Document:

AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT

                            DATED AS OF JUNE 28, 2000

                                      among

                       WELLSFORD FINANCE, LLC, as Borrower

                                       and

                               FLEET NATIONAL BANK
                            (f/k/a BANKBOSTON, N.A.),

                                       and

                         OTHER LENDERS WHICH MAY BECOME
                      PARTIES TO THIS AGREEMENT, as Lenders

                                       and

                               FLEET NATIONAL BANK
                            (f/k/a BANKBOSTON, N.A.),
                                    as Agent

<PAGE>

                                TABLE OF CONTENTS

ss.1.       DEFINITIONS AND RULES OF INTERPRETATION...........................1
         ss.1.1.    Definitions.  ............................................1
         ss.1.2.    Rules of Interpretation..................................12

ss.2.      THE REVOLVING CREDIT FACILITY.....................................13
         ss.2.1.    Commitment to Lend.  ....................................13
         ss.2.2.    Facility Fee.  ..........................................13
         ss.2.3.    Reduction of Commitment.  ...............................13
         ss.2.4.    Notes.  .................................................14
         ss.2.5.    Interest on Loans........................................14
         ss.2.6.    Requests for Loans.  ....................................15
         ss.2.7.    Funds for Loans.  .......................................15

ss.3.      REPAYMENT OF THE LOANS............................................16
         ss.3.1.    Stated Maturity.  .......................................16
         ss.3.2.    Mandatory Prepayments.  .................................16
         ss.3.3.    Optional Prepayments.  ..................................17
         ss.3.4.    Partial Prepayments.  ...................................17
         ss.3.5.    Effect of Prepayments.  .................................17

ss.4.      CERTAIN GENERAL PROVISIONS........................................17
         ss.4.1.    Conversion Options.......................................17
         ss.4.2.    Closing Fee.  ...........................................18
         ss.4.3.    INTENTIONALLY OMITTED....................................18
         ss.4.4.    Funds for Payments.......................................18
         ss.4.5.    Computations.  ..........................................19
         ss.4.6.    Inability to Determine Eurodollar Rate.  ................19
         ss.4.7.    Illegality.  ............................................19
         ss.4.8.    Additional Interest.  ...................................20
         ss.4.9.    Additional Costs, Etc.  .................................20
         ss.4.10.    Capital Adequacy.  .....................................21
         ss.4.11.    Indemnity of Borrower.  ................................22
         ss.4.12.    Interest on Overdue Amounts; Late Charge.  .............22
         ss.4.13.    Certificate.  ..........................................22
         ss.4.14.    Limitation on Interest.  ...............................22

ss.5.      COLLATERAL SECURITY...............................................23
         ss.5.1.    Collateral.  ............................................23
         ss.5.2.    Market Value.............................................23

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         ss.5.3.    INTENTIONALLY OMITTED....................................23
         ss.5.4.    INTENTIONALLY OMITTED....................................23

ss.6.      REPRESENTATIONS AND WARRANTIES....................................24
         ss.6.1.    Corporate Authority, Etc.................................24
         ss.6.2.    Governmental Approvals.  ................................25
         ss.6.3.    Title to Properties: Leases.   ..........................25
         ss.6.4.    Financial Statements.  ..................................25
         ss.6.5.    No Material Changes.  ...................................25
         ss.6.6.    Franchises, Patents, Copyrights, Etc.  ..................25
         ss.6.7.    Litigation.  ............................................25
         ss.6.8.    No Materially Adverse Contracts, Etc.  ..................26
         ss.6.9.    Compliance with Other Instruments, Laws, Etc.  ..........26
         ss.6.10.    Tax Status.  ...........................................26
         ss.6.11.    No Event of Default.  ..................................26
         ss.6.12.    Holding Company and Investment Company Acts.  ..........26
         ss.6.13.    Absence of UCC Financing Statements, Etc.  .............27
         ss.6.14.    Setoff, Etc.  ..........................................27
         ss.6.15.    Certain Transactions.  .................................27
         ss.6.16.    Employee Benefit Plans.  ...............................27
         ss.6.17.    ERISA Taxes.  ..........................................27
         ss.6.18.    Plan Payments.  ........................................28
         ss.6.19.    Regulations T, U and X.  ...............................28
         ss.6.20.    INTENTIONALLY OMITTED...................................28
         ss.6.21.    Loan Documents.  .......................................28
         ss.6.22.    Brokers.  ..............................................29
         ss.6.23.    Fair Consideration.  ...................................29
         ss.6.24.    Solvency.  .............................................29
         ss.6.25.    Other Debt.  ...........................................29
         ss.6.26.    Year 2000 Compliant.....................................29

ss.7.      AFFIRMATIVE COVENANTS OF THE BORROWER.............................30
         ss.7.1.    Punctual Payment.  ......................................30
         ss.7.2.    Maintenance of Office.  .................................30
         ss.7.3.    Records and Accounts.  ..................................30
         ss.7.4.    Financial Statements, Certificates and Information.  ....30
         ss.7.5.    Notices..................................................32
         ss.7.6.    Existence; Maintenance of Properties.....................33
         ss.7.7.    Insurance.   ............................................33
         ss.7.8.      Taxes.  ...............................................34
         ss.7.9.    Inspection of Properties and Books.  ....................34
         ss.7.10.    Compliance with Laws, Contracts, Licenses, and Permits. 34
         ss.7.11.    Use of Proceeds.  ......................................34

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         ss.7.12.    Further Assurances.  ...................................34
         ss.7.13.   INTENTIONALLY OMITTED....................................35
         ss.7.14.  ERISA Compliance.  .......................................35
         ss.7.15.   INTENTIONALLY OMITTED....................................35
         ss.7.16.    More Restrictive Agreements.  ..........................35
         ss.7.17.    Plan Assets, etc.  .....................................35
         ss.7.18.    Determination of Values.  ..............................36

ss.8.      CERTAIN NEGATIVE COVENANTS OF THE BORROWER........................36
         ss.8.1.    Restrictions on Indebtedness.  ..........................36
         ss.8.2.    Restrictions on Liens, Etc.  ............................36
         ss.8.3.    Restrictions on Investments.  ...........................37
         ss.8.4.    Merger, Consolidation.  .................................38
         ss.8.5.    Sale and Leaseback.  ....................................38
         ss.8.6.    Distributions.  .........................................38
         ss.8.7.    INTENTIONALLY OMITTED....................................39
         ss.8.8.    Covenants with Respect to Indebtedness, Operations,
                    Fundamental Changes......................................39

ss.9.      FINANCIAL COVENANTS OF BORROWER...................................41
         ss.9.1.    Liabilities to Assets Ratio.  ...........................41
         ss.9.2.    Designated Collateral Value.  ...........................41

ss.10.     CLOSING CONDITIONS................................................41
         ss.10.1.    Loan Documents.  .......................................41
         ss.10.2.    Certified Copies of Organizational Documents.  .........41
         ss.10.3.    Bylaws; Resolutions.  ..................................41
         ss.10.4.    Incumbency Certificate; Authorized Signers.  ...........42
         ss.10.5.    Opinion of Counsel.  ...................................42
         ss.10.6.    Payment of Fees.  ......................................42
         ss.10.7.    Performance; No Default.  ..............................42
         ss.10.8.    Representations and Warranties.  .......................42
         ss.10.9.    Proceedings and Documents.  ............................42
         ss.10.10.   INTENTIONALLY OMITTED...................................42
         ss.10.11.    Compliance Certificate.  ..............................42
         ss.10.12.    Governmental Policy.  .................................43
         ss.10.13.    Other.  ...............................................43

ss.11.     CONDITIONS TO ALL BORROWINGS.  ...................................43
         ss.11.1.    Prior Conditions Satisfied.  ...........................43
         ss.11.2.    Representations True; No Default.  .....................43
         ss.11.3.    No Legal Impediment.  ..................................43
         ss.11.4.    Governmental Regulation.  ..............................43

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         ss.11.5.    Proceedings and Documents.  ............................43
         ss.11.6.    Borrowing Documents.  ..................................44

ss.12.     EVENTS OF DEFAULT; ACCELERATION; ETC.  ...........................44
         ss.12.1.    Events of Default and Acceleration.  ...................44
         ss.12.1A.  Limitation of Cure Periods.  ............................47
         ss.12.1B.  Certain Cure Periods.  ..................................47
         ss.12.2.    Termination of Commitments.  ...........................48
         ss.12.3.    Remedies. ..............................................48
         ss.12.4.    Distribution of Collateral Proceeds.  ..................48

ss.13.     SETOFF............................................................49

ss.14.     THE AGENT.........................................................50
         ss.14.1.    Authorization.  ........................................50
         ss.14.2.    Employees and Agents.  .................................50
         ss.14.3.    No Liability.  .........................................50
         ss.14.4.    No Representations.  ...................................50
         ss.14.5.    Payments................................................51
         ss.14.6.    Holders of Notes.  .....................................52
         ss.14.7.    Indemnity.  ............................................52
         ss.14.8.    Agent as Lender.  ......................................52
         ss.14.9.    Resignation.  ..........................................52
         ss.14.10.    Duties in the Case of Enforcement.  ...................53

ss.15.     EXPENSES..........................................................53

ss.16.     INDEMNIFICATION...................................................54

ss.17.     SURVIVAL OF COVENANTS, ETC.  .....................................55

ss.18.     ASSIGNMENT AND PARTICIPATION......................................55
         ss.18.1.    Conditions to Assignment by Lenders.  ..................55
         ss.18.2.    Register.  .............................................56
         ss.18.3.    New Notes.  ............................................56
         ss.18.4.    Participations.  .......................................56
         ss.18.5.    Pledge by Lender.  .....................................57
         ss.18.6.    No Assignment by Borrower.  ............................57
         ss.18.7.    Disclosure.  ...........................................57

ss.19.     NOTICES...........................................................57

ss.20.     RELATIONSHIP.  ...................................................59

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ss.21.     GOVERNING LAW; CONSENT TO JURISDICTION
           AND SERVICE. .....................................................59

ss.22.     HEADINGS..........................................................59

ss.23.     COUNTERPARTS......................................................59

ss.24.     ENTIRE AGREEMENT, ETC.............................................60

ss.25.     WAIVER OF JURY TRIAL..............................................60

ss.26.     DEALINGS WITH THE BORROWER.  .....................................60

ss.27.     CONSENTS, AMENDMENTS, WAIVERS, ETC.  .............................60

ss.28.     SEVERABILITY......................................................61

ss.29.     NO UNWRITTEN AGREEMENTS...........................................61

ss.30.     TIME OF THE ESSENCE.  ............................................61

ss.31.     REPLACEMENT NOTES.................................................62

<PAGE>

SCHEDULE OF EXHIBITS
--------------------

EXHIBIT A         Form of Amended and Restated Note
EXHIBIT B         Form of Request for Loan
EXHIBIT C         Form of Compliance Certificate

SCHEDULE 1        Lenders and Commitments
SCHEDULE 6.3      Title to Properties; Leases
SCHEDULE 6.7      Litigation
SCHEDULE 6.17     ERISA Plans

<PAGE>

                              AMENDED AND RESTATED
                           REVOLVING CREDIT AGREEMENT
                           --------------------------

     THIS AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT is made as of the 28th
day of June,  2000,  by and among  WELLSFORD  FINANCE,  LLC, a Delaware  limited
liability  company having its principal place of business at 535 Madison Avenue,
26th Floor,  New York, New York 10022  ("Borrower"),  FLEET NATIONAL BANK (f/k/a
BankBoston,  N.A.),  a  national  banking  association,  and the  other  lending
institutions  which may become parties hereto  pursuant to ss.18  (collectively,
the "Lenders"),  and FLEET NATIONAL BANK (f/k/a BankBoston,  N.A.), as Agent for
the Lenders (the "Agent").

                                    RECITALS:
                                    ---------

     WHEREAS,  Wellsford  Finance,  Inc.  ("Original  Borrower"),  Agent and the
lenders a party thereto  entered into that certain  Revolving  Credit  Agreement
dated as of January 12, 1999 (the "Original Agreement"); and

     WHEREAS,  on or about June ____ 2000, Original Borrower assigned all of its
rights under the Original  Agreement to Borrower and Borrower assumed all of the
liabilities  and obligations of Original  Borrower under the Original  Agreement
pursuant  to  that  certain  Assumption  Agreement  between  Borrower,  Original
Borrower, Agent and the Lenders; and

     WHEREAS,  Borrower  has  requested  that the  Lenders  modify the  Original
Agreement in certain respects; and

     WHEREAS, Agent and the Lenders are willing to modify the Original Agreement
by amending and restating same upon the terms and conditions set forth herein;

     NOW,  THEREFORE,  in  consideration  of the recitals  herein and the mutual
covenants  contained  herein,  the parties  hereto  hereby amend and restate the
Original Agreement in its entirety as follows:

     ss.1.  DEFINITIONS  AND  RULES OF  INTERPRETATION.DEFINITIONS  AND RULES OF
INTERPRETATION.

     ss.1.1. Definitions.  The following terms shall have the meanings set forth
in this ss.l or elsewhere in the provisions of this Agreement referred to below:

     Affiliate.  An  Affiliate,  as applied to any Person,  shall mean any other
Person  directly  or  indirectly  controlling,  controlled  by, or under  common
control  with,  that  Person.   For  purposes  of  this  definition,   "control"
(including, with correlative meanings, the terms "controlling",

<PAGE>

"controlled  by" and "under  common  control  with"),  as applied to any Person,
means  (a) the  possession,  directly  or  indirectly,  of the power to vote ten
percent  (10%)  or  more  of  the  stock,  shares,  voting  trust  certificates,
beneficial interest,  partnership interests, member interests or other interests
having voting power for the election of directors of such Person or otherwise to
direct or cause the  direction  of the  management  and policies of that Person,
whether through the ownership of voting  securities or by contract or otherwise,
or (b) the  ownership  of (i) a general  partnership  interest,  (ii) a managing
member's interest in a limited liability company or (iii) a limited  partnership
interest or  preferred  stock (or other  ownership  interest)  representing  ten
percent  (10%)  or  more  of  the  outstanding  limited  partnership  interests,
preferred stock or other ownership interests of such Person.

     Agent.  Fleet National Bank (f/k/a  BankBoston,  N.A.), a national  banking
association, its successors and assigns, acting as agent for the Lenders.

     Agent's Head Office.  The Agent's  head office  located at 111  Westminster
Street,  Providence,  Rhode Island 02903, or at such other location as the Agent
may designate from time to time by notice to the Borrower and the Lenders.

     Agent's Special  Counsel.  Long Aldridge & Norman LLP or such other counsel
as may be approved by the Agent.

     Agreement. This Amended and Restated Revolving Credit Agreement,  including
the Schedules and Exhibits hereto.

     Agreement  Regarding Fees. The Agreement  Regarding Fees dated of even date
herewith between Borrower and FNB.

     Balance Sheet Date. June 26, 2000.

     Base Rate.  The higher of (a) the annual  rate of interest  announced  from
time to time by FNB at its head office in Providence,  Rhode Island 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.

     Borrower. As defined in the preamble hereto.

     Business Day. Any day on which banking institutions in New York City or 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.

<PAGE>

     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.

     Closing  Date.  The  first  date on which all of the  conditions  set forth
in ss.10 and ss.11 have been satisfied.

     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 Note.

     Collateral Assignment.  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 Note and related documents are pledged to the Agent.

     Collateral  Loan  Documents.  The  Collateral  Note and  each of the  other
documents,  instruments or other  agreements  evidencing,  securing or otherwise
relating to the Collateral Note.

     Collateral  Note. That certain Note dated as of June 28, 2000, made by Park
Avenue Financing Company,  LLC and PAMC Co-Manager Inc. to the order of Borrower
in the original principal face amount of $25,000,000.00.

     Collateral   Property.   Collectively,   the  equity  interests  and  other
collateral  pledged  to  secure  payment  of the  Collateral  Note  and the real
property which is directly or indirectly owned by the Person or Persons pledging
the equity interests to secure repayment of the Collateral Note.

     Commitment. With respect to each Lender, the amount set forth on Schedule 1
hereto as the amount of such Lender'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.

     Commitment  Percentage.  With respect to each Lender,  the  percentage  set
forth  on  Schedule  1  hereto  as such  Lender's  percentage  of the  aggregate
Commitments of all of the Lenders.

     Compliance Certificate. See ss.7.4(e).

     Conversion  Request.  A notice  given by the  Borrower  to the Agent of its
election to convert or continue a Loan in accordance withss.4.1.

     Debt  Offering.  The issuance and sale by the Borrower or the  Guarantor of
any debt securities of the Borrower or the Guarantor.

<PAGE>

     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. 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 in accordance with the accrual basis of accounting
used for income tax purposes)  from the  Collateral  Property  available for the
payment of all Debt  Service  secured,  in whole or in part,  by the  Collateral
Property or by direct or indirect  beneficial  interests therein relating to the
Collateral Property, including all senior loans, for such period to (b) the Debt
Service  payable with respect to all loans secured,  in whole or in part, by the
Collateral  Property  or by  direct or  indirect  beneficial  interests  therein
relating  to the  Collateral  Property,  including  all senior  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.

     Default. See ss.12.1.

     Designated  Collateral  Value.  At any time,  eighty  percent  (80%) of the
lesser of (i) the Market Value of the Collateral  Note, and (ii) the outstanding
principal balance of the Collateral Note.

     The Designated Collateral Value shall be zero for the Collateral Note:

          (a) in the event that 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
     the 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) in the event that a Subordination Event has occurred; or

          (c) in the event that the Debt Service  Coverage  Ratio is not greater
     than 1 to 1 as of any date of determination  and such ratio is not restored
     within thirty (30) days of such date of determination.

     Distribution. The declaration or payment of any dividend or distribution on
or in respect of any shares,  member interests or other  beneficial  interest 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,  member interests or other beneficial  interest of the
Borrower;  the return of capital by the Borrower to its members as such;  or any
other  distribution  on or in respect of any shares,  member  interests or other
beneficial interest of the Borrower.

<PAGE>

     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 ss.4.1..

     Employee  Benefit  Plan.  Any  employee  benefit plan within the meaning of
ss.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 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 ss.414 of the Code.

     ERISA  Reportable  Event.  A reportable  event with respect to a Guaranteed
Pension  Plan  within  the  meaning  of  ss.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.

<PAGE>

     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 Lender'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 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 ss.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.

     FNB. Fleet National Bank, a national banking association.

     Funds Available for Distribution. With respect to any Person for any fiscal
period, an amount equal to the sum of the Net Income plus depreciation and other
non-cash charges deducted in calculating such Net Income for such period.

     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

<PAGE>

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 ss.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. Wellsford Real Properties, Inc., a Maryland corporation.

     Guaranty.  That certain  Unconditional  Guaranty of Payment and Performance
dated of even  date  herewith  made by the  Guarantor  in favor of Agent and the
Lenders, as the same may be modified or amended.

     Hazardous   Substances.   Any   hazardous   waste,   as   defined   by   42
U.S.C. ss.9601(5), any hazardous substances as defined by 42 U.S.C. ss.9601(14),
any pollutant or  contaminant  as defined by 42  U.S.C.ss.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
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,  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 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 Borrower's pro rata share
of any of the above-described obligations of its unconsolidated affiliates.

<PAGE>

     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 ss.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.

<PAGE>

     Lenders.  FNB and any other Person who becomes an assignee of any rights of
a Lender  pursuant  toss.18  (but not  including  any  Participant,  as  defined
inss.18).

     Liens. See ss.8.2.

     Loan Documents.  This Agreement,  the Notes,  the Security  Documents,  the
Guaranty  and  all  other  documents,  instruments  or  agreements  executed  or
delivered  by or on  behalf  of the  Borrower  or the  Guarantor  evidencing  or
securing the Loans.

     Loan Request. See ss.2.6.

     Loans. The aggregate Loans to be made by the Lenders hereunder.

     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;  provided,  however,  such  required
percentage shall not exceed sixty-six and two-thirds percent (66.67%).

     Market Value.  With respect to the Collateral  Note, at any time determined
by the Majority  Lenders,  the outstanding  principal  balance of the Collateral
Note; provided that in the sole discretion of the Agent, the Market Value of the
Collateral  Note may be  increased  or decreased to equal the price at which the
Collateral  Note 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.
Notwithstanding  the foregoing,  the frequency of  determination of Market Value
shall be governed by ss.5.2.

     Maturity  Date.  January 12, 2002,  or such earlier date on which the Loans
shall become due and payable pursuant to the terms hereof.

     Multiemployer  Plan. Any multiemployer  plan within the meaning of ss.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.

     Notes. See ss.2.4.

     Notice. See ss.19.

<PAGE>

     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.

     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 ss.4002 of ERISA
and any successor entity or entities having similar responsibilities.

     Permitted Liens. Liens, security interests and other encumbrances permitted
by ss.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 ss.5.1 as part of the Collateral securing the Obligations.

     Real  Estate.  All real  property at any time owned or leased (as lessee or
sublessee) by the Borrower.

     Record.  The record,  including  computer records,  maintained by the Agent
with respect to any Loan referred to in the Notes.

     Reference Lender. FNB.

     Register. See ss.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 ss.4043  (b) of ERISA or
the regulations thereunder.

<PAGE>

     SEC. The federal Securities and Exchange Commission.

     Security Documents.  Collectively, the Collateral Assignment, the Guaranty,
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 the loan  evidenced by the
Collateral Note.

     Servicing  Agreement.  The agreement  pursuant to which a Servicer services
the loan evidenced by the Collateral Note.

     Short-term  Investments.  Investments  described in subsections (a) through
(g), inclusive, of ss.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,  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 any loan secured by the Collateral  Property underlying
the  Collateral  Note to  accelerate  the maturity  thereof  shall  constitute a
Subordination Event.

     Subordinated  Loan. A loan, 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 Assets.  All assets of the Borrower  determined  in  accordance  with
generally accepted accounting principles.  All Real Estate owned by the Borrower
shall be valued on an undepreciated cost basis.

<PAGE>

     Total Commitment.  The sum of the Commitments of the Lenders,  as in effect
from time to time.

     Total Liabilities. All liabilities of the Borrower determined in accordance
with  generally  accepted  accounting  principles  and all  Indebtedness  of the
Borrower, whether or not so classified.

     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.

     Year 2000 Compliant. All computers, hardware, imbedded microchips, software
and material date-affected technology used in Borrower's 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.

     ss.1.2. Rules of Interpretation.

          (1) 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.

          (2) The  singular  includes  the plural and the  plural  includes  the
     singular.

          (3) A reference to any law includes any amendment or  modification  to
     such law.

          (4) A reference to any Person  includes its permitted  successors  and
     permitted assigns.

          (5)  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.

<PAGE>

          (6) The words "include", "includes" and "including" are not limiting.

          (7) 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.

          (8) 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.

          (9)  Reference to a particular  "ss.",  refers to that section of this
     Agreement unless otherwise indicated.

          (10) 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.

     ss.2. THE REVOLVING CREDIT FACILITY.

     ss.2.1.  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 ss.2.6,  such sums as are requested by the Borrower for
the  purposes  set forth in ss.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 Lender's  Commitment and (b) such Lender's Commitment
Percentage of the Designated Collateral Value; provided,  that, in all events no
Default  or Event of Default  shall  have  occurred  and be  continuing  and the
Borrower's  financial  statements  as  required  pursuant to  ss.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 mad

<PAGE>

pro rata in  accordance  with  each  Lender's  Commitment  Percentage.  The Loan
Request shall constitute a representation  and warranty by the Borrower that all
of the conditions set forth in ss.10 and ss.11, in the case of the initial Loan,
and ss.11,  in the case of all other Loans,  have been  satisfied on the date of
such funding.

     ss.2.2.  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 ss.2.3,  with a final  payment on the  Maturity
Date.

     ss.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 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
ss.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  ss.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
$10,000,000.00 unless such Commitments are reduced to $0.

<PAGE>

     ss.2.4.  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  Lender's  Commitment  or,  if  less,  the
outstanding  amount of all Loans  made by such  Lender,  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 Lender,  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.

     ss.2.5. Interest on Loans.

          (1) 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%).

          (2) 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%).

          (3) The  Borrower  promises to pay interest on each Loan in arrears on
     each Interest Payment Date with respect thereto.

          (4) Base Rate  Loans and  Eurodollar  Rate Loans may be  converted  to
     Loans of the other Type as provided inss.4.1.

<PAGE>

     ss.2.6.  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 ss.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 ss.6.4 or ss.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 ss.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  Borrower's  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 ss.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 Borrower's 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

<PAGE>

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.

<PAGE>

     ss.2.7. Funds for Loans.

     (1) 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 Agent's
Head  Office,  in  immediately  available  funds,  the  amount of such  Lender's
Commitment  Percentage  of  the  amount  of the  requested  Loans  which  may be
disbursed pursuant to ss.2.1.  Upon receipt from each Lender of such amount, and
upon receipt of the documents  required by ss.10 and ss.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 Agent's 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 Lender'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 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  Borrower's  Loan
Request  subject  to the terms of  ss.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 ss.12.4.

     (2) 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.

<PAGE>

     ss.3.  REPAYMENT  OF THE  LOANS.

     ss.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.

     ss.3.2.  Mandatory  Prepayments.  The Borrower promises to pay principal of
the Loans prior to the stated maturity as follows:

     (1) If at any time the aggregate  outstanding principal amount of the Loans
exceeds  the Total  Commitment  or the  Designated  Collateral  Value,  then the
Borrower shall,  subject to Borrower's rights pursuant to ss.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 ss.4.8.

     (2) If at any time the Borrower  receives a payment or  prepayment of or in
respect to the principal amount of the Collateral Note (whether as a result of a
voluntary  prepayment,  the occurrence of a casualty to or  condemnation  of the
property securing such Note ,or otherwise),  then the Borrower shall immediately
pay such  amount to the Agent for the  respective  accounts  of the  Lenders for
application to the outstanding amount of the Loans, together with any additional
interest payable pursuant to ss.4.8.

     ss.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 this ss.3.3 may be made only on the last day of the Interest  Period
relating thereto except as otherwise  required pursuant to ss.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 ss.3.3 of
any Base Rate Loans and at least four  Eurodollar  Business  Days  notice of any
proposed  repayment  pursuant to this ss.3.3 of Eurodollar  Rate Loans,  in each
case  specifying the proposed date of payment of Loans and the principal  amount
to be paid.

<PAGE>

     ss.3.4.   Partial  Prepayments.   Each  partial  prepayment  of  the  Loans
under ss.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.

     ss.3.5.  Effect of  Prepayments.  Amounts of the Loans prepaid  underss.3.2
and ss.3.3 prior to the Maturity Date may be reborrowed as provided in ss.2.

     ss.4. CERTAIN GENERAL PROVISIONS.

     ss.4.1. Conversion Options.

<PAGE>

     (1) 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.

     (2) 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 ss.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
ss.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.

<PAGE>

     (3) 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.

     ss.4.2.  Closing Fee. The Borrower  agrees to pay, on or before the Closing
Date, to FNB a commitment fee as specified in the Agreement Regarding Fees.

     ss.4.3. INTENTIONALLY OMITTED.

     ss.4.4. Funds for Payments.

     (1) 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 Lenders
and the Agent,  as the case may be, at the Agent's office at 100 Federal Street,
Boston,  Massachusetts  02110, 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 FNB, 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.

     (2) 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

<PAGE>

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.

     ss.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.

     ss.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  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.

     ss.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 Lender

<PAGE>

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.

     ss.4.8.  Additional Interest.  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).

     ss.4.9.  Additional  Costs, Etc.  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

<PAGE>

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:

     (1) 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 Lender's  Commitment or the Loans (other than taxes
based upon or measured by the income or profits of such Lender or the Agent), or

     (2) 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

     (3) 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

     (4) impose on any Lender or the Agent any other  conditions or requirements
with  respect to this  Agreement,  the other  Loan  Documents,  the Loans,  such
Lender's  Commitment,  or any class of loans or  commitments of which any of the
Loans or such  Lender's  Commitment  forms a part;  and the result of any of the
foregoing is

          (1) to increase  the cost to any Lender of making,  funding,  issuing,
     renewing,  extending  or  maintaining  any of the  Loans  or such  Lender's
     Commitment, or

          (2) to  reduce  the  amount of  principal,  interest  or other  amount
     payable to such Lender or the Agent

<PAGE>

     hereunder on account of such Lender's Commitment or any of the Loans, or

          (3) 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.

     ss.4.10.  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 Lender's or such holding  company's  capital as a consequence
of such Lender's  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 Lender'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 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

<PAGE>

such reduction is determined, upon presentation by such Lender of a statement of
the amount setting for the Lender's  calculation  thereof.  In determining  such
amount,  such Lender may use any reasonable  averaging and attribution  methods,
generally applied by such Lender or the Agent.

     ss.4.11.  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.

     ss.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.

     ss.4.13.  Certificate.  A  certificate  setting  forth any amounts  payable
pursuant  toss.4.8,ss.4.9,ss.4.10,ss.4.11  or ss.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.

     ss.4.14. Limitation on Interest. Notwithstanding anything in this Agreement
to the

<PAGE>

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.

ss.5.      COLLATERAL SECURITY.

     ss.5.1.  Collateral.  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;  and (ii) 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,  which
consent may be given or withheld in the sole discretion of the Majority Lenders.

     ss.5.2. Market Value.

     (1)  The  Majority  Lenders  shall  redetermine  the  Market  Value  of the
Collateral  Note not more  frequently than once each 12-month period in order to
determine the current

<PAGE>

Designated  Collateral  Value of the Collateral Note, and the Borrower shall pay
to the Agent on demand all reasonable costs of such determination.

     (2) Notwithstanding  the provisions of ss.5.2(a),  the Majority Lenders may
redetermine  the  Market  Value  for the  purpose  of  determining  the  current
Designated  Collateral  Value of the Collateral Note (i) at any time following a
condemnation of or uninsured casualty to the Collateral  Property related to the
Collateral Note, 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  ss.5.2(b)  shall  be  borne  by the
Borrower.

     (3) In the event that the Agent shall advise the Borrower,  on the basis of
any determination  pursuant to ss.5.2,  that the Designated  Collateral Value is
insufficient  to  comply  with  the  requirements  of  ss.9.2,  then  until  the
Designated  Collateral  Value shall be restored  to  compliance  with ss.9.2 the
Lenders shall not be required to make advances under ss.2.1.

     ss.5.3. INTENTIONALLY OMITTED.

     ss.5.4. INTENTIONALLY OMITTED.

     ss.6. REPRESENTATIONS AND WARRANTIES.

     The  Borrower  represents  and  warrants  to the Agent and the  Lenders  as
follows.

     ss.6.1. Corporate Authority, Etc.

     (1) Incorporation;  Good Standing.  The Borrower (i) 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,  (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.

     (2) Guarantor. The Guarantor (i) is a corporation, duly organized under the
laws of the State of Maryland and is

<PAGE>

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 the Guarantor.

     (3)  Authorization.   The  execution,  delivery  and  performance  of  this
Agreement  and the other Loan  Documents to which the Borrower or the  Guarantor
are or are to  become  a party  and the  transactions  contemplated  hereby  and
thereby  (i) are  within  the  authority  of 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,  articles of organization,  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 the Borrower or the Guarantor, as applicable.

     (4)  Enforceability.  The execution and delivery of this  Agreement and the
other Loan Documents to which the Borrower 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.

     ss.6.2. Governmental Approvals. The execution,  delivery and performance by
the Borrower and the Guarantor of this  Agreement  and the other Loan  Documents
and the

<PAGE>

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.

     ss.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.

     ss.6.4.  Financial  Statements.  The Borrower has  furnished to each of the
Lenders the pro forma balance sheet of the Borrower as of the Balance Sheet Date
and  related  statements  of  income,  and cash  flows,  certified  by the chief
financial or chief  accounting  officer of the Borrower 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 and the results of operations for the fiscal quarter then ended (subject
to  year-end  adjustments).   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 as of such dates and the results of the  operations of
the  Borrower  for  such  periods.  There  are  no  liabilities,  contingent  or
otherwise,  of the Borrower  involving  material  amounts not  disclosed in said
financial statements and the related notes thereto.

     ss.6.5.  No  Material  Changes.  Since the Balance  Sheet  Date,  there has
occurred no materially adverse change in the financial  condition or business of
the Borrower  taken as a whole as shown on or reflected in the balance  sheet of
the Borrower as of the Balance  Sheet Date,  or its  statement of income or cash
flows,  other than changes in the ordinary  course of business that have not had
any  materially  adverse effect

<PAGE>

either  individually or in the aggregate on the business or financial  condition
of the Borrower taken as a whole.

     ss.6.6.  Franchises,   Patents,  Copyrights,  Etc.  The  Borrower  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.

     ss.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 the  Guarantor  before  any  court,  tribunal,  arbitrator  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 the  Guarantor or
materially  impair  the  right  of the  Borrower  or the  Guarantor  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 the  Guarantor,  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 or the  Guarantor to pay and
perform the  Obligations  in the manner  contemplated  by this Agreement and the
other Loan Documents.

     ss.6.8. No Materially Adverse Contracts,  Etc. Neither the Borrower nor 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 the  Borrower  or the  Guarantor.  Neither  the  Borrower  nor 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 the Borrower or the Guarantor.

     ss.6.9. Compliance with Other Instruments,  Laws, Etc. Neither the Borrower
nor 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

<PAGE>

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
or the Guarantor.

     ss.6.10. Tax Status. Each of the Borrower 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 of such Person know of no basis
for any such claim.

     ss.6.11.  No Event of Default.  No Default or Event of Default has occurred
and is continuing.

     ss.6.12.  Holding Company and Investment Company Acts. Neither the Borrower
nor 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.

     ss.6.13.  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

<PAGE>

interest  or  security  title  in,  any  property  of  the  Borrower  or  rights
thereunder.

     ss.6.14.  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.

     ss.6.15. Certain Transactions.  None of the officers, trustees,  directors,
or employees of the Borrower or the Guarantor is a party to any transaction with
the Borrower  (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,  unless  such  contract,   agreement  or  other
arrangement is an arms-length  arrangement  with terms comparable to those which
would be obtained from an unaffiliated Person.

     ss.6.16.  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 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 with the  provisions

<PAGE>

hereof and the other Loan Documents will involve any prohibited transaction.

     ss.6.17.  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.

     ss.6.18. 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.

     ss.6.19.  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.

     ss.6.20. INTENTIONALLY OMITTED

     ss.6.21.  Loan Documents.  All of the representations and warranties of the
Borrower or the Guarantor  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

<PAGE>

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).

     ss.6.22.  Brokers. The Borrower has not engaged or otherwise dealt with any
broker,  finder or similar entity in connection with this Agreement or the Loans
contemplated hereunder.

     ss.6.23.  Fair  Consideration.   The  Borrower  (and,  as  applicable,  the
Guarantor),  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,

<PAGE>

Chapter 12, Article 10, Section 272 in exchange for the delivery of the Security
Documents to Agent.

     ss.6.24.  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,  neither the Borrower
nor the  Guarantor is insolvent  on a balance  sheet basis,  the sum of the such
Person's  assets exceeds the sum of the such Person's  liabilities,  each of the
Borrower and the Guarantor is able to pay its debts as they become due, and each
of the  Borrower  and the  Guarantor  has  sufficient  capital  to  carry on its
business.

     ss.6.25.  Other Debt.  Neither the Borrower nor the Guarantor 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,  the Guarantor 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.

     ss.6.26. Year 2000 Compliant. Borrower has 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.  Borrower has
committed  and  will  commit  reasonably  adequate  resources  to be  Year  2000
Compliant.

     ss.6.27.  Ownership of Borrower.  The Guarantor directly or indirectly owns
one hundred percent (100%) of the membership interests of Borrower.

<PAGE>

     ss.7. 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:

     ss.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.

     ss.7.2.  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.

     ss.7.3.  Records and Accounts. The Borrower will (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  shall not,  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 ss.6.4 or (y) change its fiscal year.

     ss.7.4.  Financial Statements,  Certificates and Information.  The Borrower
will deliver or cause to be delivered to each of the Lenders:

     (1) 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  balance
sheet  of the  Borrower  at the end

<PAGE>

of such  year,  and the  related  unaudited  statements  of  income,  changes in
members'  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 on
the date  thereof and any other  information  the Lenders may need to complete a
financial analysis of the Borrower;

     (2) as soon as  practicable,  but in any event not later than 45 days after
the end of each of the first three (3) fiscal  quarters of the Borrower,  copies
of the  unaudited  balance  sheet of the Borrower as at the end of such quarter,
and the related unaudited statements of income,  changes in shareholders' equity
and cash flows for the portion of the Borrower's  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 on
the date thereof (subject to year-end adjustments);

     (3) 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;

     (4) INTENTIONALLY OMITTED.

     (5) 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 ss.9 and including the
Designated  Collateral  Value worksheet  attached  thereto,  and (if applicable)
reconciliations to reflect changes in generally accepted  accounting  principles
since the Balance Sheet Date;

<PAGE>

     (6) concurrently with the delivery of the financial statements described in
subsections  (b) and (c) above,  a certificate  signed by the  President,  Chief
Financial  Officer or Chief  Accounting  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;

     (7) promptly after they are filed with the Internal Revenue Service, copies
of any annual federal income tax returns and amendments thereto of the Borrower;

     (8) 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  might  reasonably  be  likely to cause the
Designated  Collateral  Value to be reduced or which may adversely affect any of
the Collateral;

     (9) a copy  of any  rent  roll,  operating  statements,  budget,  financial
statement  or  other  report  Borrower  shall  receive  from  the  maker  of the
Collateral  Note within  fifteen  (15) days after  Borrower's  receipt  thereof;
provided, however, so long as FNB is the Agent under or one of the Lenders under
the loan  evidenced by the  Collateral  Note,  Borrower shall not be required to
deliver the foregoing to the Lenders;

     (10) on or before  the third  (3rd) day after  Borrower's  receipt  of such
information  from any Servicer with respect to the  Collateral  Note, 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 45 days after each fiscal quarter of the Borrower period from
any Servicer;  provided,  further however,  so long as FNB is the Agent under or
one of the Lenders under the loan  evidenced by the  Collateral  Note,  Borrower
shall not be required to deliver the foregoing to the Lenders; and

<PAGE>

     (11) 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.

     ss.7.5. Notices.

     (1) 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 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 the Borrower or the
Guarantor, 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.

<PAGE>

     (2)  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 any Collateral Property;  (ii) of any violation of any Environmental Law
that the  Borrower or, upon the Borrower or the  Guarantor  obtaining  knowledge
thereof,  the maker of the Collateral Note,  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,  the  maker  of the  Collateral  Note  or  the  Agent's  liens  on the
Collateral pursuant to the Security Documents.

     (3)  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.

     (4) 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 the  Guarantor  or to  which  the  Borrower  or the
Guarantor is or is to become a party  involving an uninsured  claim  against the
Borrower or the Guarantor that could reasonably be expected to have a materially
adverse  effect on the  Borrower  or the  Guarantor  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 the  Guarantor in an amount in excess of
$250,000.

<PAGE>

     (5) INTENTIONALLY OMITTED

     (6) 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  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.

(7)  Notification  of Lenders.  Promptly  after  receiving any notice under this
ss.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.

     ss.7.6. Existence; Maintenance of Properties.

     (1) 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. 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  respective  businesses  now
conducted by it and in related businesses.

     (2) The Borrower (i) will cause all of its owned or leased  properties used
or useful in the  conduct  of its  business  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.

     ss.7.7.  Insurance. The Borrower, at its expense, will procure and maintain
or cause to be procured and maintained,  insurance covering the Borrower and its
properties in

<PAGE>

such  amounts  and  against  such  risks and  casualties  as are  customary  for
businesses similar to the Borrower.

     ss.7.8.  Taxes.  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  charges  imposed upon it, its assets,  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  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  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.

     ss.7.9.  Inspection of Properties and Books.  The Borrower shall permit the
Lenders, 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,
to examine the books of account of the Borrower (and to make copies  thereof and
extracts  therefrom)  and to discuss the  affairs,  finances and accounts of the
Borrower  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
Borrower's normal business operations.

     ss.7.10.  Compliance  with Laws,  Contracts,  Licenses,  and  Permits.  The
Borrower  will  comply  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

<PAGE>

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.

     ss.7.11.  Use of Proceeds.  The Borrower will use the proceeds of the Loans
solely  (a)  for  working  capital  purposes,   (b)  for  Investments  permitted
byss.8.3(h)  and (c) for such other  purposes of the  Borrower  as the  Majority
Lenders in their sole and absolute  discretion  may approve in writing from time
to time.

     ss.7.12.  Further  Assurances.  The Borrower will  cooperate  with and will
cause the  Guarantor  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.

     ss.7.13. INTENTIONALLY OMITTED.

     ss.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 $250,000.00 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.

<PAGE>

     ss.7.15. INTENTIONALLY OMITTED.

     ss.7.16. More Restrictive Agreements.  Without limiting the terms ofss.8.1,
should the Borrower or the  Guarantor,  as the case may be, 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 the Guarantor,  as the case
may be, 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 (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  Lenders in their sole
discretion.

     ss.7.17.  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 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 transferree.

     ss.7.18.  Determination of Values.  Borrower shall promptly  cooperate with
the Agent or the  Majority  Lenders in their  determination  of the Debt Service
Coverage Ratio and Market Value of the Collateral  Note,  including the delivery
to the Agent of all  information  and  documentation  in the

<PAGE>

possession of the Borrower regarding the Collateral Note or Collateral  Property
or  otherwise  required  by the  Agent or the  Majority  Lenders  in their  sole
discretion.

     ss.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 Lenders has any obligation to make any Loans:

     ss.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:

     (1) Indebtedness to the Lenders arising under any of the Loan Documents;

     (2) current  liabilities of the Borrower 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;

     (3) 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 ss.7.8;

     (4)  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  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; and

     (5) endorsements  for collection,  deposit or negotiation and warranties of
products or services, in each case incurred in the ordinary course of business.

<PAGE>

     ss.8.2.  Restrictions  on Liens,  Etc. 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; or
(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");  provided  that the Borrower may create or
incur or suffer to be created or incurred or to exist:

     (1) liens on properties to secure taxes, assessments and other governmental
charges or claims for labor,  material or supplies in respect of obligations not
overdue;

     (2) deposits or pledges made in connection  with, or to secure  payment of,
workers' compensation,  unemployment insurance, old age pensions or other social
security obligations;

     (3) liens on properties  other than the Collateral in respect of judgments,
awards or  indebtedness,  the  Indebtedness  with  respect to which is permitted
byss.8.1(d); and

<PAGE>

     (4) liens in favor of the Agent and the Lenders under the Loan Documents.

     ss.8.3.  Restrictions on Investments.  The Borrower will not make or permit
to exist or to remain outstanding any Investment except Investments in:

     (1)  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;

     (2) 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;

     (3) 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;

     (4) 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;

     (5)  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;

<PAGE>

     (6) 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;

     (7) 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;

     (8) Investments in Affiliates of the Borrower; provided, however, any loans
to Affiliates of the Borrower shall be fully funded loans and shall not obligate
Borrower to advance any additional funds under such loans; and

     (9) the Collateral Note.

     ss.8.4. Merger, Consolidation.  The Borrower will not 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.

     ss.8.5.  Sale  and  Leaseback.   The  Borrower  will  not  enter  into  any
arrangement, directly or indirectly, whereby the Borrower shall sell or transfer
any Real Estate owned by it in order that then or thereafter  the Borrower shall
lease back such Real Estate.

     ss.8.6. Distributions.  The Borrower shall not make any Distributions which
would cause it to violate any of the following covenants:

     (1) 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 one hundred percent (100%) of the Funds Available for  Distribution
for  such  period.   Notwithstanding  the  foregoing,  (i)  the  amount  of  any
Distributions paid by Borrower in the fiscal quarter of Borrower ending June 30,
2000 shall not

<PAGE>

exceed, in the aggregate, an amount equal to one hundred percent (100%) of Funds
Available for Distribution of Borrower for such quarter;  (ii) the amount of any
Distributions  paid  by  Borrower  in the  fiscal  quarter  of  Borrower  ending
September   30,  2000  shall  not,  when  added  to  the  amount  of  all  other
Distributions  paid by Borrower in the  preceding  fiscal  quarter of  Borrower,
exceed, in the aggregate, an amount equal to one hundred percent (100%) of Funds
Available  for  Distribution  of Borrower  for the period from the Closing  Date
through  September 30, 2000; and (iii) the amount of any  Distributions  paid by
Borrower in the fiscal quarter of Borrower  ending  December 31, 2000 shall not,
when  added to the amount of all other  Distributions  paid by  Borrower  in the
preceding two (2) fiscal  quarters of Borrower,  exceed,  in the  aggregate,  an
amount equal to one hundred percent (100%) of Funds  Available for  Distribution
of Borrower for the period from the Closing Date through December 31, 2000.

     (2) 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.

     ss.8.7. INTENTIONALLY OMITTED.

     ss.8.8.  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, that the Borrower:

     (1) does not own and will not own any assets other than the  Collateral and
the Investments permitted byss.8.3;

     (2) is not  engaged  and will not  engage in any  business  other  than the
ownership of the Collateral;

     (3) does not and will not have any  Subsidiaries  (whether  the same  would
constitute  an entity that could be  consolidated  on the  Borrower's  financial
statements or a minority interest);

     (4) will not enter into any contract or agreement with any partner, member,
shareholder,  principal  or  Affiliate  of  Borrower  or  Guarantor,  or  any of
Guarantor's   Subsidiaries  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

<PAGE>

be available on an arms-length basis with third parties other than an affiliate;

     (5) has not  incurred and will not incur any  Indebtedness,  other than the
Indebtedness permitted underss.8.1;

     (6) has not made and will not make any loans or advances to any third party
other than those permitted byss.8.3;

     (7)  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;

     (8) has  done or  caused  to be done and will do all  things  necessary  to
observe limited liability company formalities and to preserve its existence, and
will not, nor will any member  thereof  amend,  modify or  otherwise  change its
operating  agreement  or  other  organizational  documents  in  a  manner  which
adversely  affects such Person's or such member's  existence as a single purpose
entity, if such person is a single purpose entity;

     (9) will  conduct and  operate its  business  as  presently  conducted  and
operated;

     (10) will maintain books and records and bank accounts  separate from those
of its Affiliates, including its members;

     (11) 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 and the  Guarantor) and
shall maintain and use separate stationery, invoices and checks;

     (12) [Intentionally Omitted];

     (13) 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;

<PAGE>

     (14) will not, nor shall any member or Affiliate  seek the  dissolution  or
winding up, in whole or in part, of Borrower or Guarantor;

     (15) will not  commingle  the funds and other assets of the  Borrower  with
those of any other Person;

     (16) 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;

     (17) does not and will not hold itself out to be responsible  for the debts
or obligations of any other Person; and

     (18) shall comply with the provisions of its operating  agreement and other
organizational documents, as applicable.

     ss.9. 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:

     ss.9.1.  Liabilities to Assets Ratio.  The Borrower will not, at the end of
any fiscal quarter, permit the ratio of Total Liabilities to Total Assets of the
Borrower to exceed 0.80 to 1.

     ss.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.

     ss.10. 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 June 28, 2000:

     ss.10.1.  Loan  Documents.  Each of the Loan Documents shall have been duly
executed and delivered by the

<PAGE>

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.

     ss.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  States  in  which  each  of the  Borrower  and the
Guarantor is organized,  and by a duly authorized  officer of the Borrower to be
true and complete, of the articles of organization, articles of incorporation or
other  organizational  documents  of the  Borrower  and the  Guarantor  or their
qualification  to do  business,  as  applicable,  as in  effect  on such date of
certification.

     ss.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  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.

     ss.10.4.  Incumbency Certificate;  Authorized Signers. The Agent shall have
received from the Borrower and the Guarantor an incumbency certificate, dated as
of the Closing Date, signed by a duly authorized officer of the Borrower and the
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.

<PAGE>

     ss.10.5.  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 LLP, and other counsel of the Borrower and
the Guarantor, as to such matters as the Agent shall reasonably request.

     ss.10.6.  Payment of Fees.  The  Borrower  shall have paid to the Agent the
commitment fee pursuant toss.4.2.

     ss.10.7.  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.

     ss.10.8. 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,  the 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.

     ss.10.9.  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 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.

     ss.10.10. INTENTIONALLY OMITTED

     ss.10.11.  Compliance Certificate. A Compliance Certificate dated as of the
date of the Closing Date  demonstrating  compliance  with each of the

<PAGE>

covenants  calculated therein as of the most recent fiscal quarter end for which
the Borrower has provided financial statements  underss.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.

     ss.10.12. 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 or the Guarantor.

     ss.10.13.  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.

     ss.11. 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:

     ss.11.1. Prior Conditions Satisfied. All conditions set forth inss.10 shall
continue to be satisfied as of the date upon which any Loan is to be made.

     ss.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,  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

<PAGE>

the Borrower signed by an authorized officer of the Borrower to such effect.

     ss.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 Lender would make it illegal for such Lender to make such Loan.

     ss.11.4.  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.

     ss.11.5.  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.

     ss.11.6.  Borrowing  Documents.  In the case of any request for a Loan, the
Agent shall have received a copy of each of the following:

     (1) the  request  for a Loan  required  by ss.2.6 in the form of  Exhibit B
hereto, fully completed; and

     (2) the Compliance  Certificate required by clause (iii) of ss.2.6 prepared
in a manner reasonably acceptable to the Agent.

     ss.12. EVENTS OF DEFAULT; ACCELERATION; ETC.

     ss.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:

<PAGE>

     (1) 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;

     (2) 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;

     (3) the  Borrower  shall  fail to comply  with any  covenant  contained  in
ss.9.2,  in which event,  subject to the  provisions  of ss.12.1A,  the Borrower
shall have the cure period or periods provided in ss.12.1B;

     (4) the Borrower shall fail to comply with any covenant contained in ss.9.1
and such  failure  shall  continue  for 30 Business  Days after  written  notice
thereof shall have been given to the Borrower by the Agent;

     (5) the  Borrower,  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 ss.12.1);

     (6) any representation or warranty of the Borrower or the 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;

     (7) the Borrower or the Guarantor 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

<PAGE>

thereof;  provided  that  solely  with  respect  to the  Guarantor,  the  events
described in this  ss.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  ss.12.1(g),  involve singly or in the aggregate  obligations  for borrowed
money or credit received totaling in excess of $10,000,000.00;

     (8) the Borrower 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 the  Borrower or the  Guarantor  or of any  substantial  part of the
assets of any thereof,  (B) shall commence any case or other proceeding relating
to  the  Borrower  or  the  Guarantor  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;

     (9) a  petition  or  application  shall be filed for the  appointment  of a
trustee or other  custodian,  liquidator  or  receiver  of the  Borrower  or the
Guarantor or any  substantial  part of the assets of any  thereof,  or a case or
other proceeding shall be commenced  against the Borrower or the Guarantor 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 the  Guarantor  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;

     (10) a decree or order is entered  appointing any such trustee,  custodian,
liquidator or receiver or adjudicating the Borrower 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 the  Borrower  or the
Guarantor,  in each case of the foregoing in an  involuntary  case under federal
bankruptcy laws as now or hereafter constituted;

     (11) 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 the Guarantor  that,  with other  outstanding  uninsured
final  judgments,  undischarged,  against  the  Borrower or the  Guarantor  that
exceeds in the aggregate $1,000,000.00;

<PAGE>

     (12) 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  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 Lenders;

     (13) any dissolution,  termination, partial or complete liquidation, merger
or  consolidation  of the Borrower or the  Guarantor,  or any sale,  transfer or
other disposition of the assets of the Borrower or the Guarantor,  other than as
permitted under the terms of this Agreement or the other Loan Documents;

     (14)  any suit or  proceeding  shall be filed  against  the  Borrower,  the
Guarantor,  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 or the  Guarantor to perform each
and every one of their  respective  obligations  under and by virtue of the Loan
Documents;

     (15) the Borrower or the Guarantor shall be indicted for a federal crime, a
punishment  for which could include the forfeiture of any assets of the Borrower
or the Guarantor included in the Collateral;

     (16) Jeffrey H. Lynford shall cease to be the Chairman of the Board of, and
Edward  Lowenthal shall cease to be the President of, the Borrower or Guarantor,
and a competent and experienced  successor for such Person shall not be approved
by the Majority Lenders within six (6) months of such event;

<PAGE>

     (17) 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 or the Guarantor to the PBGC or such Guaranteed
Pension  Plan in an  aggregate  amount  exceeding  $250,000.00  with  respect to
Borrower  or  $1,000,000  with  respect  to  Guarantor  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; or

     (18) the  Guarantor  denies that  Guarantor has any liability or obligation
under  the  Guaranty,  or  shall  notify  the  Agent  or any of the  Lenders  of
Guarantor's  intention to attempt to cancel or terminate the Guaranty,  or shall
fail to observe or comply with any term, covenant,  condition or agreement under
the Guaranty;

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 ss.12.1(h),  ss.12.1(i) or ss.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.

     ss.12.1A. Limitation of Cure Periods.

     (a) Notwithstanding  anything contained in ss.12.1 to the contrary,  (i) no
Event of Default  shall  exist  hereunder  upon the  occurrence  of any  failure
described in ss.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

<PAGE>

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 ss.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 ss.7.7,  to any  default  consisting  of a failure to
comply with ss.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 ss.12.1 or
of ss.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.

     ss.12.1B. Certain Cure Periods.

     In the event that there  shall  occur any Default  under  ss.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  satisfactory  to all of the  Lenders  in their  sole and
absolute  discretion,  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 Borrower's  proposed  actions  (provided that upon the
occurrence  of any event  which may cause a Default  to occur  under  ss.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  ss.12.1B  shall be  available).  The  Borrower's  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

<PAGE>

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 Borrower's  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
Borrower's 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 Borrower's  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.

     ss.12.2.  Termination of Commitments.  If any one or more Events of Default
specified in ss.12.1(h),  ss.12.1(i) or ss.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 ss.12.2 shall relieve the Borrower of
its  obligations  to the Lenders  arising under this Agreement or the other Loan
Documents.

     ss.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  Lenders  shall have
accelerated  the maturity of the Loans pursuant to ss.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,

<PAGE>

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.

     ss.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:

     (1) 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;

     (2) 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 Agent's fee payable pursuant to ss.4.3 and all other Obligations,
(ii) in the event that any Lender  shall  have  wrongfully  failed or refused to
make an advance  under ss.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

<PAGE>

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

     (3) Third, the excess, if any, shall be returned to the Borrower or to such
other Persons as are entitled thereto.

     ss.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  Lenders  to the
Borrower or the Guarantor and any  securities or other  property of the Borrower
or the  Guarantor 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.

     ss.14. THE AGENT.

     ss.14.1.  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

<PAGE>

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.

     ss.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.

     ss.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.

     ss.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 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

<PAGE>

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 the  Guarantor.  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.

     ss.14.5. Payments.

     (1) 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  Lender  shall
constitute a payment to such  Lender.  The Agent  agrees to  distribute  to each
Lender not later than one Business Day after the Agent's  receipt of good funds,
determined in accordance with the Agent's customary practices, such Lender's 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.

     (2) 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.

     (3) 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 ss.13 with respect to making  dispositions  and  arrangements  with the other
Lenders, where such Lender'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 Lenders,  in each case as, when and to the full extent required by
the provisions of this Agreement, shall be deemed delinquent (a

<PAGE>

"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 and the  Guarantor,
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.

     ss.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.

     ss.14.7.  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 byss.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.

     ss.14.8.  Agent as Lender. In its individual  capacity,  FNB shall have the
same  obligations  and the same rights,  powers and privileges in respect to its
Commitment

<PAGE>

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.

     ss.14.9.  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  Agent's  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 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.

     ss.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  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 Agent's compliance with such direction to
be unlawful or commercially unreasonable in any applicable jurisdiction.

     ss.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 Lenders (other
than taxes based upon the Agent's or any  Lender's  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  Agent's  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 ss.18.4),  the review of any additional or substitute  Collateral,
each closing hereunder, and amendments,  modifications,  approvals,  consents or
waivers hereto or

<PAGE>

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 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  Lender's  relationship  with  the  Borrower  or the  Guarantor,  (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  attorney's fees and costs) incurred by
FNB in connection  with the assignment of Commitments and interests in the Loans
pursuant to  ss.18.1.  The  covenants  of this ss.15  shall  survive  payment or
satisfaction of payment of amounts owing with respect to the Notes.

     ss.16. INDEMNIFICATION.

<PAGE>

     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 ss.16 based upon any  agreement,  arrangement or
action made or taken,  or alleged to have been made or taken, by the Borrower or
the Guarantor,  (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 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
(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 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), 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 ss.16 to indemnify  any Person for  liabilities  arising from such Person's
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
ss.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 ss.16 shall survive the
repayment of the Loans and the  termination  of the  obligations  of the Lenders
hereunder.

     ss.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

<PAGE>

Borrower or the  Guarantor  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 the  Guarantor  pursuant  hereto or in
connection  with  the   transactions   contemplated   hereby  shall   constitute
representations and warranties by the Borrower or the Guarantor hereunder.

     ss.18. ASSIGNMENT AND PARTICIPATION.

     ss.18.1.  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  Lender'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 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 or the Guarantor,
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 $5,000,000.00 unless otherwise
approved  by the  Agent.  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

<PAGE>

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 ss.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 or the
Guarantor.

     ss.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  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.

     ss.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 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  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

<PAGE>

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.

     ss.18.4. Participations. Each Lender may sell participations to one or more
banks  or  other  entities  in all or a  portion  of such  Lender's  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 or the Guarantor  except the rights  granted to the Lenders
pursuant  toss.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 the Guarantor.

     ss.18.5.  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
ss.4 of the Federal Reserve Act, 12 U.S.C. ss.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.

     ss.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 Lenders.

     ss.18.7.  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.

     ss.19. NOTICES.

<PAGE>

     Each notice,  demand,  election or request  provided for or permitted to be
given  pursuant  to this  Agreement  (hereinafter  in this ss.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 FNB:

                           Fleet National Bank
                           100 Federal Street
                           Boston, Massachusetts  02110
                           Attention:   Real Estate Division

     with a copy to:

                           Fleet National Bank
                           115  Perimeter Center Place, N.E.
                           Suite 500
                           Atlanta, Georgia  30346
                           Attention:   Mr. Jay Johns
                           Telecopy No.:   (770) 390-8434

     If to the Borrower:

                           Wellsford Finance, LLC
                           535 Madison Avenue
                           26th Floor
                           New York, New York 10022
                           Attention:   James J. Burns

<PAGE>

     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.

     ss.20. 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.

     ss.21. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE.

<PAGE>

     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 ss.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.

     ss.22. HEADINGS.

     The captions in this  Agreement are for  convenience  of reference only and
shall not define or limit the provisions hereof.

     ss.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.

     ss.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 ss.27.

     ss.25. WAIVER OF JURY TRIAL.

<PAGE>

     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 ss.25. BORROWER ACKNOWLEDGES THAT IT HAS HAD AN OPPORTUNITY TO
REVIEW  THIS  ss.25  WITH ITS  LEGAL  COUNSEL  AND THAT  BORROWER  AGREES TO THE
FOREGOING AS ITS FREE, KNOWING AND VOLUNTARY ACT.

     ss.26. 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, the Guarantor or any of their affiliates regardless of the capacity of
the Lender hereunder.

     ss.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  Lenders.   Notwithstanding  the
foregoing,  none of the following may occur without the written  consent of each
Lender:  a reduction  in the rate of  interest on the Notes;  an increase in the
amount of the  Commitments  of the Lenders  (except as provided in  ss.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

<PAGE>

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 the Guarantor 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 ss.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 Agent's fee
payable for the Agent's  account and the  provisions of ss.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.

     ss.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.

     ss.29. 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.

     ss.30. 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.

<PAGE>

     ss.31. 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.

                      [SIGNATURES BEGIN ON FOLLOWING PAGE]

<PAGE>

     IN WITNESS WHEREOF,  the undersigned have duly executed this Agreement as a
sealed instrument as of the date first set forth above.

     WELLSFORD FINANCE, LLC, a Delaware limited liability company

          By: Wellsford  Capital,  a Maryland real estate  investment trust, its
          manager

          By: /s/ James J. Burns
          ----------------------
               Name: James J. Burns
               Title: Senior Vice President

                                [CORPORATE SEAL]

                    [SIGNATURES CONTINUED ON FOLLOWING PAGE]

<PAGE>

     FLEET  NATIONAL  BANK  (f/k/a   BankBoston,   N.A.),  a  national   banking
     association, individually and as Agent

          By: /s/ Jay G. Johns
          --------------------
               Name: Jay G. Johns
               Title: Vice President

                                   [BANK SEAL]

<PAGE>

                                    EXHIBIT A
                                    ---------

                        FORM OF AMENDED AND RESTATED NOTE

$______________                                                 June  ____, 2000

     FOR VALUE RECEIVED,  the  undersigned  WELLSFORD  FINANCE,  LLC, a Delaware
limited     liability     company,     hereby     promises     to     pay     to
___________________________________  or order,  in accordance  with the terms of
that certain Amended and Restated  Revolving  Credit  Agreement dated as of June
28, 2000 (the  "Credit  Agreement"),  as from time to time in effect,  among the
undersigned,  Fleet National Bank (f/k/a  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 Fleet National Bank, 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

<PAGE>

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.

     This Note is executed in amendment and  restatement  of any Notes under the
Original Agreement.

     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, LLC, a Delaware limited liability company

          By: Wellsford  Capital,  a Maryland real estate  investment trust, its
          manager

          By:
               Name:
               Title:

                                [CORPORATE SEAL]

<PAGE>

                                    EXHIBIT B
                                    ---------
                            FORM OF REQUEST FOR LOAN

Fleet National Bank, as Agent
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, Georgia  30346
Attention:  Mr. Jay Johns

Ladies and Gentlemen:

     Pursuant to the provisions of ss.2.6 of the Amended and Restated  Revolving
Credit Agreement dated as of June ___, 2000, as from time to time in effect (the
"Credit  Agreement"),  among  Wellsford  Finance,  LLC (the  "Borrower"),  Fleet
National Bank (f/k/a  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  underss.2.1  of the Credit
Agreement:

                  Principal Amount: $

                  Type (Eurodollar, Base Rate):

                  Drawdown Date:                , 20

                  Interest Period:

by credit to the general  account of the Borrower  with the Agent at the Agent's
Office at 100 Federal Street, Boston, Massachusetts 02110.

     2. Use of  Proceeds.  Such Loan  shall be used for the  following  purposes
permitted byss.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

<PAGE>

Request  for Loan is a  Compliance  Certificate  prepared  using  the  financial
statements  of the Borrower  most  recently  provided or required to be provided
under ss.6.4 or ss.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  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,  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 ss.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
_______________, 200___.

     WELLSFORD FINANCE, LLC, a Delaware limited liability company

          By: Wellsford  Capital,  a Maryland real estate  investment trust, its
          manager

          By:
              Chief Financial or
              Chief Accounting Officer

<PAGE>

                                    EXHIBIT C
                                    ---------
                                     FORM OF
                             COMPLIANCE CERTIFICATE

Fleet National Bank
for itself and as Agent
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, Georgia  30346
Attention:  Mr. Jay Johns

Ladies and Gentlemen:

     Reference is made to the Amended and Restated  Revolving  Credit  Agreement
dated as of June 28,  2000  (the  "Credit  Agreement")  by and  among  Wellsford
Finance, LLC (the "Borrower"), Fleet National Bank (f/k/a 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 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
ss.2.6(iii),  ss.7.4(e), ss.10.11 or ss.11.6(b) of the Credit Agreement. If this
certificate is provided under a provision other than ss.7.4(e), 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 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.)

<PAGE>

     The  Borrower  is  providing  the  following   information  to  demonstrate
compliance as of the date hereof with the following covenants:

     I. ss.9.1. Liabilities to Assets Ratio.

         A.       Total Liabilities per balance sheet              $____________

         B.       Total Assets per balance sheet                   $____________

         Ratio of A to B may not exceed 0.80 to 1.

     III. ss.9.2. Designated Collateral Value.

         A.       Total outstanding principal
                  balance of Loans (after giving
                  effect to any Loan Request)                        $__________

         B.       Designated Collateral Value

                  Sum of Designated Collateral Values                $__________
                  (Attach Designated Collateral Value worksheet)

                           Total                                     $ _________

         Ratio of A to B may not be more than 1 to 1.

     IN  WITNESS  WHEREOF,  I  have  hereunto  set  my  hand  this  ____  day of
___________, 2000.

          WELLSFORD FINANCE, LLC, a Delaware limited liability company

     By: Wellsford Capital, a Maryland real estate investment trust, its manager

          By:
               Name:
               Title:

<PAGE>

                                   SCHEDULE 1
                                   ----------
                             LENDERS AND COMMITMENTS

Name and Address                         Commitment        Commitment Percentage
----------------                         ----------        ---------------------

Fleet National Bank                     $20,000,000                100%
100 Federal Street
Boston, Massachusetts 02110
Attn:  Real Estate Division

Eurodollar Lending Office
         Same as above

Total Commitment                        $20,000,000                100%

<PAGE>

                                  SCHEDULE 6.3
                                  ------------
                           TITLE TO PROPERTIES; LEASES

                                      None.
<PAGE>

                                  SCHEDULE 6.7
                                  ------------
                                   LITIGATION

                                      None.

<PAGE>

                                  SCHEDULE 6.17
                                  -------------
                                   ERISA PLANS

                                      None.

<PAGE>BOND PLEDGE AND SECURITY AGREEMENT

                                     Between

                  PALOMINO PARK PUBLIC IMPROVEMENTS CORPORATION
                         WELLSFORD REAL PROPERTIES INC.

                                 COMMERZBANK AG,
                                New York Branch,

                                       and

                     UNITED STATES TRUST COMPANY OF NEW YORK

                            Dated as of June 16, 2000

                      (Letter of Credit No. 150SBY00300064)

<PAGE>

                       BOND PLEDGE AND SECURITY AGREEMENT

     THIS BOND PLEDGE AND SECURITY AGREEMENT (the "Pledge Agreement"),  dated as
of June  16,  2000,  is made by and  among  Palomino  Park  Public  Improvements
Corporation,  a Colorado  nonprofit  corporation (the "Bond Issuer"),  Wellsford
Real Properties,  Inc., a Maryland corporation ("WRP" and, collectively with the
Bond Issuer, the "Pledgor"), Commerzbank AG, a banking corporation organized and
existing  under  the laws of The  Federal  Republic  of  Germany,  acting by and
through its New York Branch (the "Bank"), and United States Trust Company of New
York, as custodian for the Bank (the "Bond Trustee"),  pursuant to the Letter of
Credit  Reimbursement  Agreement dated as of June 16, 2000,  between the Pledgor
and the Bank  (hereinafter,  as the same may  from  time to time be  amended  or
supplemented, called the "Reimbursement Agreement").

                              W I T N E S S E T H:
                              - - - - - - - - - -

     WHEREAS,  the Bond  Issuer is issuing at the request of and for the benefit
of WRP and its Subsidiary,  The Park at Highlands,  L.L.C.,  a Colorado  limited
liability company  ("Highlands"),  its "Palomino Park Public  Improvements Corp.
Assessment Lien Revenue Bonds Series 1995," in the aggregate principal amount of
$14,755,000 (the "Bonds") pursuant to a Trust Indenture dated as of September 1,
1995,  (the "Bond  Indenture")  between the Bond Issuer and United  States Trust
Company of New York,  as trustee  (said  trustee,  together  with any  successor
trustee, hereinafter referred to as the "Bond Trustee");

     WHEREAS,  the Bond  Indenture  requires the purchase of Bonds under certain
circumstances  as set  forth  in  Section  4.04 of the Bond  Indenture  from the
holders thereof;

     WHEREAS, the Pledgor has entered into the Reimbursement  Agreement in order
to cause the Bank to issue its  Letter of Credit No.  150SBY00300064  dated June
16, 2000,  which may be used,  inter alia, to pay the purchase  price of certain
Bonds  (to the  extent  moneys  drawn  under the  Letter  of Credit  are used to
purchase such Bonds, such Bonds are hereinafter referred to as "Pledged Bonds");
and

     WHEREAS, it is a condition precedent to the obligation of the Bank to issue
the Letter of Credit that the Pledgor  shall have  executed and  delivered  this
Pledge Agreement to the Bank;

     NOW, THEREFORE, in consideration of the premises and in order to induce the
Bank to enter into the  Reimbursement  Agreement  and issue the Letter of Credit
thereunder  and for other good and valuable  consideration,  receipt of which is
hereby acknowledged, the Pledgor hereby agrees with the Bank as follows:

     1. Defined Terms.  Unless  otherwise  defined herein,  terms defined in the
Reimbursement Agreement shall have such defined meanings when used herein.

<PAGE>

     2. Pledge. The Pledgor hereby pledges,  assigns,  hypothecates,  transfers,
and  delivers  to the Bank all of its right,  title and  interest  in and to the
Pledged Bonds as the same may be from time to time delivered to the Bond Trustee
by the holders  thereof and the Pledgor  hereby  grants to the Bank a first lien
on,  and  security  interest  in, its right,  title and  interest  in and to the
Pledged  Bonds,  all interest or other income  thereon and all proceeds  thereof
(the  "Collateral"),  as collateral security for the prompt and complete payment
when due of all amounts due in respect of the  obligations  of the Pledgor under
the  Reimbursement  Agreement  and interest on such  amounts (all the  foregoing
being hereinafter called the "Obligations").  The Pledgor hereby consents to the
Bond  Trustee  acting  as the  agent  and  bailee  of the Bank for  purposes  of
perfecting  the Lien of this Pledge  Agreement and of holding the Collateral for
the benefit of the Bank.

     3.  Payments on the Pledged  Bonds.  If, while this Pledge  Agreement is in
effect,  the  Pledgor  shall  become  entitled  to receive or shall  receive any
principal  or  interest  payment in respect of the  Pledged  Bonds,  the Pledgor
agrees to accept the same as the  Bank's  agent and to hold the same in trust on
behalf  of the Bank and to  deliver  the same  forthwith  to the  Bank.  Pledgor
instructs and authorizes  the Bond Trustee to deliver  forthwith to the Bank any
payment  to be made on  Pledged  Bonds and  instructs  and  authorizes  the Bond
Trustee to hold and receive on behalf of the Bank and deliver  forthwith  to the
Bank any payments to be made or received in respect of Pledged Bonds  (including
all proceeds of any remarketing of the Pledged Bonds). All sums of money so paid
in respect of the Pledged  Bonds  which are  received by the Pledgor and paid to
the Bank shall be credited  against the  obligations  of the Pledgor to the Bank
first to any fees,  costs,  charges  or  expenses  payable to the Bank under the
Reimbursement  Agreement or the Letter of Credit, next to any accrued but unpaid
interest under Sections 2.1 or 2.2 of the Reimbursement  Agreement,  next to any
current interest due, and then to outstanding principal.

     4. Release of Pledged  Bonds.  Subject to and in accordance  with the terms
and conditions of Section 2.4 of the Reimbursement  Agreement, the Pledgor shall
have the right to effect  releases of Pledged  Bonds from the security  interest
created by this Agreement.

     5. Rights of the Bank.  The Bank shall not be liable for failure to collect
or  realize  upon  the  Obligations  or any  collateral  security  or  guarantee
therefor,  or any part  thereof,  or for any  delay in so doing  nor shall it be
under any obligation to take any action  whatsoever with regard  thereto.  If an
Event of  Default  has  occurred  and is  continuing,  the Bank may  thereafter,
without  notice,  exercise all rights,  privileges or options  pertaining to any
Pledged  Bonds as if it were the  absolute  owner  thereof,  upon such terms and
conditions  as it may  determine,  all without  liability  except to account for
property  actually  received  by it, but the Bank shall have no duty to exercise
any of the aforesaid rights,  privileges or options and shall not be responsible
for any failure to do so or delay in so doing.

     6. Remedies.  In the event of any Event of Default under the  Reimbursement
Agreement,   the  Bank,   without   demand  of   performance  or  other  demand,
advertisement  or notice of any kind (except the notice  specified below of time
and place of public or private  sale) to or upon the Pledgor or any other person
(all and each of which demands, advertisements and/or

<PAGE>

notices are hereby expressly waived) in its sole discretion (a) may exercise any
or all of its rights and remedies  under any or all of the Related  Documents or
any other  instrument  or  agreeing,  securing,  evidencing  or  relating to the
Obligations or under applicable law (including all of the rights and remedies of
a secured  creditor  under  the New York  Uniform  Commercial  Code or any other
applicable  law), (b) may forthwith  collect,  receive,  appropriate and realize
upon the Collateral, or any part thereof, and/or (c) may forthwith sell, assign,
give option or options to purchase, contract to sell or otherwise dispose of and
deliver said Collateral,  or any part thereof,  in one or more parcels at public
or  private  sale or sales,  at any  exchange,  broker's  board or at any of the
Bank's  offices  or  elsewhere  upon such  terms and  conditions  as it may deem
advisable  and at such prices as it may deem best,  for cash or on credit or for
future  delivery  without  assumption of any credit risk,  with the right to the
Bank upon any such sale or sales,  public or private,  to purchase  the whole or
any part of said  Collateral so sold,  free of any right or equity of redemption
in the Pledgor,  which right or equity is hereby  expressly  waived or released.
The Bank shall apply the net proceeds of any such collection, recovery, receipt,
appropriation,  realization or sale,  after  deducting all reasonable  costs and
expenses of every kind incurred  therein or incidental to the care,  safekeeping
or  otherwise  of any and all of the  Collateral  or in any way  relating to the
rights of the Bank  hereunder,  including  reasonable  attorney's fees and legal
expenses,  to the payment, in whole or in part, of the Obligations in such order
as the Bank may elect, the Pledgor remaining liable for any deficiency remaining
unpaid after such application,  and only after so applying such net proceeds and
after the  payment by the Bank of any other  amount  required  to be paid by any
provision of law, including, without limitation,  Section 9-504(l)(c) of the New
York Uniform Commercial Code, need the Bank account for the surplus,  if any, to
the Pledgor.  The Pledgor agrees that the Bank need not give more than ten days'
notice of the time and place of any  public  sale or of the time  after  which a
private sale or other intended disposition is to take place and that such notice
is reasonable notification of such matters. No notification need be given to the
Pledgor if it has signed after  default a statement  renouncing or modifying any
right to notification of sale or other intended disposition.  In addition to the
rights and  remedies  granted to it in this  Pledge  Agreement  and in any other
instrument  or  agreement  securing,  evidencing  or  relating  to  any  of  the
Obligations,  the Bank shall have all the rights and remedies of a secured party
under the Uniform  Commercial Code of the State of New York. The Pledgor further
agrees to waive and agrees not to assert any rights or  privileges  which it may
acquire  under  Section  9-112 of the New York Uniform  Commercial  Code and the
Pledgor shall be liable for the  deficiency if the proceeds of any sale or other
disposition of the Collateral are  insufficient  to pay all amounts to which the
Bank is entitled,  and the fees and costs of any attorneys  employed by the Bank
to collect such deficiency.  The Bond Trustee,  in its capacity as custodian for
the Bank,  agrees to take such  steps as Bank  reasonably  requests  in order to
effect or implement any of the foregoing remedies.

     7.  Representations,  Warranties and Covenants of the Pledgor.  The Pledgor
represents  and warrants  that:  (a) on the date that any Bonds  become  Pledged
Bonds, none of the Bond Issuer, WRP nor the Bond Trustee (except in its capacity
as the Bank's  designated  custodian  to hold the  Pledged  Bonds) will have any
right,  title or interest in and to the Pledged Bonds;  (b) the Pledgor has, and
on the date  that such  Bonds  become  Pledged  Bonds  will  have,  full  power,
authority and legal right to pledge all of its right,  title and interest in and
to the  Pledged  Bonds  pursuant  to this  Pledge  Agreement;  (c)  this  Pledge
Agreement has been duly

<PAGE>

authorized, executed and delivered by the Pledgor and constitutes a legal, valid
and binding obligation of the Pledgor  enforceable in accordance with its terms;
(d) no consent of any other party (including,  without limitation,  creditors of
the Pledgor) and no consent,  license,  permit,  approval or  authorization  of,
exemption by, notice or report to, or registration,  filing or declaration with,
any governmental  authority,  domestic or foreign, is required to be obtained by
the Pledgor in connection  with the  execution,  delivery or performance of this
Pledge  Agreement;  (e) the execution,  delivery and  performance of this Pledge
Agreement  will not  violate,  in any  material  respect,  any  provision of any
applicable law or regulation or of any order, judgment, writ, award or decree of
any court, arbitrator or governmental authority,  domestic or foreign, or of any
mortgage, indenture, lease, contract, or other agreement, instrument undertaking
to which the Pledgor is a party or which purports to be binding upon the Pledgor
or upon its assets  and will not result in the  creation  or  imposition  of any
lien,  charge or encumbrance on or security interest in any of the assets of the
Pledgor except as  contemplated  by this Pledge  Agreement;  and (f) the pledge,
assignment and delivery of such Pledged Bonds pursuant to this Pledge  Agreement
will create a valid first lien on and a first  perfected  security  interest in,
all right, title or interest of the Pledgor in or to such Pledged Bonds, and the
proceeds thereof,  subject to no prior pledge,  lien,  mortgage,  hypothecation,
security interest,  charge, option or encumbrance or to any agreement purporting
to grant to any third party a security interest in the property or assets of the
Pledgor which would include the Pledged Bonds. The Pledgor  covenants and agrees
that it will defend the Bank's right,  title and security interest in and to the
Pledged  Bonds and the  proceeds  thereof  against the claims and demands of all
persons whomsoever; and covenants and agrees that it will have like title to and
right to pledge any other property at any time hereafter  pledged to the Bank as
Collateral  hereunder  and will  likewise  defend the Bank's  right  thereto and
security interest therein.

     8. No Disposition,  etc. Without the prior written consent of the Bank, the
Pledgor  and the Bond  Trustee  each  agree  that they  will not  sell,  assign,
transfer,  exchange,  or otherwise  dispose of, or grant any option with respect
to, the Collateral,  nor will they create,  incur or permit to exist any pledge,
lien, mortgage,  hypothecation,  security interest,  charge, option or any other
encumbrance with respect to any of the Collateral,  or any interest therein,  or
any proceeds thereof,  except for the lien and security interest provided for by
this Pledge  Agreement and sale of the Pledged Bonds pursuant to Section 4.05 of
the Bond Indenture, subject to Section 4 of this Pledge Agreement.

     9. Sale of Collateral.

     (a) The Pledgor  recognizes  that the Bank may be unable to effect a public
sale of any or all of the  Pledged  Bonds  by  reason  of  certain  prohibitions
contained in the Securities Act of 1933, as amended (the "Securities  Act"), and
applicable  state securities laws, but may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers who will be obliged to
agree,  among other things,  to acquire such  securities for its own account for
investment  and not  with a view to the  distribution  or  resale  thereof.  The
Pledgor  acknowledges and agrees that any such private sale may result in prices
and other  terms less  favorable  to the seller  than if such sale were a public
sale and, notwithstanding such circumstances,  agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner.

<PAGE>

The Bank  shall be under  no  obligation  to delay a sale of any of the  Pledged
Bonds for the period of time  necessary to permit the issuer of such  securities
to register such  securities for public sale under the Securities  Act, or under
applicable state securities laws, even if the issuer would agree to do so.

     (b) The  Pledgor  further  agrees to do or cause to be done all such  other
acts and things as may be necessary to make such sale or sales of any portion or
all of the Pledged  Bonds valid and binding and in  compliance  with any and all
applicable laws, regulations,  orders, writs, injunctions,  decrees or awards of
any and all courts, arbitrators or governmental  instrumentalities,  domestic or
foreign,  having  jurisdiction over any such sale or sales, all at the Pledgor's
expense.  The  Pledgor  further  agrees  that a breach  of any of the  covenants
contained in this Pledge  Agreement will cause  irreparable  injury to the Bank,
that the Bank has no adequate  remedy at law in respect of such breach and, as a
consequence,  agrees  that  each and every  covenant  contained  in this  Pledge
Agreement shall be specifically  enforceable against the Pledgor and the Pledgor
hereby  waives  and  agrees  not to assert  any  defenses  against an action for
specific  performance  of such  covenants  except for a defense that no Event of
Default has occurred  under the  Reimbursement  Agreement.  The Pledgor  further
acknowledges the impossibility of ascertaining the amount of damages which would
be  suffered  by the Bank by reason of a breach  of any of such  covenants  and,
consequently,  agrees  that,  if the Bank shall sue for damages for breach,  the
Pledgor shall pay, as liquidated  damages and not as a penalty,  an amount equal
to the outstanding  principal  amount of, accrued  premium,  if any, and accrued
interest on the Pledged Bonds and all other amounts payable  pursuant to Article
2 of the  Reimbursement  Agreement on the date the Bank shall demand  compliance
with this Paragraph.

     (c) The Bond Trustee,  as custodian for the Bank,  agrees to cooperate with
the Bank and the  Pledgor and to do or cause to be done all such acts and things
as may be  necessary  to permit  the  Pledgor  to make such sale or sales of any
portion or all of the Pledged Bonds valid and binding and in compliance with any
and all applicable laws,  regulations,  orders, writs,  injunctions,  decrees or
awards of any and all courts,  arbitrators  or  governmental  instrumentalities,
domestic or foreign, having jurisdiction over any such sale or sales.

     10. Bond Trustee.

     (i) If a book-entry depository administered by the Depository Trust Company
or any successor or nominee thereto (the "Depository") is in use pursuant to the
Bond  Indenture,  the  Bond  Trustee  shall  notify  the  Depository  (in a form
acceptable to the Depository for such notice) of the principal  amount(s) of the
Bonds  which are to  become  Pledged  Bonds  prior to or  concurrently  with its
receipt from the Bank of a federal funds tracking  number for a wire transfer in
payment of a drawing  under the Letter of Credit to purchase  such  Bonds.  Said
notice  shall  further  instruct  the  Depository  to  record  in its  system  a
corresponding  increase  in the  principal  amount of the Bonds  credited to the
account  of the Bond  Trustee  as the agent and bailee of the Bank or such other
Person  identified  by the Bank  (through  notice  to the Bond  Trustee  and the
Pledgor) as the entity which should hold  Pledged  Bonds in a book-entry  system
(the  Bond  Trustee  or  such  other  Person,  the  "Bank's  DTC  Participant").
Concurrently  with the  delivery  of such  notice  to the  Depository,  the Bond
Trustee shall provide a copy of such notice to the Bank

<PAGE>

and the Pledgor.  The Bond Trustee and the Pledgor  shall  provide the Bank with
any  confirmation  or like notice  received  by any of them from the  Depository
evidencing the Depository's compliance with the instructions.

     (ii)  Whenever  a  book-entry  depository  is in use  pursuant  to the Bond
Indenture  and  Pledged  Bonds are held on behalf of the Bank by the  Bank's DTC
Participant, the Bank shall have the right to obtain a separate bond certificate
to evidence the Pledged  Bonds,  and upon request by the Bank,  the Pledgor will
cause the Bond Trustee to authenticate  and deliver such  certificate,  and such
certificate shall be deposited with the Depository or delivered to the Bank or a
Person designated by the Bank, as the Bank shall direct.

     (iii) If a book-entry  depository  ever ceases to be in use with respect to
the Bonds,  the Bond  Trustee  and the  Pledgor  each  hereby  agree to hold any
Pledged Bonds received by any of them as the Bank's agent and bailee and to make
a notation in its  respective  records with respect to the Pledged  Bonds.  Upon
request of the Bank,  each of the Bond  Trustee and the Pledgor will deliver all
or a portion of such Pledged Bonds to the Bank or to such Person as the Bank may
direct without termination of this Pledge Agreement.

     (iv) Except at the written  direction of the Bank,  the Bond Trustee  shall
not enter into any other agreement regarding  possession of the Pledged Bonds or
any other  Collateral  other than this Pledge  Agreement  without  prior written
consent of the Bank.  The Bond  Trustee  will not release any Pledged  Bonds for
remarketing  unless the Bank has  delivered to the Bond Trustee  written  notice
(which  may be by  telecopy)  pursuant  to  Section  2.4  of  the  Reimbursement
Agreement and Section 4.05(a) of the Bond Indenture.

     (v) Upon  appointment  of a successor  Bond Trustee under and in accordance
with the terms of the Bond  Indenture,  release and  delivery to the Bank or its
designee of any Collateral then held by the Bond Trustee pursuant to this Pledge
Agreement,  and the  assumption in writing by its  successor of its  obligations
hereunder,  the Bond Trustee  shall have the right to terminate  its position as
Bond Trustee for the Bonds and its obligations under this Pledge Agreement.

     (vi) In acting under this Pledge  Agreement,  the Bond Trustee shall not be
liable  to  the  Bank  except  for  negligence  or  willful  misconduct  in  the
performance of its obligations hereunder.

     11. Further  Assurances.  The Pledgor agrees that at any time and from time
to time upon the  written  request of the Bank,  the  Pledgor  will  execute and
deliver such further  documents  and do such further acts and things as the Bank
may reasonably request in order to effect the purposes of this Pledge Agreement.

     12.  Severability.   Any  provision  of  this  Pledge  Agreement  which  is
prohibited or unenforceable in any jurisdiction  shall, as to such  jurisdiction
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating  the  remaining  provisions  hereof,  and any such  prohibition  or
unenforceability   in  any   jurisdiction   shall  not   invalidate   or  render
unenforceable such provision in any other jurisdiction.

<PAGE>

     13. No Waiver;  Remedies Cumulative.  The Bank shall not by any act, delay,
omission  or  otherwise  be deemed to have  waived any of its rights or remedies
hereunder  and no waiver shall be valid  unless in writing,  signed by the Bank,
and then only to the extent therein set forth. A waiver by the Bank of any right
or remedy  hereunder on any one occasion  shall not be construed as a bar to any
right or remedy which the Bank would otherwise have on any future  occasion.  No
failure to exercise  nor any delay in  exercising  on the part of the Bank,  any
right,  power or privilege  hereunder,  shall operate as a waiver  thereof;  nor
shall any single or partial exercise of any right, power or privilege  hereunder
preclude  any other or further  exercise  thereof or the  exercise  of any other
right,  power  or  privilege.  The  rights  and  remedies  herein  provided  are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights or remedies provided by law.

     14. Waivers; Amendments; Applicable Law. None of the terms or provisions of
this Pledge Agreement may be waived,  altered,  modified or amended except by an
instrument in writing,  duly executed by the Bank. This Pledge Agreement and all
obligations of the Pledgor and the Bond Trustee  hereunder shall be binding upon
the successors and assigns of their respective successor and assigns, and shall,
together  with the  rights  and  remedies  of the Bank  hereunder,  inure to the
benefit of the Bank and its successors and assigns.  This Pledge Agreement shall
be governed by, and be construed and interpreted in accordance with, the laws of
the State of New York.

     15.  Designation of Custodian.  The Bank hereby designates the Bond Trustee
as the Bank's  custodian  and agent for the purpose of holding the Pledged Bonds
on behalf of the Bank and with such authority for taking actions with respect to
the Pledged  Bonds as set forth  herein and as may be directed by, and on behalf
of, the Bank.  The parties  hereto  acknowledge  that the Bank may designate any
successor Bond Trustee under the Bond Indenture,  or any substitute  Person that
the Bank may  elect to  designate,  as the  Bank's  custodian  and agent for the
purpose  of  holding  the  Pledged  Bonds on  behalf  of the Bank and with  such
authority  for taking  actions  with  respect to the Pledged  Bonds as set forth
herein and as may be directed by, and on behalf of, the Bank.

    [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK: SIGNATURE PAGE FOLLOWS]

<PAGE>

     IN WITNESS WHEREOF,  the Pledgor, the Bank and the Bond Trustee have caused
this Bond Pledge and Security Agreement to be duly executed and delivered on the
day and year first above written.

         PLEDGOR:

           PALOMINO PARK PUBLIC IMPROVEMENTS CORPORATION, a Colorado
           nonprofit corporation

           By: /s/ David M. Strong
           -----------------------
              Name: David M. Strong
              Title: President

           WELLSFORD REAL PROPERTIES, INC.

           By: /s/ David M. Strong
           -----------------------
              Name: David M. Strong
              Title: Vice President

         BANK:

           COMMERZBANK AG, New York Branch

           By: /s/ Ralph C. Marra
           ----------------------
              Name: Ralph C. Marra
              Title: Vice President

           By: /s/ David Buettner
           ----------------------
              Name: David Buettner
              Title: Assistant Treasurer

           UNITED STATES TRUST COMPANY OF NEW YORK:

           By: /s/ Christopher J. Grell
           ----------------------------
              Name: Christopher J. Grell
              Title: Assistant Vice President

<PAGE>

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