behalf service of any and all process which may be served in any such suit, action or proceeding in any federal or state court in New York, New York, and agrees that service of process upon said agent at said address and written notice of said service of Maker mailed or delivered to Maker in the manner provided in the Mortgages, shall be deemed in every respect effective service of process upon Maker, in any such suit, action or proceeding in the State of New York. Maker (i) shall give prompt notice to the Payee of any changed address of its authorized agent hereunder, (ii) may at any time and from time to time designate a substitute authorized agent with an office in New York, New York (which office shall be designated as the address for service of process), and (iii) shall promptly designate such a substitute if its authorized agent ceases to have an office in New York, New York or is dissolved without leaving a successor. Section 4.7. Headings. The Section headings in this Note are included herein for convenience of reference only and shall not constitute a part of this Note for any other purpose. Section 4.8. Assignment; Participations. (a) Subject to Section 8.09 of the Loan Agreement, Payee shall have the right to transfer, sell and assign this Note, the Mortgages and/or any of the other Loan Documents, and the obligations hereunder, to any Person. All references to "Payee" hereunder shall be deemed to include the assigns of the Payee. (b) Payee may at any time grant to one or more banks or other institutions (each a "Participant") participating interests in the Loans. In the event of any such grant by the Payee of a participating interest to a Participant, whether or not upon notice to the Maker, the Payee shall remain responsible for the performance of its obligations hereunder and under the other Loan Documents, and the Maker shall continue to deal solely and directly with the Payee in connection with the Payee's rights and obligations under this Note and the other Loan Documents. Any agreement pursuant to which the Payee may grant such a participating interest shall provide that the Payee shall retain the sole right and responsibility to enforce the obligations of the Maker hereunder and under the other Loan Documents including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Note or the other Loan Documents; provided that such participation agreement may provide that (i) the Payee will not agree to any modification, amendment or waiver of this Note or any other Loan Document (a) which increases or decreases the Loan Amount, (b) reduces the principal of or rate of interest on the Loan or fees hereunder or under any Loan Document, (c) postpones the date fixed for any payment of principal of or interest on the Loan or any fees hereunder or under any Loan Document, (d) modifies the 75% LTV Ratio requirement or (e) otherwise materially affects the rights of the Participant without the consent of the Participant and (ii) the Participant may commence servicing the Loan upon the occurrence of an Event of Default. Maker agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Section 2.4, 2.5 and 2.6 hereof as well any indemnification or similar provision contained in this Note or any other Loan Document with respect to its participating interest. Payee shall have the right to deliver from time to time to any Participant or prospective Participant copies of all financial and other information in the possession of Payee with respect to the Loan, the Maker, any guarantor or any other related person or entity, all of which information may be retained by such Participant and/or prospective Participant. Section 4.9. Severability. Wherever possible, each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Note. Section 4.10. Joint and Several. In the event there is more than one Maker, the obligations and liabilities of each Maker hereunder shall be joint and several. Section 4.11. Limitation on Liability (a) Notwithstanding anything herein or in any other Loan Documents to the contrary, but subject to the qualifications below, Payee and Maker agree that: (i) Maker shall be liable upon the Debt and for the other obligations arising under the Loan Documents to the full extent (but only to the extent) of the collateral now or hereafter securing the Debt and such other obligations; provided, however, that in the event of (A) Maker's breach or default under Sections 2.02(g) or 9.02 of any of the Mortgages, or (B) any of the Mortgaged Properties or any part thereof become an asset in a voluntary bankruptcy or insolvency proceeding, the limitation on recourse set forth in this Section 4.11 will be null and void and completely inapplicable, and this Note shall be with full recourse to Maker; (ii) If a default occurs in the timely and proper payment of all or any part of the Debt, Payee shall not enforce the liability and obligation of Maker to perform and observe the obligations contained in this Note or any of the other Loan Documents by any action or proceeding wherein a money judgment shall be sought against Maker, except that Payee may bring a foreclosure action, action for specific performance or other appropriate action or proceeding to enable Payee to enforce and realize upon the Mortgages, the other Loan Documents and the interest in the Mortgaged Properties, the Rents and any other collateral given to Payee; provided, however, that any judgment in any action or proceeding shall be enforceable against Maker only to the extent of Maker's interest in the Mortgaged Properties, in the Rents and in such other collateral given to Payee. Payee, by accepting this Note and the Mortgages, agrees that it shall not, except as otherwise herein provided, sue for, seek or demand any deficiency judgment against Maker in any action or proceeding, under or by reason of or under or in connection with this Note, the other Loan Documents or the Mortgages. (iii) The provisions of this Section 4.11 shall not (A) constitute a waiver, release or impairment of any obligation evidenced or secured by this Note, the other Loan Documents or the Mortgages; (B) impair the right of Payee to name Maker as a party defendant in any action or suit for judicial foreclosure and sale under the Mortgages; (C) affect the validity or enforceability of any indemnity, guaranty, master lease or similar instrument made in connection with this Note, the Mortgages, or the other Loan Documents; (D) impair the right of Payee to obtain the appointment of a receiver; (E) impair the enforcement of the Assignments executed in connection herewith; (F) impair the right of Payee to enforce the provisions of Article XII or Section 16.02 of the Mortgages; or (G) impair the right of Payee to obtain a deficiency judgment or judgment on this Note against Maker if necessary to obtain any insurance proceeds or condemnation awards to which Payee would otherwise be entitled under the Mortgages; provided, however, Payee shall only enforce such judgment against the insurance proceeds and/or condemnation awards. (iv) Notwithstanding the provisions of this Section to the contrary, Maker shall be personally liable to Payee for any losses it incurs due to: (A) the misapplication or misappropriation of Rents contrary to the provisions of any of the Loan Documents; (B) the misapplication or misappropriation of insurance proceeds or condemnation awards contrary to the provisions of the Mortgages; (C) Maker's failure to return or to reimburse Payee for all Personal Property taken from any of the Mortgaged Properties by or on behalf of Maker and not replaced with Personal Property of the same utility and of the same or greater value; (D) any act of actual waste or arson by Maker, any principal, affiliate, general partner or member thereof or by any Guarantor; (E) any fees or commissions paid by Maker to any principal, affiliate, general partner or member of Maker, or any Guarantor in violation of the terms of this Note, the Mortgages or the other Loan Documents; (F) Maker's failure to comply with the provisions of Article XII and Article XVI of the Mortgages; (G) the exercise of any right or remedy under any federal, state or local forfeiture laws resulting in the loss of the lien of the Mortgages, or the priority thereof, against the Mortgaged Properties; (H) fraud, willful misconduct or material misrepresentation by Maker, the General Partner, or any of their respective officers, directors, managers, members or shareholders; (I) Maker's breach or default under Section 9.01 of any of the Mortgages or (J) any claims, actions, or proceedings initiated by Maker, any principal, affiliate, general partner or member thereof or by any Guarantor alleging that the relationship of Maker and Payee is that of joint venturers, partners, tenants in common, joint tenants or any relationship other than that of debtor and creditor. (b) Nothing herein shall be deemed to be a waiver of any right which Payee may have under Sections 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim for the full amount of the Debt or to require that all collateral shall continue to secure all of the Debt, owing to Payee in accordance with this Note, the Mortgages and the other Loan Documents. IN WITNESS WHEREOF, this Note has been duly executed by the Maker the day and year first written above. SAFEGUARD CAPITAL FUND, L.P., a Delaware limited partnership By: Safeguard Equity Group, L.L.C., a limited liability company, Its General Partner By: Safeguard Holdings, L.L.C., a limited liability company, Its Manager By: /s/ Bruce C. Roch, Jr. -------------------------- Name: Bruce C. Roch, Jr. ------------------------ Title: Manager ------------------------ SCHEDULE Principal Date Amount of Loan Principal Repaid - ---- -------------- ---------------- EX-10.69 30 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. EX-10.78 31 SECURED PROMISSORY NOTE $28,000,000.00 New York New York As of October 22, 1998 FOR VALUE RECEIVED, WELLSFORD CAPITAL PROPERTIES, L.L.C., a Delaware limited liability company having an address c/o Wellsford Real Properties, Inc., 610 Fifth Avenue, New York, NY 10020 ("Borrower"), promises to pay to the order of LEHMAN BROTHERS HOLDINGS INC., doing business as Lehman Capital, a division of Lehman Brothers Holdings Inc., a Delaware corporation having an address at 3 World Financial Center, 12th Floor, New York, New York 10285-1200 ("Lender") the principal sum of TWENTYEIGHT MILLION AND 00/100 DOLLARS ($28,000,000.00) or so much thereof as may be advanced or outstanding from time to time, in lawful money of the United States of America with interest thereon to be computed from the date of this Note at the Interest Rate (hereinafter defined) to be paid as hereinafter provided (the "Loan"). Whenever used, the singular number shall include the plural, the plural the singular, and the words "Lender" and "Borrower" shall include their respective successors, assigns, heirs, executors and administrators. A non-refundable origination fee in an amount equal to 1% of the face amount hereof has been paid by Borrower to Lender on the date hereof. A. Payment Terms Borrower shall pay to Lender at the address set forth above, or at such other place as the Lender may from time to time designate in writing: (i) a payment of interest only calculated at the Interest Rate from the date hereof through October 31, 1998 shall be due and payable on the date hereof; (ii) interest only in arrears shall be due and payable on the first day of December, 1998 and on the first day of each calendar month thereafter to and including the Maturity Date (as hereinafter defined); and (iii) the balance of the principal sum then outstanding and all interest thereon, and all other sums due and payable under this Note or the Other Loan Documents (hereinafter defined) shall be due and payable on the Maturity Date. As used herein, the term "Maturity Date" shall mean the earlier to occur of (i) November 1, 2001 (the "Scheduled Maturity Date"), subject to extension for the Extended Term (hereinafter defined) as hereinafter provided, and (ii) the date on which the entire Obligations (hereinafter defined) have become due and payable upon the occurrence of an Event of Default (as that term is defined in the Security Documents (hereinafter defined)). Any payment hereunder which is stated to be due on a day which is not a Business Day shall be made on the next succeeding Business Day (and interest shall accrue for such extension of time) unless the result of such extension would be to extend such payment into another calendar month in which event such payment shall be made on the immediately preceding Business Day. "Business Day" shall mean any day other than a Saturday or Sunday or a day on which banks in New York, New York are authorized or required by law to be closed. B. Interest Prior to the Maturity Date, provided there exists no Event of Default (hereinafter defined), the unpaid principal balance shall bear interest at a rate per annum (the "Interest Rate") equal to LIBOR plus 275 basis points. "LIBOR" shall mean for each calendar month, the London Interbank Offer Rate as listed in The Wall Street Journal in the "Money Rates" column or at Telerate (page 3750) which is published or announced on the date which is two Business Days prior to the beginning of such calendar month for such calendar month. If for any reason the LIBOR Rate for any calendar month cannot be determined in accordance with the preceding sentence, then Lender will notify Borrower and instead determine the LIBOR Rate by using the rates offered to prime banks in the interbank eurocurrency market by Citibank or any successor or assign (but in all other respects in accordance with the preceding sentence). Each determination of the Interest Rate by Lender pursuant to this Note shall be conclusive and binding on the Borrower in the absence of manifest error. Interest on the principal sum of this Note shall be calculated in arrears on the basis of the actual number of days elapsed over a three hundred sixty (360) day year. C. Events of Default If an Event of Default occurs, or any other cause for acceleration of the indebtedness evidenced by this Note shall occur, then, the whole of the principal sum of this Note, together with all interest accrued and unpaid thereon and all other sums due under the Security Documents (hereinafter defined) and this Note (all such sums hereinafter collectively referred to as the "Obligations") shall without notice become immediately due and payable at the option of Lender. All of the terms, covenants and conditions contained in the Security Documents and the Other Loan Documents (hereinafter defined) are hereby made part of this Note to the same extent and with the same force as if they were fully set forth herein. In the event that it should become necessary to employ counsel to collect the Obligations or to protect or foreclose the security hereof, Borrower also agrees to pay reasonable attorney's fees for the services of such counsel whether or not suit is brought. D. Prepayment Except as specifically provided herein or in the Security Documents, no prepayment of the principal indebtedness of this Note shall be allowed at anytime during the first eighteen (18) full calendar months of the term of this Note (the "Closed Period"). After the Closed Period, Borrower, whether or not a debtor in a proceeding under Title 11, United States Code, may prepay the principal balance of this Note in whole, but not in part, without penalty or premium, on the first day of any calendar month but only upon (i) not less than thirty (30) days' but not more than sixty (60) days' irrevocable prior written notice to Lender specifying the date on which prepayment is to be made, (ii) the payment of all accrued and unpaid interest on the outstanding principal balance of this Note to and including the date of such prepayment, and (iii) the payment of all other sums then due under this Note, the Security Documents and the Other Loan Documents. Lender shall not be obligated to accept any prepayment of the principal balance of this Note unless it is accompanied by all sums due in connection therewith. If a Default Prepayment (hereinafter defined) occurs, Borrower shall pay to Lender the entire Obligations including, without limitation, the Prepayment Fee (hereinafter defined), provided, however, that Borrower shall have no obligation to pay the Prepayment Fee unless the obligation to make the Default Prepayment occurs during the Closed Period. For purposes hereof, the term "Default Prepayment" shall mean a prepayment of the principal amount of the Note made after the occurrence of any Event of Default or an acceleration of the Maturity Date under any circumstances, including, without limitation, a prepayment occurring in connection with the reinstatement of the Security Documents provided by statute under foreclosure proceedings or exercise of a power of sale, any statutory right of redemption exercised by Borrower or any other party having a statutory right to redeem or prevent foreclosure, any sale in foreclosure or under exercise of a power of sale or otherwise. For purposes hereof, the term "Prepayment Fee" shall mean one percent (1%) of the outstanding principal indebtedness of this Note. The aforementioned Prepayment Fee does not constitute a penalty, but rather represents the reasonable estimate, agreed to between Borrower and Lender, of a fair compensation for the loss that may be sustained by Lender due to prepayment of the principal indebtedness. Any prepayment fee required pursuant to the preceding paragraphs shall be paid without prejudice to the right of Lender to collect any of the amounts owing under this Note or the Security Documents or otherwise, to enforce any of its rights or remedies arising out of an Event of Default hereunder. Notwithstanding anything contained herein to the contrary, provided no Event of Default shall have occurred and be continuing, no prepayment fee shall be payable upon any prepayment of the Principal Indebtedness resulting solely from the application by Lender of any casualty insurance proceeds or condemnation awards. E. Default Interest and Late Charges Upon the occurrence of any Event of Default, or upon maturity hereof (by acceleration or otherwise), the outstanding principal balance of the indebtedness evidenced by this Note shall, at the option of Lender, bear interest from the date of occurrence of such Event of Default or such maturity until collection (including any period of time occurring after judgment), at the "Default Rate", being the lower of (a) the highest rate allowed by applicable law, or (b) a rate per annum equal to five percent (5%) above the Interest Rate in effect on the Maturity Date. If any monthly installment of principal and interest is not paid prior to the tenth (10th) day after the due date of such payment, then Borrower shall pay to Lender, upon demand, a late charge equal to the lesser of five percent (5%) of such unpaid sum or the maximum amount permitted by applicable law to defray the expenses incurred by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of the use of such delinquent payment. All default interest and late charges (i) shall be in addition to, and not in lieu of, any other remedy Lender may have and shall be in addition to, and not in lieu of, Borrower's obligation to pay any reasonable fees and charges of any agents or attorneys employed in the event of any default hereunder; (ii) shall be added to the Obligations, and shall be deemed secured by the Security Documents and Other Loan Documents; and (iii) shall not be construed as an agreement or privilege to extend the date of the payment of the Obligations, nor as a waiver of any other right or remedy accruing to Lender by reason of the occurrence of any Event of Default. F. Security This Note is secured by the Security Documents and the Other Loan Documents. The term "Security Documents" as used in this Note shall mean, collectively, the Mortgage and Security Agreement given by Borrower to Lender covering the Canton Property (as defined herein) (the "Canton Security Instrument"), the Assignment of Leases and Rents given by Borrower to Lender covering the Canton Property (the "Canton Assignment"), the Mortgage and Security Agreement given by Borrower to Lender covering the Philadelphia Property (as defined herein) (the "Philadelphia Security Instrument"), the Assignment of Leases and Rents given by Borrower to Lender covering the Philadelphia Property (the "Philadelphia Assignment"), the Mortgage and Security Agreement given by Borrower to Lender covering the West Chester Property (as defined herein) (the "West Chester Security Instrument"), the Assignment of Leases and Rents given by Borrower to Lender covering the West Chester Property (the "West Chester Assignment") the Mortgage and Security Agreement given by Borrower to Lender covering the Salem Property (as defined herein) (the "Salem Security Instrument"), the Assignment of Leases and Rents given by Borrower to Lender covering the Salem Property (the "Salem Assignment"), the Mortgage and Security Agreement given by Borrower to Lender covering the Piscataway Property (as defined herein) (the "Piscataway Security Instrument"), the Assignment of Leases and Rents given by Borrower to Lender covering the Piscataway Property (the "Piscataway Assignment") the Mortgage and Security Agreement given by Borrower to Lender covering the Cherry Hill Property (as defined herein) (the "Cherry Hill Security Instrument"), the Assignment of Leases and Rents given by Borrower to Lender covering the Cherry Hill Property (the "Cherry Hill Assignment"), the Leasehold Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing For Commercial Purposes given by Borrower Fidelity National Title Insurance Company, as trustee, for the use and benefit of Lender, covering the Santa Monica Property (as defined herein) (the "Santa Monica Security Instrument") (the Canton Security Instrument, the Philadelphia Security Instrument, the West Chester Security Instrument, the Salem Security Instrument, the Piscataway Security Instrument, the Cherry Hill Security Instrument and the Santa Monica Security Instrument are sometimes collectively referred to herein as the "Security Instruments"), the Assignment of Leases and Rents given by Borrower to Lender covering the Santa Monica Property (the "Santa Monica Assignment") (the Canton Assignment, the Philadelphia Assignment, the West Chester Assignment, the Salem Assignment, the Piscataway Assignment, the Cherry Hill Assignment and the Santa Monica Assignment are sometimes collectively referred to herein as the "Assignments"), the respective security documents, and certain pledge and security agreements dated the date hereof given by Borrower to Lender covering, respectively, (A) the fee simple estate in certain real property located in (i) Canton, Massachusetts (the "Canton Property"), (ii) Philadelphia, Pennsylvania (the "Philadelphia Property"), (iii) West Chester, Pennsylvania (the "West Chester Property"), (iv) Salem, New Hampshire (the "Salem Property"), (v) Piscataway, New Jersey (the "Piscataway Property"), and (vi) Cherry Hill, New Jersey (the "Cherry Hill Property"), and (B) the leasehold estate in certain real property located in Santa Monica, California (the "Santa Monica Property"), and the Borrower's interest in certain accounts established pursuant to the Other Loan Documents (such interest together with the Canton Property, the Philadelphia Property, the West Chester Property, the Salem Property, the Piscataway Property, the Cherry Hill Property and the Santa Monica Property are sometimes collectively referred to herein as the "Property") and other property, as more particularly described therein which (i) Canton Security Instrument and Canton Assignment are intended to be duly recorded in the land records where the Canton Property is located, (ii) Philadelphia Security Instrument and Philadelphia Assignment are intended to be duly recorded in the land records where the Philadelphia Property is located,(iii) West Chester Security Instrument and West Chester Assignment are intended to be duly recorded in the land records where the West Chester Property is located, (iv) Salem Security Instrument and Salem Assignment are intended to be duly recorded in the land records where the Salem Property is located, (v) Piscataway Security Instrument and Piscataway Assignment are intended to be duly recorded in the land records where the Piscataway Property is located, (vi) Cherry Hill Security Instrument and Cherry Hill Assignment are intended to be duly recorded in the land records where the Cherry Hill Property is located, and (vii) Santa Monica Security Instrument and Santa Monica Assignment are intended to be duly recorded in the land records where the Santa Monica Property is located. Lender may resort for the payment of the Obligations to any such security held by Lender in such order and manner as Lender, in its discretion, may elect. Lender may take any action to recover the Obligations or any portion thereof, or to enforce any covenant hereof or of the Security Documents or Other Loan Documents without prejudice to the right of Lender thereafter to foreclose under any of the Security Documents. The rights of Lender under this Note and the Security Documents and the Other Loan Documents shall be separate, distinct and cumulative and none shall be given effect to the exclusion of the others. No act of Lender shall be construed as an election to proceed under any one provision herein or of any of the Security Documents and the Other Loan Documents to the exclusion of any other provision. Lender shall not be limited exclusively to the rights and remedies herein or therein stated but shall be entitled to every right and remedy now or hereafter afforded at law or in equity. The term "Other Loan Documents" as used in this Note shall mean all and any of the documents other than this Note or the Security Documents now, hereinbefore or hereafter executed by Borrower and/or others and by or in favor of Lender, which wholly or partially secure, guarantee or relate to payment of this Note. With reference to the Security Documents, and solely for the purposes expressly contained therein, the amount of the Loan allocated to each Property is set forth on Exhibit A attached hereto and by this reference made a Part hereof. G. Savings Clause This Note is subject to the express condition that at no time shall Borrower be obligated or required to pay interest on the principal balance due hereunder at a rate which could subject Lender to either civil or criminal liability as a result of being in excess of the maximum interest rate which Borrower is permitted by applicable law to contract or agree to pay. If by the terms of this Note, Borrower is at any time required or obligated to pay interest on the principal balance due hereunder. at a rate in excess of such maximum rate the Interest Rate shall be deemed to be immediately reduced to such maximum rate and all previous payments in excess of the maximum rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder. H. Miscellaneous This Note may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Borrower or Lender, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. If Borrower consists of more than one person or party, the obligations and liabilities of each such person or party shall be joint and several. Borrower and all others who may become liable for the payment of all or any part of the Obligations do hereby severally waive presentment and demand for payment, notice of dishonor, protest and notice of protest and non-payment. No release of any security for the Obligations or extension of time for payment of this Note or any installment hereof, and no alteration, amendment or waiver of any provision of this Note, the Security Documents or the Other Loan Documents made by agreement between Lender and any other person or party shall release, modify, amend, waive, extend, change, discharge, terminate or affect the liability of Borrower, and any other who may become liable for the payment of all or any part of the Obligations, under this Note, the Security Documents or the Other Loan Documents. Borrower (and the undersigned representative of Borrower, if any) represents that Borrower has full power, authority and legal right to execute and deliver this Note, the Security Documents and the Other Loan Documents, to perform its obligations hereunder and thereunder, and that this Note, the Security Documents and the Other Loan Documents constitute valid and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms. THIS NOTE SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. Pursuant to New York General Obligations Law Section 5-1402, Borrower hereby irrevocably submits to the jurisdiction of any court of the State of New York or federal court sitting in the State of New York in any action or proceeding arising out of or relating to this Note, the Security Documents or the Other Loan Documents. Borrower hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such court of the State of New York or, to the extent permitted by law, in such federal court. Borrower hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. To the extent permitted by law, Borrower also irrevocably consents to the service of any and all process in any such action or proceeding arising out of or in connection with this Note, the Security Documents or Other Loan Documents by the mailing (postage prepaid) of copies of such process to the undersigned at the address set forth above. Borrower agrees that a final and non-appealable judgment (or a judgment whose time to appeal has expired) in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. BORROWER AND LENDER HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM WHETHER IN CONTRACT OR TORT, AT LAW OR IN EQUITY, WITH RESPECT TO, IN CONNECTION WITH OR ARISING OUT OF OR IN ANY WAY RELATED TO THIS NOTE OR THE SECURITY DOCUMENTS OR THE OTHER LOAN DOCUMENTS OR THE VALIDITY, PROTECTION, INTERPRETATION, ADMINISTRATION, COLLECTION OR ENFORCEMENT HEREOF OR THEREOF, OR ANY CLAIM OR DISPUTE HEREUNDER OR THEREUNDER. Wherever pursuant to this Note (i) Lender exercises any right given to it to approve or disapprove, (ii) any arrangement or term is to be satisfactory to Lender, or (iii) any other decision or determination is to be made by Lender, the decision of Lender to approve or disapprove, all decisions that arrangements or terms are satisfactory or not satisfactory and all other decisions and determinations made by Lender, shall be in the sole and absolute discretion of Lender and shall be final and conclusive, except as may be otherwise expressly and specifically provided herein. Wherever pursuant to this Note it is provided that Borrower pay any costs and expenses, such costs and expenses shall include, without limitation, the reasonable legal fees and disbursements of Lender. I. Limited Recourse (1) Subject to the provisions of Paragraph (2) below, Lender shall not enforce the liability and obligation of Borrower to perform and observe the obligations contained in this Note, the Security Documents or the Other Loan Documents by any action or proceeding wherein a money judgment (or equitable remedy having the effect of a money judgment) shall be sought against Borrower, except that Lender may bring a foreclosure action, action for specific performance or other appropriate action or proceeding to enable Lender to enforce and realize upon this Note, the Security Documents, the Other Loan Documents, and the interest in the Property, the Rents (as defined in the Security Instruments) and any other collateral given to Lender created by this Note, the Security Documents and the Other Loan Documents; provided, however, that any judgment in any such action or proceeding shall be enforceable against the Borrower only to the extent of Borrower's interest in the Property, the Rents and any other collateral given to Lender. Lender, by accepting this Note and the Security Documents, agrees that, except as provided in Article 15 of the Security Instruments, it shall not sue for, seek or demand any deficiency judgment against the Borrower in any such action or proceeding, under or by reason of or under or in connection with the Security Documents, the Other Loan Documents or this Note. The provisions of this paragraph shall not, however, (i) constitute a waiver, release or impairment of any obligation evidenced or secured by the Security Documents, the Other Loan Documents or this Note; (ii) impair the right of Lender to name Borrower as a party defendant in any action or suit for judicial foreclosure and sale under the Security Documents; (iii) affect the validity or enforceability of any guaranty, indemnity or similar instrument made in connection with the Security Documents, this Note, or the Other Loan Documents; (iv) impair the right of Lender to obtain the appointment of a receiver; (v) impair the enforcement of the Assignments executed in connection herewith; (vi) impair the right of Lender to obtain a deficiency judgment or judgment on the Note against Borrower if necessary to obtain any insurance proceeds or condemnation awards to which Lender would otherwise be entitled under the Security Instruments provided, however Lender shall only enforce such judgment against the insurance proceeds and/or condemnation awards; or (vii) impair the right of Lender to enforce the provisions of the Security Instruments. (2) Notwithstanding anything to the contrary contained in Paragraph (1) above Borrower shall be fully and personally liable to Lender upon the occurrence of certain events as described in Article 15 of the Security Instruments and Wellsford Capital a Maryland real estate investment trust ("Wellsford Capital" or "Guarantor"), shall be fully and personally liable to the extent set forth in and upon the occurrence of certain events as described in that certain Conditional Guarantee of even date herewith given by Guarantor in favor of Lender (the "Guarantee") and Borrower and Wellsford Capital (the "Indemnitors") shall be fully and personally liable to the extent set forth in and upon the occurrence of certain events as described in that certain Environmental Indemnity Agreement of even date herewith given by Indemnitors in favor of Lender and other Indemnified Parties (as defined therein). I. Extended Term Provided no Event of Default shall have occurred and be continuing either on the date notice to extend is given to Lender or on the commencement date of the Extended Term, Borrower shall have the option to extend the Scheduled Maturity Date of this Note to November 1, 2002 (the "Extended Term"). Borrower shall exercise such option by providing written notice to Lender not later than September 15, 2001. Lender shall so extend the Scheduled Maturity Date provided Borrower provides the following (and agrees to pay all costs and expenses in connection therewith): (i) proof satisfactory to Lender in all respects that (A) the Debt Service Coverage Ratio (as defined in the Security Instruments) for the Property is at least 1.30 to 1.0 and (B) the outstanding principal balance of this Note is less than seventy-five (75%) of the then current aggregate appraised value of the Property determined by appraisals conducted by an independent appraiser or appraisers selected or approved by Lender, (ii) payment of Lender's attorneys' fees and expenses, (iii) title reports satisfactory to Lender and its counsel showing no exceptions to title other than those contained in the mortgagee title insurance policies originally insuring the Security Documents, (iv) an affidavit from Borrower that no alterations have been made with respect to the Property which would render inaccurate those certain surveys delivered to Lender with respect to the Property in connection with the initial closing of the Loan (except for such alterations made in compliance with the applicable terms and provisions of the Security Documents and for which survey recertifications have been delivered to the Lender) and (v) at the time that the written option notice is sent to Lender, Borrower shall pay a non-refundable extension fee equal to one-half of one percent (1/2%) of the outstanding principal balance of this Note, and further provided that Borrower submits and executes such additional documents as Lender may reasonably require. Notwithstanding anything to the contrary contained herein, the foregoing extension option shall not be deemed effective until all requirements of this paragraph are fully complied with to the complete satisfaction of Lender. IN WITNESS WHEREOF, Borrower has duly executed this Note under seal the day and year first above written. WELLSFORD CAPITAL PROPERTIES, L.L.C., a Delaware limited liability company By: Wellsford Capital, a Maryland real estate investment trust, its Managing Member By: /s/ Gregory F. Hughes -------------------------------- Name: Gregory F. Hughes Title: Vice President and Assistant Treasurer STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the 21st day of October, 1998, before me personally came Gregory F. Hughes, to me known to be the individual who executed the foregoing instrument, and who, being duly sworn by me, did depose and say that he is the Vice President and Assistant Treasurer of Wellsford Capital, a Maryland real estate investment trust, which trust is the managing member of Wellsford Capital Properties, L.L.C., a Delaware limited liability company; and that he had authority to sign the same; and that he acknowledged to me that he executed the same in such capacity as the act the deed of said limited liability company for the uses and purposes therein mentioned. /s/ Frantz Michaud ------------------------- Notary Public EXHIBIT A (Allocated Loan Amounts) 1. Canton Property: $1,940,000 2. Philadelphia Property: $2,000,000 3. West Chester Property: $8,400,000 4. Salem Property: $2,420,000 5. Piscataway Property: $1,340,000 6. Cherry Hill Property: $2,300,000 7. Santa Monica Property: $9,600,000 EX-10.79 32 CONDITIONAL GUARANTEE --------------------- THIS GUARANTEE, dated as of October 22, 1998 is made by WELLSFORD CAPITAL, a Maryland real estate investment trust, having an address c/o Wellsford Real Properties, Inc., 610 Fifth Avenue, New York, New York 10020 (the "Guarantor") in favor of LEHMAN BROTHERS HOLDINGS INC. doing business as Lehman Capital, a division of Lehman Brothers Holdings Inc., a Delaware corporation having an address at 3 World Financial Center, 12th Floor, New York New York 10285-1200 ("Lender"). Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed thereto in (i) that certain Leasehold Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing for Commercial Purposes dated of even date herewith, given by Wellsford Capital Properties, L.L.C., a Delaware limited liability company (the "Borrower"), as mortgagor, to Fidelity National Title Insurance Company, as trustee, for the use and benefit of Lender, as beneficiary, covering the Santa Monica Property (as defined herein) (as the same may hereafter be amended, modified or supplemented from time to time, the "Santa Monica Security Instrument"), and (ii) that certain Mortgage and Security Agreement dated of even date herewith between Borrower, as mortgagor, and Lender, as mortgagee, covering the Canton Property (as defined herein) (as the same may hereafter be amended, modified or supplemented from time to time, the "Canton Security Instrument"), (iii) that certain Mortgage and Security Agreement dated of even date herewith between Borrower, as mortgagor, and Lender, as mortgagee, covering the Philadelphia Property (as defined herein) (as the same may hereafter be amended, modified or supplemented from time to time, the "Philadelphia Security Instrument"), (iv) that certain Mortgage and Security Agreement dated of even date herewith between Borrower, as mortgagor, and Lender, as mortgagee, covering the West Chester Property (as defined herein) (as the same may hereafter be amended, modified or supplemented from time to time, the "West Chester Security Instrument"), (v) that certain Mortgage and Security Agreement dated of even date herewith between Borrower, as mortgagor, and Lender, as mortgagee, covering the Salem Property (as defined herein) (as the same may hereafter be amended, modified or supplemented from time to time, the "Salem Security Instrument"), (vi) that certain Mortgage and Security Agreement dated of even date herewith between Borrower, as mortgagor, and Lender, as mortgagee, covering the Piscataway Property (as defined herein) (as the same may hereafter be amended, modified or supplemented from time to time, the "Piscataway Security Instrument"), and (vii) that certain Mortgage and Security Agreement dated of even date herewith between Borrower, as mortgagor, and Lender, as mortgagee, covering the Cherry Hill Property (as defined herein) (as the same may hereafter be amended, modified or supplemented from time to time, the "Cherry Hill Security Instrument"), (the Santa Monica Security Instrument, the Canton Security Instrument, the Philadelphia Security Instrument, the West Chester Security Instrument, the Salem Security Instrument, the Piscataway Security Instrument and the Cherry Hill Security Instrument are sometimes collectively referred to herein as the "Security Instruments"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, Borrower is the owner of (A) a leasehold interest in and to those certain premises known as 900 Colorado Avenue and 1651 16th Street located in Santa Monica, California, as more particularly described in the Santa Monica Security Instrument (the "Santa Monica Property"), and (B) fee simple title to those certain premises known as (i) 250 Turnpike Street located in Canton, Massachusetts, as more particularly described in the Canton Security Instrument (the "Canton Property"), (ii) 421 Chestnut Street located in Philadelphia, Pennsylvania, as more particularly described in the Philadelphia Security Instrument (the "Philadelphia Property"), (iii) Bradford Plaza located in West Chester, Pennsylvania, as more particularly described in the West Chester Security Instrument (the "West Chester Property"), (iv) 19-21 Keewaydin Drive located in Salem, New Hampshire, as more particularly described in the Salem Security Instrument (the "Salem Property"), (v) 501 Hoes Lane located in Piscataway, New Jersey, as more particularly described in the Piscataway Security Instrument (the "Piscataway Property"), and (vi) 2 Executive Campus located in Cherry Hill, New Jersey, as more particularly described in the Cherry Hill Security Instrument (the "Cherry Hill Property") (the Santa Monica Property, the Canton Property, the Philadelphia Property, the West Chester Property, the Salem Property, the Piscataway Property and the Cherry Hill Property are sometimes collectively referred to herein as the "Property"); WHEREAS, Borrower has requested a mortgage loan (the "Loan") from Lender in the original principal amount of $28,000,000.00 and Lender has agreed to make such Loan upon the terms and conditions of, among other documents, a Secured Promissory Note dated the date hereof (the "Note"), the Security Instruments and this Guarantee (the Note, the Security Instruments and any other documents executed in connection herewith are sometimes collectively referred to herein as the "Loan Documents"); WHEREAS, simultaneously herewith, the Loan Documents have been executed and delivered to Lender; WHEREAS, Lender has required, as a condition of making the Loan, the execution of this Guarantee by the Guarantor; WHEREAS, Guarantor is the owner of 100% of the membership interests in -Borrower, and accordingly, will derive a substantial benefit from the Loan; WHEREAS, capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Security Instruments. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the Guarantor hereby agrees with Lender as follows: 1. Guarantee. The Guarantor hereby unconditionally and irrevocably guarantees to Lender the full and punctual payment and performance when due of all of Borrower's obligations under the Loan Documents, whether at maturity or earlier by reason of acceleration or otherwise and whether denominated as damages, principal, interest, fees or otherwise, together with all pre-and post- maturity interest thereon (including, without limitation, amounts that, but for the initiation of any proceeding under any insolvency or bankruptcy law, would become due), if any of the occurrences set forth in subparagraphs (a) through (k) herein occur. The occurrences set forth in such subparagraphs (a) through (k) are hereinafter collectively referred to as the "Recourse Events." Notwithstanding the foregoing, the Guaranteed Obligations (as defined below) with respect to the Recourse Events set forth in subparagraphs (a) through (g) herein shall be limited to the amount of all Losses, as defined by the Security Instruments, incurred by Lender due to such occurrences. In the event the Guaranteed Obligations are in excess of the Losses incurred by Lender, such excess shall be applied by Lender to reduce principal and interest under the Loan, such application to be made in the sole discretion of Lender. Guarantor's obligations under this Guaranty (the "Guaranteed Obligations") shall arise in the event one or more of the following events or conditions occurs: (a) fraud or material misrepresentation by Borrower or any other person or entity in connection with the execution and the delivery of the Loan Documents; (b) Borrower's gross negligence or willful misconduct with respect to the management and operation of the Property and/or Borrower's financial affairs; (c) Borrower's removal or disposal of any Personal Property after an Event of Default; (d) Borrower's failure to pay Taxes, Insurance Premiums, Other Charges (except to the extent that sums sufficient to pay such amounts have been deposited with Lender pursuant to the terms of the Security Instruments and/or the Lockbox Agreement), charges for labor or materials or other charges that can create liens on the Property; (e) Borrower or Guarantor or any party acting at the behest of Borrower or Guarantor challenges the validity or enforceability of this Guarantee, the Note, the Security Instruments or the other Loan Documents and/or Borrower or Guarantor or any party acting at the behest of Borrower or Guarantor asserts defenses (other than (1) the defense of payment in full of the Obligations, provided that no other Event of Default has occurred and is continuing, or (2) a defense made in good faith as to the improper exercise of Lender's remedies under the Note, the Security Instruments or the other Loan Documents, provided that no Event of Default has occurred and is continuing at the time of Lender's exercise of such remedies) to the validity or enforceability of this Guarantee, the Note, the Security Instruments or the other Loan Documents, in each case solely for the purpose of delaying, hindering or impairing Lender's rights and remedies under this Guarantee, the Note, the Security Instruments or the other Loan Documents. (f) Borrower or any party acting at Borrower's behest misapplies or misappropriates Rents, tenant security deposits, insurance proceeds or condemnation awards; (g) Borrower's failure to comply with the provisions of Section 3.3, 3.9, 4.2. 4.3. 12.1, 12.2, 13.1, 13.2, 13.3, 13.4 or 13.5 of the Security Instruments; (h) Borrower defaults under Section 8.2 or 8.3 of the Security Instruments; (i) a voluntary bankruptcy or insolvency proceeding is filed or instituted by Borrower or Guarantor, or an involuntary bankruptcy or insolvency proceeding is filed or instituted against Borrower or Guarantor which is not dismissed within ninety (90) days of the filing thereof (unless such involuntary proceeding is brought by Lender); or (j) any financial information concerning Borrower or the Guarantor provided in this Guarantee, the Note, the Security Instruments or the other Loan Documents or otherwise in order to induce Lender to make the loan evidenced by the Note is fraudulent in any respect, contains any fraudulent information or misrepresents in any material respect the financial condition of Borrower or any Guarantor or Indemnitor; The Guarantor also agrees to pay any and all costs and expenses (including, without limitation, all reasonable fees and disbursements of counsel) which may be paid or incurred by Lender in connection with the enforcement of this Guarantee. The foregoing shall not in any manner impair or release the debt evidenced by the Note or the other Loan Documents or otherwise impair or derogate from the Lender's ability to enforce its rights under the Loan Documents. 2. Guarantee Absolute. The Guarantor guarantees that, to the extent of the Guaranteed Obligations, the Debt will be paid strictly in accordance with the terms of the Security Instruments regardless of any requirement of law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of Lender with respect thereto. The liability of the Guarantor hereunder shall be absolute and unconditional irrespective of: (a) any lack of validity or enforceability of the Note, the Security Instruments, the other Loan Documents or any other agreement between Lender and the Borrower relating thereto; (b) any change in the time, manner, place of payment of the indebtedness under, or in any other term of, or any other amendment or waiver of, or any consent to, departure from, any agreement between the Borrower and Lender, including, without limitation, the Note, the Security Instruments or the other Loan Documents; (c) the insolvency of, or voluntary or involuntary bankruptcy, assignment for the benefit of creditors, reorganization or other similar proceedings affecting, the Borrower or any of its assets; or (d) any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Borrower in respect of the Debt or of the Guarantor in respect of this Guarantee. No payment made by the Guarantor, any other guarantor or any other Person, or received or collected by the Lender from the Guarantor, any other guarantor or any other Person by virtue of any action or proceeding or set off or application at any time in reduction of or in payment of the Debt shall be deemed to modify, release or otherwise affect the liability of Guarantor under this Guarantee. Notwithstanding any such payments received or collected by the Lender in connection with the Debt, Guarantor shall remain liable for the balance of the Guaranteed Obligations until the Debt is paid in full. This Guarantee shall continue to be effective or be reinstated, as the case may be, if at any time any payment of the Debt or any portion thereof is rescinded or must otherwise be returned by the Lender upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, all as though such payment had not been made. Lender shall not be required to inquire into the powers of the Borrower or any of its partners, managers or other agents acting or purporting to act on its behalf, and monies, advances, renewals or credits described in Section 1 hereof in fact borrowed or obtained from Lender in professed exercise of such powers shall be deemed to form part of the debts and liabilities hereby guaranteed, notwithstanding that such borrowing or obtaining of monies, advances, renewals, or credits shall be in excess of the powers of the Borrower, or of its partners, managers or other agents aforesaid, or be in any way irregular, defective or informal. 3. Dealing with the Borrower and Others. (a) The Guaranteed Obligations shall not be released, discharged, limited or in any way affected by anything done, suffered or permitted by Lender in connection with any monies or credit advanced by Lender to the Borrower or any security therefor, including any loss of or in respect of any security received by Lender from the Borrower or others. It is agreed that Lender, without releasing, discharging, limiting or otherwise affecting in whole or in part the Guaranteed Obligations and liabilities hereunder, may, without limiting the generality of the foregoing: (i) grant time, renewals, extensions, indulgences, releases and discharges to the Borrower and any other Person guaranteeing payment of or otherwise liable with respect to the Debt (each such Person, an "Obligor"); (ii) take or abstain from taking security or collateral from the Borrower or any Obligor or from perfecting security or collateral of the Borrower or any Obligor; (iii) accept compromises from the Borrower or any Obligor; (iv) apply all monies at any time received from the Borrower or any Obligor upon such part of the Obligations as Lender may see fit; or (v) otherwise deal with the Borrower or any Obligor as Lender may see fit. (b) Lender shall not be bound or obliged to exhaust recourse against the Borrower or any other Obligor or any security, guarantee, indemnity, mortgage or collateral it may hold or take any other action (other than make demand pursuant to Section 7 of this Guarantee) before being entitled to payment from the Guarantor hereunder; and (c) Any account settled by or between Lender and the Borrower shall be accepted by the Guarantor as conclusive evidence that the balance or amount thereby appearing due to Lender is so due. 4. Subrogation. The Guarantor shall not exercise any right of subrogation with respect to payments made to Lender hereunder until such time as all indebtedness of the Borrower to Lender shall have been irrevocably paid in full in cash. In the case of the liquidation, winding-up or bankruptcy of the Borrower (whether voluntary or involuntary) or in the event that the Borrower shall make an arrangement or composition with its creditors, Lender shall have the right to rank first for its full claim and to receive all payments in respect thereof until its claim has been paid in full and the Guarantor shall continue to be liable to Lender for any balance of the Guaranteed Obligations. The Guarantor, to the extent permitted by law, irrevocably releases and waives any subrogation rights or right of contribution or indemnity (whether arising by operation of law, contract or otherwise) Guarantor may have against the Borrower or any Person constituting the Borrower if and to the extent any such right or rights would give rise to a claim under the U.S. Bankruptcy Code that payments to Lender with respect to the Obligations constitute a preference in favor of Guarantor or a claim under the Bankruptcy Code that any such preference is recoverable from Lender. 5. Representations and Warranties. The Guarantor hereby represents and warrants to Lender that: (a) the Guarantor is not insolvent (as such term is defined in the debtor/creditor laws of the State of New York), and Guarantor now has, and covenants and agrees that at all times until the Debt is paid in full it shall maintain, a net worth of at least $50,000,000.00; and (b) the execution, delivery and performance of this Guarantee will not (i) make Guarantor insolvent (as such term is defined in the debtor/creditor laws of the State of New York), or (ii) violate any provision of any requirement of law or contractual obligation of Guarantor and will not result in or require the creation or imposition of any lien on any of the properties or revenues of Guarantor pursuant to any requirement of law or contractual obligation of Guarantor. (c) the Guarantor has all requisite power and authority to execute, deliver and perform its obligations under this Guarantee. (d) the execution, delivery of this Guarantee and the performance by the Guarantor of its obligations hereunder does not and will not contravene, violate or conflict with any requirement of law, and does not and will not contravene, violate or conflict with, or result in a breach of or default under, the operating agreement of Borrower, or any contractual obligation to which Guarantor or its assets is or are subject, and does not require or result in the creation or imposition of any lien in favor of any Person other than Lender. (e) the execution and delivery hereof and the performance by the Guarantor of its obligations hereunder does not and will not contravene, violate or conflict with, or result in a breach of or default under, any indenture, mortgage, deed of trust, ground lease, contract, assignment, agreement or other instrument to which the Borrower or the assets of the Borrower are subject. (f) no consent of any other party (including, without limitation, any partner, or any creditor of the Guarantor or Borrower) is required that has not been obtained by the Guarantor. (g) this Guarantee has been duly executed and delivered by Guarantor and is the legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, moratorium, insolvency, reorganization or similar laws affecting creditors' rights generally. 6. Intentionally Omitted. 7. Demand for Payment: The Guarantor shall make payment of the Guaranteed Obligations and other amounts payable by the Guarantor hereunder forthwith after demand therefor is made by Lender to the Guarantor in writing. Lender shall not be required to seek payment of the Debt from Borrower or any other Person, prior to demanding payment of the Guaranteed Obligations from the Guarantor. 8. Waiver of Notice of Acceptance. The Guarantor hereby waives notice of acceptance of this Guarantee. 9. Additional Guaranties. This Guarantee is in addition and without prejudice to any guaranties of any kind (including, without limitation, guaranties whether or not in the same form as this instrument) or any indemnification agreements now or hereafter held by Lender. Lender shall not be obligated to proceed under any other guaranty or security with respect to all or any portion of the Debt before being entitled to payment from Guarantor under this Guarantee. 10. GOVERNING LAW. THIS INSTRUMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. THIS CHOICE OF LAW IS MADE PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401. 11. Addresses of Notices. All notices, demands, and other communications provided for hereunder shall be in writing and shall be personally delivered, sent by overnight delivery, or mailed (certified mail, return receipt requested and postage prepaid), to and addressed as follows: if to the Guarantor, delivered to it at its address set forth above, with a copy to Robinson Silverman Pearce Aronsohn & Berman LLP, 1290 Avenue of the Americas, New York, New York 10104 Attention: Dennis M. Sughrue, Esq., and if to Lender, delivered to it at Three World Financial Center, 12th Floor, New York, New York 10285-1200, Attention: Charles W. Schoenherr, with a copy to Kelley Drye & Warren LLP, 101 Park Avenue, New York New York 10178, Attention: James J. Kirk, Esq., or as to each party at such other address or addresses within the continental United States of America as shall be designated by such party in a written notice to each other party complying as to delivery with the terms of this Section 11. 12. No Waiver. Remedies. No failure on the part of Lender to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise of any right hereunder 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. Any amendments to, revisions of, or waivers of any provisions of this Guarantee must be in writing to be effective. 13. Benefit and Binding Nature. This Guarantee is a continuing guaranty of payment and shall (a) remain in full force and effect until irrevocable payment in full of the Guaranteed Obligations and all other amounts payable hereunder in cash, (b) be binding upon the Guarantor, its personal representatives, executors, administrators, heirs, distributees and successors and assigns, and (c) inure to the benefit of and be enforceable by Lender and its respective successors and assigns. 14. WAIVER OF TRIAL BY JURY. THE GUARANTOR AND LENDER WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM, OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT LAW OR IN EQUITY, WITH RESPECT TO, IN CONNECTION WITH OR ARISING OUT OF OR IN ANY WAY RELATED TO THIS GUARANTEE OR THE SECURITY INSTRUMENTS OR THE NOTE OR ANY OTHER DOCUMENT DELIVERED IN CONNECTION HEREWITH OR THEREWITH. 15. Jurisdiction. The Guarantor hereby irrevocably submits to the jurisdiction of any New York State or Federal court sitting in the County of New York in any action or proceeding arising out of or relating to this Guarantee, the Note, the Security Instruments or any other document delivered in connection herewith or therewith and the Guarantor hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State court, or to the extent permitted by law, in such Federal court. The Guarantor hereby irrevocably waives, to the fullest extent he may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. To the extent permitted by law, the Guarantor also irrevocably consents to the service of any and all process in any such action or proceeding by the mailing of copies (certified mail, return receipt requested and postage prepaid) of such process to it at its address specified in Section 11 hereof. The Guarantor agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. IN WITNESS WHEREOF, the Guarantor has executed this Guarantee as of the date and year set forth above. GUARANTOR: WELLSFORD CAPITAL, a Maryland real estate investment trust By: /s/ Gregory F. Hughes ---------------------- Name: Gregory F. Hughes Title: Vice President and Assistant Treasurer COUNTY OF NEW YORK ) :.ss COUNTY OF NEW YORK ) On the 21 day of October, 1998, before me personally came Gregory F. Hughes, to me known, who, being by me duly sworn, did depose and say that he has an address at 610 Fifth Avenue, New York, NY; he is the Vice President and Assistant Treasurer of Wellsford Capital, a Maryland real estate investment trust; and is the person whose name is subscribed to the foregoing instrument and that he executed the same in such capacity for the purposes therein contained. /s/ Frantz Michaud - -------------------- Notary Public EX-10.80 33 WELLSFORD CAPITAL PROPERTIES, L.L.C., as mortgagor (Borrower) to LEHMAN BROTHERS HOLDINGS INC., as mortgagee (Lender) ----------------------------------------------------------- MORTGAGE AND SECURITY AGREEMENT ----------------------------------------------------------- Dated: October 22, 1998 Location: 19-23 Keewaydin Drive Salem, New Hampshire PREPARED BY AND UPON RECORDATION RETURN TO: Kelley Drye & Warren LLP 101 Park Avenue New York NY 10178 Attention: Thomas E. Tether, Esq. TABLE OF CONTENTS Page ARTICLE 1 GRANTS OF SECURITY . . . . . . . . . . . . . . . . . . . . . . . .1 Section 1.1 Property Mortgaged . . . . . . . . . . . . . . . . . . .1 Section 1.2 Assignment of Rents. . . . . . . . . . . . . . . . . . .3 Section 1.3 Security Agreement . . . . . . . . . . . . . . . . . . .4 Section 1.4 Pledge of Monies Held. . . . . . . . . . . . . . . . . .4 ARTICLE 2 DEBT AND OBLIGATIONS SECURED . . . . . . . . . . . . . . . . . . .4 Section 2.1 Debt . . . . . . . . . . . . . . . . . . . . . . . . . .4 Section 2.2 Other Obligations. . . . . . . . . . . . . . . . . . . .5 Section 2.3 Debt and Other Obligations . . . . . . . . . . . . . . .5 Section 2.4 Payments . . . . . . . . . . . . . . . . . . . . . . . .5 ARTICLE 3 BORROWER COVENANTS . . . . . . . . . . . . . . . . . . . . . . . .6 Section 3.1 Payment of Debt. . . . . . . . . . . . . . . . . . . . .6 Section 3.2 Incorporation by Reference . . . . . . . . . . . . . . .6 Section 3.3 Insurance. . . . . . . . . . . . . . . . . . . . . . . .6 Section 3.4 Payment of Taxes, etc. . . . . . . . . . . . . . . . . 10 Section 3.5 Escrow Fund. . . . . . . . . . . . . . . . . . . . . . 11 Section 3.6 Condemnation . . . . . . . . . . . . . . . . . . . . . 11 Section 3.7 Leases and Rents . . . . . . . . . . . . . . . . . . . 12 Section 3.8 Maintenance of Property. . . . . . . . . . . . . . . . 13 Section 3.9 Waste. . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 3.10 Compliance With Laws . . . . . . . . . . . . . . . . . 14 Section 3.11 Books and Records. . . . . . . . . . . . . . . . . . . 14 Section 3.12 Payment for Labor and Materials. . . . . . . . . . . . 16 Section 3.13 Management Agreements. . . . . . . . . . . . . . . . . 16 Section 3.14 Performance of Other Agreements. . . . . . . . . . . . 17 Section 3.15 Change of Name, Identity or Structure. . . . . . . . . 18 Section 3.16 Existence. . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE 4 SPECIAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . 18 Section 4.1 Property Use . . . . . . . . . . . . . . . . . . . . . 18 Section 4.2 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . 18 TABLE OF CONTENTS (continued) Page Section 4.3 Single Purpose Entity. . . . . . . . . . . . . . . . . 19 Section 4.4 Restoration. . . . . . . . . . . . . . . . . . . . . . 20 Section 4.5 Lockbox Account. . . . . . . . . . . . . . . . . . . . 26 Section 4.6 Other Debt . . . . . . . . . . . . . . . . . . . . . . 26 ARTICLE 5 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 26 Section 5.1 Warranty of Title. . . . . . . . . . . . . . . . . . . 26 Section 5.2 Authority. . . . . . . . . . . . . . . . . . . . . . . 27 Section 5.3 Legal Status and Authority . . . . . . . . . . . . . . 27 Section 5.4 Validity of Documents. . . . . . . . . . . . . . . . . 27 Section 5.5 Litigation . . . . . . . . . . . . . . . . . . . . . . 27 Section 5.6 Status of Property . . . . . . . . . . . . . . . . . . 27 Section 5.7 No Foreign Person. . . . . . . . . . . . . . . . . . . 29 Section 5.8 Separate Tax Lot . . . . . . . . . . . . . . . . . . . 29 Section 5.9 ERISA Compliance . . . . . . . . . . . . . . . . . . . 29 Section 5.10 Leases . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 5.11 Financial Condition. . . . . . . . . . . . . . . . . . 29 Section 5.12 Business Purposes. . . . . . . . . . . . . . . . . . . 30 Section 5.13 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 5.14 Mailing Address. . . . . . . . . . . . . . . . . . . . 30 Section 5.15 No Change in Facts or Circumstances. . . . . . . . . . 30 Section 5.16 Disclosure . . . . . . . . . . . . . . . . . . . . . . 30 Section 5.17 Third Party Representations. . . . . . . . . . . . . . 30 Section 5.18 Illegal Activity . . . . . . . . . . . . . . . . . . . 30 ARTICLE 6 OBLIGATIONS AND RELIANCES. . . . . . . . . . . . . . . . . . . . 30 Section 6.1 Relationship of Borrower and Lender. . . . . . . . . . 30 Section 6.2 No Reliance on Lender. . . . . . . . . . . . . . . . . 30 Section 6.3 No Lender Obligations. . . . . . . . . . . . . . . . . 31 Section 6.4 Reliance . . . . . . . . . . . . . . . . . . . . . . . 31 ARTICLE 7 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . 31 Section 7.1 Recording of Security Instrument, etc. . . . . . . . . 31 TABLE OF CONTENTS (continued) Page Section 7.2 Further Acts, etc. . . . . . . . . . . . . . . . . . . 32 Section 7.3 Changes in Tax, Debt, Credit and Documentary Stamp Laws32 Section 7.4 Estoppel Certificates. . . . . . . . . . . . . . . . . 32 Section 7.5 Splitting of Security Instrument . . . . . . . . . . . 33 Section 7.6 Replacement Documents. . . . . . . . . . . . . . . . . 34 ARTICLE 8 DUE ON SALE/ENCUMBRANCE. . . . . . . . . . . . . . . . . . . . . 34 Section 8.1 Lender Reliance. . . . . . . . . . . . . . . . . . . . 34 Section 8.2 No Sale/Encumbrance. . . . . . . . . . . . . . . . . . 34 Section 8.3 Sale/Encumbrance Defined . . . . . . . . . . . . . . . 34 Section 8.4 Lender's Rights. . . . . . . . . . . . . . . . . . . . 35 ARTICLE 9 PREPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 9.1 Prepayment Before Event of Default . . . . . . . . . . 35 Section 9.2 Prepayment After Event of Default. . . . . . . . . . . 36 ARTICLE 10 DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 10.1 Events of Default. . . . . . . . . . . . . . . . . . . 36 Section 10.2 Late Payment Charge. . . . . . . . . . . . . . . . . . 39 Section 10.3 Default Interest . . . . . . . . . . . . . . . . . . . 39 ARTICLE 11 RIGHTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . 39 Section 11.1 Remedies . . . . . . . . . . . . . . . . . . . . . . . 39 Section 11.2 Application of Proceeds. . . . . . . . . . . . . . . . 41 Section 11.3 Right to Cure Defaults . . . . . . . . . . . . . . . . 42 Section 11.4 Actions and Proceedings. . . . . . . . . . . . . . . . 42 Section 11.5 Recovery of Sums Required To Be Paid . . . . . . . . . 42 Section 11.6 Examination of Books and Records . . . . . . . . . . . 42 Section 11.7 Other Rights, etc. . . . . . . . . . . . . . . . . . . 43 Section 11.8 Right to Release Any Portion of the Property . . . . . 43 Section 11.9 Violation of Laws. . . . . . . . . . . . . . . . . . . 43 Section 11.10 Recourse and Choice of Remedies. . . . . . . . . . . . 43 Section 11.11 Right of Entry . . . . . . . . . . . . . . . . . . . . 44 ARTICLE 12 ENVIRONMENTAL HAZARDS . . . . . . . . . . . . . . . . . . . 44 TABLE OF CONTENTS (continued) Page Section 12.1 Environmental Representations and Warranties . . . . . 44 Section 12.2 Environmental Covenants. . . . . . . . . . . . . . . . 46 Section 12.3 Lender's Rights. . . . . . . . . . . . . . . . . . . . 47 ARTICLE 13 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 47 Section 13.1 General Indemnification. . . . . . . . . . . . . . . . 47 Section 13.2 Mortgage and/or Intangible Tax . . . . . . . . . . . . 48 Section 13.3 ERISA Indemnification. . . . . . . . . . . . . . . . . 48 Section 13.4 Environmental Indemnification. . . . . . . . . . . . . 48 Section 13.5 Duty to Defend; Attorneys' Fees and Other Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 ARTICLE 14 WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 14.1 Waiver of Counterclaim . . . . . . . . . . . . . . . . 50 Section 14.2 Marshalling and Other Matters. . . . . . . . . . . . . 50 Section 14.3 Waiver of Notice . . . . . . . . . . . . . . . . . . . 50 Section 14.4 Waiver of Statute of Limitations . . . . . . . . . . . 51 Section 14.5 Sole Discretion of Lender. . . . . . . . . . . . . . . 51 Section 14.6 Survival . . . . . . . . . . . . . . . . . . . . . . . 51 Section 14.7 WAIVER OF TRIAL BY JURY. . . . . . . . . . . . . . . . 51 ARTICLE 15 EXCULPATION . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 15.1 Exculpation. . . . . . . . . . . . . . . . . . . . . . 52 Section 15.2 Reservation of Certain Rights. . . . . . . . . . . . . 52 Section 15.3 Exceptions to Exculpation. . . . . . . . . . . . . . . 52 Section 15.4 Recourse . . . . . . . . . . . . . . . . . . . . . . . 53 Section 15.5 Bankruptcy Claims. . . . . . . . . . . . . . . . . . . 53 ARTICLE 16 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 16.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . 53 ARTICLE 17 SERVICE OF PROCESS. . . . . . . . . . . . . . . . . . . . . 54 Section 17.1 Submission to Jurisdiction . . . . . . . . . . . . . . 54 Section 17.2 Jurisdiction Not Exclusive . . . . . . . . . . . . . . 55 ARTICLE 18 APPLICABLE LAW. . . . . . . . . . . . . . . . . . . . . . . 55 Section 18.1 Choice of Law. . . . . . . . . . . . . . . . . . . . . 55 TABLE OF CONTENTS (continued) Page Section 18.2 Usury Laws . . . . . . . . . . . . . . . . . . . . . . 55 Section 18.3 Provisions Subject to Applicable Law . . . . . . . . . 55 ARTICLE 19 SECONDARY MARKET. . . . . . . . . . . . . . . . . . . . . . 55 Section 19.1 Transfer of Loan . . . . . . . . . . . . . . . . . . . 55 ARTICLE 20 COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Section 20.1 Performance at Borrower's Expense. . . . . . . . . . . 56 Section 20.2 Attorney's Fees for Enforcement. . . . . . . . . . . . 56 ARTICLE 21 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 57 Section 21.1 General Definitions. . . . . . . . . . . . . . . . . . 57 ARTICLE 22 MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . 57 Section 22.1 No Oral Change . . . . . . . . . . . . . . . . . . . . 57 Section 22.2 Liability. . . . . . . . . . . . . . . . . . . . . . . 57 Section 22.3 Inapplicable Provisions. . . . . . . . . . . . . . . . 57 Section 22.4 Headings, etc. . . . . . . . . . . . . . . . . . . . . 58 Section 22.5 Duplicate Originals; Counterparts. . . . . . . . . . . 58 Section 22.6 Number and Gender. . . . . . . . . . . . . . . . . . . 58 Section 22.7 Entire Agreement . . . . . . . . . . . . . . . . . . . 58 ARTICLE 23 CROSS-COLLATERALIZATION . . . . . . . . . . . . . . . . . . 58 THIS MORTGAGE AND SECURITY AGREEMENT (this "Security Instrument") is made as of the 22nd day of October, 1998, by WELLSFORD CAPITAL PROPERTIES, L.L.C., a Delaware limited liability company having its principal place of business c/o Wellsford Real Properties, Inc., 610 Fifth Avenue, New York, New York 10020, as mortgagor ("Borrower") to LEHMAN BROTHERS HOLDINGS INC., doing business as Lehman Capital, a division of Lehman Brothers Holdings Inc., a Delaware corporation, having an address at 3 World Financial Center, 12th Floor, New York, New York 10285-1200, as mortgagee ("Lender"). R E C I T A L S: Borrower by its promissory note of even date herewith given to Lender is indebted to Lender in the principal sum of Twenty-Eight Million and 00/100 Dollars ($28,000,000.00) in lawful money of the United States of America (the note together with all extensions, renewals, modifications, substitutions and amendments thereof shall collectively be referred to as the "Note"), with interest from the date thereof at the rates set forth in the Note, principal and interest to be payable in accordance with the terms and conditions provided in the Note. Borrower desires to secure the payment of the Debt (as defined in Article 2) and the performance of all of its obligations under the Note and the Other Obligations (as defined in Article 2). ARTICLE 1 GRANTS OF SECURITY Section 1.1 Property Mortgaged. Borrower, for consideration paid, does hereby irrevocably mortgage, grant, bargain, sell, pledge, assign, warrant, transfer and convey to Lender with MORTGAGE COVENANTS, and grant a security interest to Lender in, the following property, rights, interests and estates now owned, or hereafter acquired by Borrower (collectively, the "Property"): (a) Land. The real property described in Exhibit A attached hereto and made a part hereof (the "Land"); (b) Additional Land. All additional lands, estates and development rights hereafter acquired by Borrower for use in connection with the Land and the development of the Land and all additional lands and estates therein which may, from time to time, by supplemental mortgage or otherwise be expressly made subject to the lien of this Security Instrument: (c) Improvements. The buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements now or hereafter erected or located on the Land (the "Improvements"); (d) Easements. All easements, rights-of-way or use, rights, strips and gores of land, streets, ways, alleys, passages, sewer rights, water, water courses, water rights and powers, air rights and development rights, and all estates, rights, titles, interests, privileges, liberties, servitudes, tenements, hereditaments and appurtenances of any nature whatsoever, in any way now or hereafter belonging, relating or pertaining to the Land and the Improvements and the reversion and reversions, remainder and remainders, and all land lying in the bed of any street, road or avenue, opened or proposed, in front of or adjoining the Land, to the center line thereof and all the estates, rights, titles, interests, dower and rights of dower, curtesy and rights of curtesy, property, possession, claim and demand whatsoever, both at law and in equity, of Borrower of, in and to the Land and the Improvements and every part and parcel thereof, with the appurtenances thereto, and all minerals, oils, gas and other hydrocarbon substances thereon or therein; (e) Fixtures and Personal Property. All machinery, equipment, fixtures (including, but not limited to, all heating, air conditioning, plumbing, lighting, communications and elevator fixtures) and other property of every kind and nature whatsoever owned by Borrower, or in which Borrower has or shall have an interest, now or hereafter located upon the Land and the Improvements, or appurtenant thereto, and usable in connection with the present or future operation and occupancy of the Land and the Improvements and all building equipment, materials and supplies of any nature whatsoever owned by Borrower, or in which Borrower has or shall have an interest, now or hereafter located upon the Land and the Improvements, or appurtenant thereto, or usable in connection with the present or future operation and occupancy of the Land and the Improvements (collectively, the "Personal Property"), and the right, title and interest of Borrower in and to any of the Personal Property which may be subject to any security interests, as defined in the Uniform Commercial Code, as adopted and enacted by the state or states where any of the Property is located (the "Uniform Commercial Code"), superior in lien to the lien of this Security Instrument and all proceeds and products of the above; (f) Leases and Rents. All leases and other agreements affecting the use, enjoyment or occupancy of all or any part of the Land and the Improvements heretofore or hereafter entered into, whether before or after the filing by or against Borrower of any petition for relief under 11 U.S.C. Section 101 et seq., as the same may be amended from time to time (the "Bankruptcy Code") together with all extensions, renewals, guaranties and/or modifications of, and substitutions for, the same (the "Leases") and all right, title and interest of Borrower, its successors and assigns therein and thereunder, including, without limitation, cash or securities deposited thereunder to secure the performance by the lessees of their obligations thereunder and all rents, revenues, issues and profits, royalties, income and other benefits, including those now due, past due and to become due, under or by virtue of the Leases, including without limitation, base rents, minimum rents, additional rents, percentage rents, security deposits, charges for parking, maintenance, taxes and insurance, deficiency rents and damages following default, the premium payable by any tenant upon the exercise of a cancellation privilege provided in any Lease, all proceeds payable under any policy of insurance covering loss of rent resulting from any destruction or damage to all or any part of the Property, and all other rights and claims of any kind which Borrower may have against any tenant or any other occupant of all or any part of the Property (including all oil and gas or other mineral royalties and bonuses) from the Land and the Improvements whether paid or accruing before or after the filing by or against Borrower of any petition for relief under the Bankruptcy Code (the "Rents") and all proceeds from the sale or other disposition of the Leases and the right to receive and apply the Rents to the payment of the Debt; (g) Condemnation Awards. All awards or payments, including interest thereon, which may heretofore and hereafter be made with respect to the Property, whether from the exercise of the right of eminent domain (including but not limited to any transfer made in lieu of or in anticipation of the exercise of the right), or for a change of grade, or for any other injury to or decrease in the value of the Property; (h) Insurance Proceeds. All proceeds of and any unearned premiums on any insurance policies covering the Property, including, without limitation, the right to receive and apply the proceeds of any insurance, judgments, or settlements made in lieu thereof, for damage to the Property; (i) Tax Certiorari. All refunds, rebates or credits in connection with a reduction in real estate taxes and assessments charged against the Property as a result of tax certiorari or any applications or proceedings for reduction; (j) Conversion. All proceeds of the conversion, voluntary or involuntary, of any of the foregoing including, without limitation, proceeds of insurance and condemnation awards, into cash or liquidation claims; (k) Rights. The right, in the name and on behalf of Borrower, to appear in and defend any action or proceeding brought with respect to the Property and to commence any action or proceeding to protect the interest of Lender in the Property; (1) Agreements. All agreements, contracts, certificates, instruments, franchises, permits, licenses, plans, specifications and other documents, now or hereafter entered into, and all rights therein and thereto, respecting or pertaining to the use, occupation, construction, management or operation of the Land and any part thereof and any Improvements or respecting any business or activity conducted on the Land and any part thereof and all right, title and interest of Borrower therein and thereunder, including, without limitation, the right, upon the happening of any default hereunder, to receive and collect any sums payable to Borrower thereunder; (m) Trademarks. All tradenames, trademarks, servicemarks, logos, copyrights, goodwill, books and records and all other general intangibles relating to or used in connection with the operation of the Property; and (n) Other Rights. Any and all other rights of Borrower in and to the items set forth in Subsections (a) through (m) above. Section 1.2 Assignment of Rents. Borrower hereby absolutely and unconditionally assigns to Lender Borrower's right, title and interest in and to all current and future Leases and Rents; it being intended by Borrower that this assignment constitutes a present, absolute assignment and not an assignment for additional security only. Nevertheless, subject to the terms of this Section 1.2 and Section 3.7, Lender grants to Borrower a revocable license to collect and receive the Rents. Borrower shall hold the Rents, or a portion thereof sufficient to discharge all current sums due on the Debt, for use in the payment of such sums. Section 1.3 Security Agreement. This Security Instrument is both a real property mortgage and a "security agreement" within the meaning of the Uniform Commercial Code. The Property includes both real and personal property and all other rights and interests, whether tangible or intangible in nature, of Borrower in the Property. By executing and delivering this Security Instrument, Borrower hereby grants to Lender, as security for the Obligations (defined in Section 2.3), a security interest in the Personal Property to the full extent that the Personal Property may be subject to the Uniform Commercial Code. Section 1.4 Pledge of Monies Held. Borrower hereby pledges to Lender any and all monies now or hereafter held by Lender, including, without limitation, any sums deposited in the Escrow Fund (as defined in Section 3.5), Net Proceeds (as defined in Section 4.4), the Lockbox Account (as defined in Section 4.5) and condemnation awards or payments described in Section 4.4, as additional security for the Obligations until expended or applied as provided in this Security Instrument. CONDITIONS TO GRANT TO HAVE AND TO HOLD the above granted and described Property unto and to the use and benefit of Lender, and the successors and assigns of Lender, forever; PROVIDED, HOWEVER, these presents are upon the express condition that, if Borrower shall well and truly pay to Lender the Debt at the time and in the manner provided in the Note and this Security Instrument, shall well and truly perform the Other Obligations as set forth in this Security Instrument and shall well and truly abide by and comply with each and every covenant and condition set forth herein and in the Note, these presents and the estate hereby granted shall cease, terminate and be void. ARTICLE 2 DEBT AND OBLIGATIONS SECURED Section 2.1 Debt. This Security Instrument and the grants, assignments and transfers made in Article 1 are given for the purpose of securing the following, in such order of priority as Lender may determine in its sole discretion (the "Debt"): (a) the payment of the indebtedness evidenced by the Note in lawful money of the United States of America; (b) the payment of interest, default interest, late charges and other sums, as provided in the Note, this Security Instrument or the Other Security Documents (defined below); (c) the payment of the Prepayment Fee (as defined in the Note); (d) the payment of all other moneys agreed or provided to be paid by Borrower in the Note, this Security Instrument or the Other Security Documents (as defined herein); (e) the payment of all sums advanced pursuant to this Security Instrument to protect and preserve the Property and the lien and the security interest created hereby; and (f) the payment of all sums advanced and reasonable costs and expenses incurred by Lender in connection with the Debt or any part thereof, any renewal, extension, or change of or substitution for the Debt or any part thereof, or the acquisition or perfection of the security therefor, whether made or incurred at the request of Borrower or Lender. Section 2.2 Other Obligations. This Security Instrument and the grants, assignments and transfers made in Article 1 are also given for the purpose of securing the following (the "Other Obligations"): (a) the performance of all other obligations of Borrower contained herein; (b) the performance of each obligation of Borrower contained in any other agreement given by Borrower to Lender which is for the purpose of further securing the obligations secured hereby, and any amendments, modifications and changes thereto; and (c) the performance of each obligation of Borrower contained in any renewal, extension, amendment, modification, consolidation, change of, or substitution or replacement for, all or any part of the Note, this Security Instrument or the Other Security Documents. Section 2.3 Debt and Other Obligations. Borrower's obligations for the payment of the Debt and the performance of the Other Obligations shall be referred to collectively below as the "Obligations." Section 2.4 Payments. Unless payments are made in the required amount in immediately available funds at the place where the Note is payable, remittances in payment of all or any part of the Debt shall not, regardless of any receipt or credit issued therefor, constitute payment until the required amount is actually received by Lender in funds immediately available at the place where the Note is payable (or any other place as Lender, in Lender's sole discretion, may have established by delivery of written notice thereof to Borrower) and shall be made and accepted subject to the condition that any check or draft may be handled for collection in accordance with the practice of the collecting bank or banks. Acceptance by Lender of any payment in an amount less than the amount then due shall be deemed an acceptance on account only, and the failure to pay the entire amount then due shall be and continue to be an Event of Default (defined below). ARTICLE 3 BORROWER COVENANTS Borrower covenants and agrees that: Section 3.1 Payment of Debt. Borrower will pay the Debt at the time and in the manner provided in the Note and in this Security Instrument. Section 3.2 Incorporation by Reference. All the covenants, conditions and agreements contained in (a) the Note and (b) all and any of the documents other than the Note or this Security Instrument now or hereafter executed by Borrower and/or others and by or in favor of Lender, which wholly or partially secure or guaranty payment of the Note (the "Other Security Documents"), are hereby made a part of this Security Instrument to the same extent and with the same force as if fully set forth herein. Section 3.3 Insurance. (a) Borrower shall obtain and maintain, or cause to be maintained, insurance for Borrower and the Property providing at least the following coverages: (i) comprehensive all risk insurance on the Improvements and the Personal Property, including contingent liability from Operation of Building Laws, Demolition Costs and Increased Cost of Construction Endorsements, in each case (A) in an amount equal to 100% of the "Full Replacement Cost," which for purposes of this Security Instrument shall mean actual replacement value (exclusive of costs of excavations, foundations, underground utilities and footings) with a waiver of depreciation, but the amount shall in no event be less than the allocated loan amount for the Property as set forth in Exhibit A to the Note; (B) containing an agreed amount endorsement with respect to the Improvements and Personal Property waiving all co-insurance provisions; (C) providing for no deductible in excess of the lesser of $10,000.00 and one percent (1%) of the face value of such policy; and (D) containing an "Ordinance or Law Coverage" or "Enforcement" endorsement if any of the Improvements or the use of the Property shall at any time constitute legal non-conforming structures or uses. The Full Replacement Cost shall be redetermined from time to time (but not more frequently than once in any twenty-four (24) calendar months) at the request of Lender by an appraiser or contractor designated and paid by Borrower and approved by Lender, or by an engineer or appraiser in the regular employ of the insurer. After the first appraisal, additional appraisals may be based on construction cost indices customarily employed in the trade. No omission on the part of Lender to request any such ascertainment shall relieve Borrower of any of its obligations under this Subsection. In addition, Borrower shall obtain (y) flood hazard insurance if any portion of the Improvements is currently or at any time in the future located in a federally designated "special flood hazard area", such flood hazard insurance to be in an amount equal to the lesser of (a) the allocated loan amount for the Property as set forth on Exhibit A to the Note or (b) the maximum amount of such insurance available under the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform Act of 1994, as each may be amended; and (z) earthquake insurance in amounts and in form and substance satisfactory to Lender in the event the Property is located in an area with a high degree of seismic activity, provided that the insurance pursuant to clauses (y) and (z) hereof shall be on terms consistent with the comprehensive all risk insurance policy required under this Subsection 3.3(a)(i) except that the deductible on such insurance shall not be in excess of five percent (5%) of the allocated loan amount for the Property as set forth on Exhibit A to the Note; (ii) commercial general liability insurance against claims for personal injury, bodily injury, death or property damage occurring upon, in or about the Property, such insurance (A) to be on the so-called "occurrence" form with a combined single limit of not less than $1,000,000.00; (B) to continue at not less than the aforesaid limit until required to be changed by Lender in writing by reason of changed economic conditions making such protection inadequate as determined by Lender in the exercise of its reasonable discretion; and (C) to cover at least the following hazards: (1) premises and operations; (2) products and completed operations on an "if any" basis; (3) independent contractors; (4) blanket contractual liability for all written and oral contracts; and (5) contractual liability covering the indemnities contained in Article 13 hereof to the extent the same is available; (iii) business income insurance (A) with loss payable to Lender; (B) covering all risks required to be covered by the insurance provided for in Subsection 3.3(a)(i); (C) containing an extended period of indemnity endorsement which provides that after the physical loss to the Improvements and Personal Property has been repaired, the continued loss of income will be insured until such income either returns to the same level it was at prior to the loss, or the expiration of twenty-four (24) months from the date of the loss, whichever first occurs, and notwithstanding that the policy may expire prior to the end of such period; and (D) in an amount equal to 100% of the projected gross income from the Property for a period of twelve (12) months. The amount of such business income insurance shall be determined prior to the date hereof and at least once each year thereafter based on Borrower's reasonable estimate of the gross income from the Property for the succeeding twenty-four (24) month period. All insurance proceeds payable to Lender pursuant to this Subsection 3.3(a)(iii) shall be held by Lender and shall be applied to the obligations secured hereunder from time to time due and payable hereunder and under the Note; provided, however, that nothing herein contained shall be deemed to relieve Borrower of its obligations to pay the obligations secured hereunder on the respective dates of payment provided for in the Note except to the extent such amounts are actually paid out of the proceeds of such business income insurance; (iv) at all times during which structural construction, repairs or alterations are being made with respect to the Improvements (A) owner's contingent or protective liability insurance covering claims not covered by or under the terms or provisions of the above mentioned commercial general liability insurance policy; and (B) the insurance provided for in Subsection 3.3(a)(i) shall be written in a so-called builder's risk completed value form (1) on a non-reporting basis, (2) against all risks insured against pursuant to Subsection 3.3(a)(i), (3) including permission to occupy the Property, and (4) with an agreed amount endorsement waiving co-insurance provisions; (v) workers' compensation, subject to the statutory limits of the state in which the Property is located, and employer's liability insurance with a limit of at least $1,000,000.00 per accident and per disease per employee, and $1,000,000.00 for disease aggregate in respect of any work or operations on or about the Property, or in connection with the Property or its operation (if applicable); (vi) comprehensive boiler and machinery insurance, if applicable, in amounts as shall be reasonably required by Lender on terms consistent with the comprehensive all risk insurance policy required under Subsection 3.3(a)(i); (vii) umbrella liability insurance in an amount not less than $50,000,000.00 per occurrence on terms consistent with the commercial general liability insurance policy required under Subsection 3.3(a)(ii); (viii) motor vehicle liability coverage for all owned and non-owned vehicles, including rented and leased vehicles containing minimum limits per occurrence of $1,000,000.00; and (ix) such other insurance and in such amounts as Lender from time to time may reasonably request against such other insurable hazards which at the time are commonly insured against for property similar to the Property located in or around the region in which the Property is located. (b) All insurance provided for in Subsection 3.3(a) hereof shall be obtained under valid and enforceable policies (the "Policies" or in the singular, the "Policy"), and shall be subject to the reasonable approval of Lender as to insurance companies, amounts, forms, deductibles, loss payees and insureds. The Policies shall be issued by financially sound and responsible insurance companies authorized to do business in the state in which the Property is located and approved by Lender in the exercise of its reasonable discretion. The insurance companies must have a rating of "Aa1" or better for claims paying ability assigned by Moody's Investors Service, Inc. and a rating from A.M. Best's of at least A:XV, and in the event such insurance companies are rated by Fitch Investors Service, Inc. and Duff & Phelps Credit Rating Company, and if there are any Securities (defined in Section 19.1 below) issued which have been assigned a rating by a credit rating agency approved by Lender (a "Rating Agency"), the insurance company shall have a claims paying ability rating by such Rating Agency equal to or greater than the rating of the highest class of the Securities (each such insurer shall be referred to below as a "Qualified Insurer"). The Policies described in Subsections 3.3(a)(i), (iii), (iv)(B) and (vi) shall designate Lender as loss payee. Not less than thirty (30) days prior to the expiration dates of the Policies theretofore furnished to Lender pursuant to Subsection 3.3(a), certified copies of the Policies marked "premium paid" or accompanied by evidence satisfactory to Lender of payment of the premiums due thereunder (the "Insurance Premiums") shall be delivered by Borrower to Lender; provided, however, that in the case of renewal Policies, Borrower may furnish Lender with binders therefor to be followed by the original Policies when issued. (c) Borrower shall not obtain (i) any umbrella or blanket liability or casualty Policy unless, in each case, such Policy is approved in advance in writing by Lender and Lender's interest is included therein as provided in this Security Instrument and such Policy is issued by a Qualified Insurer, or (ii) separate insurance concurrent in form or contributing in the event of loss with that required in Subsection 3.3(a) to be furnished by, or which may be reasonably required to be furnished by, Borrower. In the event Borrower obtains separate insurance or an umbrella or a blanket Policy, Borrower shall notify Lender of the same and shall cause certified copies of each Policy to be delivered as required in Subsection 3.3(a). Any blanket insurance Policy shall specifically allocate to the Property the amount of coverage from time to time required hereunder and shall otherwise provide the same protection as would a separate Policy insuring only the Property in compliance with the provisions of Subsection 3.3(a). (d) All Policies of insurance provided for or contemplated by Subsection 3.3(a), except for the Policy referenced in Subsection (a)(v), shall name Lender and Borrower as the insured or additional insured, as their respective interests may appear, and in the case of property damage, boiler and machinery, flood and earthquake insurance, shall contain a so-called New York standard non-contributing mortgagee clause in favor of Lender providing that the loss thereunder shall be payable to Lender. (e) All Policies of insurance provided for in Subsection 3.3(a) shall contain clauses or endorsements to the effect that: (i) no act or negligence of Borrower, or anyone acting for Borrower, or of any tenant under any Lease or other occupant, or failure to comply with the provisions of any Policy which might otherwise result in a forfeiture of the insurance or any part thereof, shall in any way affect the validity or enforceability of the insurance insofar as Lender is concerned; (ii) the Policy shall not be materially changed (other than to increase the coverage provided thereby) or cancelled without at least 30 days' written notice to Lender and any other party named therein as an insured; and (iii) each Policy shall provide that the issuers thereof shall give written notice to Lender if the Policy has not been renewed thirty (30) days prior to its expiration; and (iv) Lender shall not be liable for any Insurance Premiums thereon or subject to any assessments thereunder. (f) Borrower shall furnish to Lender, on or before thirty (30) days after the close of each of Borrower's fiscal years, a statement certified by Borrower or a duly authorized officer of Borrower of the amounts of insurance maintained in compliance herewith, of the risks covered by such insurance and of the insurance company or companies which carry such insurance and, if requested by Lender, verification of the adequacy of such insurance by an independent insurance broker or appraiser acceptable to Lender. (g) If at any time Lender is not in receipt of written evidence that all insurance required hereunder is in full force and effect, Lender shall have the right, without notice to Borrower, to take such action as Lender deems necessary to protect its interest in the Property, including, without limitation, the obtaining of such insurance coverage as Lender in its sole discretion deems appropriate, and all expenses incurred by Lender in connection with such action or in obtaining such insurance and keeping it in effect shall be paid by Borrower to Lender upon demand and until paid shall be secured by this Security Instrument and shall bear interest in accordance with Section 10.3 hereof. (h) If the Property shall be damaged or destroyed, in whole or in part, by fire or other casualty, Borrower shall give prompt notice of such damage to Lender and shall promptly commence and diligently prosecute the completion of the repair and restoration of the Property as nearly as possible to the condition the Property was in immediately prior to such fire or other casualty, with such alterations as may be approved by Lender (the "Restoration") and otherwise in accordance with Section 4.4 of this Security Instrument. Borrower shall pay all costs of such Restoration whether or not such costs are covered by insurance. Lender may, but shall not be obligated to make proof of loss if not made promptly by Borrower. (i) In the event of foreclosure of this Security Instrument, or other transfer of title to the Property in extinguishment in whole or in part of the Debt, all right, title and interest of Borrower in and to such policies then in force concerning the Property and all proceeds payable thereunder shall thereupon vest in the purchaser at such foreclosure or Lender or other transferee in the event of such other transfer of title. Section 3.4 Payment of Taxes, etc. Borrower shall promptly pay all taxes, assessments, water rates, sewer rents, governmental impositions, and other charges, including without limitation vault charges and license fees for the use of vaults, chutes and similar areas adjoining the Land, now or hereafter levied or assessed or imposed against the Property or any part thereof (the "Taxes"), all ground rents, maintenance charges and similar charges, now or hereafter levied or assessed or imposed against the Property or any part thereof (the "Other Charges"), and all charges for utility services provided to the Property as same become due and payable. Borrower will deliver to Lender, promptly upon Lender's request, evidence satisfactory to Lender that the Taxes, Other Charges and utility service charges have been so paid or are not then delinquent. Borrower shall not suffer and shall promptly cause to be paid and discharged any lien or charge whatsoever which may be or become a lien or charge against the Property. Except to the extent sums sufficient to pay all Taxes and Other Charges have been deposited with Lender in accordance with the terms of this Security Instrument and/or the Lockbox Agreement, Borrower shall furnish to Lender paid receipts for the payment of the Taxes and Other Charges prior to the date the same shall become delinquent. If any Taxes or Other Charges are not paid as herein provided or pursuant to the Lockbox Agreement, Lender shall have the right to pay the same, together with any penalty and interest thereon, and the amount or amounts so paid or advanced shall forthwith be payable by Borrower to Lender and shall be secured by the lien of this Security Instrument; provided, however, that Borrower may in good faith contest, at Borrower's own cost and expenses, by proper legal proceedings, the validity or amount of any Taxes or Other Charges, on the condition that Borrower first shall, unless the contested amount is paid in full when due despite such contest, deposit with Lender, as security for the payment of such contested item, an amount equal to the contested item plus all penalties and interest which would be payable if Borrower is ultimately required to pay such contested item, and on the further condition that no amount so contested may remain unpaid for such length of time as shall permit the Property, or the lien thereon created by the item being contested, to be sold for the nonpayment thereof, or as shall permit an action, either of foreclosure or otherwise, to be commenced by the holder of any such lien, or as shall permit the Property to be otherwise in danger of sale, forfeiture or loss by reason of such proceedings. Borrower will not claim any credit on, or make any deduction from the Debt by reason of the payment of any Taxes or Other Charges. Section 3.5 Escrow Fund. In addition to the initial deposits with respect to Taxes, Premiums and Other Charges made by Borrower to Lender on the date hereof in accordance with the Lockbox Agreement, Borrower shall pay to Lender on the first day of each calendar month (a) one-twelfth of an amount which would be sufficient to pay the Taxes payable, or estimated by Lender to be payable, during the next ensuing twelve (12) months, (b) one- twelfth of an amount which would be sufficient to pay the Insurance Premiums due for the renewal of the coverage afforded by the Policies upon the expiration thereof and (c) one-twelfth of an amount which would be sufficient to pay the Other Charges payable, or estimating by Lender to be payable, during the next ensuing twelve (12) months (the amounts in (a), (b) and (c) above shall be called the "Escrow Fund"). Borrower agrees to notify Lender immediately of any changes to the amounts, schedules and instructions for payment of any Taxes, Insurance Premiums and Other Charges of which it has obtained knowledge and authorizes Lender or its agent to obtain the bills for Taxes and Other Charges directly from the appropriate taxing authority or other appropriate party. The Escrow Fund and the payments of interest or principal or both, payable pursuant to the Note shall be added together and shall be paid as an aggregate sum by Borrower to Lender. Lender will apply the Escrow Fund to payments of Taxes, Insurance Premiums and Other Charges required to be made by Borrower pursuant to Sections 3.3 and 3.4 hereof. If the amount of the Escrow Fund shall exceed the amounts due for Taxes, Insurance Premiums and Other Charges pursuant to Sections 3.3 and 3.4 hereof, Lender shall, in its discretion, return any excess to Borrower or credit such excess against future payments to be made to the Escrow Fund. In allocating such excess, Lender may deal with the person shown on the records of Lender to be the owner of the Property. If the Escrow Fund is not sufficient to pay the items set forth in clauses (a), (b) and (c) of this Section 3.5 above, Borrower shall promptly pay to Lender, upon demand, an amount which Lender shall estimate as sufficient to make up the deficiency. The Escrow Fund shall not constitute a trust fund and may be commingled with other monies held by Lender. No earnings on interest on the Escrow Fund shall be payable to Borrower. The Escrow Fund shall be established pursuant to the terms and provisions of the Lockbox Agreement. In the event of any inconsistency between the terms and provisions of this Section 3.5 and the terms and provisions of the Lockbox Agreement, the terms and provisions of the Lockbox Agreement shall control. Section 3.6 Condemnation. Borrower shall promptly give Lender notice of the actual or threatened commencement of any condemnation or eminent domain proceeding and shall deliver to Lender copies of any and all papers served in connection with such proceedings. Lender may participate in any such proceedings, and Borrower shall from time to time deliver to Lender all instruments requested by it to permit such participation. Borrower shall, at its expense, diligently prosecute any such proceedings, and shall consult with Lender, its attorneys and experts, and cooperate with them in the carrying on or defense of any such proceedings. Notwithstanding any taking by any public or quasi-public authority through eminent domain or otherwise (including but not limited to any transfer made in lieu of or in anticipation of the exercise of such taking), Borrower shall continue to pay the Debt at the time and in the manner provided for its payment in the Note and in this Security Instrument and the Debt shall not be reduced until any award or payment therefor shall have been actually received and applied by Lender, after the deduction of reasonable expenses of collection, to the reduction or discharge of the Debt. Lender shall not be limited to the interest paid on the award by the condemning authority but shall be entitled to receive out of the award interest at the rate or rates provided herein or in the Note. If the Property or any portion thereof is taken by a condemning authority, Borrower shall promptly commence and diligently prosecute the Restoration of the Property and otherwise comply with the provisions of Section 4.4 of this Security Instrument. If the Property is sold, through foreclosure or otherwise, prior to the receipt by Lender of the award or payment, Lender shall have the right, whether or not a deficiency judgment on the Note shall have been sought, recovered or denied, to receive the award or payment, or a portion thereof sufficient to pay the Debt. Section 3.7 Leases and Rents. (a) Except as otherwise consented to by Lender, all Leases shall be written on the standard form of lease which shall have been approved by Lender (the "Standard Lease Form"). Upon request, Borrower shall furnish Lender with executed copies of all Leases. No material changes may be made to the Standard Lease Form without the prior written consent of Lender. In addition, all renewals of Leases and all proposed leases shall provide for rental rates and terms comparable to existing local market rates and terms and shall be arms-length transactions with bona fide, independent third party tenants. All proposed leases and renewals of existing Leases shall be subject to the prior approval of Lender and its counsel, at Borrower's expense. All Leases shall provide that they are subordinate to this Security Instrument and that the lessee agrees to attorn to Lender, provided that, upon request of any proposed tenant in connection with any proposed Lease in excess of 5,000 rentable square feet, Lender will agree not to disturb the tenant's possession of the premises demised thereunder for so long as the tenant is not in default under the Lease beyond the expiration of any applicable notice or grace period pursuant, and subject, to the terms and provisions of a subordination, non-disturbance and attornment agreement in Lender's customary form (or in the form provided in the Lease or by Tenant, if reasonably acceptable to Lender) (an "SNDA") in respect of such Lease. Borrower (i) shall observe and perform all the obligations imposed upon the lessor under the Leases and shall not do or permit to be done anything to impair the value of the Leases as security for the Debt; (ii) shall promptly send copies to Lender of all notices of default which Borrower shall send or receive thereunder; (iii) shall enforce all of the terms, covenants and conditions contained in the Leases upon the part of the lessee thereunder to be observed or performed, short of termination thereof; Borrower may terminate, however, Minor Leases as the result of a default by lessee thereunder; (iv) shall not collect any of the Rents more than one (1) month in advance; (v) shall not execute any other assignment of the lessor's interest in the Leases or the Rents; (vi) except as expressly permitted herein, shall not alter, modify or change the terms of the Leases without the prior written consent of Lender, or cancel or terminate the Leases or accept a surrender thereof or convey or transfer or suffer or permit a conveyance or transfer of the Land or of any interest therein so as to effect a merger of the estates and rights of, or a termination or diminution of the obligations of, lessees thereunder; (vii) shall not alter, modify or change the terms of any guaranty, letter of credit or other credit support with respect to the Leases (the "Lease Guaranty") or cancel or terminate such Lease Guaranty without the prior written consent of Lender; and (viii) shall not consent to any assignment of or subletting under the Leases not in accordance with their terms, without the prior written consent of Lender. (b) Notwithstanding the provisions of Subsection (a) above, renewals of existing commercial Leases and proposed leases for commercial space shall not be subject to the prior approval of Lender provided all of the following conditions are satisfied: (i) the renewal Lease or series of leases or proposed lease or series of leases covers less than 5,000 rentable square feet, in the aggregate (any such lease or series of leases demising less than 5,000 rentable square feet of the Property being hereinafter referred to as a "Minor Lease"), (ii) the renewal Lease or series of leases or proposed lease or series of leases shall be written on the standard form of Lease which shall have been approved by Lender, (iii) no rent credits, free rents or concessions have been granted under the renewal Lease or proposed lease which are inconsistent with customary leasing practices in the local market in which the Property is located, (iv) the renewal Lease or proposed lease shall provide for rental rates and terms comparable to existing local market rates and terms, (v) the renewal Lease or proposed lease shall be an arms-length transaction with a bona fide, independent third party tenant, and (vi) the renewal Lease or proposed lease shall satisfy such additional criteria as shall be reasonably required by Lender in its sole discretion and of which Borrower has been notified by Lender. Borrower shall deliver to Lender copies of all Leases which are entered into pursuant to the preceding sentence together with Borrower's certification that it has satisfied all of the conditions of the preceding sentence within thirty (30) days after the execution of the Lease. (c) To the extent permitted by law, Borrower shall promptly deposit with Lender any and all monies representing security deposits under the Leases, whether or not Borrower actually received such monies (the "Security Deposits"). Lender shall hold the Security Deposits in accordance with the terms of the respective Lease, and shall only release the Security Deposits in order to return a tenant's Security Deposit to such tenant if such tenant is entitled to the return of the Security Deposit under the terms of the Lease and is not otherwise in default under the Lease. To the extent required by Applicable Laws (defined below), Lender shall hold the Security Deposits in an interest-bearing account selected by Lender in its sole discretion (it being understood that (i) Lender or Servicer shall have no obligation to maximize the return or yield on any sums so invested, and (ii) any such interest shall constitute additional security for the Obligations). In the event Lender is not permitted by law to hold the Security Deposits, Borrower shall deposit the Security Deposits into an account with a federally insured institution as approved by Lender. Section 3.8 Maintenance of Property. Borrower shall cause the Property to be maintained in a good and safe condition and repair, reasonable wear and tear excepted. The Improvements and the Personal Property shall not be removed, demolished or materially altered (except for normal replacement of the Personal Property) without the consent of Lender. Borrower shall promptly repair, replace or rebuild any part of the Property which may be destroyed by any casualty, or become damaged, worn or dilapidated or which may be affected by any proceeding of the character referred to in Section 3.6 hereof and shall complete and pay for any structure at any time in the process of construction or repair on the Land. Borrower shall not initiate, join in, acquiesce in, or consent to any change in any private restrictive covenant, zoning law or other public or private restriction, limiting or defining the uses which may be made of the Property or any part thereof. If under applicable zoning provisions the use of all or any portion of the Property is or shall become a nonconforming use, Borrower will not cause or permit the nonconforming use to be discontinued or abandoned without the express written consent of Lender. Section 3.9 Waste. Borrower shall not commit or suffer any waste of the Property or make any change in the use of the Property which will in any way materially increase the risk of fire or other hazard arising out of the operation of the Property, or take any action that might invalidate or give cause for cancellation of any Policy, or do or permit to be done thereon anything that may in any way impair the value of the Property or the security of this Security Instrument. Borrower will not, without the prior written consent of Lender, permit any drilling or exploration for or extraction, removal, or production of any minerals from the surface or the subsurface of the Land, regardless of the depth thereof or the method of mining or extraction thereof. Section 3.10 Compliance With Laws. (a) Borrower shall promptly comply with all existing and future federal, state and local laws, orders, ordinances, governmental rules and regulations or court orders affecting the Property, or the use thereof including, but not limited to, the Americans with Disabilities Act ("ADA") (collectively, the "Applicable Laws"). (b) Borrower shall from time to time, upon Lender's request, provide Lender with evidence satisfactory to Lender that the Property complies with all Applicable Laws or is exempt from compliance with Applicable Laws. (c) Notwithstanding any provisions set forth herein or in any document regarding Lender's approval of alterations of the Property, Borrower shall not alter the Property in any manner which would increase Borrower's responsibilities for compliance with Applicable Laws without the prior written approval of Lender. Lender's approval of the plans, specifications, or working drawings for alterations of the Property shall create no responsibility or liability on behalf of Lender for their completeness, design, sufficiency or their compliance with Applicable Laws. The foregoing shall apply to tenant improvements constructed by Borrower or by any of its tenants. Lender may condition any such approval upon receipt of a certificate of compliance with Applicable Laws from an independent architect, engineer, or other person acceptable to Lender. (d) Borrower shall give prompt notice to Lender of the receipt by Borrower of any notice related to a violation of any Applicable Laws and of the commencement of any proceedings or investigations which relate to compliance with Applicable Laws. (e) Borrower will take appropriate measures to prevent and will not engage in or knowingly permit any illegal activities at the Property. Section 3.11 Books and Records. (a) Borrower and any Guarantors (as defined in Subsection 10.1 (e) and Indemnitors (as defined in Subsection 10.1 (k)), if any, shall keep adequate books and records of account in accordance with generally accepted accounting principles, consistently applied ("GAAP"), or in accordance with other methods acceptable to Lender in its sole discretion, consistently applied and furnish to Lender: (i) monthly operating statements of the Property together with a property balance sheet for such month, prepared and certified by Borrower in the form required by Lender, detailing the revenues received, the expenses incurred and the net operating income before and after debt service (principal and interest) and major capital improvements for that month and containing appropriate year to date information, and containing a comparison for such quarter with the annual budget delivered pursuant to Subsection 3.11(a)(v), within thirty (30) days after the end of such month; (ii) monthly certified rent rolls signed and dated by Borrower, detailing the names of all tenants of the Improvements, the portion of Improvements occupied by each tenant, the base rent and any other charges payable under each Lease and the term of each Lease, including the expiration date, and any other information as is reasonably required by Lender, within thirty (30) days after the end of such month; (iii) an annual operating statement of the Property detailing the total revenues received, total expenses incurred, total cost of all capital improvements, total debt service and total cash flow, and containing a comparison for such period with the annual budget delivered pursuant to Subsection 3.11(a)(v), to be prepared and certified by Borrower in the form required by Lender, or if required by Lender, an audited annual operating statement prepared and certified by an independent certified public accountant acceptable to Lender, within ninety (90) days after the close of each fiscal year of Borrower; (iv) an annual balance sheet and profit and loss statement of Borrower, any Guarantors and any Indemnitors in the form required by Lender, prepared and certified by the respective Borrower, Guarantors and/or Indemnitors, or if required by Lender, audited financial statements prepared by an independent certified public accountant acceptable to Lender, within ninety (90) days after the close of each fiscal year of Borrower, Guarantors and Indemnitors, as the case may be; (v) an annual operating budget presented on a monthly basis consistent with the quarterly and annual operating statements described above for the Property, including cash flow projections for the upcoming year, and all proposed capital replacements and improvements at least fifteen (15) days prior to the start of each calendar year; and (vi) copies of Borrower's federal income tax returns within fifteen (15) days of the date such returns are filed. (b) Upon reasonable request from Lender (but, provided no Event of Default shall have occurred and be continuing, not more than two (2) times in any twelve (12) month period) Borrower, its affiliates, any Guarantor and any Indemnitor shall furnish to Lender: (i) a property management report for the Property, showing the number of inquiries made and/or rental applications received from tenants or prospective tenants and deposits received from tenants and any other information reasonably requested by Lender, in reasonable detail and certified by Borrower (or an officer, general partner or principal of Borrower if Borrower is not an individual) to be true and complete; and (ii) an accounting of all security deposits held in connection with any Lease of any part of the Property, including the name and identification number of the accounts in which such security deposits are held, the name and address of the financial institutions in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to obtain information regarding such accounts directly from such financial institutions. (c) Borrower, its affiliates, any Guarantor and any Indemnitor shall furnish Lender with such other additional financial or management information as may, from time to time, be reasonably required by Lender in form and substance satisfactory to Lender. (d) Borrower, its affiliates, any Guarantor and any Indemnitor shall furnish to Lender and its agents convenient facilities for the examination and audit of any such books and records. Within a reasonable time after request by Lender, Borrower, its affiliates, any Guarantor and any Indemnitor shall provide any other information with respect to the Property and the financial condition of Borrower, its affiliates, any Guarantor and any Indemnitor as Lender may from time to time request. Section 3.12 Payment for Labor and Materials. Borrower will promptly pay when due all bills and costs for labor, materials, and specifically fabricated materials incurred in connection with the Property and never permit to exist beyond the due date thereof in respect of the Property or any part thereof any lien or security interest, even though inferior to the liens and the security interests hereof, and in any event never permit to be created or exist in respect of the Property or any part thereof any other or additional lien or security interest other than the liens or security interests hereof, except for the Permitted Exceptions (defined below). Section 3.13 Management Agreements. (a) If the Improvements are operated under the terms and conditions of that certain management agreement dated April 1, 1998 between Wellsford Capital (predecessor-in-interest to Borrower), as owner, and Trammel Crow Operations, Inc. (the "Manager"), the owner's interest in which was assigned to Borrower by that certain instrument of assignment dated as of the date hereof (hereinafter, together with any renewals or replacements thereof, being referred to as the "Management Agreement"), which Management Agreement has been approved by Lender, Borrower shall (i) diligently perform and observe all of the terms, covenants and conditions of the Management Agreement on the part of Borrower to be performed and observed to the end that all things shall be done which are necessary to keep unimpaired the rights of Borrower under the Management Agreement and (ii) promptly notify Lender of the giving of any notice to Borrower of any default by Borrower in the performance or observance of any of the terms, covenants or conditions of the Management Agreement on the part of Borrower to be performed and observed and deliver to Lender a true copy of each such notice. Borrower shall not surrender the Management Agreement, consent to the assignment by the Manager of its interest under the Management Agreement (to the extent such consent is required by the Management Agreement), or terminate or cancel the Management Agreement or modify, change, supplement, alter or amend the Management Agreement, in any respect, either orally or in writing, and Borrower hereby assigns to Lender as further security for the payment of the Debt and for the performance and observance of the terms, covenants and conditions of this Security Instrument, all the rights, privileges and prerogatives of Borrower to surrender the Management Agreement or to terminate, cancel, modify, change, supplement, alter or amend the Management Agreement in any respect, and any such surrender of the Management Agreement or termination, cancellation, modification, change, supplement, alteration or amendment of the Management Agreement without the prior consent of Lender shall be void and of no force and effect. If Borrower shall default in the performance or observance of any material term, covenant or condition of the Management Agreement on the part of Borrower to be performed or observed, then, without limiting the generality of the other provisions of this Security Instrument, and without waiving or releasing Borrower from any of its obligations hereunder, Lender shall have the right, but shall be under no obligation, to pay any sums and to perform any act or take any action as may be appropriate to cause all the terms, covenants and conditions of the Management Agreement on the part of Borrower to be performed or observed to be promptly performed or observed on behalf of Borrower, to the end that the rights of Borrower in, to and under the Management Agreement shall be kept unimpaired and free from default. Lender and any person designated by Lender shall have, and are hereby granted, the right to enter upon the Property at any time and from time to time for the purpose of taking any such action. If the Manager under the Management Agreement shall deliver to Lender a copy of any notice sent to Borrower of default under the Management Agreement, such notice shall constitute full protection to Lender for any action taken or omitted to be taken by Lender in good faith, in reliance thereon. Borrower shall, from time to time, use its best efforts to obtain from the Manager under the Management Agreement such certificates of estoppel with respect to compliance by Borrower with the terms of the Management Agreement as may be requested by Lender. Borrower shall exercise each individual option, if any, to extend or renew the term of the Management Agreement upon demand by Lender made at any time within one (1) year of the last day upon which any such option may be exercised, and Borrower hereby expressly authorizes and appoints Lender its attorney-in-fact to exercise any such option in the name of and upon behalf of Borrower, which power of attorney shall be irrevocable and shall be deemed to be coupled with an interest. Any sums expended by Lender pursuant to this Section 3.13 shall bear interest at the Default Rate (hereinafter defined) from the date such cost is incurred to the date of payment to Lender, shall be deemed to constitute a portion of the Debt, shall be secured by the lien of this Security Instrument and the Other Security Documents and shall be immediately due and payable upon demand by Lender therefor. (b) Without limitation of the foregoing, if (i) the Manager shall become insolvent, or (ii) an Event of Default shall occur and be continuing, then Lender, at its option, may require Borrower to engage a bona fide, independent third party management agent approved by Lender in its sole discretion (the "New Manager") to manage the Property. The New Manager shall be engaged by Borrower pursuant to a written management agreement that complies with the terms hereof and is otherwise satisfactory to Lender in all respects. Section 3.14 Performance of Other Agreements. Borrower shall observe and perform each and every term to be observed or performed by Borrower pursuant to the terms of any agreement or recorded instrument affecting or pertaining to the Property, or given by Borrower to Lender for the purpose of further securing an obligation secured hereby and any amendments, modifications or changes thereto. Section 3.15 Change of Name, Identity or Structure. Borrower will not change Borrower's name, identity (including its trade name or names) or, if not an individual, Borrower's corporate, partnership or other structure without notifying Lender of such change in writing at least thirty (30) days prior to the effective date of such change and, in the case of a change in Borrower's structure, without first obtaining the prior written consent of Lender. Borrower will execute and deliver to Lender, prior to or contemporaneously with the effective date of any such change, any financing statement or financing statement change required by Lender to establish or maintain the validity, perfection and priority of the security interest granted herein. At the request of Lender, Borrower shall execute a certificate in form satisfactory to Lender listing the trade names under which Borrower intends to operate the Property, and representing and warranting that Borrower does business under no other trade name with respect to the Property. Section 3.16 Existence. Borrower will continuously maintain its existence and its rights to do business in the state where the Property is located together with its franchises and trade names. ARTICLE 4 SPECIAL COVENANTS Borrower covenants and agrees that: Section 4.1 Property Use. The Property shall be used only for commercial office space, and for no other use without the prior written consent of Lender, which consent may be withheld in Lender's sole and absolute discretion. Section 4.2 ERISA. (a) It shall not engage in any transaction which would cause any obligation, or action taken or to be taken, hereunder (or the exercise by Lender of any of its rights under the Note, this Security Instrument and the Other Security Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). (b) Borrower further covenants and agrees to deliver to Lender such certifications or other evidence from time to time throughout the term of the Security Instrument, as requested by Lender in its sole discretion, that (i) Borrower is not an "employee benefit plan" as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, or a "governmental plan" within the meaning of Section 3(32) of ERISA; (ii) Borrower is not subject to state statutes regulating investments and fiduciary obligations with respect to governmental plans; and (iii) one or more of the following circumstances is true: (I) Equity interests in Borrower are publicly offered securities, within the meaning of 29 C.F.R. Section 2510.3-101(b)(2); (II) Less than 25 percent of each outstanding class of equity interests in Borrower are held by "benefit plan investors" within the meaning of 29 C.F.R. Section 2510.3-101(f)(2); or (III) Borrower qualifies as an "operating company" or a "real estate operating company" within the meaning of 29 C.F.R. Section 2510.3-101(c) or (e) or an investment company registered under The Investment Company Act of 1940. Section 4.3 Single Purpose Entity. Borrower has not and shall not: (a) engage in any business or activity other than the ownership, operation and maintenance of the Property (and the Additional Property (hereinafter defined)), and activities incidental thereto; (b) acquire or own any material assets other than (i) the Property and Additional Property, and (ii) such incidental Personal Property as may be necessary for the operation of the Property and the Additional Property; (c) merge into or consolidate with any person or entity or dissolve, terminate or liquidate in whole or in part, transfer or otherwise dispose of all or substantially all of its assets or change its legal structure, without in each case Lender's consent; (d) fail to preserve its existence as an entity duly organized, validly existing and in good standing (if applicable) under the laws of the jurisdiction of its organization or formation, or without the prior written consent of Lender, amend, modify, terminate or fail to comply with the provisions of Borrower's Partnership Agreement, Articles or Certificate of Incorporation or similar organizational documents, as the case may be, as same may be further amended or supplemented, if such amendment, modification, termination or failure to comply would adversely affect the ability of Borrower to perform its obligations hereunder, under the Note or under the Other Security Documents; (e) own any subsidiary or make any investment in, any person or entity without the consent of Lender; (f) commingle its assets with the assets of any of its general partners, affiliates, principals or of any other person or entity; (g) incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than the Debt, except in the ordinary course of its business of owning and operating the Property and the Additional Property, provided that such debt is paid when due: (h) become insolvent and fail to pay its debts and liabilities from its assets as the same shall become due: (i) fail to maintain its records, books of account and bank accounts separate and apart from those of the general partners, principals and affiliates of Borrower, the affiliates of a general partner of Borrower, and any other person or entity; (j) enter into any contract or agreement with any general partner, principal or affiliate of Borrower, Guarantor or Indemnitor, or any general partner, principal or affiliate thereof, except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties other than any general partner, principal or affiliate of Borrower, Guarantor or Indemnitor, or any general partner, principal or affiliate thereof; (k) seek the dissolution or winding-up in whole, or in part, of Borrower; (1) maintain its assets in such a manner that it will be costly or difficult to segregate, ascertain or identify its individual assets from those of any member, general partner, principal or affiliate of Borrower, or any member, general partner, principal or affiliate thereof or any other person; (m) hold itself out to be responsible for the debts of another person; (n) make any loans or advances to any third party, including any member, general partner, principal or affiliate of Borrower, or any general partner, principal or affiliate thereof; (o) fail to file its own tax returns; (p) agree to, enter into or consummate any transaction which would render Borrower unable to furnish the certification or other evidence referred to in Section 4.2(b) hereof; (q) fail either to hold itself out to the public as a legal entity separate and distinct from any other entity or person or to conduct its business solely in its own name in order not (i) to mislead others as to the identity with which such other party is transacting business, or (ii) to suggest that Borrower is responsible for the debts of any third party (including any general partner, principal or affiliate of Borrower, or any general partner, principal or affiliate thereof); (r) fail to maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; or (s) file or consent to the filing of any petition, either voluntary or involuntary, to take advantage of any applicable insolvency, bankruptcy, liquidation or reorganization statute, or make an assignment for the benefit of creditors. The foregoing covenants shall apply to the members, general partners or principal shareholders of Borrower when appropriate as determined by Lender. Section 4.4 Restoration. The following provisions shall apply in connection with the Restoration of the Property: (a) If the Net Proceeds shall be less than $200,000.00 and the costs of completing the Restoration shall be less than $200,000.00, the Net Proceeds will be disbursed by Lender to Borrower upon receipt, provided that all of the conditions set forth in Subsection 4.4(b)(i) are met and Borrower delivers to Lender a written undertaking to expeditiously commence and to satisfactorily complete with due diligence the Restoration in accordance with the terms of this Security Instrument. (b) If the Net Proceeds are equal to or greater than $200,000.00 or the costs of completing the Restoration are equal to or greater than $200,000.00, Lender shall make the Net Proceeds available for the Restoration in accordance with the provisions of this Subsection (b). The term "Net Proceeds" for purposes of this Section 4.4 shall mean: (i) the net amount of all insurance proceeds received by Lender pursuant to Subsections 3.3(b)(i), (iv), (vi) and (vii) of this Security Instrument as a result of such damage or destruction, after deduction of its reasonable costs and expenses (including, but not limited to, reasonable counsel fees), if any, in collecting same ("Insurance Proceeds"), or (ii) the net amount of all awards and payments received by Lender with respect to a taking referenced in Section 3.6 of this Security Instrument, after deduction of its reasonable costs and expenses (including, but not limited to, reasonable counsel fees), if any, in collecting same ("Condemnation Proceeds"), whichever the case may be. (i) The Net Proceeds shall be made available to Borrower for the Restoration provided that each of the following conditions are met: (A) no Event of Default shall have occurred and be continuing under the Note, this Security Instrument or any of the Other Security Documents; (B) in the event the Net Proceeds are (1) Insurance Proceeds, less than fifty percent (50%) of the total floor area of the Improvements has been damaged, destroyed, or rendered unusable as a result of such fire or other casualty or (2) Condemnation Proceeds, less than ten (10%) of the land constituting the Property is taken, and such land is located along the perimeter or periphery of the Property, and no portion of the Improvements is located in such land; (C) Leases demising in the aggregate a percentage amount equal to or greater than the Rentable Space Percentage (hereinafter defined) of the total rentable space in the Property which has been demised under executed and delivered Leases in effect as of the date of the occurrence of such fire or other casualty or taking, whichever the case may be, shall remain in full force and effect during and after the completion of the Restoration. The term "Rentable Space Percentage" shall mean (1) in the event the Net Proceeds are Insurance Proceeds, a percentage amount equal to fifty percent (50%) and (2) in the event the Net Proceeds are Condemnation Proceeds, a percentage amount equal to ninety percent (90%); (D) Borrower shall commence the Restoration as soon as reasonably Practicable (but in no event later than sixty (60) days after such damage or destruction or taking, whichever the case may be, occurs) and shall diligently pursue the same to satisfactory completion; (E) Lender shall be satisfied that any operating deficits, including all scheduled payments of principal and interest under the Note and the Applicable Interest Rate (as defined in the Note), which will be incurred with respect to the Property as a result of the occurrence of any such fire or other casualty or taking, whichever the case may be, will be covered out of (1) the Net Proceeds, (2) the insurance coverage referred to in Subsection 3.3(a)(iii), if applicable, or (3) by other funds of Borrower; (F) Lender shall be satisfied that, upon the completion of the Restoration, the Debt Service Coverage Ratio (as defined herein) shall be at least 1.30 to 1.0, as determined by Lender in its sole and absolute discretion: (G) Lender shall be satisfied that the Restoration will be completed on or before the earliest to occur of (1) six (6) months prior to the Maturity Date (as defined in the Note), (2) twelve (12) months after the occurrence of such fire or other casualty or taking, whichever the case may be, (3) the earliest date required for such completion under the terms of any Leases which are required in accordance with the provisions of this Subsection 4.4(b) to remain in effect subsequent to the occurrence of such fire or other casualty or taking, whichever the case may be, and the completion of the Restoration or (4) such time as may be required under applicable zoning law, ordinance, rule or regulation in order to repair and restore the Property to the condition it was in immediately prior to such fire or other casualty or to as nearly as possible the condition it was in immediately prior to such taking, as applicable; (H) the Property and the use thereof after the Restoration will be in compliance with and permitted under all applicable zoning laws, ordinances, rules and regulations (or, to the extent the Property Constituted a permitted non-conforming use, will continue to constitute a permitted con-conforming use); (I) the Restoration shall be done and completed by Borrower in an expeditious and diligent fashion and in compliance with all applicable governmental laws, rules and regulations (including, without limitation, all applicable Environmental Laws) defined below; and (J) such fire or other casualty or taking, as applicable, does not result in the loss of access to the Property or the Improvements. The term "Debt Service Coverage Ratio" as used herein shall mean the ratio of (a) the NOI (hereinafter defined) produced by the operation of the Property and the Additional Property during the twelve (12) calendar month period immediately preceding the calculation to (b) the aggregate required debt service payments that would be due and payable with respect to the Property and the Additional Property for the twelve (12) calendar month period immediately following the calculation. The term "NOI" as used herein shall mean the gross income derived from the operation of the Property and the Additional Property, less Expenses (hereinafter defined). NOI shall include only Rents and such other income, including any rent loss or business income insurance proceeds, laundry, parking, vending or concession income and any expenditure relating to the maintenance or operation of the Property and the Additional Property paid by Borrower which is reimbursed by tenants under written leases (a "Tenant Pass-Through") (such as, by way of example, reimbursements for proportionate share of property taxes and operating expenses), which are actually received by Borrower or its agents or representatives and Expenses actually paid or payable on an accrual basis during the twelve (12) month period ending one month prior to the date on which the NOI is being calculated, as set forth on operating statements satisfactory to Lender. NOI shall be calculated on a cash basis in accordance with customary accounting principles applicable to real estate. Notwithstanding the foregoing, NOI shall not include (a) condemnation or insurance proceeds (excluding rent or business income insurance proceeds); (b) any proceeds from the sale, exchange, transfer, financing or refinancing of all or any portion of the Property or any Additional Property; (c) amounts received from tenants as a security deposit; or (d) any other type of income otherwise includable in NOI but paid directly by any tenant to a person or entity other than Borrower or its agents or representatives. The term "Expenses" as used herein shall mean the aggregate of the following items: (a) real estate taxes, general and special assessments or similar charges; (b) sales, use and personal property taxes; (c) management fees of not less than 3% of gross income derived from the operation of the Property and the Additional Property and disbursements for management services, whether such services are performed at the Property or the Additional Property or off-site; (d) wages, salaries, pension costs and all fringe and other employee-related benefits and expenses, up to and including (but not above) the level of the on-site manager, engaged in the repair, operation and maintenance of the Property and the Additional Property and service to tenants and on-site personnel engaged in audit and accounting functions performed by Borrower; (e) insurance premiums including, but not limited to, casualty, liability, rent and fidelity insurance premiums; (f) cost of all electricity, oil, gas, water, steam, HVAC and any other energy, utility or similar item and overtime services, the cost of building and cleaning supplies, and all other administrative, management, ownership, operating, advertising, marketing and maintenance expenses incurred in connection with the operation of the Property and the Additional Property; (g) cost of necessary cleaning, repair, replacement, maintenance, decoration or painting of existing improvements on the Property and the Additional Property (including, without limitation, parking lots and roadways), of like kind and quantity or such kind or quality which is necessary to maintain the Property and the Additional Property to the same standards as competitive properties of similar size and location of the Property and the Additional Property, as applicable, together with adequate reserves for the repair and replacement of capital improvements on the Property and the Additional Property acceptable to Lender; (h) the cost of such other maintenance materials, HVAC repairs, parts and supplies, and all equipment to be used in the ordinary course of business, which is not capitalized in accordance with GAAP; (i) legal, accounting and other professional expenses incurred in connection with the Property and the Additional Property; (j) casualty losses to the extent not reimbursed by a third party; (k) all amounts that should be reserved, as reasonably determined by Borrower with approval by the Lender in its reasonable discretion, for repair or maintenance of the Property and the Additional Property and to maintain the value of the Property and the Additional Property, including replacement reserves; and (1) cost of leasing commissions and tenant concessions payable to tenants pursuant to Leases in effect at the Property. The Expenses shall be based on the above- described items actually incurred or payable on an accrual basis in accordance with GAAP by Borrower during the twelve (12) month period ending one month prior to the date on which the NOI is to be calculated (except the capital expenses and reserves set forth in Subsection (g) above), with customary adjustments for items such as taxes and insurance which accrue but are paid periodically, as adjusted by Lender to reflect projected adjustments for the subsequent twelve (12) month period beginning on the date on which the NOI is to be calculated. Notwithstanding the foregoing, the term "Expenses" shall not include (i) depreciation or amortization or any other non-cash item of expense unless approved by Lender; (ii) interest, principal, fees, costs and expense reimbursements of Lender in administrating the loan evidenced by the Note or exercising remedies under this Security Instrument or the Other Security Documents; or (iii) any expenditure (other than leasing commissions and tenant concessions) properly treated as a capital item under GAAP and such expenditure is treated by Borrower as a capital item in Borrower's financial statements. (ii) The Net Proceeds shall be held by Lender and, until disbursed in accordance with the provisions of this Subsection 4.4(b), shall constitute additional security for the Obligations. The Net Proceeds shall be disbursed by Lender to, or as directed by, Borrower from time to time during the course of the Restoration. Upon receipt of evidence satisfactory to Lender that (A) all materials installed and work and labor performed (except to the extent that they are to be paid for out of the requested disbursement) in connection with the Restoration have been paid for in full, and (B) there exist no notices of pendency, stop orders, mechanic's or materialman's liens or notices of intention to file same, or any other liens or encumbrances of any nature whatsoever on the Property arising out of the Restoration which have not either been fully bonded to the satisfaction of Lender and discharged of record or in the alternative fully insured to the satisfaction of Lender by the title company insuring the lien of this Security Instrument. (iii) All plans and specifications required in connection with the Restoration shall be subject to prior review and reasonable acceptance in all respects by Lender and by an independent consulting engineer selected by Lender (the "Casualty Consultant"). Lender shall have the use of the plans and specifications and all permits, licenses and approvals required or obtained in connection with the Restoration. The identity of the contractors, subcontractors and materialmen engaged in the Restoration, as well as the contracts under which they have been engaged, shall be subject to prior review and reasonable acceptance by Lender and the Casualty Consultant. All costs and expenses incurred by Lender in connection with making the Net Proceeds available for the Restoration including, without limitation, reasonable counsel fees and disbursements and the Casualty Consultant's fees, shall be paid by Borrower. (iv) In no event shall Lender be obligated to make disbursements of the Net Proceeds in excess of an amount equal to the costs actually incurred from time to time for work in place as part of the Restoration, as certified by the Casualty Consultant, minus the Casualty Retainage. The term "Casualty Retainage" as used in this Subsection (b) shall mean an amount equal to 10% of the costs actually incurred for work in place as part of the Restoration, as certified by the Casualty Consultant, until the Restoration has been completed. The Casualty Retainage shall in no event, and notwithstanding anything to the contrary set forth above in this Subsection (b), be less than the amount actually held back by Borrower from contractors, subcontractors and materialmen engaged in the Restoration. The Casualty Retainage shall not be released until the Casualty Consultant certifies to Lender that the Restoration has been completed in accordance with the provisions of this Subsection (b) and that all approvals necessary for the re-occupancy and use of the Property have been obtained from all appropriate governmental and quasi-governmental authorities, and Lender receives evidence satisfactory to Lender that the costs of the Restoration have been paid in full or will be paid in full out of the Casualty Retainage, provided, however, that Lender will release the portion of the Casualty Retainage being held with respect to any contractor, subcontractor or materialman engaged in the Restoration as of the date upon which the Casualty Consultant certifies to Lender that the contractor, subcontractor or materialman has satisfactorily completed all work and has supplied all materials in accordance with the provisions of the contractor's, subcontractor's or materialman's contract, and the contractor, subcontractor or materialman delivers the lien waivers (conditioned only upon payment) or evidence of payment in full of all sums due to the contractor, subcontractor or materialman as may be reasonably requested by Lender or by the title company insuring the lien of this Security Instrument. If required by Lender, the release of any such portion of the Casualty Retainage shall be approved by the surety company, if any, which has issued a payment or performance bond with respect to the contractor, subcontractor or materialman. (v) Lender shall not be obligated to make disbursements of the Net Proceeds more frequently than once every calendar month. (vi) If at any time the Net Proceeds or the undisbursed balance thereof shall not, in the opinion of Lender, be sufficient to pay in full the balance of the costs which are estimated by the Casualty Consultant to be incurred in connection with the completion of the Restoration, Borrower shall deposit the deficiency (the "Net Proceeds Deficiency") with Lender before any further disbursement of the Net Proceeds shall be made. The Net Proceeds Deficiency deposited with Lender shall be held by Lender and shall be disbursed for costs actually incurred in connection with the Restoration on the same conditions applicable to the disbursement of the Net Proceeds, and until so disbursed pursuant to this Subsection 4.4(b) shall constitute additional security for the Obligations. (vii) The excess, if any, of the Net Proceeds and the remaining balance, if any, of the Net Proceeds Deficiency deposited with Lender after the Casualty Consultant certifies to Lender that the Restoration has been completed in accordance with the provisions of this Subsection 4.4(b), and the receipt by Lender of evidence satisfactory to Lender that all costs incurred in connection with the Restoration have been paid in full, shall be remitted by Lender to Borrower, provided no Event of Default shall have occurred and shall be continuing under the Note, this Security Instrument or any of the Other Security Documents. (c) All Net Proceeds not required (i) to be made available for the Restoration or (ii) to be returned to Borrower as excess Net Proceeds pursuant to Subsection 4.4(b)(vii) may be retained and applied by Lender toward the payment of the Debt whether or not then due and payable in such order, priority and proportions as Lender in its discretion shall deem proper or, at the discretion of Lender, the same may be paid, either in whole or in part, to Borrower for such purposes as Lender shall designate, in its discretion. If Lender shall receive and retain Net Proceeds, the lien of this Security Instrument shall be reduced only by the amount thereof received and retained by Lender and actually applied by Lender in reduction of the Debt Section 4.5 Lockbox Account. Borrower shall cause all rents to be deposited as provided in the Lockbox Agreement (as hereinafter defined). Section 4.6 Other Debt. Borrower will not incur or permit to exist any indebtedness for borrowed money or guarantee the obligations of another person or entity other than the Debt. ARTICLE 5 REPRESENTATIONS AND WARRANTIES Borrower represents and warrants to Lender that: Section 5.1 Warranty of Title. Borrower has good title to the Property and has the right to mortgage, grant, bargain, sell, pledge, assign, warrant, transfer and convey the same and that Borrower possesses an unencumbered fee simple absolute estate in the Land and the Improvements and that it owns the Property free and clear of all liens, encumbrances and charges whatsoever except for those exceptions shown in the title insurance policy insuring the lien of this Security Instrument (the "Permitted Exceptions"). Borrower shall forever warrant, defend and preserve the title and the validity and priority of the lien of this Security Instrument and shall forever warrant and defend the same to Lender against the claims of all persons whomsoever. Section 5.2 Authority. Borrower (and the undersigned representative of Borrower, if any) has full power, authority and legal right to execute this Security Instrument, and to mortgage, grant, bargain, sell, pledge, assign, warrant, transfer and convey the Property pursuant to the terms hereof and to keep and observe all of the terms of this Security Instrument on Borrower's part to be performed. Section 5.3 Legal Status and Authority. Borrower (a) is duly organized, validly existing and in good standing under the laws of its state of organization or incorporation; (b) is duly qualified to transact business and is in good standing in the state where the Property is located; and (c) has all necessary approvals, governmental and otherwise, and full power and authority to own the Property and carry on its business as now conducted and proposed to be conducted. Borrower now has and shall continue to have the full right, power and authority to operate and lease the Property, to encumber the Property as provided herein and to perform all of the other obligations to be performed by Borrower under the Note, this Security Instrument and the Other Security Documents. Section 5.4 Validity of Documents. (a) The execution, delivery and performance of the Note, this Security Instrument and the Other Security Documents and the borrowing evidenced by the Note (i) are within the corporate/partnership/limited liability power of Borrower; (ii) have been authorized by all requisite corporate/partnership/limited liability company action; (iii) have received all necessary approvals and consents, corporate, governmental, judicial or otherwise; (iv) will not violate, conflict with, result in a breach of or constitute (with notice or lapse of time, or both) a default under any provision of law, any order or judgment of any court or governmental authority, the articles of incorporation, by-laws, partnership, operating or trust agreement, or other governing instrument of Borrower, or any indenture, agreement or other instrument to which Borrower is a party or by which it or any of its assets or the Property is or may be bound or affected; (v) will not result in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of its assets, except the lien and security interest created hereby; and (vi) will not require any authorization or license from, or any filing with, any governmental, judicial or other body (except for the recordation of this instrument in appropriate land records in the state where the Property is located and except for Uniform Commercial Code filings relating to the security interest created hereby); and (b) the Note, this Security Instrument and the Other Security Documents constitute the legal, valid and binding obligations of Borrower. Section 5.5 Litigation. There is no action, suit or proceeding, judicial, administrative or otherwise (including any condemnation or similar proceeding), pending or, to the best of Borrower's knowledge, threatened or contemplated against, or affecting, Borrower, a Guarantor, if any, an Indemnitor, if any, or the Property that has not been disclosed to Lender or is not adequately covered by insurance, as determined by Lender in its sole and absolute discretion. Section 5.6 Status of Property. (a) No portion of the Improvements is located in an area identified by the Secretary of Housing and Urban Development or any successor thereto as an area having special flood hazards pursuant to the National Flood Insurance Act of 1968 or the Flood Disaster Protection Act of 1973, as amended, or any successor law, or, if located within any such area, Borrower has obtained and will maintain the insurance prescribed in Section 3.3(a)(i)(y) hereof. (b) To Borrower's best knowledge, Borrower has obtained all necessary certificates, licenses and other approvals, governmental, judicial and otherwise, necessary for the operation of the Property and the conduct of its business and all required zoning, building code, land use, environmental and other similar permits or approvals, all of which are in full force and effect as of the date hereof and not subject to revocation, suspension, forfeiture or modification. (c) To Borrower's best knowledge, and except as disclosed in the engineering report obtained by Lender in connection with this Security Instrument, the Property and the present and contemplated use and occupancy thereof are in full compliance with all Applicable Laws, including, without limitation, zoning ordinances, building codes, land use and environmental laws, laws relating to the disabled (including, but not limited to, the ADA) and other similar laws. (d) To Borrower's best knowledge, and except as disclosed in the engineering report obtained by Lender in connection with this Security Instrument, the Property is served by all utilities required for the current or contemplated use thereof. All utility service is provided by public utilities and the Property has accepted or is equipped to accept such utility service. (e) All public roads and streets necessary for service of and access to the Property for the current or contemplated use thereof have been completed, are serviceable and all-weather and are physically and legally open for use by the public. (f) The Property is served by public water and sewer systems. (g) The Property is free from damage caused by fire or other casualty. (h) All costs and expenses of any and all labor, materials, supplies and equipment used in the construction of the Improvements have been paid in full. (i) Borrower has paid in full for, and is the owner of, all furnishings, fixtures and equipment (other than tenants' property) used in connection with the operation of the Property, free and clear of any and all security interests, liens or encumbrances, except the lien and security interest created hereby. (j) To Borrower's best knowledge, all liquid and solid waste disposal, septic and sewer systems located on the Property are in a good and safe condition and repair and in compliance with all Applicable Laws. (k) Except as disclosed in the surveys delivered to Lender by Borrower in connection with this Security Instrument, all Improvements lie within the boundary of the Land. Section 5.7 No Foreign Person. Borrower is not a "foreign person" within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended, and the related Treasury Department regulations, including temporary regulations. Section 5.8 Separate Tax Lot. The Property is assessed for real estate tax purposes as one or more wholly independent tax lot or lots, separate from any adjoining land or improvements not constituting a part of such lot or lots, and no other land or improvement is assessed and taxed together with the Property or any portion thereof. Section 5.9 ERISA Compliance. (a) As of the date hereof and throughout the term of this Security Instrument, (i) Borrower is not and will not be an "employee benefit plan" as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, and (ii) the assets of Borrower do not and will not constitute "plan assets" of one or more such plans for purposes of Title I of ERISA; and (b) As of the date hereof and throughout the term of this Security Instrument (i) Borrower is not and will not be a "governmental plan" within the meaning of Section 3(32) of ERISA and (ii) transactions by or with Borrower are not and will not be subject to state statutes applicable to Borrower regulating investments of and fiduciary obligations with respect to governmental plans. Section 5.10 Leases. (a) Borrower is the sole owner of the entire lessor's interest in the Leases; (b) the Leases are valid and enforceable; (c) the terms of all alterations, modifications and amendments to the Leases are reflected in the certified occupancy statement delivered to and approved by Lender; (d) none of the Rents reserved in the Leases have been assigned or otherwise pledged or hypothecated; (e) none of the Rents have been collected for more than one (1) month in advance; (f) the premises demised under the Leases have been completed and the tenants under the Leases have accepted the same and have taken possession of the same on a rent-paying basis; (g) except as disclosed in the estoppel certificates delivered to Lender by tenants under Leases at the Property in connection with the execution and delivery of this Security Instrument, there exist no offsets or defenses to the payment of any portion of the Rents; (h) no Lease contains an option to purchase, right of first refusal to purchase, or any other similar provision; (i) no person or entity has any possessory interest in, or right to occupy, the Property except under and pursuant to a Lease; and (j) except as previously disclosed to Lender in writing, each Lease is subordinate to this Security Instrument, either pursuant to its terms or a recorded subordination agreement. Section 5.11 Financial Condition. (a) Borrower is solvent, and no bankruptcy, reorganization, insolvency or similar proceeding under any state or federal law with respect to Borrower has been initiated, and (b) it has received reasonably equivalent value for the granting of this Security Instrument. Section 5.12 Business Purposes. The loan evidenced by the Note is solely for the business purpose of Borrower, and is not for personal, family, household, or agricultural purposes. Section 5.13 Taxes. Borrower, any Guarantor and any Indemnitor have filed all federal, state, county, municipal, and city income and other tax returns required to have been filed by them and have paid all taxes and related liabilities which have become due pursuant to such returns or pursuant to any assessments received by them. Neither Borrower, any Guarantor nor any Indemnitor knows of any basis for any additional assessment in respect of any such taxes and related liabilities for prior years. Section 5.14 Mailing Address. Borrower's mailing address, as set forth in the opening paragraph hereof or as changed in accordance with the provisions hereof, is true and correct. Section 5.15 No Change in Facts or Circumstances. All information in the application for the loan submitted to Lender (the "Loan Application") and in all financing statements, rent rolls, reports, certificates and other documents submitted in connection with the Loan Application or in satisfaction of the terms thereof, are accurate, complete and correct in all respects. There has been no adverse change in any condition, fact, circumstance or event that would make any such information inaccurate, incomplete or otherwise materially misleading. Section 5.16 Disclosure. Borrower has disclosed to Lender all material facts and has not failed to disclose any material fact that could cause any representation or warranty made herein to be materially misleading. Section 5.17 Third Party Representations. Each of the representations and the warranties made herein or in any Other Security Document(s) by (i) Guarantor and (ii) Indemnitor, is true and correct in all material respects. Section 5.18 Illegal Activity. No portion of the Property has been or will be purchased with proceeds of any illegal activity. ARTICLE 6 OBLIGATIONS AND RELIANCES Section 6.1 Relationship of Borrower and Lender. The relationship between Borrower and Lender is solely that of debtor and creditor, and Lender has no fiduciary or other special relationship with Borrower, and no term or condition of any of the Note, this Security Instrument and the Other Security Documents shall be construed so as to deem the relationship between Borrower and Lender to be other than that of debtor and creditor. Section 6.2 No Reliance on Lender. The general partners, principals and (if Borrower is a trust) beneficial owners of Borrower are experienced in the ownership and operation of properties similar to the Property, and Borrower and Lender are relying solely upon such expertise and business plan in connection with the ownership and operation of the Property. Borrower is not relying on Lender's expertise, business acumen or advice in connection with the Property. Section 6.3 No Lender Obligations. (a) Notwithstanding the provisions of Subsections 1.1(f) and 1.1(1) or Section 3.7, Lender is not undertaking the performance of (i) any obligations under the Leases; or (ii) any obligations with respect to such agreements, contracts, certificates, instruments, franchises, permits, trademarks, licenses and other documents. (b) By accepting or approving anything required to be observed, performed or fulfilled or to be given to Lender pursuant to this Security Instrument, the Note or the Other Security Documents, including without limitation, any officer's certificate, balance sheet, statement of profit and loss or other financial statement, survey, appraisal, or insurance policy, Lender shall not be deemed to have warranted, consented to, or affirmed the sufficiency, the legality or effectiveness of same, and such acceptance or approval thereof shall not constitute any warranty or affirmation with respect thereto by Lender. Section 6.4 Reliance. Borrower recognizes and acknowledges that in accepting the Note, this Security Instrument and the Other Security Documents, Lender is expressly and primarily relying on the truth and accuracy of the warranties and representations set forth in Article 5 without any obligation to investigate the Property and notwithstanding any investigation of the Property by Lender; that such reliance existed on the part of Lender prior to the date hereof; that the warranties and representations are a material inducement to Lender in accepting the Note, this Security Instrument and the Other Security Documents; and that Lender would not be willing to make the loan evidenced by the Note, this Security Instrument and the Other Security Documents and accept this Security Instrument in the absence of the warranties and representations as set forth in Article 5. ARTICLE 7 FURTHER ASSURANCES Section 7.1 Recording of Security Instrument, etc. Borrower forthwith upon the execution and delivery of this Security Instrument and thereafter, from time to time, will cause this Security Instrument and any of the Other Security Documents creating a lien or security interest or evidencing the lien hereof upon the Property and each instrument of further assurance to be filed, registered or recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to protect and perfect the lien or security interest hereof upon, and the interest of Lender in, the Property. Borrower will pay all taxes, filing, registration or recording fees, and all expenses incident to the preparation, execution, acknowledgment and/or recording of the Note, this Security Instrument, the Other Security Documents, any note or mortgage supplemental hereto, any security instrument with respect to the Property and any instrument of further assurance, and any modification or amendment of the foregoing documents, and all federal, state, county and municipal taxes, duties, imposts, assessments and charges arising out of or in connection with the execution and delivery of this Security Instrument, any mortgage supplemental hereto, any security instrument with respect to the Property or any instrument of further assurance, and any modification or amendment of the foregoing documents, except where prohibited by law so to do. Section 7.2 Further Acts, etc. Borrower will, at the cost of Borrower, and without expense to Lender, do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, mortgages, assignments, notices of assignments, transfers and assurances as Lender shall, from time to time, require, for the better assuring, conveying, assigning, transferring, and confirming unto Lender the property and rights hereby mortgaged, granted, bargained, sold, conveyed, confirmed, pledged, assigned, warranted and transferred or intended now or hereafter so to be, or which Borrower may be or may hereafter become bound to convey or assign to Lender, or for carrying out the intention or facilitating the performance of the terms of this Security Instrument or for filing, registering or recording this Security Instrument, or for complying with all Applicable Laws. Borrower, on demand, will execute and deliver and hereby authorizes Lender to execute in the name of Borrower upon Borrower's failure to comply with Lender's demand for a period in excess of fifteen (15) days, or without the signature of Borrower to the extent Lender may lawfully do so, one or more financing statements, chattel mortgages or other instruments, to evidence more effectively the security interest of Lender in the Property. Borrower grants to Lender an irrevocable power of attorney coupled with an interest for the purpose of exercising and perfecting any and all rights and remedies available to Lender at law and in equity, including without limitation such rights and remedies available to Lender pursuant to this Section 7.2. Section 7.3 Changes in Tax, Debt, Credit and Documentary Stamp Laws. (a) If any law is enacted or adopted or amended after the date of this Security Instrument which deducts the Debt from the value of the Property for the purpose of taxation or which imposes a tax, either directly or indirectly, on the Debt or Lender's interest in the Property, Borrower will pay the tax, with interest and penalties thereon, if any. If Lender is advised by counsel chosen by it that the payment of tax by Borrower would be unlawful or taxable to Lender or unenforceable or provide the basis for a defense of usury, then Lender shall have the option by written notice of not less than ninety (90) days to declare the Debt immediately due and payable. (b) Borrower will not claim or demand or be entitled to any credit or credits on account of the Debt for any part of the Taxes or Other Charges assessed against the Property, or any part thereof, and no deduction shall otherwise be made or claimed from the assessed value of the Property, or any part thereof, for real estate tax purposes by reason of this Security Instrument or the Debt. If such claim, credit or deduction shall be required by law, Lender shall have the option, by written notice of not less than ninety (90) days, to declare the Debt immediately due and payable. (c) If at any time the United States of America, any state thereof or any subdivision of any such state shall require revenue or other stamps to be affixed to the Note, this Security Instrument, or any of the Other Security Documents or impose any other tax or charge on the same, Borrower will pay for the same, with interest and penalties thereon, if any. Section 7.4 Estoppel Certificates. (a) After request by Lender, Borrower, within ten (10) days, shall furnish Lender or any proposed assignee with a statement, duly acknowledged and certified, setting forth (i) the amount of the original principal amount of the Note, (ii) the unpaid principal amount of the Note, (iii) the rate of interest of the Note, (iv) the terms of payment and maturity date of the Note, (v) the date installments of interest and/or principal were last paid, (v) that, except as provided in such statement, there are no defaults or events which with the passage of time or the giving of notice or both, would constitute an event of default under the Note or the Security Instrument, (vi) that the Note and this Security Instrument are valid, legal and binding obligations and have not been modified or if modified, giving particulars of such modification, (vii) whether any offsets or defenses exist against the obligations secured hereby and, if any are alleged to exist, a detailed description thereof, (viii) that all Leases are in full force and effect and (provided the Property is not a residential multifamily property) have not been modified (or if modified, setting forth all modifications), (ix) the date to which the Rents thereunder have been paid pursuant to the Leases, (x) whether or not, to the best knowledge of Borrower, any of the lessees under the Leases are in default under the Leases, and, if any of the lessees are in default, setting forth the specific nature of all such defaults, (xi) the amount of security deposits held by Borrower under each Lease and that such amounts are consistent with the amounts required under each Lease, and (xii) as to any other matters reasonably requested by Lender and reasonably related to the Leases, the obligations secured hereby, the Property or this Security Instrument. (b) To the extent required of lessees under any Leases, Borrower shall deliver to Lender, and, otherwise, Borrower shall use commercially reasonable efforts to deliver to Lender, promptly upon request, duly executed estoppel certificates from any one or more lessees as required by Lender attesting to such facts regarding the Lease as Lender may require, including but not limited to attestations that the Lease is in full force and effect with no defaults thereunder on the part of any party, that none of the Rents have been paid more than one month in advance, and that the lessee claims no defense or offset against the full and timely performance of its obligations under the Lease, provided, however, that Borrower shall be deemed to have satisfied its obligations pursuant to the terms of this subparagraph (b) if it obtains from the lessee under the Lease an estoppel certificate in the form required by the Lease. To the extent any lessee shall refuse or fail to so deliver an estoppel certificate as aforesaid, Borrower shall deliver to Lender the required estoppel certificate which shall further provide an explanation as to why the lessee failed or refused to deliver the estoppel certificate. (c) Upon any transfer or proposed transfer contemplated by Section 19.1 hereof, at Lender's request, Borrower, any Guarantors and any Indemnitors shall provide an estoppel certificate to the Investor (defined in Section 19.1) or any prospective Investor in such form, substance and detail as Lender, such Investor or prospective Investor may reasonably require. Section 7.5 Splitting of Security Instrument. This Security Instrument and the Note shall, at any time until the same shall be fully paid and satisfied, at the sole election of Lender, and at Lender's cost and expense, be split or divided into two or more notes and two or more security instruments, each of which shall cover all or a portion of the Property to be more particularly described therein. To that end, Borrower, upon written request of Lender, shall execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered by the then owner of the Property, to Lender and/or its designee or designees substitute notes and security instruments in such principal amounts, aggregating not more than the then unpaid principal amount of this Security Instrument, and containing terms, provisions and clauses similar to those contained herein and in the Note, and such other documents and instruments as may be reasonably required by Lender, provided that none of the foregoing instruments shall alter the monetary terms contained in the Note, this Security Instrument or the Other Security Documents or increase the obligations or decrease the rights of Borrower, Guarantor or any Indemnitor in respect of the loan secured hereby. In such event, in any instance where the consent of Lender is required under this Security Instrument, Borrower shall be required to obtain only the consent of the holder of the security instrument having the highest lien priority; provided, however, that the foregoing shall not limit Borrower's obligation to obtain the written agreement of the holder of each and every such security instrument to the extent any waiver of rights of any of the holder(s) thereof is requested by Borrower, or in the case of any modification or amendment to any such security instrument. Section 7.6 Replacement Documents. Upon receipt of an affidavit of an officer of Lender as to the loss, theft, destruction or mutilation of the Note or any Other Security Document which is not of public record, and, in the case of any such mutilation, upon surrender and cancellation of such Note or Other Security Document, Borrower will issue, in lieu thereof, a replacement Note or Other Security Document, dated the date of such lost, stolen, destroyed or mutilated Note or Other Security Document in the same principal amount thereof and otherwise of like tenor. ARTICLE 8 DUE ON SALE/ENCUMBRANCE Section 8.1 Lender Reliance. Borrower acknowledges that Lender has examined and relied on the experience of Borrower and its general partners, members, principals and (if Borrower is a trust) beneficial owners in owning and operating properties such as the Property in agreeing to make the loan secured hereby, and will continue to rely on Borrower's ownership of the Property as a means of maintaining the value of the Property as security for repayment of the Debt and the performance of the Other Obligations. Borrower acknowledges that Lender has a valid interest in maintaining the value of the Property so as to ensure that, should Borrower default in the repayment of the Debt or the performance of the Other Obligations, Lender can recover the Debt by a sale of the Property. Section 8.2 No Sale/Encumbrance. Borrower agrees that Borrower shall not, without the prior written consent of Lender, sell, convey, mortgage, grant, bargain, encumber, pledge, assign, or otherwise transfer the Property or any part thereof or permit the Property or any part thereof to be sold, conveyed, mortgaged, granted, bargained, encumbered, pledged, assigned, or otherwise transferred. Section 8.3 Sale/Encumbrance Defined. A sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer within the meaning of this Article 8 shall be deemed to include, but not be limited to, (a) an installment sales agreement wherein Borrower agrees to sell the Property or any part thereof for a price to be paid in installments; (b) an agreement by Borrower leasing all or a substantial part of the Property for other than actual occupancy by a space tenant thereunder or a sale, assignment or other transfer of, or the grant of a security interest in, Borrower's right, title and interest in and to any Leases or any Rents; (c) if Borrower, any Guarantor, any Indemnitor, or any general partner, member or principal shareholder of Borrower, Guarantor or Indemnitor is a corporation, the voluntary or involuntary sale, conveyance, transfer or pledge of such corporation's stock (or the stock of any corporation directly or indirectly controlling such corporation by operation of law or otherwise) or the creation or issuance of new stock by which an aggregate of more than 10% of such corporation's stock shall be vested in a party or parties who are not now stockholders; and (d) if Borrower, any Guarantor or Indemnitor or any partner or member of Borrower, any Guarantor or Indemnitor is a limited or general partnership, limited liability company or joint venture, the change, removal or resignation of a general partner or managing partner or managing member, or the transfer or pledge of the partnership or membership interest of any partner or member or any profits or proceeds relating to such partnership or membership interest. Notwithstanding the foregoing, (i) with the prior written consent of Lender, any member in Borrower shall be permitted to transfer its membership interest to any other member in Borrower as of the date of this Security Instrument, (ii) transfers of stock in Wellsford Real Properties, Inc. ("WRP") shall not require Lender's consent, nor shall Lender's consent be required to any merger, consolidation or other combination of WRP or the direct or indirect sale, lease, exchange, or transfer of all or substantially all of the assets of WRP in one transaction or in a series of related transactions, and (iii) transfers of ownership interests in Wellsford Capital shall not require Lender's consent so long as Wellsford Real Properties, Inc. continues to own a majority interest and maintain management control over Wellsford Capital. Section 8.4 Lender's Rights. Lender reserves the right to condition the consent required hereunder upon a modification of the terms hereof and on assumption of the Note, this Security Instrument and the Other Security Documents as so modified by the proposed transferee, payment of a transfer fee of not less than one percent (1%) of the principal balance of the Note and all of Lender's expenses incurred in connection with such transfer, the approval by a Rating Agency of the proposed transferee, the proposed transferee's continued compliance with the covenants set forth in Sections 4.2 and 4.3 hereof, or such other conditions as Lender shall determine in its sole discretion to be in the interest of Lender. Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default hereunder in order to declare the Debt immediately due and payable upon Borrower's sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the Property without Lender's consent in such cases where such consent is required. This provision shall apply to every sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the Property regardless of whether voluntary or not, or whether or not Lender has consented to any previous sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the Property. ARTICLE 9 PREPAYMENT Section 9.1 Prepayment Before Event of Default. The Debt may be prepaid only in strict accordance with the express terms and conditions of the Note including the payment of any prepayment consideration. Section 9.2 Prepayment After Event of Default. If a Default Prepayment (defined below) occurs, Borrower shall pay to Lender the entire Debt, including without limitation, the Prepayment Fee; provided, however, that Borrower shall have no obligation to pay the Prepayment Fee unless the obligation to make the Default Prepayment occurs during the Closed Period (as defined in the Note). For purposes of this Section 9.2, the term "Default Prepayment" shall mean a prepayment of the principal amount of the Note made after the occurrence of any Event of Default or an acceleration of the Maturity Date (as defined in the Note) under any circumstances, including, without limitation, a prepayment occurring in connection with reinstatement of this Security Instrument provided by statute under foreclosure proceedings or exercise of a power of sale, any statutory right of redemption exercised by Borrower or any other party having a statutory right to redeem or prevent foreclosure, any sale in foreclosure or under exercise of a power of sale or otherwise. ARTICLE 10 DEFAULT Section 10.1 Events of Default. The occurrence of any one or more of the following events shall constitute an "Event of Default": (a) if any portion of the Debt is not paid on or before the fifth (5th) day after the same is due or if the entire Debt is not paid on or before the Maturity Date; (b) if any of the Taxes or Other Charges is not paid when the same is due and payable except to the extent sums sufficient to pay such Taxes and Other Charges have been deposited with Lender in accordance with the terms of this Security Instrument and/or the Lockbox Agreement; (c) if the Policies are not kept in full force and effect (for any reason other than the failure to pay the premiums therefor to the extent sums sufficient to pay the same have been deposited with Lender pursuant to this Security Instrument and/or the Lockbox Agreement and have not been so paid or applied by Lender), or if the Policies are not delivered to Lender upon request or Borrower has not delivered evidence of the renewal of the Policies thirty (30) days prior to their expiration as provided in Section 3.3(b); (d) if Borrower violates or does not comply with any of the provisions of Sections 3.7 or 4.3 or Articles 8, 12 or 13; (e) if any representation or warranty of Borrower, Indemnitor or any person guaranteeing payment of the Debt or any portion thereof or performance by Borrower of any of the terms of this Security Instrument (a "Guarantor"), or any general partner, member, principal or beneficial owner of any of the foregoing, made herein or in the Environmental Indemnity (defined below) or any guaranty, or in any certificate, report, financial statement or other instrument or document furnished to Lender shall have been false or misleading in any material respect when made; (f) if (i) Borrower or any general partner or member of Borrower, or any Guarantor or Indemnitor shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, conservatorship or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or Borrower or any general partner or member of Borrower, or any Guarantor or Indemnitor shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against Borrower or any general partner or member of Borrower, or any Guarantor or Indemnitor any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of ninety (90) days; or (iii) there shall be commenced against Borrower or any general partner or member of Borrower, or any Guarantor or Indemnitor any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of any order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within ninety (90) days from the entry thereof; or (iv) Borrower or any general partner or member of Borrower, or any Guarantor or Indemnitor shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) Borrower or any general partner or member of Borrower, or any Guarantor or Indemnitor shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; (g) if Borrower shall be in default under any other mortgage, deed of trust, deed to secure debt or other security agreement covering any part of the Property whether it be superior or junior in lien to this Security Instrument; (h) if the Property becomes subject to any mechanic's, materialman's or other lien other than a lien for local real estate taxes and assessments not then due and payable and the lien shall remain undischarged of record (by payment, bonding or otherwise) for a period of thirty (30) days following Borrower's receipt of notice of the filing thereof; (i) if any federal tax lien is filed against the Property and same is not discharged of record within thirty (30) days following Borrower's receipt of notice of the filing thereof; (j) if (i) Borrower fails to timely provide Lender with the written certification and evidence referred to in Section 4.2(b) hereof, or (ii) Borrower consummates a transaction which would cause this Security Instrument or Lender's exercise of its rights under this Security Instrument, the Note or the Other Security Documents to constitute a nonexempt prohibited transaction under ERISA or result in a violation of a state statute regulating governmental plans, subjecting Lender to liability for a violation of ERISA or a state statute; (k) if any default occurs under any guaranty or indemnity executed in connection herewith including, without limitation, (1) that certain Conditional Guarantee dated the date hereof given by Wellsford Capital, a Maryland real estate investment trust ("Wellsford Capital" or "Guarantor") to Lender, and (2) that certain Environmental Indemnity Agreement dated the date hereof given by Borrower and Wellsford Capital (collectively, "Indemnitors") to Lender, and such default continues beyond the expiration of any applicable notice and grace periods, if any; (1) if any default occurs under that certain Lockbox Pledge and Security Agreement dated the date hereof by and between Lender, Hatfield Philips Inc. (the "Servicer") and Borrower (the "Lockbox Agreement") and such default continues after the expiration of applicable notice and grace period, if any; (m) if any default occurs under (i) that certain Mortgage and Security Agreement dated as of the date hereof given by Borrower to Lender (the "Canton Security Instrument") encumbering certain real property located in Canton, Massachusetts and more particularly described therein (the "Canton Property"), (ii) that certain Mortgage and Security Agreement dated as of the date hereof given by Borrower to Lender (the "Philadelphia Security Instrument") encumbering certain real property located in Philadelphia, Pennsylvania as more particularly described therein (the "Philadelphia Property"), (iii) that certain Mortgage and Security Agreement dated as of the date hereof given by Borrower to Lender (the "West Chester Security Instrument") encumbering certain real property located in West Chester, Pennsylvania as more particularly described therein (the "West Chester Property"), (iv) that certain Mortgage and Security Agreement dated the date hereof given by Borrower to Lender (the "Piscataway Security Instrument") encumbering certain real property located in Piscataway, New Jersey (the "Piscataway Property"), (v) that certain Mortgage and Security Agreement dated as of the date hereof given by Borrower to Lender (the "Cherry Hill Security Instrument") encumbering certain real property located in Cherry Hill, New Jersey (the "Cherry Hill Property"), and (vi) that certain Leasehold Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing for Commercial Purposes dated the date hereof given by Borrower to Fidelity National Title Insurance Company, as trustee, for the use and benefit of Lender, as beneficiary (the "Santa Monica Security Instrument") encumbering Borrower's leasehold estate in certain real property located in Santa Monica, California and more particularly described therein (the "Santa Monica Property") (the Canton Security Instrument, the Philadelphia Security Instrument, the West Chester Security Instrument, the Piscataway Security Instrument, the Cherry Hill Security Instrument and the Santa Monica Security Instrument are sometimes herein referred to collectively as the "Additional Security Instruments"; the Canton Property, the Philadelphia Property, the West Chester Property, the Piscataway Property, the Cherry Hill Property and the Santa Monica Property are sometimes herein referred to collectively as the "Additional Property"); or (n) if for more than ten (10) days after notice from Lender, Borrower shall continue to be in default under any other term, covenant or condition of the Note, this Security Instrument or the Other Security Documents in the case of any default which can be cured by the payment of a sum of money or for thirty (30) days after notice from Lender in the case of any other default, provided that if such default cannot reasonably be cured within such thirty (30) day period and Borrower shall have commenced to cure such default within such thirty (30) day period and thereafter diligently and expeditiously proceeds to cure the same, such thirty (30) day period shall be extended for so long as it shall require Borrower in the exercise of due diligence to cure such default, it being agreed that no such extension shall be for a period in excess of one hundred twenty (120) days. Section 10.2 Late Payment Charge. If any monthly installment of principal and interest is not paid on or before the tenth (10th) day after the date on which it is due, Borrower shall pay to Lender upon demand an amount equal to the lesser of five percent (5%) of such unpaid portion of the outstanding monthly installment of principal and interest then due or the maximum amount permitted by applicable law, to defray the expense incurred by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of the use of such delinquent payment, and such amount shall be secured by this Security Instrument and the Other Security Documents. Section 10.3 Default Interest. Borrower does hereby agree that upon the occurrence of an Event of Default, Lender shall be entitled to receive and Borrower shall pay interest on the entire principal amount of the Note at a rate (the "Default Rate") equal to the lesser of (i) the Interest Rate (as defined in the Note) plus five percent (5%) or (ii) the maximum interest rate permitted by applicable law. The Default Rate shall be computed from the occurrence of the Event of Default until the earlier of the date upon which the Event of Default is cured or the date upon which the Debt is paid in full. Interest calculated at the Default Rate shall be added to the Debt, and shall be deemed secured by this Security Instrument. This clause, however, shall not be construed as an agreement or privilege to extend the date of the payment of the Debt, nor as a waiver of any other right or remedy accruing to Lender by reason of the occurrence of any Event of Default. ARTICLE 11 RIGHTS AND REMEDIES Section 11.1 Remedies. Upon the occurrence of any Event of Default, Borrower agrees that Lender may take such action, without notice or demand, as it deems advisable to protect and enforce its rights against Borrower and in and to the Property, including, but not limited to, the following actions, each of which may be pursued concurrently or otherwise, at such time and in such order as Lender may determine, in its sole discretion, without impairing or otherwise affecting the other rights and remedies of Lender: (a) declare the entire unpaid Debt to be immediately due and payable; (b) institute proceedings, judicial or otherwise, for the complete foreclosure of this Security Instrument under any applicable provision of law in which case the Property or any interest therein may be sold for cash or upon credit in one or more parcels or in several interests or portions and in any order or manner; (c) with or without entry, to the extent permitted and pursuant to the procedures provided by applicable law, institute proceedings for the partial foreclosure of this Security Instrument for the portion of the Debt then due and payable, subject to the continuing lien and security interest of this Security Instrument for the balance of the Debt not then due, unimpaired and without loss of priority; (d) sell for cash or upon credit the Property or any part thereof and all estate, claim, demand, right, title and interest of Borrower therein and rights of redemption thereof, pursuant to power of sale or otherwise, at one or more sales, as an entity or in parcels, at such time and place, upon such terms and after such notice thereof as may be required or permitted by law; (e) institute an action, suit or proceeding in equity for the specific performance of any covenant, condition or agreement contained herein, in the Note or in the Other Security Documents; (f) recover judgment on the Note either before, during or after any proceedings for the enforcement of this Security Instrument or the Other Security Documents; (g) as a matter of right, have a receiver, trustee, liquidator or conservator of the Property appointed, without notice and without regard for the adequacy of the security for the Debt and without regard for the solvency of Borrower, any Guarantor, Indemnitor or of any person, firm or other entity liable for the payment of the Debt; (h) subject to any applicable law, the license granted to Borrower under Section 1.2 shall automatically be revoked and Lender may enter into or upon the Property, either personally or by its agents, nominees or attorneys and dispossess Borrower and its agents and servants therefrom, without liability for trespass, damages or otherwise and exclude Borrower and its agents or servants wholly therefrom, and take possession of all books, records and accounts relating thereto and Borrower agrees to surrender possession of the Property and of such books, records and accounts to Lender upon demand, and thereupon Lender may (i) use, operate, manage, control, insure, maintain, repair, restore and otherwise deal with all and every part of the Property and conduct the business thereat; (ii) complete any construction on the Property in such manner and form as Lender deems advisable; (iii) make alterations, additions, renewals, replacements and improvements to or on the Property; (iv) exercise all rights and powers of Borrower with respect to the Property, whether in the name of Borrower or otherwise, including, without limitation, the right to make, cancel, enforce or modify Leases, obtain and evict tenants, and demand, sue for, collect and receive all Rents of the Property and every part thereof; (v) require Borrower to pay monthly in advance to Lender, or any receiver appointed to collect the Rents, the fair and reasonable rental value for the use and occupation of such part of the Property as may be occupied by Borrower; (vi) require Borrower to vacate and surrender possession of the Property to Lender or to such receiver and, in default thereof, Borrower may be evicted by summary proceedings or otherwise; and (vii) apply the receipts from the Property to the payment of the Debt, in such order, priority and proportions as Lender shall deem appropriate in its sole discretion after deducting therefrom all expenses (including reasonable attorneys' fees) incurred in connection with the aforesaid operations and all amounts necessary to pay the Taxes, Other Charges, insurance and other expenses in connection with the Property, as well as just and reasonable compensation for the services of Lender, its counsel, agents and employees; (i) exercise any and all rights and remedies granted to a secured party upon default under the Uniform Commercial Code, including, without limiting the generality of the foregoing: (i) the right to take possession of the Personal Property or any part thereof, and to take such other measures as Lender may deem necessary for the care, protection and preservation of the Personal Property, and (ii) request Borrower at its expense to assemble the Personal Property and make it available to Lender at a convenient place acceptable to Lender. Any notice of sale, disposition or other intended action by Lender with respect to the Personal Property sent to Borrower in accordance with the provisions hereof at least five (5) days prior to such action, shall constitute commercially reasonable notice to Borrower; (j) apply any sums then deposited in the Escrow Fund and any other sums held in escrow or otherwise by Lender in accordance with the terms of this Security Instrument, the Lockbox Agreement or any Other Security Document to the payment of the following items in any order in its uncontrolled discretion: (i) Taxes and Other Charges; (ii) Insurance Premiums; (iii) Interest on the unpaid principal balance of the Note; (iv) Amortization of the unpaid principal balance of the Note; (v) All other sums payable pursuant to the Note, this Security Instrument and the Other Security Documents, including without limitation advances made by Lender pursuant to the terms of this Security Instrument; (k) surrender the Policies maintained pursuant to Article 3 hereof, collect the unearned Insurance Premiums and apply such sums as a credit on the Debt in such priority and proportion as Lender in its discretion shall deem proper, and in connection therewith, Borrower hereby appoints Lender as agent and attorney-in-fact (which is coupled with an interest and is therefore irrevocable) for Borrower to collect such Insurance Premiums; (l) pursue such other remedies as Lender may have under applicable law, including, without limitation, the STATUTORY POWER OF SALE; (m) apply the undisbursed balance of any Net Proceeds Deficiency deposit, together with interest thereon, to the payment of the Debt in such order, priority and proportions as Lender shall deem to be appropriate in its discretion; or (n) notwithstanding any other provisions set forth herein and without limitation thereof, this Security Instrument is upon the STATUTORY CONDITIONS, for any breach of which the Lender shall have the STATUTORY POWER OF SALE. In the event of a sale, by foreclosure, power of sale, or otherwise, of less than all of the Property, this Security Instrument shall continue as a lien and security interest on the remaining portion of the Property unimpaired and without loss of priority. Notwithstanding the provisions of this Section 11.1 to the contrary, if any Event of Default as described in clauses (i) or (ii) of Subsection 10.1(f) shall occur, the entire unpaid Debt shall be automatically due and payable, without any further notice, demand or other action by Lender. Section 11.2 Application of Proceeds. The purchase money, proceeds and avails of any disposition of the Property, or any part thereof, or any other sums collected by Lender pursuant to the Note, this Security Instrument or the Other Security Documents, may be applied by Lender to the payment of the Debt in such priority and proportions as Lender in its discretion shall deem proper. Section 11.3 Right to Cure Defaults. Upon the occurrence of any Event of Default or if Borrower fails to make any payment or to do any act as herein provided, Lender may, but without any obligation to do so and without notice to or demand on Borrower and without releasing Borrower from any obligation hereunder, make or do the same in such manner and to such extent as Lender may deem necessary to protect the security hereof. Lender is authorized to enter upon the Property for such purposes, or appear in, defend, or bring any action or proceeding to protect its interest in the Property or to foreclose this Security Instrument or collect the Debt, and the cost and expense thereof (including reasonable attorneys' fees to the extent permitted by law), with interest as provided in this Section 11.3, shall constitute a portion of the Debt and shall be due and payable to Lender upon demand. All such costs and expenses incurred by Lender in remedying such Event of Default or such failed payment or act or in appearing in, defending, or bringing any such action or proceeding shall bear interest at the Default Rate, for the period after notice from Lender that such cost or expense was incurred to the date of payment to Lender. All such costs and expenses incurred by Lender together with interest thereon calculated at the Default Rate shall be deemed to constitute a portion of the Debt and be secured by this Security Instrument and the Other Security Documents and shall be immediately due and payable upon demand by Lender therefor. Section 11.4 Actions and Proceedings. Lender has the right to appear in and defend any action or proceeding brought with respect to the Property and to bring any action or proceeding, in the name and on behalf of Borrower, which Lender, in its discretion, decides should be brought to protect its interest in the Property. Section 11.5 Recovery of Sums Required To Be Paid. Lender shall have the right from time to time to take action to recover any sum or sums which constitute a part of the Debt as the same become due, without regard to whether or not the balance of the Debt shall be due, and without prejudice to the right of Lender thereafter to bring an action of foreclosure, or any other action, for a default or defaults by Borrower existing at the time such earlier action was commenced. Section 11.6 Examination of Books and Records. Lender, its agents, accountants and attorneys shall have the right, upon reasonable advance notice and at reasonable times, to examine the records, books, management and other papers of Borrower and its affiliates or of any Guarantor or Indemnitor which reflect upon their financial condition, at the Property or at any office regularly maintained by Borrower, its affiliates or any Guarantor or Indemnitor where the books and records are located. Lender and its agents shall have the right to make copies and extracts from the foregoing records and other papers. In addition, Lender, its agents, accountants and attorneys shall have the right upon reasonable advance notice and at reasonable times to examine and audit the books and records of Borrower and its affiliates or of any Guarantor or Indemnitor pertaining to the income, expenses and operation of the Property during reasonable business hours at any office of Borrower, its affiliates or any Guarantor or Indemnitor where the books and records are located. This Section 11.6 shall apply throughout the term of the Note and without regard to whether an Event of Default has occurred or is continuing. Section 11.7 Other Rights, etc. (a) The failure of Lender to insist upon strict performance of any term hereof shall not be deemed to be a waiver of any term of this Security Instrument. Borrower shall not be relieved of Borrower's obligations hereunder by reason of (i) the failure of Lender to comply with any request of Borrower, any Guarantor or any Indemnitor to take any action to foreclose this Security Instrument or otherwise enforce any of the provisions hereof or of the Note or the Other Security Documents, (ii) the release, regardless of consideration, of the whole or any part of the Property, or of any person liable for the Debt or any portion thereof, or (iii) any agreement or stipulation by Lender extending the time of payment or otherwise modifying or supplementing the terms of the Note, this Security Instrument or the Other Security Documents. (b) It is agreed that the risk of loss or damage to the Property is on Borrower, and Lender shall have no liability whatsoever for decline in value of the Property, for failure to maintain the Policies, or for failure to determine whether insurance in force is adequate as to the amount of risks insured. Possession by Lender shall not be deemed an election of judicial relief, if any such possession is requested or obtained, with respect to any Property or collateral not in Lender's possession. (c) Lender may resort for the payment of the Debt to any other security held by Lender in such order and manner as Lender, in its discretion, may elect. Lender may take action to recover the Debt, or any portion thereof, or to enforce any covenant hereof without prejudice to the right of Lender thereafter to foreclose this Security Instrument. The rights of Lender under this Security Instrument shall be separate, distinct and cumulative and none shall be given effect to the exclusion of the others. No act of Lender shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision. Lender shall not be limited exclusively to the rights and remedies herein stated but shall be entitled to every right and remedy now or hereafter afforded at law or in equity. Section 11.8 Right to Release Any Portion of the Property. Lender may release any portion of the Property for such consideration as Lender may require without, as to the remainder of the Property, in any way impairing or affecting the lien or priority of this Security Instrument, or improving the position of any subordinate lienholder with respect thereto, except to the extent that the obligations hereunder shall have been reduced by the actual monetary consideration, if any, received by Lender for such release, and may accept by assignment, pledge or otherwise any other property in place thereof as Lender may require without being accountable for so doing to any other lienholder. This Security Instrument shall continue as a lien and security interest in the remaining portion of the Property. Section 11.9 Violation of Laws. If the Property is not in compliance with Applicable Laws, Lender may impose additional requirements upon Borrower in connection herewith including, without limitation, monetary reserves or financial equivalents. Section 11.10 Recourse and Choice of Remedies. Notwithstanding any other provision of this Security Instrument, including but not limited to Article 15 hereof, Lender and other Indemnified Parties (defined in Section 13.1 below) are entitled to enforce the obligations of Borrower, Guarantor and Indemnitor contained in Sections 13.2 and 13.3 and 13.4 without first resorting to or exhausting any security or collateral and without first having recourse to the Note or any of the Property, through foreclosure or acceptance of a deed in lieu of foreclosure or otherwise, and in the event Lender commences a foreclosure action against the Property, Lender is entitled to pursue a deficiency judgment with respect to such obligations against Borrower, Guarantor and Indemnitor. The provisions of Sections 13.2 and 13.3, 13.4 and 15.3 are exceptions to any non-recourse or exculpation provisions in the Note, this Security Instrument or the Other Security Documents, and Borrower, Guarantor and Indemnitor are fully and personally liable for the obligations pursuant to Sections 13.2 and 13.3, 13.4 and 15.3. The liability of Borrower, Guarantor and Indemnitor are not limited to the original principal amount of the Note. Notwithstanding the foregoing, nothing herein shall inhibit or prevent Lender from foreclosing pursuant to this Security Instrument or exercising any other rights and remedies pursuant to the Note, this Security Instrument and the Other Security Documents, whether simultaneously with foreclosure proceedings or in any other sequence. A separate action or actions may be brought and prosecuted against Borrower, whether or not action is brought against any other person or entity or whether or not any other person or entity is joined in the action or actions. In addition, Lender shall have the right but not the obligation to join and participate in, as a party if it so elects, any administrative or judicial proceedings or actions initiated in connection with any matter addressed in Article 12 or Section 13.4. Section 11.11 Right of Entry. Lender and its agents shall have the right to enter and inspect the Property at all reasonable times. ARTICLE 12 ENVIRONMENTAL HAZARDS Section 12.1 Environmental Representations and Warranties. To the best of Borrower's knowledge, after due inquiry: (a) there are no Hazardous Substances (defined below) or underground storage tanks in, on, or under the Property, except those that are both (i) in compliance with Environmental Laws (defined below) and with permits issued pursuant thereto and (ii) fully disclosed to Lender in writing pursuant to the written reports resulting from the environmental assessments of the Property delivered to Lender (the "Environmental Report"); (b) there are no past, present or threatened Releases (defined below) of Hazardous Substances in, on, under or from the Property except as described in the Environmental Report; (c) there is no threat of any Release of Hazardous Substances migrating to the Property except as described in the Environmental Report; (d) there is no past or present non-compliance with Environmental Laws, or with permits issued pursuant thereto, in connection with the Property except as described in the Environmental Report; (e) Borrower does not know of, and has not received, any written or oral notice or other communication from any person or entity (including but not limited to a governmental entity) relating to Hazardous Substances or Remediation (defined below) thereof, of possible liability of any person or entity pursuant to any Environmental Law, other environmental conditions in connection with the Property, or any actual or potential administrative or judicial proceedings in connection with any of the foregoing; and (f) Borrower has truthfully and fully provided to Lender, in writing, any and all information relating to conditions in, on, under or from the Property that is known to Borrower and that is contained in Borrower's files and records, including but not limited to any reports relating to Hazardous Substances in, on, under or from the Property and/or to the environmental condition of the Property. "Environmental Law" means any present and future federal, state and local laws, statutes, ordinances, rules, regulations and the like, as well as common law, relating to protection of human health or the environment, relating to Hazardous Substances, relating to liability for or costs of Remediation or prevention of Releases of Hazardous Substances or relating to liability for or costs of other actual or threatened danger to human health or the environment. "Environmental Law" includes, but is not limited to, the following statutes, as amended, any successor/hereto, and any regulations promulgated pursuant thereto, and any state or local statutes, ordinances, rules, regulations and the like addressing similar issues: the Comprehensive Environmental Response, Compensation and Liability Act; the Emergency Planning and Community Right-to-Know Act; the Hazardous Substances Transportation Act; the Resource Conservation and Recovery Act (including but not limited to Subtitle I relating to underground storage tanks); the Solid Waste Disposal Act; the Clean Water Act; the Clean Air Act; the Toxic Substances Control Act; the Safe Drinking Water Act; the Occupational Safety and Health Act, the Federal Water Pollution Control Act; the Federal Insecticide, Fungicide and Rodenticide Act; the Endangered Species Act; the National Environmental Policy Act; and the River and Harbors Appropriation Act. "Environmental Law" also includes, but is not limited to, any present and future federal, state and local laws, statutes, ordinances, rules, regulations and the like, as well as common law: conditioning transfer of property upon a negative declaration or other approval of a governmental authority of the environmental condition of the property; requiring notification or disclosure of Releases of Hazardous Substances or other environmental condition of the Property to any governmental authority or other person or entity, whether or not in connection with transfer of title to or interest in property; imposing conditions or requirements in connection with permits or other authorization for lawful activity; relating to nuisance, trespass or other causes of action related to the Property; and relating to wrongful death, personal injury, or property or other damage in connection with any physical condition or use of the Property. "Hazardous Substances" include but are not limited to any and all substances (whether solid, liquid or gas) defined, listed, or otherwise classified as pollutants, hazardous wastes, hazardous substances, hazardous materials, extremely hazardous wastes, or words of similar meaning or regulatory effect under any present or future Environmental Laws or that may have a negative impact on human health or the environment, including but not limited to petroleum and petroleum products, asbestos and asbestos-containing materials, polychlorinated biphenyls, lead, radon, radioactive materials, flammables and explosives. "Release" of any Hazardous Substance includes but is not limited to any release, deposit, discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Substances. "Remediation" includes but is not limited to any response, remedial, removal, or corrective action, any activity to clean up, detoxify, decontaminate, contain or otherwise remediate any Hazardous Substance, any actions to prevent, cure or mitigate any Release of any Hazardous Substance, any action to comply with any Environmental Laws or with any permits issued pursuant thereto, any inspection, investigation, study, monitoring, assessment, audit, sampling and testing, laboratory or other analysis, or evaluation relating to any Hazardous Substances or to anything referred to in Article 12. Section 12.2 Environmental Covenants. Borrower covenants and agrees that: (a) all uses and operations on or of the Property, whether by Borrower or any other person or entity, shall be in compliance with all Environmental Laws and permits issued pursuant thereto; (b) there shall be no Releases of Hazardous Substances in, on, under or from the Property that shall not be remediated in accordance with all applicable Environmental Laws within sixty (60) days of the occurrence thereof; (c) there shall be no Hazardous Substances in, on, or under the Property, except those that are both (1) in compliance with all Environmental Laws and with permits issued pursuant thereto and (2) fully disclosed to Lender in writing; (d) Borrower shall keep the Property free and clear of all liens and other encumbrances imposed pursuant to any Environmental Law, whether due to any act or omission of Borrower or any other person or entity (the "Environmental Liens"); (e) Borrower shall, at its sole cost and expense, fully and expeditiously cooperate in all activities pursuant to Section 12.3 below, including but not limited to providing all relevant information and making knowledgeable persons available for interviews; (f) Borrower shall, at its sole cost and expense, perform any environmental site assessment or other investigation of environmental conditions in connection with the Property, pursuant to any written request of Lender following a Release of a Hazardous Substance upon the Property or Lender's receipt of notice from Borrower pursuant to clause (i) below (including but not limited to sampling, testing and analysis of soil, water, air, building materials and other materials and substances whether solid, liquid or gas), and share with Lender the reports and other results thereof, and Lender and other Indemnified Parties shall be entitled to rely on such reports and other results thereof; (g) Borrower shall, at its sole cost and expense, comply with all reasonable written requests of Lender to (1) reasonably effectuate Remediation of any condition (including but not limited to a Release of a Hazardous Substance) in, on, under or from the Property; (2) comply with any Environmental Law; (3) comply with any directive from any governmental authority; and (4) take any other reasonable action necessary or appropriate for protection of human health or the environment; (h) Borrower shall not do or allow any tenant or other user of the Property to do any act that materially increases the dangers to human health or the environment, poses an unreasonable risk of harm to any person or entity (whether on or off the Property), impairs or may impair the value of the Property, is contrary to any requirement of any insurer, constitutes a public or private nuisance, constitutes waste, or violates any covenant, condition, agreement or easement applicable to the Property; and (i) Borrower shall immediately notify Lender in writing of (A) any presence or Releases or threatened Releases of Hazardous Substances in, on, under, from or migrating towards the Property; (B) any non-compliance with any Environmental Laws related in any way to the Property; (C) any actual or potential Environmental Lien; (D) any required or proposed Remediation of environmental conditions relating to the Property; and (E) any written or oral notice or other communication of which Borrower becomes aware from any source whatsoever (including but not limited to a governmental entity) relating in any way to Hazardous Substances or Remediation thereof, possible liability of any person or entity pursuant to any Environmental Law, other environmental conditions in connection with the Property, or any actual or potential administrative or judicial proceedings in connection with anything referred to in this Article 12. Any failure of Borrower to perform its obligations pursuant to this Section 12.2 shall constitute bad faith waste with respect to the Property. Section 12.3 Lender's Rights. Lender and any other person or entity designated by Lender, including but not limited to any receiver, any representative of a governmental entity, and any environmental consultant, shall have the right, but not the obligation, to enter upon the Property at all reasonable times to assess any and all aspects of the environmental condition of the Property and its use, including but not limited to conducting any environmental assessment or audit (the scope of which shall be determined in Lender's sole and absolute discretion) and taking samples of soil, groundwater or other water, air, or building materials, and conducting other invasive testing, provided that Lender or its designee shall repair any physical damage to the Property caused by such invasive testing. Borrower shall cooperate with and provide access to Lender and any such person or entity designated by Lender. ARTICLE 13 INDEMNIFICATION Section 13.1 General Indemnification. Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all claims, suits, liabilities (including, without limitation, strict liabilities), actions, proceedings, obligations, debts, damages, losses, costs, expenses, diminutions in value, fines, penalties, charges, fees, expenses, judgments, awards, amounts paid in settlement, punitive damages, foreseeable and unforeseeable consequential damages, of whatever kind or nature (including but not limited to attorneys' fees and other costs of defense) (the "Losses") imposed upon or incurred by or asserted against any Indemnified Parties and directly or indirectly arising out of or in any way relating to any one or more of the following (except to the extent any such Losses result from the willful misconduct or gross negligence of Lender or such Indemnified Parties): (a) ownership of this Security Instrument, the Property or any interest therein or receipt of any Rents; (b) any amendment to, or restructuring of, the Debt, and the Note, this Security Instrument, or any Other Security Documents; (c) any and all lawful action that may be taken by Lender in connection with the enforcement of the provisions of this Security Instrument or the Note or any of the Other Security Documents, whether or not suit is filed in connection with same, or in connection with Borrower, any Guarantor or Indemnitor and/or any partner, joint venturer or shareholder thereof becoming a party to a voluntary or involuntary federal or state bankruptcy, insolvency or similar proceeding; (d) any accident, injury to or death of persons or loss of or damage to property occurring in, on or about the Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (e) any use, nonuse or condition in, on or about the Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (f) any failure on the part of Borrower to perform or be in compliance with any of the terms of this Security Instrument; (g) performance of any labor or services or the furnishing of any materials or other property in respect of the Property or any part thereof; (h) the failure of any person to file timely with the Internal Revenue Service an accurate Form 1099-B, Statement for Recipients of Proceeds from Real Estate, Broker and Barter Exchange Transactions, which may be required in connection with the Security Instrument, or to supply a copy thereof in a timely fashion to the recipient of the proceeds of the transaction in connection with which this Security Instrument is made; (i) any failure of the Property to be in compliance with any Applicable Laws; (j) the enforcement by any Indemnified Party of the provisions of this Article 13; (k) any and all claims and demands whatsoever which may be asserted against Lender by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants, or agreements contained in any Lease; (1) the payment of any commission, charge or brokerage fee to anyone which may be payable in connection with the funding of the loan evidenced by the Note and secured by this Security Instrument (Lender, by its acceptance hereof, represents that no mortgage broker has been retained by Lender in connection with the making of the loan evidenced by the Note); or (m) any misrepresentation made by Borrower in this Security Instrument or any Other Security Document. Any amounts payable to Lender by reason of the application of this Section 13.1 shall become immediately due and payable and shall bear interest at the Default Rate from the date loss or damage is sustained by Lender until paid. For purposes of this Article 13, the term "Indemnified Parties" means Lender and any person or entity who is or will have been involved in the origination of the loan secured hereby, any person or entity who is or will have been involved in the servicing of the loan secured hereby, any person or entity in whose name the encumbrance created by this Security Instrument is or will have been recorded, persons and entities who may hold or acquire or will have held a full or partial interest in the loan secured hereby (including, but not limited to, Investors or prospective Investors in the Securities, as well as custodians, trustees and other fiduciaries who hold or have held a full or partial interest in the loan secured hereby for the benefit of third parties) as well as the respective directors, officers, shareholders, partners, employees, agents, servants, representatives, contractors, subcontractors, affiliates, subsidiaries, participants, successors and assigns of any and all of the foregoing (including but not limited to any other person or entity who holds or acquires or will have held a participation or other full or partial interest in the loan secured hereby or the Property, whether during the term of the loan secured hereby or as a part of or following a foreclosure of the loan secured hereby and including, but not limited to, any successors by merger, consolidation or acquisition of all or a substantial portion of Lender's assets and business). Section 13.2 Mortgage and/or Intangible Tax. Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all Losses imposed upon or incurred by or asserted against any Indemnified Parties and directly or indirectly arising out of or in any way relating to any tax on the making and/or recording of this Security Instrument, the Note or any of the Other Security Documents. Section 13.3 ERISA Indemnification. Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all Losses (including, without limitation, attorneys' fees and costs incurred in the investigation, defense, and settlement of Losses incurred in correcting any prohibited transaction or in the sale of a prohibited loan, and in obtaining any individual prohibited transaction exemption under ERISA that may be required, in Lender's sole discretion) that Lender may incur, directly or indirectly, as a result of a default under Sections 4.2 or 5.9 or Subsection 4.3(p). Section 13.4 Environmental Indemnification. Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all Losses and costs of Remediation (whether or not performed voluntarily), engineers' fees, environmental consultants' fees, and costs of investigation (including but not limited to sampling, testing, and analysis of soil, water, air, building materials and other materials and substances whether solid, liquid or gas) imposed upon or incurred by or asserted against any Indemnified Parties, and directly or indirectly arising out of or in any way relating to any one or more of the following: (a) any presence of any Hazardous Substances in, on, above, or under the Property; (b) any past, present or threatened Release of Hazardous Substances in, on, above, under or from the Property; (c) any activity by Borrower, any person or entity affiliated with Borrower or any tenant or other user of the Property in connection with any actual, proposed or threatened use, treatment, storage, holding, existence, disposition or other Release, generation, production, manufacturing, processing, refining, control, management, abatement, removal, handling, transfer or transportation to or from the Property of any Hazardous Substances at any time located in, under, on or above the Property; (d) any activity by Borrower, any person or entity affiliated with Borrower or any tenant or other user of the Property in connection with any actual or proposed Remediation of any Hazardous Substances at any time located in, under, on or above the Property, whether or not such Remediation is voluntary or pursuant to court or administrative order, including but not limited to any removal, remedial or corrective action; (e) any past or present non-compliance or violations of any Environmental Laws (or permits issued pursuant to any Environmental Law) in connection with the Property or operations thereon, including but not limited to any failure by Borrower, any person or entity affiliated with Borrower or any tenant or other user of the Property to comply with any order of any governmental authority in connection with any Environmental Laws; (f) the imposition, recording or filing of any Environmental Lien encumbering the Property; (g) any administrative processes or proceedings or judicial proceedings in any way connected with any matter addressed in Article 12 and this Section 13.4; (h) any past, present or threatened injury to, destruction of or loss of natural resources in any way connected with the Property, including but not limited to costs to investigate and assess such injury, destruction or loss; (i) any acts of Borrower or other users of the Property in arranging for disposal or treatment, or arranging with a transporter for transport for disposal or treatment, of Hazardous Substances owned or possessed by such Borrower or other users, at any facility or incineration vessel owned or operated by another person or entity and containing such or any similar Hazardous Substance; (j) any acts of Borrower or other users of the Property, in accepting any Hazardous Substances for transport to disposal or treatment facilities, incineration vessels or sites selected by Borrower or such other users, from which there is a Release, or a threatened Release of any Hazardous Substance which causes the incurrence of costs for Remediation; (k) any personal injury, wrongful death, or property damage arising under any statutory or common law or tort law theory, including but not limited to damages assessed for the maintenance of a private or public nuisance or for the conducting of an abnormally dangerous activity on or near the Property; and (1) any misrepresentation or inaccuracy in any representation or warranty or material breach or failure to perform any covenants or other obligations pursuant to Article 12. The foregoing indemnity shall survive the payment of the Note, the exercise of a power of sale in respect of the Property, the foreclosure of this Security Instrument or the acceptance of a deed in lieu of the foreclosure of this Security Instrument for a period of two (2) years (the "Environmental Survival Period"), and, except as hereinafter provided, any claim not brought within the Environmental Survival Period shall be deemed waived. Notwithstanding the foregoing, upon the payment in full of the Note and the performance by Borrower of all other Obligations and the release or discharge of record by Lender of this Security Instrument, the foregoing indemnity shall be of no further force or effect upon Borrower's delivery to Lender of an environmental report, prepared by an environmental consultant satisfactory to Lender, showing that no Releases have occurred upon the Property which have not been remediated in accordance with all applicable Environmental Laws and that the Property is otherwise in compliance in all material respects with all Environmental Laws; provided, however, that, notwithstanding anything contained herein to the contrary, in the event such environmental report, or any other environmental report obtained by Lender, shall disclose that a Release occurred upon the Property which has not been remediated in compliance in all material respects with all applicable Environmental Laws or that the Property is not in compliance in all material respects with all Environmental Laws, the foregoing indemnity shall fully survive indefinitely. Nothing herein shall be deemed to impose any liability upon Borrower for any Release of Hazardous Substances, or any violation of Environmental Laws, occurring solely subsequent to (A) a transfer of the Property in accordance with the terms of Article 8 hereof, provided that the transferee shall execute and deliver to the Lender an indemnification substantially in the form of this Section 13.4, (B) the payment in full of the Note and the performance by Borrower of all other Obligations and the release or discharge of record by Lender of this Security Instrument, (C) the exercise of any power of sale in respect of the Property, or (D) the foreclosure of this Security Instrument or the acceptance of a deed in lieu of foreclosure of this Security Instrument. Section 13.5 Duty to Defend; Attorneys' Fees and Other Fees and Expenses. Upon written request by any Indemnified Party, Borrower shall defend such Indemnified Party (if requested by any Indemnified Party, in the name of the Indemnified Party) by attorneys and other professionals approved by the Indemnified Parties. Notwithstanding the foregoing, any Indemnified Parties may, in their sole and absolute discretion, engage their own attorneys and other professionals to defend or assist them, and, at the option of Indemnified Parties, their attorneys shall control the resolution of claim or proceeding. Upon demand, Borrower shall pay or, in the sole and absolute discretion of the Indemnified Parties, reimburse, the Indemnified Parties for the payment of reasonable fees and disbursements of attorneys, engineers, environmental consultants, laboratories and other professionals in connection therewith. ARTICLE 14 WAIVERS Section 14.1 Waiver of Counterclaim. Borrower hereby waives the right to assert a counterclaim, other than a mandatory or compulsory counterclaim, in any action or proceeding brought against it by Lender arising out of or in any way connected with this Security Instrument, the Note, any of the Other Security Documents, or the Obligations. Section 14.2 Marshalling and Other Matters. Borrower hereby waives, to the extent permitted by law, the benefit of all appraisement, valuation, stay, extension, reinstatement and redemption laws now or hereafter in force and all rights of marshalling in the event of any sale hereunder of the Property or any part thereof or any interest therein. Further, Borrower hereby expressly waives any and all rights of redemption from sale under any order or decree of foreclosure of this Security Instrument on behalf of Borrower, and on behalf of each and every person acquiring any interest in or title to the Property subsequent to the date of this Security Instrument and on behalf of all persons to the extent permitted by applicable law. Section 14.3 Waiver of Notice. Borrower shall not be entitled to any notices of any nature whatsoever from Lender except with respect to matters for which this Security Instrument specifically and expressly provides for the giving of notice by Lender to Borrower and except with respect to matters for which Lender is required by applicable law to give notice, and Borrower hereby expressly waives the right to receive any notice from Lender with respect to any matter for which this Security Instrument does not specifically and expressly provide for the giving of notice by Lender to Borrower. Section 14.4 Waiver of Statute of Limitations. Borrower hereby expressly waives and releases to the fullest extent permitted by law, the pleading of any statute of limitations as a defense to Payment of the Debt or performance of its Other Obligations. Section 14.5 Sole Discretion of Lender. Wherever pursuant to this Security Instrument (a) Lender exercises any right given to it to approve or disapprove, (b) any arrangement or term is to be satisfactory to Lender, or (c) any other decision or determination is to be made by Lender, the decision of Lender to approve or disapprove, all decisions that arrangements or terms are satisfactory or not satisfactory and all other decisions and determinations made by Lender, shall be in the sole and absolute discretion of Lender and shall be final and conclusive, except as may be otherwise expressly and specifically provided herein. Section 14.6 Survival. The indemnifications made pursuant to Sections 13.2, 13.3 and 13.4 and the representations and warranties, covenants, and other obligations arising under Article 12, shall continue indefinitely in full force and effect and shall survive and shall in no way be impaired by: any satisfaction or other termination of this Security Instrument, any assignment or other transfer of all or any portion of this Security Instrument or Lender's interest in the Property (but, in such case, shall benefit both Indemnified Parties and any assignee or transferee), any exercise of Lender's rights and remedies pursuant hereto including but not limited to foreclosure or acceptance of a deed in lieu of foreclosure, any exercise of any rights and remedies pursuant to the Note or any of the Other Security Documents, any transfer of all or any portion of the Property (whether by Borrower or by Lender following foreclosure or acceptance of a deed in lieu of foreclosure or at any other time), any amendment to this Security Instrument, the Note or the Other Security Documents, and any act or omission that might otherwise be construed as a release or discharge of Borrower from the obligations pursuant hereto. Section 14.7 WAIVER OF TRIAL BY JURY. BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THE NOTE, THE APPLICATION FOR THE LOAN EVIDENCED BY THE NOTE, THE NOTE, THIS SECURITY INSTRUMENT OR THE OTHER SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER, ITS OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH. ARTICLE 15 EXCULPATION Section 15.1 Exculpation. Except as otherwise provided, Lender shall not enforce the liability and obligation of Borrower to perform and observe the obligations contained in the Note or this Security Instrument by any action or proceeding wherein a money judgment shall be sought against Borrower, except that Lender may bring a foreclosure action, action for specific performance or other appropriate action or proceeding to enable Lender to enforce and realize upon this Security Instrument, the Other Security Documents, and the interest in the Property, the Rents and any other collateral given to Lender created by this Security Instrument and the Other Security Documents; provided, however, that any judgment in any action or proceeding shall be enforceable against Borrower only to the extent of Borrower's interest in the Property, in the Rents and in any other collateral given to Lender. Lender, by accepting the Note and this Security Instrument, agrees that it shall not, except as otherwise provided in Sections 15.2 and 15.3, sue for, seek or demand any deficiency judgment against Borrower in any action or proceeding, under or by reason of or under or in connection with the Note, the Other Security Documents or this Security Instrument. Section 15.2 Reservation of Certain Rights. The provisions of Section 15.1 shall not (a) constitute a waiver, release or impairment of any obligation evidenced or secured by the Note, the Other Security Documents or this Security Instrument; (b) impair the right of Lender to obtain a deficiency judgment in any action or proceeding in order to preserve its rights and remedies, including, without limitation, foreclosure, nonjudicial foreclosure, or the exercise of a power of sale, under the Additional Security Instruments; however, Lender agrees that it shall not enforce such deficiency judgment against any assets of Borrower other than the Additional Property or in the exercise of its rights and remedies under the Additional Security Instruments; (c) impair the right of Lender to name Borrower as a party defendant in any action or suit for judicial foreclosure and sale under this Security Instrument; (d) affect the validity or enforceability of any indemnity, guaranty, master lease or similar instrument made in connection with the Note, this Security Instrument, or the Other Security Documents; (e) impair the right of Lender to obtain the appointment of a receiver; (f) impair the enforcement of the Assignment of Leases and Rents executed in connection herewith; (g) impair the right of Lender to obtain a deficiency judgment or judgment on the Note against Borrower if necessary to obtain any insurance proceeds or condemnation awards to which Lender would be otherwise entitled under this Security Instrument, provided, however, Lender shall only enforce such judgment against the insurance proceeds and/or condemnation awards; or (h) impair the right of Lender to enforce the provisions of Sections 11.10, 13.1, 13.2, 13.3 and 13.4 of this Security Instrument. Section 15.3 Exceptions to Exculpation. Notwithstanding the provisions of this Article 15 to the contrary, Borrower shall be personally liable to Lender for the Losses it incurs due to: (i) fraud or material misrepresentation by Borrower or any other person or entity in connection with the execution and the delivery of the Note, this Security Instrument or the Other Security Documents; (ii) Borrower's gross negligence or willful misconduct with respect to the management and operation of the Property and/or Borrower's financial affairs; (iii) Borrower's removal or disposal of any Personal Property after an Event of Default; (iv) Borrower's failure to pay Taxes, Insurance Premiums, Other Charges (except to the extent that sums sufficient to pay such amounts have been deposited with Lender pursuant to the terms of this Security Instrument and/or the Lockbox Agreement), charges for labor or materials or other charges that can create liens on the Property; (v) Borrower or Guarantor or any party acting at the behest of Borrower or Guarantor challenges the validity or enforceability of the Note, this Security Instrument or Other Security Documents and/or Borrower or Guarantor or any party acting at the behest of Borrower or Guarantor asserts defenses (other than (A) the defense of payment in full of the Obligations, provided that no other Event of Default has occurred and is continuing, or (B) a defense made in good faith as to the improper exercise of Lender's remedies under the Note, this Security Instrument or the Other Security Documents, provided that no Event of Default has occurred and is continuing at the time of Lender's exercise of such remedies) to the validity or enforceability of the Note, this Security Instrument or Other Security Documents, in each case solely for the purpose of delaying, hindering or impairing Lender's rights and remedies under the Note, this Security Instrument or Other Security Documents; (vi) Borrower or any party acting at Borrower's behest misapplies or misappropriates Rents, tenant security deposits, insurance proceeds or condemnation awards; or (vii) Borrower's failure to comply with the provisions of Sections 3.3, 3.9, 4.2, 4.3, 12.1, 12.2, 13.1, 13.2, 13.3, 13.4 or 13.5 of this Security Instrument. Section 15.4 Recourse. Notwithstanding the foregoing, the agreement of Lender not to pursue recourse liability as set forth in Section 15.1 above SHALL BECOME NULL AND VOID and shall be of no further force and effect in the event (1) Borrower defaults under Sections 8.2 or 8.3 of this Security Instrument, (2) a voluntary bankruptcy or insolvency proceeding is filed or instituted by Borrower or Guarantor, or an involuntary bankruptcy or insolvency proceeding is filed or instituted against Borrower or Guarantor which is not dismissed within ninety (90) days of the filing thereof (except if such involuntary proceeding is brought by Lender), or (3) any financial information concerning Borrower or Guarantor provided in the Note, this Security Instrument or the Other Security Documents or otherwise in order to induce Lender to make the loan evidenced by the Note is fraudulent in any respect, contains any fraudulent information or misrepresents in any material respect the financial condition of Borrower or any Guarantor or Indemnitor. Section 15.5 Bankruptcy Claims. Nothing herein shall be deemed to be a waiver of any right which Lender may have under Sections 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim for the full amount of the Debt secured by this Security Instrument or to require that all collateral shall continue to secure all of the Debt owing to Lender in accordance with the Note, this Security Instrument and the Other Security Documents. ARTICLE 16 NOTICES Section 16.1 Notices. All notices or other written communications hereunder shall be deemed to have been properly given (i) upon delivery, if delivered in person or by facsimile transmission with receipt acknowledged by the recipient thereof, (ii) one (1) Business Day (defined below) after having been deposited for overnight delivery with any reputable overnight courier service, or (iii) three (3) Business Days after having been deposited in any post office or mail depository regularly maintained by the U.S. Postal Service and sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows: If to Borrower: Wellsford Capital Properties, L.L.C. c/o Wellsford Real Properties, Inc. 610 Fifth Avenue, New York, New York 10020 Attention: Gregory F. Hughes Facsimile No.: 212-333-2323 Confirmation No.: 212-333-2300 With a copy to: Robinson Silverman Pearce Aronsohn & Berman LLP 1290 Avenue of the Americas New York, NY 10104 Attention: Dennis M. Sughrue, Esq. Facsimile No.: (212) 541-1490 Confirmation No.: (212) 541-2009 If to Lender: Lehman Brothers Holdings Inc. 3 World Financial Center - 12th Floor New York, New York 10295-1200 Attention: Charles W. Schoenherr Facsimile No.: (212) 528-6680 Confirmation No.: (212) 526-5069 With a copy to: Kelley Drye & Warren LLP 101 Park Avenue New York, NY 10178 Attention: James J. Kirk, Esq. Facsimile No.: (2112) 808-7897 Confirmation No.: (212) 808-7623 or addressed as such party may from time to time designate by written notice to the other parties. Either party by notice to the other may designate additional or different addresses for subsequent notices or communications. For purposes of this Subsection 16.1, "Business Day" shall mean a day on which commercial banks are not authorized or required by law to close in New York, New York. ARTICLE 17 SERVICE OF PROCESS Section 17.1 Submission to Jurisdiction. With respect to any claim or action arising hereunder or under the Note or the Other Security Documents, Borrower (a) irrevocably submits to the nonexclusive jurisdiction of the courts of the State of New York and the state where the Property is located and the United States District Court located in the Borough of Manhattan in New York, New York and the county in which the Property is located, and appellate courts from any thereof, and (b) irrevocably waives any objection which it may have at any time to the laying on venue of any suit, action or proceeding arising out of or relating to this Security Instrument brought in any such court, irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Section 17.2 Jurisdiction Not Exclusive. Nothing in this Security Instrument will be deemed to preclude Lender from bringing an action or proceeding with respect hereto in any other jurisdiction. ARTICLE 18 APPLICABLE LAW Section 18.1 Choice of Law. This Security Instrument shall be governed, construed, applied and enforced in accordance with the laws of the state in which the Property is located and the applicable laws of the United States of America. Section 18.2 Usury Laws. This Security Instrument and the Note are subject to the express condition that at no time shall Borrower be obligated or required to pay interest on the Debt at a rate which could subject the holder of the Note to either civil or criminal liability as a result of being in excess of the maximum interest rate which Borrower is permitted by applicable law to contract or agree to pay. If by the terms of this Security Instrument or the Note, Borrower is at any time required or obligated to pay interest on the Debt at a rate in excess of such maximum rate, the rate of interest under the Security Instrument and the Note shall be deemed to be immediately reduced to such maximum rate and the interest payable shall be computed at such maximum rate and all prior interest payments in excess of such maximum rate shall be applied and shall be deemed to have been payments in reduction of the principal balance of the Note. All sums paid or agreed to be paid to Lender for the use, forbearance, or detention of the Debt shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Note until payment in full so that the rate or amount of interest on account of the Debt does not exceed the maximum lawful rate of interest from time to time in effect and applicable to the Debt for so long as the Debt is outstanding. Section 18.3 Provisions Subject to Applicable Law. All rights, powers and remedies provided in this Security Instrument may be exercised only to the extent that the exercise thereof does not violate any applicable provisions of law and are intended to be limited to the extent necessary so that they will not render this Security Instrument invalid, unenforceable or not entitled to be recorded, registered or filed under the provisions of any applicable law. If any term of this Security Instrument or any application thereof shall be invalid or unenforceable, the remainder of this Security Instrument and any other application of the term shall not be affected thereby. ARTICLE 19 SECONDARY MARKET Section 19.1 Transfer of Loan. Lender may, at any time, and without the consent of Borrower, but at Lender's sole cost and expense, sell, transfer or assign the Note, this Security Instrument and the Other Security Documents, and any or all servicing rights with respect thereto, or grant participations therein or issue mortgage pass-through certificates or other securities evidencing a beneficial interest in a rated or unrated public offering or private placement (the "Securities"). Lender may forward to each purchaser, transferee, assignee, servicer, participant, investor in such Securities or any Rating Agency rating such Securities (all of the foregoing entities collectively referred to as the "Investor") and each prospective Investor, all documents and information which Lender now has or may hereafter acquire relating to the Debt and to Borrower, any Guarantor, any Indemnitor and the Property, whether furnished by Borrower, any Guarantor, any Indemnitor or otherwise, as Lender determines necessary or desirable. Borrower, any Guarantor and any Indemnitor agree to cooperate with Lender in connection with any transfer made or any Securities created pursuant to this Section 19.1, including, without limitation, the delivery of an estoppel certificate required in accordance with Subsection 7.4(c) hereof and such other documents as may be reasonably requested by Lender; provided that such cooperation shall not alter the monetary terms of the Note, this Security Instrument or the Other Security Documents, or increase the obligations, or decrease the rights, of Borrower, any Guarantor or any Indemnitor hereunder or thereunder. Borrower shall also furnish and Borrower, any Guarantor and any Indemnitor consent to Lender furnishing to such Investors or such prospective Investors or Rating Agency any and all information concerning the Property, the Leases, the financial condition of Borrower, any Guarantor and any Indemnitor as may be requested by Lender, any Investor or any prospective Investor or Rating Agency in connection with any sale, transfer or participation interest. ARTICLE 20 COSTS Section 20.1 Performance at Borrower's Expense. Borrower acknowledges and confirms that Lender shall impose certain administrative processing and/or commitment fees in connection with (a) the extension, renewal, modification, amendment and termination of its loans, (b) the release or substitution of collateral therefor, (c) obtaining certain consents, waivers and approvals with respect to the Property, or (d) the review of any Lease or proposed lease or the preparation or review of any subordination, non- disturbance agreement (the occurrence of any of the above shall be called an "Event"). Borrower further acknowledges and confirms that it shall be responsible for the payment of all costs of reappraisal of the Property or any part thereof, whether required by law, regulation, Lender or any governmental or quasi-governmental authority. Borrower hereby acknowledges and agrees to pay, immediately, with or without demand, all such fees (as the same may be increased or decreased from time to time), and any additional fees of a similar type or nature which may be imposed by Lender from time to time, upon the occurrence of any Event or otherwise, provided that such fees shall be customary and reasonable for the work undertaken. Wherever it is provided for herein that Borrower pay any costs and expenses, such costs and expenses shall include, but not be limited to, all reasonable legal fees and disbursements of Lender, whether of retained firms, the reimbursement for the expenses of in-house staff or otherwise. Section 20.2 Attorney's Fees for Enforcement. (a) Borrower shall pay all reasonable legal fees incurred by Lender in connection with (i) the preparation of the Note, this Security Instrument and the Other Security Documents and (ii) the items set forth in Section 20.1 above, and (b) Borrower shall pay to Lender on demand any and all expenses, including legal expenses and attorneys' fees, incurred or paid by Lender in protecting its interest in the Property or Personal Property or in collecting any amount payable hereunder or in enforcing its rights hereunder with respect to the Property or Personal Property, whether or not any legal proceeding is commenced hereunder or thereunder and whether or not any default or Event of Default shall have occurred and is continuing, together with interest thereon at the Default Rate from the date paid or incurred by Lender until such expenses are paid by Borrower. ARTICLE 21 DEFINITIONS Section 21.1 General Definitions. Unless the context clearly indicates a contrary intent or unless otherwise specifically provided herein, words used in this Security Instrument may be used interchangeably in singular or plural form and the word "Borrower" shall mean "each Borrower and any subsequent owner or owners of the Property or any part thereof or any interest therein," the word "Lender" shall mean "Lender and any subsequent holder of the Note," the word "Note" shall mean "the Note and any other evidence of indebtedness secured by this Security Instrument," the word "person" shall include an individual, corporation, partnership, trust, limited liability company, unincorporated association, government, governmental authority, and any other entity, the word "Property" shall include any portion of the Property and any interest therein, and the phrases "attorneys' fees", "legal fees" and "counsel fees" shall include any and all attorneys', paralegal and law clerk fees and disbursements, including, but not limited to, fees and disbursements at the pre-trial, trial and appellate levels incurred or paid by Lender in protecting its interest in the Property, the Leases and the Rents and enforcing its rights hereunder. ARTICLE 22 MISCELLANEOUS PROVISIONS Section 22.1 No Oral Change. This Security Instrument, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Borrower or Lender, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. Section 22.2 Liability. If Borrower consists of more than one person, the obligations and liabilities of each such person hereunder shall be joint and several. This Security Instrument shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns forever. Section 22.3 Inapplicable Provisions. If any term, covenant or condition of the Note or this Security Instrument is held to be invalid, illegal or unenforceable in any respect, the Note and this Security Instrument shall be construed without such provision. Section 22.4 Headings, etc. The headings and captions of various Sections of this Security Instrument 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. Section 22.5 Duplicate Originals; Counterparts. This Security Instrument may be executed in any number of duplicate originals and each duplicate original shall be deemed to be an original. This Security Instrument may be executed in several counterparts, each of which counterparts shall be deemed an original instrument and all of which together shall constitute a single Security Instrument. The failure of any party hereto to execute this Security Instrument, or any counterpart hereof, shall not relieve the other signatories from their obligations hereunder. Section 22.6 Number and Gender. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice versa. Section 22.7 Entire Agreement. The Note, this Security Instrument and the Other Security Documents constitute the entire understanding and agreement between Borrower and Lender with respect to the transactions arising in connection with the Debt and supersede all prior written or oral understandings and agreements between Borrower and Lender with respect thereto. Borrower hereby acknowledges that, except as incorporated in writing in the Note, this Security Instrument and the Other Security Documents, there are not, and were not, and no persons are or were authorized by Lender to make, any representations, understandings, stipulations, agreements or promises, oral or written, with respect to the transaction which is the subject of the Note, this Security Instrument and the Other Security Documents. ARTICLE 23 CROSS-COLLATERALIZATION Section 23.1 Cross Collateralization. Borrower acknowledges that the Debt is secured by this Security Instrument together with the Additional Security Instruments encumbering the Additional Property, all as more specifically set forth in the Note. Upon the occurrence of an Event of Default, Lender shall have the right to institute a proceeding or proceedings for the total or partial foreclosure of this Security Instrument and the Additional Security Instruments whether by court action, power of sale or otherwise, under any applicable provision of law, including, without limitation, the STATUTORY POWER OF SALE, for all of the Debt or the portion of the Debt allocated to the Property as set forth in Exhibit A to the Note, and the liens and the security interests created by the Additional Security Instruments shall continue in full force and effect without loss of priority as liens and security interests securing the payment of that portion of the Debt then due and payable but still outstanding. Borrower acknowledges and agrees that the Property and the Additional Property are located in one or more states and counties, and therefore Lender shall be permitted to enforce payment of the Debt and the performance of any term, covenant or condition of the Note, this Security Instrument, the other Security Documents or the Additional Security Instruments and exercise any and all rights and remedies under the Note, this Security Instrument, the Other Security Documents or the Additional Security Instruments, or as provided by law or at equity, by one or more proceedings, whether contemporaneous, consecutive or both, to be determined by Lender, in its sole discretion, in any one or more of the states or counties in which the Property or the Additional Property is located. Neither the acceptance of this Security Instrument, the Other Security Documents or the Additional Security Instruments nor the enforcement thereof in any one state or county, whether by court action, foreclosure, power of sale or otherwise, shall prejudice or in any way limit or preclude enforcement by court action, foreclosure, power of sale or otherwise, of the Note, this Security Instrument, the Other Security Documents, or any Additional Security Instrument through one or more additional proceedings in that state or county or in any other atate or county. Any and all sums received by Lender under the Note, this Security Instrument, and the Other Security Documents shall be applied to the Debt in such order and priority as Lender shall determine, in its sole discretion, without regard to the allocated loan amounts set forth on Exhibit A to the Note or the appraised value of the Property or the Additional Property. IN WITNESS WHEREOF, THIS SECURITY INSTRUMENT has been executed by Borrower as of the day and year first above written. WELLSFORD CAPITAL PROPERTIES, L.L.C., a Delaware limited liability company By: Wellsford Capital, a Maryland real estate investment trust, its Managing Member By: /s/ Gregory F. Hughes ------------------------------------ Name: Gregory F. Hughes Title: Vice President and Assistant Treasurer STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the 21st day of October, 1998, before me personally came Gregory F. Hughes, to me known to be the individual who executed the foregoing instrument, and who, being duly sworn by me, did depose and say that he is the Vice President and Assistant Treasurer of Wellsford Capital, a Maryland real estate investment trust, which trust is the managing member of Wellsford Capital Properties, L.L.C., a Delaware limited liability company; and that he had authority to sign the same; and that he acknowledged to me that he executed the same in such capacity as the act and deed of said limited liability company for the uses and purposes therein mentioned. /s/ Frantz Michaud --------------------- Frantz Michaud Notary Public Exhibits Exhibit A Description of Land PARCEL 1: Beginning at a point on the easterly sideline of Keewaydin Drive in the City of Salem, New Hampshire at the southwesterly corner of the granted premises at land now or formerly of Robert B. Ross; thence Northeasterly a distance of Six Hundred Five and Twenty-Nine Hundredths (605.29) feet to a point; thence S 24 degree - 57 - 30"W a distance of Three Hundred Twenty-Five (325.00) feet to a point; thence S 65 degree - 02' - 30"W a distance of Six Hundred Eighty-Nine and Fifty- Seven Hundredths (689.57) feet to a point; and thence N 10 degree - 25' - 10"W a distance of Three Hundred Thirty-Five and Seventy- Five Hundredths (335.75) feet to a point of beginning, or as otherwise bounded and described. The above described parcel of land contains an area of 210,414 square feet or 4.83 acres, more or less, in said Salem and is shown as lot 29-B on a plan entitled "Plan of Land in Salem, New Hampshire, prepared for TA Associates Realty One Limited Partnership," dated June, 1984, prepared by Allen & Demurjian, Inc., and recorded with the Rockingham County (New Hampshire) Registry of Deeds as Plan No. D12590, which plan was revised April 25, 1985, and, as revised, recorded with the Rockingham County Registry of Deeds as Plan No. 13605. PARCEL 2: Beginning at a point on the easterly sideline of Keewaydin Drive in the City of Salem, New Hampshire at the northwesterly corner of the premises described below, at land formerly of TA Associates Realty One Limited Partnership, such other land being Parcel 1 described above; thence Northeasterly a distance of Six Hundred Eighty-Nine and Fifty-Seven Hundredths (689.57) feet to a point; thence S 24 degree - 57' - 30"E a distance of Six Hundred Ninety-Seven and Eighty- Five Hundredths (697.85) feet to a point; thence S 77 degree - 55' - 20"W a distance of Five Hundred Four and Sixty-Three Hundredths (504.63) feet; thence Northwesterly a distance of Forty-Four and Fifty Hundredths (44.50) feet to a point; thence Southwesterly a distance of Three Hundred and Thirty-Seven Hundredths (300.37) feet to a point of curvature; thence Northwesterly and curving to the left along the arc of a curve having a radius of Seventy-Five (75.00) feet, a length of Twenty- Nine and Thirty-Two Hundredths (29.32) feet to a point; thence Northwesterly and curing to the right along the arc of a curve having a radius of Fifty (50.00) feet, a length of Forty-Three and Eighty-One Hundredths (43.81) feet to a point; and thence N 10 degree - 25' - 10"W a distance of Four Hundred Ten and Fifty-Eight Hundredths (410.58) feet to the point of beginning, or as otherwise bounded and described. The above described parcel of land in Salem in shown as Lot 29-A on the Plan, and as shown on the revised plan recorded as Plan No. 13605 in the Rockingham County Registry of Deeds, contains an area of 444,880 square feet or 10.2 acres, more or less. PARCEL 3: Beginning at a point of curvature on the easterly sideline of Keewaydin Drive in the City of Salem, New Hampshire at the northwesterly corner of the granted premises at land formerly of TA Associates Realty One Limited Partnership, such other land being Parcel 2 described above; thence N 79 degree - 45' - 23"E a distance of Three Hundred and Thirty-Seven Hundredths (300.37) feet to a point; thence S 12 degree - 24' - 29"E a distance of Five Hundred Eighty-One and Ninety- Nine Hundredths (581.99) feet to a point; thence N 67 degree - 40' - 50"W a distance of One Hundred Twelve and Fifty-Seven Hundredths (112.57) feet to a point; thence S 82 degree - 01' - 50"W a distance of Two Hundred Ninety-Two and Forty-Seven Hundredths (292.47) feet to a point; thence N 10 degree - 25' - 10"W a distance of Three Hundred Ninety-Nine and Twenty Hundredths (399.20) feet to a point of curvature; and thence Northeasterly and curving to the left along the arc of a curve having a radius of Seventy-Five (75.00) feet, a length of One Hundred Fifty-Four and Twenty-One Hundredths (154.21) feet to the point of beginning, or as otherwise bounded and described. The above described parcel of land contains an area of 189,953 square feet or 4.4 acres, more or less in said Salem and is shown as lot 29-1 on a plan entitled "Plan of Land in Salem, New Hampshire, prepared for TA Associates Realty One Limited Partnership," dated June, 1984, prepared by Allen & Demurjian, Inc., recorded with the Rockingham County (New Hampshire) Registry of Deeds as Plan No. D12590, and on that same plan, as revised April 25, 1985, and recorded as plan No. 13605 in the Rockingham County Registry of Deeds. EX-10.81 34 WELLSFORD REAL PROPERTIES, INC. 1998 MANAGEMENT INCENTIVE PLAN WELLSFORD REAL PROPERTIES, INC., a Maryland corporation (the "Company"), hereby establishes and adopts the following 1998 Management Incentive Plan (the "Plan"). RECITALS WHEREAS, the Company desires to encourage high levels of performance by those individuals who are key to the success of the Company, to attract new individuals who are highly motivated and who will contribute to the success of the Company and to encourage such individuals to remain as directors and/or employees of the Company and its subsidiaries by increasing their proprietary interest in the Company's growth and success. WHEREAS, to attain these ends, the Company has formulated the Plan embodied herein to authorize the granting of incentive awards through grants of stock options ("Options"), grants of stock appreciation rights, grants of Stock Purchase Awards (hereafter defined), and grants of Restricted Stock Awards (hereafter defined) to those individuals whose judgment, initiative and efforts are responsible for the success of the Company. NOW, THEREFORE, the Company hereby constitutes, establishes and adopts the following Plan and agrees to the following provisions: ARTICLE 10. PURPOSE OF THE PLAN 10.1. Purpose. The purpose of the Plan is to assist the Company in attracting and retaining selected individuals to serve as directors, officers and employees of the Company who will contribute to the Company's success and to achieve long-term objectives which will inure to the benefit of all shareholders of the Company through the additional incentive inherent in the ownership of the Company's Common Stock (the "Shares"). Options granted under the Plan will be either "incentive stock options," intended to qualify as such under the provisions of section 422 of the Internal Revenue Code of 1986, as from time to time amended (the "Code"), or "nonqualified stock options." For purposes of the Plan, the term "subsidiary" shall mean "subsidiary corporation," as such term is defined in section 424(f) of the Code, and "affiliate" shall have the meaning set forth in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). For purposes of the Plan, the term "Award" shall include a grant of an Option, stock appreciation rights, a Stock Purchase Award, a Restricted Stock Award, or any other award made under the terms of the Plan. ARTICLE 11. SHARES SUBJECT TO AWARDS 11.1. Number of Shares. Subject to the adjustment provisions of Section 9.9 hereof, the aggregate number of Shares which may be issued under Awards under the Plan, whether pursuant to Options, Stock Purchase Awards or Restricted Stock Awards shall not exceed 2,000,000. No Options to purchase fractional Shares shall be granted or issued under the Plan. For purposes of this Section 2.1, the Shares that shall be counted toward such limitation shall include all Shares: (1) issued or issuable pursuant to Options that have been or may be exercised; (2) issued or issuable pursuant to Stock Purchase Awards; and (3) issued as, or subject to issuance as a Restricted Stock Award. 11.2. Shares Subject to Terminated Awards. The Shares covered by any unexercised portions of terminated Options granted under Articles 4 and 6, Shares forfeited as provided in Section 8.2(a) and Shares subject to any Awards which are otherwise surrendered by the Participant without receiving any payment or other benefit with respect thereto may again be subject to new Awards under the Plan. In the event the purchase price of an Option is paid in whole or in part through the delivery of Shares, the number of Shares issuable in connection with the exercise of the Option shall not again be available for the grant of Awards under the Plan. Shares subject to Options, or portions thereof, which have been surrendered in connection with the exercise of share appreciation rights shall not again be available for the grant of Awards under the Plan. 11.3. Character of Shares. Shares delivered under the Plan may be authorized and unissued Shares or Shares acquired by the Company, or both. 11.4. Limitations on Grants to Individual Participant. Subject to adjustments pursuant to the provisions of Section 9.9 hereof, the maximum number of Shares with respect to which Options or stock appreciation rights may be granted hereunder to any employee during any fiscal year shall be 500,000 Shares (the "Limitation"). If an Option is canceled, the canceled Option shall continue to be counted toward the Limitation for the year granted. An Option (or a stock appreciation right) that is repriced during any fiscal year is treated as the cancellation of the Option (or stock appreciation right) and a grant of a new Option (or stock appreciation right) for purposes of the Limitation for that fiscal year. ARTICLE 12. ELIGIBILITY AND ADMINISTRATION 12.1. Awards to Employees and Directors. (a) Participants who receive Options under Articles 4 and 6 hereof (including stock appreciation rights under Article 5) ("Optionees"), Stock Purchase Awards under Article 7 or Restricted Stock Awards under Article 8 (in either case, a "Participant") shall consist of such key employees and Directors (hereinafter defined) of the Company or any of its subsidiaries or affiliates as the Committee shall select from time to time. The Committee's designation of an Optionee or Participant in any year shall not require the Committee to designate such person to receive Awards or grants in any other year. The designation of an Optionee or Participant to receive Awards or grants under one portion of the Plan shall not require the Committee to include such Optionee or Participant under other portions of the Plan. (b) No Option which is intended to qualify as an "incentive stock option" may be granted to any employee or Director who, at the time of such grant, owns, directly or indirectly (within the meaning of sections 422(b)(6) and 424(d) of the Code), shares possessing more than ten percent (10%) of the total combined voting power of all classes of shares of the Com- pany or any of its subsidiaries or affiliates, unless at the time of such grant, (i) the option price is fixed at not less than 110% of the Fair Market Value (as defined below) of the Shares subject to such Option, determined on the date of the grant, and (ii) the exercise of such Option is prohibited by its terms after the expiration of five (5) years from the date such Option is granted. 12.2. Administration. (a) The Plan shall be administered by a committee (the "Committee") consisting of not fewer than two Directors of the Company (the directors of the Company being hereinafter referred to as the "Directors"), as designated by the Directors. The Directors may remove from, add members to, or fill vacancies in the Committee. Unless otherwise determined by the Directors, each member of the Committee will be a "Non- Employee Director" within the meaning of Rule 16b-3 (or any successor rule) of the Exchange Act and an "outside director" within the meaning of Section 162(m)(4)(C)(i) of the Code and the regulations thereunder. Any Award to a member of the Committee shall be on terms consistent with Awards made to other Directors who are not members of the Committee, except where the Award is approved or ratified by the Compensation Committee (excluding persons who are also members of the Committee) of the Board of Directors of the Company. (b) The Committee is authorized, subject to the provisions of the Plan, to establish such rules and regulations as it may deem appropriate for the conduct of meetings and proper administration of the Plan. All actions of the Committee shall be taken by majority vote of its members. The Committee is also authorized, subject to the provisions of the Plan, to make provisions in various Awards pertaining to a "change of control" of the Company and to amend or modify existing Awards. (c) Subject to the provisions of the Plan, the Committee shall have authority, in its sole discretion, to interpret the provisions of the Plan and, subject to the requirements of applicable law, including Rule 16b-3 of the Exchange Act, to prescribe, amend, and rescind rules and regula- tions relating to it as it may deem necessary or advisable. All decisions made by the Committee pursuant to the provisions of the Plan shall be final, conclusive and binding on all persons, including the Company, its shareholders, Directors and employees, and Plan participants. ARTICLE 13. OPTIONS 13.1. Grant of Options. The Committee shall determine, within the limitations of the Plan, the Directors and employees of the Company and its subsidiaries and affiliates to whom Options are to be granted under the Plan, the number of Shares that may be purchased under each such Option and the option price, and shall designate such Options at the time of the grant as either "incentive stock options" or "nonqualified stock options;" provided, however, that Options granted to employees of an affiliate (that is not also a subsidiary) or to non-employees of the Company may only be "nonqualified stock options." All Options granted pursuant to this Article 4 and Article 6 herein shall be authorized by the Committee and shall be evidenced in writing by stock option agreements ("Stock Option Agreements") in such form and containing such terms and conditions as the Committee shall determine which are not inconsistent with the provisions of the Plan, and, with respect to any Stock Option Agreement granting Options which are intended to qualify as "incentive stock options," are not inconsistent with Section 422 of the Code. Granting of an Option pursuant to the Plan shall impose no obligation on the recipient to exercise such option. Any individual who is granted an Option pursuant to this Article 4 and Article 6 herein may hold more than one Option granted pursuant to such Articles at the same time and may hold both "incentive stock options" and "nonqualified stock options" at the same time. To the extent that any Option does not qualify as an "incentive stock option" (whether because of its provisions, the time or manner of its exercise or otherwise) such Option or the portion thereof which does not so qualify shall constitute a separate "nonqualified stock option." 13.2. Option Price. (a) Subject to Section 3.1(b), the option price per each Share purchasable under any "incentive stock option" granted pursuant to this Article 4 and any "nonqualified stock option" granted pursuant to Article 6 herein shall not be less than 100% of the Fair Market Value (as hereinafter defined) of such Share on the date of the grant of such Option. (b) The option price per share of each Share purchasable under any "nonqualified stock option" granted pursuant to this Article 4 shall be such amount as the Committee shall determine at the time of the grant of such Option. 13.3. Other Provisions. Options granted pursuant to this Article 4 shall be made in accordance with the terms and provision of Article 9 hereof and any other applicable terms and provisions of the Plan. ARTICLE 14. STOCK APPRECIATION RIGHTS 14.1. Grant and Exercise. Stock appreciation rights may be granted in conjunction with all or part of any Option granted under the Plan provided such rights are granted at the time of the grant of such Option. A "stock appreciation right" is a right to receive cash or Shares, as provided in this Article 5, in lieu of the purchase of a Share under a related Option. A share appreciation right or applicable portion thereof shall terminate and no longer be exercisable upon the termination or exercise of the related Option, and a stock appreciation right granted with respect to less than the full number of Shares covered by a related Option shall not be reduced until, and then only to the extent that, the exercise or termination of the related Option exceeds the number of Shares not covered by the share appreciation right. A stock appreciation right may be exercised by the holder thereof (the "Holder"), in accordance with Section 5.2 of this Article 5, by giving written notice thereof to the Company and surrendering the applicable portion of the related Option. Upon giving such notice and surrender, the Holder shall be entitled to receive an amount determined in the manner prescribed in Section 5.2 of this Article 5. Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the extent the related share appreciation rights have been exercised. 14.2. Terms and Conditions. Stock appreciation rights shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Committee, including the following: (a) Stock appreciation rights shall be exercisable only at such time or times and to the extent that the Options to which they relate shall be exercisable in accordance with the provisions of the Plan. (b) Upon the exercise of a stock appreciation right, a Holder shall be entitled to receive up to, but no more than, an amount in cash or whole Shares equal to the excess of the then Fair Market Value of one Share over the option price per Share specified in the related Option multiplied by the number of Shares in respect of which the share appre- ciation right shall have been exercised. The Holder shall specify in his written notice of exercise, whether payment shall be made in cash or in whole Shares. Each share appreciation right may be exercised only at the time and so long as a related Option, if any, would be exercisable or as otherwise permitted by applicable law. (c) Upon the exercise of a stock appreciation right, the Option or part thereof to which such share appreciation right is related shall be deemed to have been exercised for the purpose of the limitation of the number of Shares to be issued under the Plan, as set forth in Section 2.1 of the Plan. (d) With respect to stock appreciation rights granted in connection with an Option that is intended to be an "incentive stock option," the following shall apply: (i) No stock appreciation right shall be transferable by a Holder otherwise than by will or by the laws of descent and distribution, and stock appreciation rights shall be exercisable, during the Holder's lifetime, only by the Holder. (ii) Stock appreciation rights granted in connection with an Option may be exercised only when the Fair Market Value of the Shares subject to the Option exceeds the option price at which Shares can be acquired pursuant to the Option. ARTICLE 15. RELOAD OPTIONS 15.1. Authorization of Reload Options. Concurrently with the award of any Option (such Option hereinafter referred to as the "Underlying Option") to any participant in the Plan, the Committee may grant one or more reload options (each, a "Reload Option") to such participant to purchase for cash or Shares a number of Shares as specified below. A Reload Option shall be exercisable for an amount of Shares equal to (i) the number of Shares delivered by the Optionee to the Company to exercise the Underlying Option, and (ii) to the extent authorized by the Committee, the number of Shares used to satisfy any tax withholding requirement incident to the exercise of the Underlying Option, subject to the availability of Shares under the Plan at the time of such exercise. Any Reload Option may provide for the grant, when exercised, of subsequent Reload Options to the extent and upon such terms and conditions consistent with this Article 6, as the Committee in its sole discretion shall specify at or after the time of grant of such Reload Option. The grant of a Reload Option will become effective upon the exercise of an Underlying Option or Reload Option by delivering to the Company Shares in payment of the exercise price and/or tax withholding obligations. Notwithstanding the fact that the Underlying Option may be an "incentive stock option," a Reload Option is not intended to qualify as an "incentive stock option" under Section 422 of the Code. 15.2. Reload Option Amendment. Each Share Option Agreement shall state whether the Committee has authorized Reload Options with respect to the Underlying Option. Upon the exercise of an Underlying Option or other Reload Option, the Reload Option will be evidenced by an amendment to the underlying Share Option Agreement. 15.3. Reload Option Price. The option price per Share deliverable upon the exercise of a Reload Option shall be the Fair Market Value of a Share on the date the grant of the Reload Option becomes effective. 15.4. Term and Exercise. Each Reload Option is fully exercisable immediately upon its grant. The term of each Reload Option shall be equal to the remaining option term of the Underlying Option. 15.5. Termination of Employment. No additional Reload Options shall be granted to Optionees when Options and/or Reload Options are exercised pursuant to the terms of this Plan following termination of the Optionee's employment unless the Committee, in its sole discretion, shall determine otherwise. awful Applicability of Other Sections. Except as otherwise provided in this Article 6, the provisions of Article 9 applicable to Options shall apply equally to Reload Options. ARTICLE 16. STOCK PURCHASE AWARDS 16.1. Grant of Stock Purchase Award. The term "Stock Purchase Award" means the right to purchase Shares of the Company and to pay for such Shares through a loan made by the Company to the Participant (a "Purchase Loan") as set forth in this Article 7. 16.2. Terms of Purchase Loans. (a) Purchase Loan. Each Purchase Loan shall be evidenced by a promissory note. The term of the Purchase Loan shall be for a period of years, as determined by the Committee, and the proceeds of the Purchase Loan shall be used exclusively by the Participant for purchase of Shares from the Company at a purchase price equal to the Fair Market Value on the date of the Stock Purchase Award. (b) Interest on Purchase Loan. A Purchase Loan shall be non- interest bearing or shall bear interest at whatever rate the Committee shall determine (but not in excess of the maximum rate permissible under applicable law), payable in a manner and at such times as the Committee shall determine. Those terms and provisions as the Committee shall determine shall be incorporated into the promissory note evidencing the Purchase Loan. (c) Forgiveness of Purchase Loan. Subject to Section 7.4 hereof, the Company may forgive the repayment of up to 100% of the principal amount of the Purchase Loan, subject to such terms and conditions as the Committee shall determine and set forth in the promissory note evidencing the Purchase Loan. A Participant's Purchase Loan can be prepaid at any time, and from time to time, without penalty. 16.3. Security for Loans. (a) Stock Power and Pledge. Purchase Loans granted to Participants shall be secured by a pledge of the Shares acquired pursuant to the Stock Purchase Award. Such pledge shall be evidenced by a pledge agreement (the "Pledge Agreement") containing such terms and conditions as the Committee shall determine. The share certificates for the Shares purchased by a Participant pursuant to a Stock Purchase Award shall be issued in the Participant's name, but shall be held by the Company as security for repayment of the Participant's Purchase Loan together with a stock power executed in blank by the Participant (the execution and delivery of which by the Participant shall be a condition to the issuance of the Stock Purchase Award). The Participant shall be entitled to exercise all rights applicable to such Shares, including, but not limited to, the right to vote such Shares and the right to receive dividends and other distributions made with respect to such Shares. When the Purchase Loan and any accrued but unpaid interest thereon has been repaid or otherwise satisfied in full, the Company shall deliver to the Participant the share certificates for the Shares purchased by a Participant under the Stock Purchase Award. Purchase Loans shall be recourse or non-recourse with respect to a Participant, as determined by the Committee. (b) Release and Delivery of Stock Certificates During the Term of the Purchase Loan. The Company shall release and deliver to each Participant certificates for Shares purchased by a Participant pursuant to a Stock Purchase Award, in such amounts and on such terms and conditions as the Committee shall determine, which shall be set forth in the Pledge Agreement. (c) Release and Delivery of Stock Certificates Upon Repayment of the Purchase Loan. The Company shall release and deliver to each Participant certificates for the Shares purchased by the Participant under the Stock Purchase Award and then held by the Company, provided the Participant has paid or otherwise satisfied in full the balance of the Purchase Loan and any accrued but unpaid interest thereon. In the event the balance of the Purchase Loan is not repaid, forgiven or otherwise satisfied within ninety (90) days after (i) the date repayment of the Purchase Loan is due (whether in accordance with its term, by reason of acceleration or otherwise), or (ii) such longer time as the Committee, in its discretion, shall provide for repayment or satisfaction, the Company shall retain those Shares then held by the Company in accordance with the Pledge Agreement. (d) Recourse Purchase Loans. Notwithstanding Sections 7.3(a), (b) and (c) above, in the case of a recourse Purchase Loan, the Committee may make a Purchase Loan on such terms as it determines, including without limitation, not requiring a pledge of the acquired Shares. 16.4. Termination of Employment. (a) Termination of Employment by Death, Disability or by the Company Without Cause; Change of Control. In the event of a Participant's termination of employment by reason of death, "disability" or by the Company without "cause", or in the event of a "change of control", the Committee shall have the right (but shall not be required) to forgive the remaining unpaid amount (principal and interest) of the Purchase Loan in whole or in part as of the date of such occurrence. "Change of Control", "disability" and "cause" shall have the respective meanings as set forth in the promissory note evidencing the Purchase Loan. (b) Termination of Employment. Subject to Section 7.4(a) above, in the event of a Participant's termination of employment for any reason, the Participant shall repay to the Company the entire balance of the Purchase Loan and any accrued but unpaid interest thereon, which amounts shall become immediately due and payable, provided, however, that if the Participant voluntarily resigns as an employee in good standing, such amounts will become due and payable on the ninetieth (90th ) day after the effective date of such resignation. 16.5. Restrictions on Transfer. No Stock Purchase Award or Shares purchased through such an Award and pledged to the Company as collateral security for the Participant's Purchase Loan (and accrued by unpaid interest thereon) may be otherwise pledged, sold, assigned or transferred (other than by will or by the laws of descent and distribution). ARTICLE 17. RESTRICTED STOCK AWARDS 17.1. Restricted Stock Awards. (a) A grant of Shares made pursuant to this Article 8 is referred to as a "Restricted Stock Award." The Committee may grant to any Participant an amount of Shares in such manner, and subject to such terms and conditions relating to vesting, forfeitability and restrictions on delivery and transfer (whether based on performance standards, periods of service or otherwise) as the Committee shall establish (such Shares, "Restricted Shares"). The terms of any Restricted Stock Award granted under this Plan shall be set forth in a written agreement (a "Restricted Stock Agreement") which shall contain provisions determined by the Committee and not inconsistent with this Plan. The provisions of Restricted Stock Awards need not be the same for each Participant receiving such Awards. (b) Issuance of Restricted Shares. As soon as practicable after the date of grant of a Restricted Stock Award by the Committee, the Company shall cause to be transferred on the books of the Company, Shares registered in the name of the Company, as nominee for the Participant, evidencing the Restricted Shares covered by the Award, but subject to forfeiture to the Company retroactive to the date of grant, if a Restricted Stock Agreement delivered to the Participant by the Company with respect to the Restricted Shares covered by the Award is not duly executed by the Participant and timely returned to the Company. All Restricted Shares covered by Awards under this Article 8 shall be subject to the restrictions, terms and conditions contained in the Plan and the Restricted Stock Agreement entered into by and between the Company and the Participant. Until the lapse or release of all restrictions applicable to an Award of Restricted Shares, the share certificates representing such Restricted Shares shall be held in custody by the Company or its designee. (c) Shareholder Rights. Beginning on the date of grant of the Restricted Stock Award and subject to execution of the Restricted Stock Agreement as provided in Sections 8.1(a) and (b), the Participant shall become a shareholder of the Company with respect to all Shares subject to the Restricted Stock Agreement and shall have all of the rights of a shareholder, including, but not limited to, the right to vote such Shares and the right to receive distributions made with respect to such Shares; provided, however, that any Shares distributed as a dividend or otherwise with respect to any Restricted Shares as to which the restrictions have not yet lapsed shall be subject to the same restrictions as such Restricted Shares and shall be represented by book entry and held as prescribed in Section 8.1(b). (d) Restriction on Transferability. None of the Restricted Shares may be assigned or transferred (other than by will or the laws of descent and distribution), pledged or sold prior to lapse or release of the restrictions applicable thereto. (e) Delivery of Shares Upon Release of Restrictions. Upon expiration or earlier termination of the forfeiture period without a forfeiture and the satisfaction of or release from any other conditions prescribed by the Committee, the restrictions applicable to the Restricted Shares shall lapse. As promptly as administratively feasible thereafter, subject to the requirements of Section 10.1, the Company shall deliver to the Participant or, in case of the Participant's death, to the Participant's beneficiary, one or more stock certificates for the appropriate number of Shares, free of all such restrictions, except for any restrictions that may be imposed by law. 17.2. Terms of Restricted Shares. (a) Forfeiture of Restricted Shares. Subject to Section 8.2(b), all Restricted Shares shall be forfeited and returned to the Company and all rights of the Participant with respect to such Restricted Shares shall terminate unless the Participant continues in the service of the Company as an employee until the expiration of the forfeiture period for such Restricted Shares and satisfies any and all other conditions set forth in the Restricted Stock Agreement. The Committee in its sole discretion, shall determine the forfeiture period (which may, but need not, lapse in installments) and any other terms and conditions applicable with respect to any Restricted Stock Award. (b) Waiver of Forfeiture Period. Notwithstanding anything contained in this Article 8 to the contrary, the Committee may, in its sole discretion, waive the forfeiture period and any other conditions set forth in any Restricted Stock Agreement under appropriate circumstances (including the death, disability or retirement of the Participant or a material change in circumstances arising after the date of an Award) and subject to such terms and conditions (including forfeiture of a proportionate number of the Restricted Shares) as the Committee shall deem appropriate. ARTICLE 18. GENERALLY APPLICABLE PROVISIONS 18.1. Option Period. Subject to Section 3.1(b), the period for which an Option is exercisable shall not exceed ten (10) years from the date such Option is granted, provided, however, in the case of an Option that is not intended to be an "incentive stock option", the Committee may prescribe a period in excess of ten years. After the Option is granted, the option period may not be reduced. 18.2. Fair Market Value. If the Shares are listed or admitted to trading on a securities exchange registered under the Exchange Act, the "Fair Market Value" of a Share as of a specified date shall mean the average of the high and low price of the shares for the day immediately preceding the date as of which Fair Market Value is being determined (or if there was no re- ported sale on such date, on the last preceding date on which any reported sale occurred) reported on the principal securities exchange on which the Shares are listed or admitted to trading. If the Shares are not listed or admitted to trading on any such exchange but are listed as a national market security on the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ"), traded in the over-the-counter market or listed or traded on any similar system then in use, the Fair Market Value of a Share shall be the average of the high and low sales price for the day immediately preceding the date as of which the Fair Market Value is being determined (or if there was no reported sale on such date, on the last preceding date on which any reported sale occurred) reported on such system. If the Shares are not listed or admitted to trading on any such exchange, are not listed as a national market security on NASDAQ and are not traded in the over-the-counter market or listed or traded on any similar system then in use, but are quoted on NASDAQ or any similar system then in use, the Fair Market Value of a Share shall be the average of the closing high bid and low asked quotations on such system for the Shares on the date in question. If the Shares are not publicly traded, Fair Market Value shall be determined by the Committee in its sole discretion using appropriate criteria. An Option shall be con- sidered granted on the date the Committee acts to grant the Option or such later date as the Committee shall specify. 18.3. Exercise of Options. Options granted under the Plan shall be exercised by the Optionee thereof (or by his or her executors, administrators, guardian or legal representative, or by a Permitted Assignee, as provided in Sections 9.6 and 9.7 hereof) as to all or part of the Shares covered thereby, by the giving of written notice of exercise to the Company, specifying the number of Shares to be purchased, accompanied by payment of the full purchase price for the Shares being purchased. Full payment of such purchase price shall be made within five (5) business days following the date of exercise and shall be made (i) in cash or by certified check or bank check, (ii) with the consent of the Committee, by delivery of a promissory note in favor of the Company upon such terms and conditions as determined by the Committee, (iii) with the consent of Committee, by tendering previously acquired Shares (valued at its Fair Market Value, as determined by the Committee as of the date of tender), or (iv) with the consent of the Committee, any combination of (i), (ii) and (iii). In connection with a tender of previously acquired Shares pursuant to clause (iii) above, the Committee, in its sole discretion, may permit the Optionee to constructively exchange Shares already owned by the Optionee in lieu of actually tendering such Shares to the Company, provided that adequate documentation concerning the ownership of the Shares to be constructively tendered is furnished in form satisfactory to the Committee. The notice of exercise, accompanied by such payment, shall be delivered to the Company at its principal business office or such other office as the Committee may from time to time direct, and shall be in such form, containing such further provisions consistent with the provisions of the Plan, as the Committee may from time to time prescribe. In no event may any Option granted hereunder be exercised for a fraction of a Share. The Company shall effect the transfer of Shares purchased pursuant to an Option as soon as practicable, and, within a reasonable time thereafter, such transfer shall be evidenced on the books of the Company. No person exercising an Option shall have any of the rights of a holder of Shares subject to an Option until certificates for such Shares shall have been issued following the exercise of such Option. No adjustment shall be made for cash dividends or other rights for which the record date is prior to the date of such issuance. 18.4. Transferability. No Option that is intended to qualify as an "incentive stock option" under Section 422 of the Code shall be assignable or transferable by the Optionee, other than by will or the laws of descent and distribution, and such Option may be exercised during the life of the Optionee only by the Optionee or his guardian or legal representative. "Nonqualified stock options" and any stock appreciation rights granted in tandem therewith are transferrable (together and not separately) by the Optionee or Holder, as the case may be, to any one or more of the following persons (each, a "Permitted Assignee"): (i) the spouse, parent, issue, spouse of issue, or issue of spouse ("issue" shall include all descendants whether natural or adopted) of such Optionee or Holder, as the case may be; (ii) a trust for the benefit of one or more of those persons described in clause (i) above or for the benefit of such Optionee or Holder, as the case may be, or for the benefit of any such persons and such Optionee or Holder, as the case may be; or (iii) an entity in which the Optionee or Holder or any Permitted Assignee thereof is a beneficial owner; provided, however, that such Permitted Assignee shall be bound by all of the terms and conditions of this Plan and shall execute an agreement satisfactory to the Company evidencing such obligation; provided further, however that any transfer by an Optionee or Holder who is not then a Director of the Company to any Permitted Assignee shall be subject to the prior consent of the Committee; and provided further, however, that such Optionee or Holder shall remain bound by the terms and conditions of this Plan. The Company shall cooperate with an Optionee's Permitted Assignee and the Company's transfer agent in effectuating any transfer permitted pursuant to this Section 9.4. 18.5. Termination of Employment. In the event of the termination of employment of an Optionee or the separation from service of a Director (who is an Optionee) for any reason (other than death or disability as provided below), any Option(s) held by such Optionee (or its Permitted Assignee) under this Plan and not previously exercised or expired shall be deemed canceled and terminated on the day of such termination or separation, unless the Committee decides, in its sole discretion, to extend the term of the Option for a period not to exceed three months after the date of such termination or separation, provided, however, that in no instance may the term of the Option, as so extended, exceed the maximum term set forth in Section 3.1(b)(ii) or 9.1 above. Notwithstanding the foregoing, in the event of the separation from service of a non-employee Director (who is an Optionee) by reason of death, disability or under conditions satisfactory to both the Director and the Company, any nonqualified stock options held by such Director (or its Permitted Assignee) under the Plan and not previously exercised or expired shall be exercisable for a period not to exceed five (5) years after the date of such separation, provided, however, that in no instance may the term of the Option, as so extended, exceed the maximum term set forth in Sections 3.1(b)(ii) or 9.1 above. 18.6. Death. In the event an Optionee (other than a non-employee Director) dies while employed by the Company or any of its subsidiaries or affiliates any Option(s) held by such Optionee (or its Permitted Assignee) and not previously expired or exercised shall, to the extent exercisable on the date of death, be exercisable by the estate of such Optionee or by any person who acquired such Option by bequest or inheritance, or by the Permitted Assignee at any time within one year after the death of the Optionee, unless earlier terminated pursuant to its terms, provided, however, that if the term of such Option would expire by its terms within six months after the Optionee's death, the term of such Option shall be extended until six months after the Optionee's death, provided further, however, that in no instance may the term of the Option, as so extended, exceed the maximum term set forth in Section 3.1(b)(ii) or 9.1 above. 18.7. Disability. In the event of the termination of employment of an Optionee (other than a non-employee Director) due to total disability, the Optionee, or his guardian or legal representative, or a Permitted Assignee shall have the unqualified right to exercise any Option(s) which have not been previously exercised or expired and which the Optionee was eli- gible to exercise as of the first date of total disability (as determined by the Committee), at any time within one (1) year after such termination, unless earlier terminated pursuant to its terms, provided, however, that if the term of such Option would expire by its terms within six months after such termination, the term of such Option shall be extended until six months after such termination, provided further, however, that in no instance may the term of the Option, as so extended, exceed the maximum term set forth in Section 3.1(b)(ii) or 9.1 above. The term "total disability" shall, for purposes of this Plan, be defined in the same manner as such term is defined in Section 22(e)(3) of the Code. 18.8. Amendment and Modification of the Plan. The Compensation Committee of the Board of Directors of the Company may, from time to time, alter, amend, suspend or terminate the Plan as it shall deem advisable, subject to any requirement for shareholder approval imposed by applicable law or any rule of any stock exchange or quotation system on which Shares are listed or quoted; provided that such Compensation Committee may not amend the Plan, without the approval of the Company's shareholders, to increase the number of Shares that may be the subject of Options under the Plan (except for adjustments pursuant to Section 9.9 hereof). In addition, no amendments to, or termination of, the Plan shall in any way impair the rights of an Optionee or a Participant (or a Permitted Assignee thereof) under any Award previously granted without such Optionee's or Participant's consent. 18.9. Adjustments. In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, com- bination, repurchase, or exchange of Shares or other securities, the issuance of warrants or other rights to purchase Shares or other securities, or other similar corporate transaction or event affects the Shares with respect to which Options have been or may be issued under the Plan, such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as the Committee may deem equitable, adjust any or all of (i) the number and type of Shares that thereafter may be made the subject of Options, (ii) the number and type of Shares subject to outstanding Options and share appreciation rights, and (iii) the grant or exercise price with respect to any Option, or, if deemed appropriate, make provision for a cash payment to the holder of any outstanding Option; provided, in each case, that with respect to "incentive stock options," no such adjustment shall be authorized to the extent that such adjustment would cause such options to violate Section 422(b) of the Code or any successor provision; and provided further, that the number of Shares subject to any Option denominated in Shares shall always be a whole number. In the event of any reorganization, merger, consolidation, split-up, spin-off, or other business combination involving the Company (collectively, a "Reorganization"), the Compensation Committee of the Board of Directors or the Board of Directors may cause any Award outstanding as of the effective date of the Reorganization to be canceled in consideration of a cash payment or alternate Award made to the holder of such canceled Award equal in value to the fair market value of such canceled Award. The determination of fair market value shall be made by the Compensation Committee of the Board of Directors or the Board of Directors, as the case may be, in their sole discretion. ARTICLE 19. MISCELLANEOUS 19.1. Tax Withholding. All payments or distributions made pursuant to the Plan to an Optionee or Participant (or a Permitted Assignee thereof) shall be net of any applicable federal, state and local withholding taxes arising as a result of the grant of any Award, exercise of an Option or stock appreciation rights or any other event occurring pursuant to this Plan. The Company shall have the right to withhold from such Optionee or Participant (or a Permitted Assignee thereof) such withholding taxes as may be required by law, or to otherwise require the Optionee or Participant (or a Permitted Assignee thereof) to pay such withholding taxes. If the Optionee or Participant (or a Permitted Assignee thereof) shall fail to make such tax payments as are required, the Company or its subsidiaries or affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Optionee or Participant or to take such other action as may be necessary to satisfy such withholding obligations. In satisfaction of the requirement to pay withholding taxes, the Optionee or Participant(or Permitted Assignee) make a written election (the "Tax Election"), which may be accepted or rejected in the discretion of the Committee, to have withheld a portion of the Shares then issuable to the Optionee (or Permitted Assignee) pursuant to the Plan, having an aggregate Fair Market Value equal to the withholding taxes. 19.2. Right of Discharge Reserved. Nothing in the Plan nor the grant of an Award hereunder shall confer upon any employee, Director or other individual the right to continue in the employment or service of the Company or any subsidiary or affiliate of the Company or affect any right that the Company or any subsidiary or affiliate of the Company may have to terminate the employment or service of (or to demote or to exclude from future Options under the Plan) any such employee, Director or other individual at any time for any reason. Except as specifically provided by the Committee, the Company shall not be liable for the loss of existing or potential profit from an Award granted in the event of termination of an employment or other relationship even if the termination is in violation of an obligation of the Company or any subsidiary or affiliate of the Company to the employee or Director. 19.3. Nature of Payments. All Awards made pursuant to the Plan are in consideration of services performed for the Company or any subsidiary or affiliate of the Company. Any income or gain realized pursuant to Awards under the Plan and any share appreciation rights constitutes a special incentive payment to the Optionee, Participant or Holder and shall not be taken into account, to the extent permissible under applicable law, as compensation for purposes of any of the employee benefit plans of the Company or any subsidiary or affiliate of the Company except as may be determined by the Committee or by the Directors or directors of the applicable subsidiary or affiliate of the Company. 19.4. Severability. If any provision of the Plan shall be held unlawful or otherwise invalid or unenforceable in whole or in part, such unlawfulness, invalidity or unenforceability shall not affect any other provision of the Plan or part thereof, each of which remain in full force and effect. If the making of any payment or the provision of any other benefit required under the Plan shall be held unlawful or otherwise invalid or unen- forceable, such unlawfulness, invalidity or unenforceability shall not prevent any other payment or benefit from being made or provided under the Plan, and if the making of any payment in full or the provision of any other benefit required under the Plan in full would be unlawful or otherwise invalid or unenforceable, then such unlawfulness, invalidity or unenforce- ability shall not prevent such payment or benefit from being made or provided in part, to the extent that it would not be unlawful, invalid or unenforceable, and the maximum payment or benefit that would not be unlawful, invalid or unenforceable shall be made or provided under the Plan. 19.5. Gender and Number. In order to shorten and to improve the understandability of the Plan document by eliminating the repeated usage of such phrases as "his or her" and any masculine terminology herein shall also include the feminine, and the definition of any term herein in the singular shall also include the plural except when otherwise indicated by the context. 19.6. Governing Law. The Plan and all determinations made and actions taken thereunder, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by the laws of the State of New York and construed accordingly. 19.7. Termination of Plan. The Plan shall be effective on the date of the approval of the Plan by the holders of a majority of the shares entitled to vote thereon, provided such approval is obtained within 12 months after the date of adoption of the Plan by the Board of Directors. Awards may be granted under the Plan at any time and from time to time on or prior to March 10,2008, on which date the Plan will expire except as to Awards and related share appreciation rights then outstanding under the Plan. Such outstanding Awards and stock appreciation rights shall remain in effect until they have been exercised or terminated, or have expired. 19.8. Captions. The captions in this Plan are for convenience of reference only, and are not intended to narrow, limit or affect the substance or interpretation of the provisions contained herein. EX-21.1 35 Exhibit 21.1 Subsidiaries of the Registrant The following is a list of subsidiaries of the registrant as of December 31, 1998: o Wellsford Capital (100% direct) o Wellsford Capital Properties, L.L.C. (100% indirect) o VPT Real Estate Corp. I (100% indirect) o Wellsford Finance Inc. (100% indirect) o Wellsford Broomfield, L..L.C. (100% indirect) o WRL Holdings, L.L.C. ( 51.1% indirect) o WRL Management, L.L.C. (33.4% indirect) o WRL Finance, L.L.C. (50.9% indirect) o Wellsford CRC Holding Corp. (100% direct) o Creamer Realty Consultants (49% indirect) o Creamer Vitale Wellsford, L.L.C. (49% indirect) o Wellsford Sonterra L.L.C. (100% direct) o Wellsford Park Highlands Corp. (80% direct) o Park at Highlands L.L.C (80% indirect) o Red Canyon at Palomino Park L.L.C (80% indirect) o Silver Mesa at Palomino Park, L.L.C. (79.2% indirect) o Palomino Park Telecom L.L.C. (100% direct) o Wellsford Commercial Properties Trust (99.9% direct) o Wellsford/Whitehall Properties II, L.L.C. (47.7% indirect) o Wellsford/Whitehall Holdings, L.L.C. (47.7% indirect) o 1275 K Street Holding, L.L.C. (47.7% indirect) o WEL/WH Convention Managers, L.L.C. (47.7% indirect) o Wells Avenue Holdings, L.L.C. (47.7% indirect) o WASH Manager, L.L.C. (47.7% indirect) o Wells Avenue Senior Holdings, L.L.C. (47.7% indirect) o Wellsford Ventures, Inc. (100% direct) o North American Medical Research Corp. (100% direct) o VPT Real Estate Corp. II (100% indirect) o VPT Real Estate Corp. III (100% indirect) o VPT Real Estate Corp. IV (100% indirect) o VPT Real Estate Corp. V (100% indirect) o MRT Santa Monica, Inc. (100% indirect) o Bay City Holdings, L.P. (100% indirect) o MRT Creekside, Inc. (100% indirect) o MRT West, Inc. (100% indirect) o MRT Newark, Inc. (100% indirect) o Newark C&C Associates, L.P. (90% indirect) o 150 Rittenhouse Circle, Inc. (100% indirect) o Keystone Venture I (70% indirect) o TPIP II (75% indirect) EX-27.1 36
5 This Schedule contains summary financial information extracted from the consolidated balance sheets and consolidated statements of operation and is qualified in its entirety by reference to such financial statements. 1 12-MOS DEC-31-1998 DEC-31-1998 18,129,887 0 124,706,499 0 0 29,165,376 153,029,835 (2,707,390) 384,970,658 12,788,324 137,176,790 207,504 0 0 231,417,319 384,970,658 0 29,677,423 0 7,643,615 5,062,895 0 4,599,309 12,294,054 2,850,298 9,443,756 0 0 0 9,443,756 0.47 0.46
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