This is an Agreement, made as of [date], between [name] (Principal) and [name] (Participant).
WHEREAS, Principal has issued a Commitment to make a construction and permanent loan (Loan) to [name] (Borrower), said Commitment consisting of [$ amount]; and
WHEREAS, said Loan is for the purpose of financing construction of [describe property] on a tract of land containing approximately [number] acres located on the southeast corner of [location], said land and improvements being herein referred to as the "Project"; and
WHEREAS, Participant desires to join with Principal in the making of the construction portion only of said Loan under the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of their mutual promises, Principal and Participant represent and agree as follows:
1. Participation. Principal and Participant each agree to make advances to Borrower in accordance with the Loan Documents with Principal advancing [percent], which participation shall amount to [percent], which participation shall amount to [$ amount]. Principal will determine when advances are required under the Loan Documents and Participant will receive reasonable notice on behalf of Participant and call on Participant for its share. In event that either party shall advance, in share, the other party shall, on demand, pay to the party making such excess advancement such amount as shall cause the investment of the parties to be equal to the above percentages. In the event Principal shall have sold or shall hereafter sell to others participations in the Loan, all references to the Principal's share in the Loan shall be deemed to include the shares held by such others; and all reference to advances by Principal shall be deemed to mean advances by Principal and such others, it being agreed that Principal will make all advances required of such other participants in event they do not do so. All Loan Documents shall be deemed to mean advances by Principal and such others, it being agreed that Principal will make all advances required of such other participants in event they do not do so. Principal reserves the right to cancel or reduce the percentage interest of Participant if Participant fails to make the required advances within [number] days after Principal so requests. All Loan Documents shall be in the name of Principal for convenience of administration. All such documents shall be held by Principal for the benefit of both parties.
2. Participation Certificate. Upon each advance by Participant, pursuant to Paragraph 1, the Principal shall deliver to Participant a Participation Certificate in the form annexed hereto as Exhibit A.
3. Collections and Servicing of the Loan. Principal shall do all normal servicing of the Loan and receive all payments in connection therewith. Principal shall promptly remit to Participant its share of all payments of principal and interest received on the Loan.
4. Sharing Expenses. Principal and Participant shall share all expenses in connection with the Loan in proportion to their respective shares of the principal of the Loan. Said expenses shall include, but not be limited to, disbursement for the protection of the property or enforcement of the Loan, but shall not include Principal's ordinary overhead expenses.
5. Defaults. In event of a default continuing for more than ten days, Principal will notify Participant. Principal will not, without Participant's consent, institute foreclosure proceedings. In event either Principal or Participant wishes to institute foreclosure proceedings and the other will not consent, then the party desiring to institute foreclosure proceedings may purchase the interest of the other for the total of the unrepaid advances, which such other party shall have made with interest thereon to the day of purchase.
6. Bookkeeping and Accounting. The Principal shall at all times keep proper books of account and records reflecting all disbursements on, and out-of-pocket expenses in connection with, the Loan and shall from time to time, as Participant may reasonably request, give a report thereof to the Participant. In recording its interest in the Loan in its own books and records, the Principal shall clearly reflect the partial ownership interest of the Participant in the Loan. The Principal will, upon reasonable requests made by the Participant from time to time, permit the Participant or its representatives to examine and make copies of or extracts from all books, records, and documents held by the Principal in connection with the Loan.
7. Sale of Participation. The Participant represents that it is purchasing its interest in the Loan for investment and not with a view to subsequent sale or distribution, and that it will not sell or otherwise transfer its participation in the Loan without giving the Principal thirty days' advance written notice thereof, during which period the Principal shall have the right to purchase such participation and to cancel this Agreement by paying to the Participant its share of the principal of the note with interest to date, or such lesser amount as Participant may have agreed or be willing to agree to accept therefor from any other purchaser.
8. Sharing Setoffs. If either the Principal or the Participant shall, by enforcement of any right of setoff, obtain a payment of the Loan, the party receiving such payment shall share the same ratably with the other party a portion of the Loan, so that, following such purchase, the total outstanding indebtedness of the Borrower to both parties shall be in the same proportions as existed immediately prior to such setoff. In case any payment received by way of such setoff is subsequently recovered by the borrower, in whole or in part, appropriate further adjustment shall be made between the parties hereto so as to maintain the aforesaid proportion of holdings of indebtedness of the Borrower.
9. Standards of Care. In making advances to Borrower, servicing, administering, and enforcing the Loan, and in exercising any other right or duty hereunder, Principal shall be obligated to exercise reasonable care.
10. Loan Documents and Their Approval. Principal represents that the only documents pertinent to this Loan (Loan Documents) consist of the following:
1. Principal's commitment;
2. Promissory note;
3. Guarantee agreement;
4. Mortgage or deed of trust;
5. Building loan agreement;
6. Title insurance policy;
7. Survey;
8. Hazard insurance policy;
9. MAI appraisal; and
10. Final plans and specifications.
Unless all of said Documents (and any other loan documents Participant shall deem pertinent hereto) shall have been exhibited to and approved by Participant, true copies thereof will be furnished to Participant no later than ten days following the execution hereof. If, upon examination, any of said Documents are objectionable to Participant, Participant may require Principal to repurchase Participant's interest in said Loan for the total amount which Participant shall have advanced, together with interest thereon to the date of repurchase. Such right to require repurchase shall be conditioned on Participant giving Principal written notice of such requirement no later than twenty days following the
receipt by Participant of all of the Loan Documents.
11. Commitment Agreement dated [date] between Principal and Participant is hereby incorporated herein and made a part hereof.
WITNESS the signatures and seals of the parties hereto as of the day and year first hereinbefore written.
EXHIBIT A: CERTIFICATE OF PARTICIPATION
[date]
[Salutation]:
Confirming our telephone conversation of today (and pursuant to Paragraph 1 of the Participation Agreement concerning the [identify] Loan), we anticipate recording the transaction on [date], at which time we will be disbursing estimated loan fees and title charges of [$amount] and a construction disbursement to [name] of [$ amount] for a total of [$ amount]. Your one-fifth (dividing by five) interest is [$ amount]. It is our understanding that you will credit [name]'s Bank's account on the aforesaid date of recording, [date], with your one-fifth share of the [$ amount] amount.
[Signatures]
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